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Chapter 13
This document provides an overview of e-business models and concepts. It compares e-commerce and e-business, describing the four main e-business models: business-to-business, business-to-consumer, consumer-to-business, and consumer-to-consumer. Specific models like e-shops, e-malls, and online auctions are defined. Benefits and challenges of e-business are outlined. The document also briefly discusses mashups and includes opening case study questions.
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Chapter 13
- 1. Chapter 13 E-Business McGraw-Hill/Irwin © 2008 The McGraw-Hill Companies, All Rights Reserved
- 2. Learning Outcomes 14.1 Comparee-commerce and e-business 14.2 Compare the four types of e-business models 14.3 Describe the benefits and challenges associated with e-business 14.4 Explain the differences among e-shops, e- malls, and online auctions 14-2
- 3. E-Business • The Internetis a powerful channel that presents new opportunities for an organization to: – Touch customers – Enrich products and services with information – Reduce costs 14-3
- 4. E-Business • How doe-commerce and e-business differ? – E-commerce – the buying and selling of goods and services over the Internet – E-business – the conducting of business on the Internet including, not only buying and selling, but also serving customers and collaborating with business partners 14-4
- 5.
- 6. E-Business Models • E-businessmodel – an approach to conducting electronic business on the Internet 14-6
- 7. E-Business Models 14-7
- 8. E-Business Models 14-8
- 9. Business-to-Business (B2B) • Electronic marketplace (e- marketplace) – interactive business communities providing a central market where multiple buyers and sellers can engage in e-business activities 14-9
- 10. Business-to-Consumer (B2C) • CommonB2C e-business models include: – e-shop – a version of a retail store where customers can shop at any hour of the day without leaving their home or office – e-mall – consists of a number of e-shops; it serves as a gateway through which a visitor can access other e-shops • Business types: – Brick-and-mortar business – Pure-play business – Click-and-mortar business 14-10
- 11. Consumer-to-Business (C2B) • Priceline.comis an example of a C2B e- business model • The demand for C2B e-business will increase over the next few years due to customer’s desire for greater convenience and lower prices 14-11
- 12. Consumer-to-Consumer (C2C) • Onlineauctions – Electronic auction (e-auction) - Sellers and buyers solicit consecutive bids from each other and prices are determined dynamically – Forward auction - Sellers use as a selling channel to many buyers and the highest bid wins – Reverse auction - Buyers use to purchase a product or service, selecting the seller with the lowest bid 14-12
- 13. Consumer-to-Consumer (C2C) • C2Ccommunities include: – Communities of interest - People interact with each other on specific topics, such as golfing and stamp collecting – Communities of relations - People come together to share certain life experiences, such as cancer patients, senior citizens, and car enthusiasts – Communities of fantasy - People participate in imaginary environments, such as fantasy football teams and playing one-on-one with Michael Jordan 14-13
- 14. E-Business Benefits and Challenges • E-Business benefits include: – Highly accessible – Increased customer loyalty – Improved information content – Increased convenience – Increased global reach – Decreased cost 14-14
- 15. E-Business Benefits and Challenges • E-business challenges include: – Protecting consumers – Leveraging existing systems – Increasing liability – Providing security – Adhering to taxation rules 14-15
- 16. E-Business Benefits and Challenges • There are numerous advantages and limitations in e-business revenue models including: – Transaction fees – License fees – Subscription fees – Value-added fees – Advertising fees 14-16
- 17. Mashups • Web mashup- a Web site or Web application that uses content from more than one source to create a completely new service – Application programming interface (API) - a set of routines, protocols, and tools for building software applications – Mashup editor - WSYIWYGs (What You See Is What You Get) for mashups 14-17
- 18. CHAPTER FOURTEEN OpeningCase Study Questions 1. Identify the type of e-business model eBay is using and explain why it has been so successful 2. Other major Web sites, like Amazon.com and Yahoo!, have entered the e-marketplace with far less success than eBay. How has eBay maintained its dominant position? 3. What are the three different types of online auctions and which one is eBay using? 14-18
- 19. CHAPTER FOURTEEN CASE eBiz • There are numerous ways to make money on the Internet – Million dollar home page – One red paperclip 14-19
- 20. Chapter Fourteen CaseQuestions 1. How else can you use the Internet to raise money? 2. What types of businesses could benefit from trading on the Internet? 3. Can you think of any other disruptive or non- traditional ways that you could use the Internet? 14-20
Editor's Notes
- #2 CLASSROOM OPENER GREAT BUSINESS DECISIONS – Jeff Bezos Decides to Sell Books over the Internet Jeff Bezos owns 41 percent of Amazon and is estimated to be worth over $900 million. Bezos graduated from Princeton and was the youngest Vice President at Banker’s Trust in New York. Bezos had to make a decision to stay and receive his 1994 Wall Street bonus or leave and start a business on the Internet. “I tried to imagine being eighty years old, looking back on my life. I knew that I would hardly regret having missed the 1994 Wall Street bonus. But having missed being part of the Internet boom – that would have really hurt,” stated Bezos. The first books ordered through Amazon were dispatched in the fall of 1994 (personally packaged by Bezos and his wife). Amazon.com is now the biggest bookstore on the planet. It is the exemplar of electronic business.
- #3 14.1 Compare e-commerce and e-business E-commerce is the buying and selling of goods and services over the Internet. E-commerce refers only to online transactions. E-business is the conducting of business on the Internet, not only buying and selling, but also serving customers and collaborating with business partners. The primary difference between e-commerce and e-business is that e-business also refers to online exchanges of information. For example, a manufacturer allowing its suppliers to monitor production schedules or a financial institution allowing its customers to review their banking, credit card, and mortgage accounts. 14.2 Compare the four types of e-business models Business-to-business (B2B) Applies to businesses buying from and selling to each other over the Internet. Business-to-consumer (B2C) Applies to any business that sells its products or services to consumers over the Internet. Consumer-to-business (C2B) Applies to any consumer that sells a product or service to a business over the Internet. Consumer-to-consumer (C2C) Applies to sites primarily offering goods and services to assist consumers interacting with each other over the Internet. The primary difference between B2B and B2C are the customers; B2B customers are other businesses while B2C markets to consumers. Overall, B2B relations are more complex and have higher security needs; plus B2B is the dominant e-business force, representing 80 percent of all online business. 14.3 Describe the benefits and challenges associated with e-business E-business is the conducting of business on the Internet, not only buying and selling, but also serving customers and collaborating with business partners. E-business benefits include Highly accessible, Increased customer loyalty, Improved information content, Increased convenience, Increased global reach, Decreased cost E-business challenges include Protecting consumers, Leveraging existing systems, Increasing liability, Providing security, Adhering to taxation rules 14.4 Explain the differences among e-shops, e-malls, and online auctions An e-shop is a version of a retail store where customers can shop at any hour of the day without leaving their home or office. An e-mall consists of a number of e-shops; it serves as a gateway through which a visitor can access other e-shops. An online auction is a place where buyers and sellers come together to auction items and prices are determined dynamically.
- #4 Strategic alliances enable businesses to gain competitive advantage(s) through access to partner(s) resources, including markets, technologies, capital, and people Teaming up with another business adds complementary resources and capabilities, enabling participants to grow and expand more quickly and efficiently - especially fast growing companies who rely heavily on outsourcing many areas of their business to extend their technical and operational resources CLASSROOM EXERCISE Where the Internet Really Started Ask students, “How did the Internet (really) get started.” A few responses might include: Al Gore (“Information Superhighway”), or the Department of Defense (ARPANET), or even Bill Gates (Microsoft). For many people, the Internet is the epitome of cutting-edge technology. However, in the nineteenth century, the first “online communications network” was already in place - the telegraph! In addition, at the time, it was just as perplexing, controversial, and revolutionary as the Internet is today. In essence, the telegraph was the first incarnation of the Internet. Ask students to “Imagine an almost instantaneous communication system that would allow people and governments all over the world to send and receive messages about politics, war, illness, and family events. The government has tried and failed to control it.” Was it the Internet? Nope, the humble telegraph fit this bill way back in the 1800s. The parallels between the now-ubiquitous Internet and the telegraph are amazing, offering insight into the ways new technologies can change the very fabric of society within a single generation. Emphasize the history of the telegraph: Begin with the funny story of a mile-long line of monks holding a wire and getting simultaneous shocks in the interest of investigating electricity, and ending with the advent of the telephone (this is the true scenario). Discuss the early “online” pioneers: Samuel Morse, Thomas Edison, and a seemingly endless parade of code-makers, entrepreneurs, and spies who helped ensure the success of this communications revolution. With the invention of the telegraph, the world of communications was forever changed. The telegraph gave rise to creative business practices and new forms of crime. Romances blossomed over its wires. In addition, attitudes toward everything from news gathering to war had to be completely rethought. The saga of the telegraph offers many parallels to that of the Internet in our own time, and is a remarkable episode in the history of technology.
- #5 Ask your students to differentiate between e-commerce and e-business E-commerce refers only to online transactions E-business refers to online transactions, serving customers and collaborating with business partners On July 18,2005 media conglomerate News Corp. bought Intermix Media, the company that owns MySpace and about 30 other sites, for $580 million in cash. Los Angeles-based Intermix owns 53% of MySpace and plans to buy the rest. It will become part of News Corp.'s new Fox Interactive Media unit, which was created on July 15, 2005 and also is based in L.A. Since MySpace is a social networking site, why would a business conglomerate such as News Corporation want to purchase it for $580 million?
- #6 CLASSROOM EXERCISE E-business Business Ask your students to list the types of companies they want to work for when they graduate List the companies on the board and categorize them by industry Assign each industry to a group, or assign the industry to each individual depending on the company they want to work for, and have the students research how the different industries are using e-business Manufacturing and Retail: RFID, online payments and orders, sales via the Internet, customer service via the Internet Financial: online banking, online mortgages, online loans Telecommunications: Voice over the Internet (VoIP) Healthcare: digital hospitals, pharmacy orders via the Internet Travel: online reservations, Travelocity, Expedia
- #7 Can a business operate with more than one e-business model? Yes, eBay and Amazon are prime examples. eBay and Amazon’s e-business models change depending on who is posting the goods for sale and who is buying the goods for sale?
- #8 This is a new service by Google that allows customers to checkout - Google e-Business http://checkout.google.com/seller/demo.html
- #9 Can you define a business the operates in each segment? B2B: Electronic marketplace, Google search marketing B2C: Progressive insurance, Carfax, Best Buy, Amazon C2B: eBay, Amazon C2C: eBay, Amazon
- #10 Electronic marketplaces, or e-marketplaces, present structures for conducting commercial exchange, consolidating supply chains, and creating new sales channels Their primary goal is to increase market efficiency by tightening and automating the relationship between buyers and sellers Existing e-marketplaces allow access to various mechanisms in which to buy and sell almost anything, from services to direct materials
- #11 Brick-and-mortar business - operates in a physical store without an Internet presence. Pure-play (virtual) business - a business that operates on the Internet only without a physical store. Examples include Amazon.com and Expedia.com. Click-and-mortar business – a business that operates in a physical store and on the Internet. Examples include REI and Barnes and Noble. Can you name a company that operates in each of the different business types? Brick-and-mortar business – local book store, college book store (there are not many today) Pure-play business – Amazon.com, eBay Click-and-mortar business – Barnes and Noble
- #12 CLASSROOM EXERCISE Trip to a trip Have your students create a trip itinerary for a 7 day trip to Paris with a nice hotel and rental car on Priceline.com and Expeida.com Which site did they like best? Which site had the best Web site? Which site will they continue to use?
- #13 eBay is the Internet’s most successful C2C site and is now ranked in the top 15 retailers in the United States Which products or services would they want to purchase using an online auction? Which type of auction would they use? Car Boat Vacation Bicycle Coat DVDs Pet grooming service Dog walking service Wedding catering
- #14 If you could start a new e-business, which community would you address to ensure a successful launch? How would you address the community?
- #15 Which benefit would you pick if asked to identify the most important e-business benefit? Would it change depending on the industry? Would it change depending on the company? Would it change depending on the customer? E-Business Benefits Highly Accessible - Businesses can operate 24 hours a day, 7 days a week, 365 days a year Increased Customer Loyalty - Additional channels to contact, respond to, and access customers helps contribute to customer loyalty Improved Information Content- In the past, customers had to order catalogs or travel to a physical facility before they could compare price and product attributes. Electronic catalogs and Web pages present customers with updated information in real-time about goods, services, and prices Increased Convenience - E-business automates and improves many of the activities that make up a buying experience Increased Global Reach - Businesses, both small and large, can reach new markets Decreased Cost - The cost of conducting business on the Internet is substantially smaller than traditional forms of business communication
- #16 Review the figure for a full listing of e-business challenges Which challenge would you pick if asked to identify the most difficult e-business challenge? Would it change depending on the industry? Would it change depending on the company? Would it change depending on the customer?
- #17 Review the figure for a detailed listing of the various advantages and limitations in the e-business revenue model Which type of revenue model would an ASP find most lucrative? Which type of revenue model would an ISP find most lucrative? Which type of revenue model would an online auction Web site find most lucrative? Which type of revenue model would an online search engine such as Google find most lucrative?
- #18 A Web mashup is a Web site or Web application that uses content from more than one source to create a completely new service. The term is typically used in the context of music; putting Jay-Z lyrics over a Radiohead song makes something old become new. The Web version of a mashup allows users to mix map data, photos, video, news feeds, blog entries and so on. Content used in mashups is typically sourced from an application programming interface (API), which is a set of routines, protocols, and tools for building software applications. Mashup editors are WSYIWYGs (What You See Is What You Get) for mashups. They provide a visual interface to build a mashup, often allowing the user to drag and drop data points into a Web application 1001 Secret Fishing Holes: Over a thousand fishing spots in national parks, wildlife refuges, lakes, campgrounds, historic trails etc. (Google Maps API). 25 Best Companies to Work For: Map of the 100 best U.S. companies to work for as rated by Fortune magazine. (Google Maps API). Album Covers: Uses the Amazon API and an Ajax-style user interface to retrieve CD/DVD covers from the Amazon catalog (Amazon eCommerce API). Gawker: A handy mashup for keeping up with celebrity sightings in New York City. Readers are encouraged to e-mail as soon as the celeb is spotted (Google Maps API). Gigul8tor: Provides a data entry page where bands can enter information about upcoming gigs and venues. Gigul8tor displays a list of possible locations depending on the venue engine and enters event information right into Eventful in an interface designed just for bands. It shows how different user interfaces could be built in front of Eventful with mashup techniques. GBlinker: A Google pin wired to a serial port so it flashes when e-mail arrives. OpenKapow: Offers a platform for creating Web-based APIs, feeds, and HTML snippets from any Web site, taking mashup possibilities way beyond the move than 300 APIs offered on ProgrammableWeb. The Hype Machine: Combines blog posts from a set of curated music blogs with Amazon sales data and upcoming events. The Hype Machine tracks songs and discussion posted on the best blogs about music. It integrates with iTunes to take customers right from the Web page to the track they are interested in. If the customer prefers buying through Amazon, The Hype Machine figures out what CD page to display.
- #19 1. Identify the type of e-business model eBay is using and explain why it has been so successful. eBay began in the C2C space, using the brokerage value model and collecting transaction fees in consumer-to-consumer auctions. Rapid user growth created community, content, and search value streams, which in turn created the critical mass for substantial advertising revenue. B2B followed by offering the Small Business Exchange. In addition, there is nothing that would prevent eBay from licensing its technology in the B2B space, for industry-specific auctions. eBay could potentially expand into the B2C space, providing firms the option of auctioning merchandise directly to consumers using the eBay infrastructure. Finally, while this would be the greatest stretch for eBay, it could choose to move into the C2B space, allowing consumers to “name their own price” for merchandise and services. 2. Other major Web sites, like Amazon.com and Yahoo!, have entered the e-marketplace with far less success than eBay. How has eBay maintained its dominant position? The obvious answer is that eBay's first-mover advantage allowed it to dominate the online auction space. eBay also has an excellent reputation for superior customer service. Two priorities dominate eBay's operational strategy: keeping its buyer/seller community happy, and keeping its massive Web site up and running. Consumers flock there because of the great product selection. The result is a juggernaut that has vanquished latecomers, such as Yahoo! Auctions and Amazon Auctions. Both of those operations are still in business, but they have reduced expectations and make relatively small contributions to their parent companies' balance sheets. 3. What are the three different types of online auctions and which one is eBay using? Electronic auction - sellers and buyers solicit consecutive bids from each other and prices are determined dynamically. Forward auction - auction that sellers use as a selling channel to many buyers and the highest bid wins. Reverse auction - an auction that buyers use to purchase a product or service, selecting the seller with the lowest bid. eBay provides a forward auction where the highest bid wins.
- #21 1. How else can you use the Internet to raise money? There are numerous ways you can use the Internet to raise money. Revenue models such as transaction fees, subscription fees, licensing fees, advertising fees, and many other models can be used to generate revenue on the Internet. This is an excellent video to inspire your students! Not so long ago, teen Ashley Qualls lived in a one-bedroom apartment with her mom and sister. But with her computer and savvy business sense she made a better life for all of them. Ashley Qualls doesn't sound like a typical high school student. Maybe that's because the 17-year-old is the CEO of a million-dollar business. http://potw.news.yahoo.com/s/potw/52250/teen-millionaire 2. What types of businesses could benefit from trading on the Internet? Any type of business can benefit including B2B, B2C, C2C, C2B, B2G, G2C, C2G, G2B. 3. Can you think of any other disruptive or non-traditional ways that you could use the Internet? This is a great question to get your students thinking. Be sure to bring up Second Life as virtual businesses are beginning to take off and make money. Here are a few examples you can show in your class.