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Wednesday, April 25, 2012

e-Business Models Paper

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e-Business Models


The remarkable growth of the Internet and connectivity to the Internet by individuals and businesses alike has brought many opportunities to create new industries and new efficiencies within businesses and between businesses. These opportunities can be seen in the different e-business models that are currently providing benefits to organizations.


This paper evaluates how BB companies like merisel.com establish webs sites that add value for suppliers and other business users. This paper provides a value analysis and justification for the product, service and information exchange of Amazon.com a leading BC web site. It evaluates how CC companies like Edeal.com forms virtual marketplace communities. It also focuses on how these sites are set up through “Porter’s Value Chain” and an “Analysis Task Chart” supplied by the University of Phoenix. The final section concludes the paper.


Business to Business (BB) Model Analysis


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Electronic commerce that creates relationships between businesses is known as a Business-to-Business (BB) model. BB EC models are expected to reach ten trillion dollars by 005 (Turban et. al. 00, p. 401). BB transactions involve either spot buying (i.e. purchase of good and services at market prices) or strategic sourcing (i.e. long term contracts based on negotiation between buyer and seller). Transactions occur within company-centric models, many-to-many marketplaces, or other models which help eliminate paper, speed cycle-time, reduce error, increase productivity, reduce cost, and increase customer service and partnership management (pg. 40, 404). An example of a BB business is merisel.com as discussed below.


Meriesel.com


Merisel provides software dealers the license to resell. The company distributes software licenses and reseller products from vendors including as Borland, Computer Associates, Corel, Network Associates, Panda, and Symantec (Internet). It also provides resellers with the latest vendor promotional programs, volume discounts, and technical data and support. In addition, Merisel offers e-commerce and logistics support services.


The company follows a commodity sales model in its BB strategy. It builds partnerships with various software vendors and sells licensing through its reseller network. Its customized electronic commerce application was designed to improve and develop strong Internet connections with their customers. In addition to quick searches, the on-line catalog encourages orders over the Web and offers logistic services and e-commerce solutions. In September of 00, the company re-engineered its SELline web site for online license configuration and procurement tool for resellers including real-time pricing, e-mail, interactive online information services for marketing programs, storage of quotations, trial downloads, detailed product information and product news and promotions (Merisel, 00). The EC application simplifies ordering through a “wizard” that automatically configures licensing tiers while calculating the media and documentation needs of each order (Merisel, 00).


ANALYSIS TASK CHART


ANALYSIS TASK MERISEL.COM


Using Porter’s Value Chain, describe the primary business Sales and Marketing.


Identify the market segmentation each firm is targeting. Software vendors and software resellers in the United States and Canada


Describe the technological methods used to enhance the business. Proprietary EC solution called SELline.


Describe the marketing approach each Web site uses. Commodity sales model


What does this Web site do to protect its intellectual property? Licensing agreements with vendors.


Business to Consumer (BC) Model Analysis


The Business to Consumer (BC) model is a classification of electronic commerce that creates a direct relationship with the consumer without distributors, wholesalers, or dealers (Turban et. al. 00, p. 8). B-to-C businesses account for half of todays Web sites and spend $7.5 billion in operating, maintenance, and development costs (Pastore, 001). Turban (00) quotes emarketer.com as reporting “75 million individual Internet users participated in some from of on-line shopping (BC) in 001”.


Amazon.com


Amazon.com build customer loyalty by focusing on what A.T. Kearney (001) calls the “7Cs.” The “7Cs” are community, connectivity, customer care, communication, content, customization, and convenience. Yet below the surface of the web, a sophisticated series of activities creates additional value. Value chain analysis and the University of Phoenix “Analysis Task Chart” provide the tools needed to analyze and justify such value.


In 180, M.E. Porter presented a model to systematically examine the development of competitive advantage (Marketingteacher.com, 00). Porter’s Value Chain (see Figure 1) consists of a series of primary and support activities that build value. The diagram’s “margin” equates to added value while primary activities are “chained” together through support activities.








Figure 1 - Source MarketingTeacher.com, 00


ANALYSIS TASK CHART


ANALYSIS TASK AMAZON.COM


Using Porter’s Value Chain, describe the primary business functions this Web site is exploiting to create business value.


Inbound Logistics


Operations


Outbound Logistics


Marketing and Sales


Service Goods are received from company suppliers, placed in inventory or offered jointly through alliances, packaged, and shipped to the customer.


Marketing communications and promotions are targeted directly to customers via direct (e.g. opt-in e-mail) and indirect (e.g. press releases and alliance announcements).


Customer Relationship Management (CRM) systems employ sophisticated front-end and bank-end systems to process, fulfill, and service orders (Turban et al. 00, pg. 6, 7)


Identify the market segmentation this firm is targeting. The company targets on-line individuals and businesses in the U.S. and non-U. S., seeking value in electronics, computers, kitchen and housewares, books, music, DVDs, videos, camera and photo items, toys, baby and baby registry, software, computer and video games, cell phones and service, tools and hardware, travel services, magazine subscriptions and outdoor living products (Turban et al. 00, pg. 6).





Describe the technological methods used to enhance the business. Patented “1-Click Settings” allow customers to manage personalized account settings and on-line orders.


Amazon Marketplace, zShops , auctions, and payment processing systems host customized storefronts for businesses (Turban et. al. 00, p. 6).


Describe the marketing approach this Web site uses. On-line superstore model creates sales through customer intimacy and CRM by employing effective front-end marketing and automated back-end systems (Turban et. al. 00, pg. 6, 7).


What does this Web site do to protect its intellectual property? Company uses selected registered trademarks, such as EARTHS BIGGEST SELECTION ® and 1-CLICK ®, throughout its web site. All web pages contain a “condition of use” link that discloses patents, trademarks, and copyright laws.


Consumer to Consumer (CC) Model Analysis


The Consumer-to-consumer (CC) is a type of electronic commerce where consumers sell directly to other consumers. CC allows you to form a virtual marketplace community where buyers and sellers can trade products.


Edeal.com


Edeal.com allows you to form a virtual marketplace community right on your own web site. You, or anyone who visits your site, can list products for sale, and anyone who visits can bid on those items. You can display all of the edeal Network categories, or only those you select, plus all of the items listed for sale in those categories. This business model allows you to create your own commerce site that can instantly be stocked with as many listings as are available on the entire edeal Network.


The edeal.com C--C model also allows you to generate additional revenue by bringing both sellers and buyers to the transaction. For every buyer or seller that you bring to the Network, edeal will pay you a commission in return for final value fees paid by you to edeal for sales closed on your site. To receive a commission, you must first pay an annual license fee to edeal in the desired amount set out on the homepage. The value of revenue share you obtain from edeal depends on the value of the license fee you pay to edeal. Commission percentage returns on final value fees (FVF) are set out according to edeals C--C Revenue Share model.


ANALYSIS TASK CHART


ANALYSIS TASK EDEAL.COM


Using Porter’s Value Chain, describe the primary business Sales of Goods


Identify the market segmentation the firm is targeting. Buyers and sellers


Describe the technological methods used to enhance the business. Ability to create your own website from within Edeal.com using customized tools


Describe the marketing approach used. Commodity sales model


What does this Web site do to protect its intellectual property? License fees paid by all sellers.


Conclusion


This paper provides insights for the manager who seeks to weave e-commerce strategies into a company’s overall business plan. It studied the different e-business models of three leading web sites, Meriesel.com, Amazon.com, and Edeal.com, and provided justification for the value exchange between product, service and information. The analysis employed “Porter’s Value Chain,” and “Analysis Task Chart,” and a number of research sources to support its findings.


Each company analyzed offers a broad based view of how businesses build e-commerce into their corporate plans. As such, the manager can draw upon their example to begin the process of formulating a thorough e-business model plan.


References


Kearny, A.T. (001). E-Business Performance Snapshot of Sales Innovation on the Web. Pg. 4-6). Internet.


http//www.atkearney.com/pdf/eng/ebusiness_perfomance_s.pdf (September 1, 00)


Turban, E. et. al. (00). e-Business and Practices. New JerseyPrentice Hall. University of Phoenix Custom Edition.


MarketingTeacher.com (00). Porter’s Value Chain. Internet http//www.marketingteacher.com/Lessons/lesson_value_chain.htm (September 1, 00)


Kapczynski et. al. (1). Merisel Technical Deployment. Microsoft Consulting Services http//www.microsoft.com/siteserver/ssrk/docs/merisel_rel_.doc (September 1, 00)


http//www.amazon.com


http//www.meriesel.com


http//edeal.com


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