Business Models for Electronic Systems Practice Flashcards

Core Definitions and Revenue Models

  • A business model is defined as an architecture describing the flows of products, services, and information.

  • It includes a comprehensive description of the various business actors involved and their specific roles.

  • The model identifies potential benefits for each of the various actors and confirms the designated source of revenue.

  • Revenue Model: This refers specifically to the section of a business model that describes how financial value is generated.

Primary Categories of E-Commerce

  • Business-to-Business (B2B):

    • This category involves business transactions conducted between one or more business entities.

    • Requirement: Both participating businesses must provide a established means for the exchange of business documents.

    • Prevalence: This model is particularly common among large organizations.

    • Core Aspects of B2B:

      • Electronic funds transfer (EFTEFT).

      • Electronic payment fulfillment systems.

      • Electronic tracking mechanisms for all transactions.

  • Business-to-Consumer (B2C):

    • Involves a seller (the business) and individual consumers.

    • Role of the Business: Acts as the primary information source.

    • Role of the Customer: Acts as the information seeker.

  • Business-to-Government (B2G):

    • Involves transactions and interactions between government agencies or departments and a business.

    • Operational Structure: Can be operated following the models of either B2C or B2B.

Structural Components and Strategic Development

  • A business model represents the diverse activities of a business through three primary modeling types:

    • Activity Models: Describe precisely what a business does.

    • Process Models: Describe how a business accomplishes its tasks and objectives.

    • Data Models: Represent the information structure and data hierarchy of the business.

  • Based on these activities, a business model can be further broken down into:

    • Buy side and Sell side: This division looks at the payment direction—specifically identifying with whom the commerce is being conducted.

    • Product or Service Type: This refers to the fundamental basis of the transaction, encompassing categories, price, advertising, sales strategies, and delivery.

  • Strategic Principles for E-Commerce:

    • E-commerce strategies are most effective when they are driven by the overall business strategy.

    • Strategic plans must be both technically feasible and financially viable.

    • Development involves dissecting the buying and selling process into individual elements to identify opportunities to apply internet technology.

    • Analysis must include how the other party’s needs are changing from a business perspective to determine how to better address them.

Specific Models: E-Shops and Market Aggregators

  • E-Shop (Virtual Storefront):

    • Definition: The web marketing presence of a company or individual shop.

    • Goals:

      • Main Goal: The sale of goods and services.

      • Secondary Goal: Promotion of the company.

      • Additional Goals: Cost-reduction of business processes.

    • Challenges: Developing effective strategies to increase consumer demand.

    • Revenue Sources: Reduced operational costs, increased sales figures, affiliate partnerships, and advertising.

    • Problems identified:

      • Online shopping can be frustrating due to current hardware/software configurations and access speeds.

      • Online experiences lack the immediacy found in real-world environments like department stores or glossy physical catalogues.

      • Security and privacy remain major areas of concern.

      • Consumer behavior in the digital space is relatively unknown, particularly regarding the effective use of marketing, promotions, and incentives to secure repeat customers.

  • Market Aggregators:

    • E-Mall:

      • A collection of several e-shops organized under a common umbrella.

      • May feature a common payment method (shared shopping cart) and a single entry point to all member shops.

      • Industry (Horizontal) Marketplace: A type of e-mall where all member stores belong to a specifically identified market segment.

      • Challenge: Individual stores must find ways to distinguish themselves from other stores in the same mall.

    • Virtual Communities:

      • Value in these communities is derived from member loyalty (among both customers and partners) and the frequency of repeat visits.

      • Members add their own information and content to the environment provided by the community company.

      • Revenue Sources: Primary sources are membership fees and advertising, with secondary revenue from affiliate marketing.

      • Strategic Value: Enhances other marketing operations, builds customer loyalty, and serves as a tool for receiving direct customer feedback.

Specific Models: Market Integrators, Procurement, and Auctions

  • Market Integrator:

    • Role: Acts by bringing buyers and sellers together within a specific market sector.

    • Industry Type: This represents a vertical market.

    • Status: The company operating as the integrator is a disinterested third party providing the business setting.

    • Revenue Sources: Generated primarily from transaction fees; some integrators also charge sellers listing fees or sell premium services like security and logistics support.

    • Problem: The difficulty of achieving and then sustaining critical mass.

  • E-Procurement:

    • Definition: The electronic tendering and procurement of goods and services.

    • Benefits for the Buyer: Wider choice of suppliers, potentially lower costs, better quality, improved delivery times, and reduced total procurement costs.

    • Benefits for the Supplier: More opportunities for tendering, lower costs for submitting bids, and the potential for collaborative tendering (participating in parts of a tender).

  • The Auction Model:

    • The site provides a "virtual space" for ongoing auctions.

    • Success is based on participants registering with the site.

    • Products: Both digital and non-digital products are traded.

    • Revenue: The site makes money by taking a commission on all successful sales.

    • Challenge: The development of trust is essential for the success of this model.

Information Services and Electronic Data Exchange

  • Information Services:

    • Purpose: To add value to data.

    • Service Examples: Information searches, customer profiling, investment advice, business opportunity brokerage, and business intelligence services.

    • Payment: Users may pay via subscription or per-use fees.

    • Certification Authorities: Examples like eTrust and Verisign offer specialized services in authentication and verification.

  • Electronic Data Exchange (EDI):

    • Use Case: Primarily Business-to-Business (B2BB2B).

    • Standards-Based Messages: Uses protocols such as ANSI X.12ANSI\,X.12 and UN EDIFACTUN\,EDIFACT.

    • Scope: Based on industry-specific schemas or usage requirements.

    • Transport Mechanisms:

      • Traditional: Conducted via private networks or brokers.

      • Direct: Conducted via the internet.

    • Areas of Interest: Logistics/procurement, transportation, insurance, finance, and government.

E-Commerce Application Types and Support

  • Brochureware:

    • Includes product/service information and electronic catalogues.

    • Functions as indexes and search engines.

    • Distribution Methods: CD-ROMs, Dial-Up Networking, and Internet websites.

    • Distribution Formats: HTMLHTML and PDFPDF documents.

  • Help Desk and Support:

    • Documentation: Provision of product/service info via CD-ROMs, downloadable PDFs, and online websites.

    • Resources: Knowledgebases, Frequently Asked Questions (FAQsFAQs), updates, and patches.

    • Interactivity: Problem submission tools, message boards, and news groups.

Transactions, Purchases, Advertising, and ASPs

  • Electronic Transactions:

    • Electronic Funds Transfers (EFT): Involves financial institutions, specific networks, and X9X9 standards.

    • Covers bill payments and credit card payments.

    • Credit Card Participants: The consumer, the merchant, the processor, and financial institutes.

  • Consumer Purchases:

    • Hard/Soft Goods: Transactions for physical or digital items via traditional mail-order or direct delivery services.

    • Intellectual Property: Includes downloadable files, streaming media, and subscriptions.

  • Advertising:

    • Methods: Web banner ads, SPAM, trial offers, and coupons.

    • Includes trial use of intellectual property.

    • Functionality: Features mechanisms for tracking and monitoring.

  • Application Service Providers (ASPs):

    • Evolving business models including application rental, added-value services, and hosting services.

    • Current Status: Primarily server-based today.

    • Market Trend: Noted as a significant growth area.