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Business Models. Characteristics. A networked architecture that defines ownership, sources of revenues, value-chain, and flows of information, goods, and payments The Internet-technology can be used to reconfigure business models and automate the flow of information

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  • A networked architecture that defines ownership, sources of revenues, value-chain, and flows of information, goods, and payments
  • The Internet-technology can be used to reconfigure business models and automate the flow of information
  • Interfaces can be one-to-many or many-to-many
  • Business model and business strategy ?
  • Ownership structure
    • Public (independent)
    • Private
    • Consortium
  • Value-chain
    • Different ways to generate value propositions
  • Industry specific
    • Vertical
    • Horizontal
  • Transactional and non-transactional
public e marketplace
Public E-marketplace
  • Owned by an independent third party
  • Automated access (many-to-many)
  • Niches
    • Low prices, commodity-type products, and indirect material
  • Value creation from aggregation
  • Contextual services
    • Logistics, financial, insurance, research reports
  • Critical mass and liquidity

private e marketplace
Private E-marketplace
  • Owner is also a trader
  • Requires approximately $100 million to build one
  • Owner creates business rules and rules of participation
  • Owner profits more than the trading partners
  • One-to-many interactions
  • Buy-side and sell-side
integration benefits
Integration Benefits
  • Single business platform
  • Use of standardized interfaces
  • Transaction process efficiency
  • Consolidated purchasing
  • Improved sourcing decisions
  • Faster production ramp-up
unique capabilities
Unique Capabilities
  • Owner interacts with partners directly and controls what information partners see.
  • Promotes communication protocols consistent with the owner’s trading practices
  • Supports different access rights of participants
  • Supports selling/buying with multiple attributes
  • Permits customer collaboration and customization
  • AMR predicts private e-marketplace market will reach $35 billion by 2005

consortium e marketplace
Consortium E-marketplace
  • A private e-marketplace where the ownership is shared by more than one
  • Liquidity of e-marketplace is assured by the equity holders
  • Equity-sharing and profit-sharing
  • Integration benefits: consolidated purchases, collaborative product design, and supply-chain improvements
consortium e marketplace cont
Consortium E-marketplace (cont)
  • Aggregation benefits: sharing infrastructure cost, product, and service standardization
  • Challenges:
    • Trading partners may perceive visibility of their relationships (with their partners) as a threat
    • May pose anti-trust problems with the FTC
  • Examples: Kraft, General Mills, Nabisco, Aerospan, Covisint, and


Roles in the Value-chain

  • Creator
      • Develop new products/service ideas
      • Refine existing products/services
  • Producer
      • Package creator’s ideas into products, services, and business solutions
  • Distributor
      • Enable buyers and sellers to connect, communicate, and transact (supply chain or demand chain)
  • Customer
      • Individual customers
      • Business customers

Model Differentiators

  • Disintermediation/Reintermediation
  • Inventory ownership
  • Online/Offline sale
  • Information sharing
  • Revenue sources
  • Cost drivers

Forward Aggregation












  • Aggregates the selling power of small sellers, and the sellers exploit economics of scale in purchasing from major suppliers
  • Sellers are helped by the marketplace in fulfillment, order configuration, logistics, and call centers (Ingram Micro)
  • A catalog hub that consolidates sellers’ catalogs is also an aggregator
  • requires only a single purchase order to purchase from a diverse set of suppliers

Reverse Aggregation




  • Aggregates the buyers
    • Price reduction, reduced transaction cost

  • Can outsource procurement
  • Would work best with a few large and many small buyers
  • Product diversity would make reverse aggregation difficult
  • Other aggregators
    • Shopbots aggregate information on books, music, and electronics
    • Relationship aggregators to management the diverse bank accounts of a company


Provide online expertise to match product features with customer needs

Knowledge of buyers and sellers’ businesses

Initial qualification, specification, packaging (identify and qualify buyers)

Works well with a fragmented supplier base, and/or complex products

Freemarkets provide structure, standards, and liquidity for complex transactions

MySimon matches multiple attributes for tailored purchasing advice

collaboration platform
Collaboration Platform

Provides a set of tools for collaboration – collaborative product design and supply chain

Online collaboration through web services (.net of Microsoft)

Plug-in business processes in a service grid, accessible to all companies

transaction facilitators
Transaction Facilitators

Provide efficient transaction services between buyers and sellers

Use of advanced databases to automate a diverse set of transactions

Payment processing, and order processing

Economics of scale in transactions

Require large business volumes for survival (low margins)

Must collaborate with originators and other e-marketplaces for referrals

Competitive advantage through customizing transactions for users

Integrate the company’s business rules in web-based purchasing

resource consolidators
Resource Consolidators

Create spot markets for resources

Capacity, inventory, and human resources

Enable companies to quickly adjust their capacities

Price volatility and demand uncertainty

High-fixed asset industries: energy, electricity, and utility

CapacityWeb, Employease,, and Enron online

service providers
Service Providers

Specialize on a specific narrow segment of the value-chain

Payment services, logistics services

Search agents

Application service providers

Customer profiling and business opportunities brokerage

Electronic notaries and certification authorities

b2b auction hub
B2B Auction Hub

Forward auction

Seller posts goods and buyers bid

Sell surplus or used equipment

Reverse auction

Buyer posts description of needed goods

Suppliers bid

E-marketplace qualifies sellers and buyers

Dynamic pricing based on supply and demand