Ebusiness Model

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3
e-Business Models

Objectives
Objectives
• To understand the different business models being
implemented on the Internet.
• To explore the transition of brick-and-mortar
businesses to e-Businesses.
• To understand Internet business models as they are
used among the leading online industries.
• To learn the terminology and basic principles behind
e-commerce.
• To learn about the many options open to Web
entrepreneurs.
The Road to the City of Emeralds is paved with yellow brick. Lyman Frank Baum
Ye shall no more give the people straw to make brick.
The Old Testament
All intelligent thoughts have already been thought; what is
necessary is to try and think them again.
Johann Wolfgang von Goethe
And the portal opens to receive me...
Ann Radcliffe

71

e-Business Models

Chapter 3

Outline
3.1
3.2

3.3
3.4
3.5

3.6
3.7
3.8
3.9
3.10
3.11
3.12
3.13
3.14
3.15
3.16
3.17
3.18
3.19

Introduction
Storefront Model
3.2.1
Shopping-cart Technology
3.2.2
Online Shopping Malls
Auction Model
Portal Model
Dynamic Pricing Models
3.5.1
Name-Your-Price Model
3.5.2
Comparison Pricing Model
3.5.3
Demand-Sensitive Pricing Model
3.5.6
Offering Free Products and Services
B2B Exchanges
B2B Service Providers
Online Trading and Lending Models
Getting a Loan Online
Recruiting on the Web
Online News Services
Online Travel Services
Online Entertainment
Online Automotive Sites
Energy Online
Selling Brainpower
Online Art Dealers
E-Learning
Click-and-Mortar Businesses

Summary • Terminology • Self-Review Exercises • Answers to Self-Review Exercises • Exercises • Works Cited • Recommended Reading

3.1 Introduction
There are many benefits of bringing your business to the Web. An e-business can offer personalized service, high-quality customer service, and improved supply chain management. In this chapter we explore the different types of businesses operating on the Web, as well as the technologies needed to build and run an e-commerce Web site. Amazon.com, eBay, Yahoo! and others have helped to define industry categories and business models on the Web. Entrepreneurs starting e-businesses need to be aware of these models and how to implement them effectively. In this chapter, we review the storefront model, the auction model, dynamic pricing models, the portal model and other Web busi-

Chapter 3

e-Business Models

72

ness models. An e-business is defined as a company that has an online presence. E-businesses that have the ability to sell, trade, barter and transact over the Web can be considered e-commerce businesses. The combination of a company’s policy, operations, technology and ideology define its business model. In this chapter, we define a number of models and the technologies that make them possible. Businesses within a particular model can leverage these fundamental technologies to differentiate themselves from the competition.

3.2 Storefront Model
Shopping online is an increasingly popular activity. At the close of 1999, nearly 55 million people, 60 percent of Internet users, were shopping online.1 The move toward e-commerce presents many benefits, as well as a host of new considerations. The storefront model is what many people think of when they hear the word e-business. The storefront combines transaction processing, security, online payment and information storage to enable merchants to sell their products on the Web. This is a basic form of e-commerce where the buyer and the seller interact directly. To conduct storefront e-commerce, merchants need to organize an online catalog of products, take orders through their Web sites, accept payments in a secure environment, send merchandise to customers and manage customer data (such as customer profiles). They must also market their sites to potential customers—a topic further explored in Chapter 4, "Internet Marketing".

Although the term e-commerce is fairly new, large corporations have been...
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