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  1. Business-to-Business: A Variety of Models Chapter 7

  2. Learning Objectives • Explain the contributions of online markets to individual firms and to the economy • Describe e-commerce business models and give examples of how revenue can be generated on the Internet • Explain how application service providers facilitate e-commerce for small and midsize businesses

  3. Learning Objectives • Explain the principles of auction and matchmaking online business • Discuss business alliances and cite real-world examples across several industries • Evaluate the benefits of government-related Web sites to citizens and governments

  4. Three contributions of online markets • Inventory squeezers • Save buyers money by allowing them to quickly find information • • Value creators • Companies that are able to create value due to the huge size of the Internet •

  5. Product creators • Provide services that lead to the creation of physical products that would otherwise not be developed • Patent and License Exchange

  6. Horizontal market • Many companies within an industry market to companies from different industries • Vertical market • Trade takes place among companies that operate in the same industry

  7. Companies must create a business model • Find a way to sustain themselves financially • Define what value they create for others • Define who would be likely to pay for the service they offer

  8. Business-to-business marketplaces • Electronic marketplace - an environment where participants can trade through communications technology • No need to travel • Full disclosure transactions take place in seconds • Close to a perfect market • No single entity can affect prices

  9. What is a business model? • The principal manner in which a business operates • In for-profit organizations, it corresponds to the manner in which the business generates revenue • The Web has created opportunities for business models that could not exist otherwise

  10. Auction and matchmaking businesses • Auction sites • create competitive environments in which buyers can obtain the lowest price • Matchmaking sites • Match potential buyers with potential sellers • Both generate revenue by getting an agreed-upon percentage on each transaction • Need critical mass of sellers and buyers

  11. Application service providers (ASPs)

  12. A company can pay a monthly fee which authorizes its employees to access software remotely • An alternative to purchasing or renting • The software is stored on the ASP’s servers and is accessed via browsers • Documents created with the software can be stored either locally or on the ASP’s server • Do not support mobile users

  13. Client benefits • May be cost effective • Flexibility in adding/removing software • Does not have to pay for upgrades • Installation, maintenance, and user support is provided by the ASP • Fixed cost; helps in budgeting and cash allocation • Save in development time

  14. Main types of ASP clients: • Small companies • Fast growing companies • Midsize companies that need expensive software, such as ERP • Organizational units that are located in less developed countries

  15. Likely to happen: • All software vendors will use the Internet as one of several distribution channels, thus becoming ASPs • Virtually all companies will use ASP’s at least to some extent

  16. Caveat emptor • Who will be responsible for keeping track of, and maintaining an inventory of, the technical environment in which applications are supported? • How will databases be backed up on an ongoing basis?

  17. What is the ASP’s ability to scale up capacity, network access, and processing capability? • How quickly can surges in business volume be accommodated, and at what cost? • Assuming that critical data is backed up, how safe and accessible are the backups, and where and how are they stored?

  18. Business-to-business alliances • B2B in the grocery industry • Retail alliances • The automakers’ alliance • Alliances in the computer industry • Airline alliances • Health care alliances • B2B in the hospitality industry • Excess products and equipment

  19. Government e-business • Types of electronic activities: • Government-to-citizen transactions • Ex.: online applications for licenses • Government-to-government transactions • Interactions between agencies of the same government • Transactions between two governments • Government-to-business transactions • Purchase transactions

  20. Business-to-Business: A Variety of Models Chapter 7