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B2C Models: Transaction Broker

Large market opportunity for online transaction brokersHesitation to switch from traditional broker

Challenge is to overcome consumer fearsEmphasizing security and privacy measures

Provide a broad range of financial services

Fee based on stock tradeFlat rate or sliding scale related to transaction size

Copyright © 2017 Pearson Education Ltd. Slide 2-40

B2C Models: Transaction Broker (cont.)

Travel sites (e.g., Booking, Expedia)

Commissions from travel books paid by hospitality company

Buy room nights from hospitality company for cheap prices, resell them for higher prices

Job sites(e.g., Monsterboard, Academic Transfer)Generate listing fees from employers up front,

rather than charging fees for filled positionsCopyright © 2017 Pearson Education Ltd. Slide 2-41

What are possible revenue models?

B2C Models: Market Creator

Generate revenue by charging percentage of every transaction made, or charging merchants for market access

eBay: Buyers and sellers are their own agents

No inventory or production costs


Why has eBay been profitable from the start?

B2C Models: Market Creator (cont.)

Uber, Lyft, and Airbnb: sharing economy companies?

1. Do not share resources

2. Companies produce revenue by extracting fees for each transaction

3. Economic value is unlocked in spare resources


https://youtu.be/330xnoXWBc4?t=1m55s

B2C Models: Service Provider

Online servicesExamples: Google Maps, Gmail, and so on;

MobielSchadeMelden

Value proposition Valuable, convenient, time-saving, low-cost

alternatives to traditional service providers

Revenue modelsSales of services, subscription fees, advertising,

sales of marketing data


https://www.mobielschademelden.nl/

B2B Business Models

Net marketplacesE-distributor

E-procurement

Exchange

Industry consortium

Private industrial network


B2B Models: E-distributor

Version of retail and wholesale store; maintenance, repair, and operations (MRO) goods, and indirect goods

Owned by one company seeking to serve many customers

Revenue model: Sales of goods

Examples: Würth, Makro, Ingram Micro


https://eshop.wurth.nl/nl/NL/EUR

B2B Models: E-procurement

Creates digital markets where participants transact for indirect goodsB2B service providers, SaaS and PaaS providers

Scale economies

Revenue model:Service fees, supply-chain management, order

fulfillment services

Example: Portbase


https://www.portbase.com/

Source: www.portbase.com Slide 2-50

Portbase Services

Source: www.portbase.com Slide 2-51

B2B Models: Exchanges Independently owned vertical digital

marketplace where hundreds of suppliers meet a small number of very large commercial purchasers

Revenue model: Transaction, commission fees

Tend to force suppliers into powerful price competition; number of exchanges has dropped dramatically

Examples: Alibaba, ThomasNet


https://www.youtube.com/watch?v=SfXE4FYlvmA

B2B Models: Industry Consortia

Industry-owned vertical digital marketspace open to select suppliers

More successful than exchangesSponsored by powerful industry players

Strengthen traditional purchasing behavior

Revenue model: Transaction, commission fees

Examples: The Seam (Cotton Blockchain)


https://www.theseam.com/resources/tour-online-cotton-trading/

https://youtu.be/JEYO8RuS4fM?list=PLxlMHVoXaEuFvt43U44ofXOHvCW7GYWeY

Private Industrial Networks

Digital network used to coordinate among firms engaged in business together

Constitute 75% of all B2B expenditures by large firms

Typically evolve out of large company’s internal enterprise system Key, trusted, long-term suppliers invited to network

Also see AEO certification in B2G and G2B sectors

Example: Active International


56

What could be a disadvantage of this model?

57

Industry Structure

Industry Value Chains

Set of activities performed by suppliers, manufacturers, transporters, distributors, and retailers that transform raw inputs into final products and services

Internet reduces cost of information and other transactional costs

Leads to greater operational efficiencies, lowering cost, prices, adding value for customers


E-commerce and Industry Value Chains

Figure 5.4, Page 354


Firm Value Chains

Activities that a firm engages in to create final products from raw inputs

Each step adds value

Effect of Internet: Increases operational efficiency. How?

Enables precise coordination of steps in chain

Enables product differentiation. How?


E-commerce and Firm Value Chains



Firm Value Webs

Networked business ecosystem

Uses Internet technology to coordinate the value chains of business partners

Coordinates a firm’s suppliers with its own production needs using an Internet-based supply chain management system


Internet-enabled Value Web



Business Strategy

Plan for achieving superior long-term returns on capital invested: that is, profit

Five generic strategiesProduct/service differentiation

Cost competition


What ways to compete on

costs does e-commerce offer?

Business Strategy


Five generic strategiesProduct/service differentiation. Opposite?

Cost competition

Ubiquity: Lowering costs of order entry

Global reach and universal standards: single order entry system worldwide


Business Strategy



Cost competition

Richness, interactivity, and personalization: Online customer profiles (no sales force)

Information intensity: detailed product information (no expensive catalogs nor sales force)


Business Strategy



Cost competition

Scope

Focus/market niche

Customer intimacy


E-commerce Technology and Business Model Disruption

Disruptive technologies

Digital disruption

Sustaining technology

Stages Disruptors introduce new products of lower quality

Disruptors improve products

New products become superior to existing products

Incumbent companies lose market share


Incumbents vs. Disruptors

ExamplesWhy didn’t Kodak see the transition to digital

photography?

Why didn’t Canon see the smartphone camera as a powerful competitor to digital cameras?

1. Unfit fitness

2. Shareholders expect ROI

3. Customer base expects continuous improvement


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