Professional Documents
Culture Documents
[Unit II]
In the most basic sense, a business model is the method of doing business by which a
company can sustain itself -- that is, generate revenue.
The business model spells-out how a company makes money by specifying where it is
positioned in the value chain.
Some models are quite simple:
o A company produces a good or service and sells it to customers. If all goes
well, the revenues from sales exceed the cost of operation and the company
realizes a profit.
Other models can be more intricately woven:
o Broadcasting is a good example. Radio, and later television, programming has
been broadcast over the airwaves free to anyone with a receiver for much of
the past century. The broadcaster is part of a complex network of distributors,
content creators, advertisers (and their agencies), and listeners or viewers. Who
makes money and how much is not always clear at the outset.
Internet commerce will give rise to new kinds of business models.
Electronic markets
Electronic markets have three functions such as: (i) matching buyers and sellers, (ii) facilitating
commercial transactions, and (iii) providing legal infrastructure. Information technology
performs and also helps to increase market efficiency and reduce transaction costs. The
interaction between participants is supported by electronic trade processes that are basically
search, valuation, payment and settlement, logistics and authentication.
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E Commerce [BBA]
[Unit II]
Business-to-Consumer (B2C)
Business-to-Business (B2B)
Business-to-Government (B2G)
Consumer-to-Consumer (C2C)
Consumer-to-Business (C2B)
Summary of e-business transaction model
Model
B2C
B2B
B2G
C2C
C2B
Description
Sells products or services directly to consumers
Sells products or services to other businesses or bring multiple buyers and sellers together in
a central marketplace.
Business selling to local, state agencies
Consumer sells directly to other consumers.
Consumer fixes price on their own, which businesses accept or decline.
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E Commerce [BBA]
[Unit II]
Makes payment
E Commerce [BBA]
[Unit II]
The volume of B2B (Business-to-Business) transactions is much higher than the volume of B2C
transactions. The primary reason for this is that in a typical supply chain there will be many B2B
transactions involving sub components or raw materials, and only one B2C transaction, specifically sale
of the finished product to the end customer. For example, an automobile manufacturer makes several
B2B transactions such as buying tires, glass for windscreens, and rubber hoses for its vehicles. The final
transaction, a finished vehicle sold to the consumer, is a single (B2C) transaction.
Advantages of B2B
Direct interaction with customers
Focused sales promotion
Building customer loyalty
Scalability
Savings in distribution costs
Consumer-to-Consumer (C2C)
Transactions between consumers
Ebay.com
o Online auction web site that provide a consumer to advertise and sell their products
online to another consumer.
Both, buyer and seller must register with the auction site
Seller needs to pay fixed fee to online auction house to sell their products, the buyer can bid
without paying any fee.
E Commerce [BBA]
Consumer
[Unit II]
Internet
Facilitator
InternetInte
rnet
3. places an order
on the portal
Seller
Connecting a large group of people to a bidirectional network has made this sort of commercial
relationship possible. The large traditional media outlets are one direction relationship whereas the
internet is bidirectional one.
Decreased cost of technology : Individuals now have access to technologies that were once only
available to large companies ( digital printing and acquisition technology, high performance
computer, powerful software)
Brokerage
Advertising
Infomediary
Merchant
Manufacturer (Direct)
Affiliate
Community
The models are implemented in a variety of ways. A firm may combine several different models as part
of its overall Internet business strategy.
E Commerce [BBA]
[Unit II]
1. Brokerage Model
Brokers are market-makers: they bring buyers and sellers together and facilitate transactions.
Brokers play a frequent role in business-to-business (B2B), business-to-consumer (B2C), or
consumer-to-consumer (C2C) markets.
Usually a broker charges a fee or commission for each transaction it enables. The formula for
fees can vary.
2. Advertising Model
The web advertising model is an extension of the traditional media broadcast model.
The broadcaster, in this case, a web site, provides content (usually, but not necessarily, for free)
and services (like e-mail, chat, forums) mixed with advertising messages in the form of banner
ads.
The banner ads may be the major or sole source of revenue for the broadcaster.
The broadcaster may be a content creator or a distributor of content created elsewhere.
The advertising model only works when the volume of viewer traffic is large or highly
specialized.
E Commerce [BBA]
[Unit II]
3. Infomediary Model
An organizer of virtual community is called an information intermediary or infomediary, who
helps customer to collect, manage and maximize the value of information about consumers.
Data about consumers and their buying/consumption habits are valuable, especially when that
information is carefully analyzed and used to target marketing campaigns.
Independently collected data about producers and their products are useful to consumers when
considering a purchase.
Some firms function as infomediaries (information intermediaries) assisting buyers and/or
sellers understand a given market.
4. Merchant Model
Wholesalers and retailers of goods and services. Sales may be made based on list prices or through
auction.
6. Affiliate Model
In contrast to the generalized portal, which seeks to drive a high volume of traffic to one site, the
affiliate model provides purchase opportunities wherever people may be surfing. It does this by offering
financial incentives (in the form of a percentage of revenue) to affiliated partner sites. The affiliates
provide purchase-point click-through to the merchant. It is a pay-for-performance model -- if an affiliate
does not generate sales, it represents no cost to the merchant. The affiliate model is inherently wellsuited to the web, which explains its popularity. Variations include banner exchange, pay-per-click, and
revenue sharing programs.
7. Community Model
"Community", an Internet buzz word is defined as