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E-business Model By Assoc. Prof. Dr. Siriluck Rotchanakitumnuai Department of Management Information Systems Faculty of Commerce and Accountancy Thammasat University 7/21/2015 1 B2B Models Company-centric models Sell-side marketplace (one-to-many) Buy-side marketplace (many-to-one) Many-to-many marketplaces—the exchange Collaborative commerce 7/21/2015 2 Models of B2B E-Commerce 7/21/2015 3 B2B Models (cont.) Virtual service industries in B2B 7/21/2015 Travel and tourism services Real estate Electronic payments Online stock trading Online financing Other online services 4 Sell-Side Marketplace Architecture 7/21/2015 5 Selling Side: Auctions and Other Models Forward auctions—quick disposal of items 7/21/2015 Revenue generation Increased page views Member acquisition and retention—bidding transactions result in additional registered members 6 Selling Side: Auctions and Other Models (cont.) Using intermediaries when: Searching and reporting 7/21/2015 No resources required Own and control auction information Fast time to market Search and report all auction activities Standard reports available Additional analysis of complex information 7 Buy Side: One-from-Many, E-Procurement Purchasing agents (buyers) Direct purchasing Indirect purchasing Use of material is scheduled Not a shelf item MROs Nonproduction materials Inefficiencies in procurement management of indirect materials 7/21/2015 8 A Traditional Purchasing Process Flow Source: ariba.com, February 2001. 7/21/2015 9 Buy Side: One-from-Many, E-Procurement (cont.) Innovative procurement management Innovative purchasing as strategic approach to increase profit margins Web facilitation includes: 7/21/2015 Electronic tendering Volume purchasing Aggregating supplier catalogs at buyer’s site Group purchasing Others 10 Buy Side: One-from-Many, E-Procurement (cont.) Goals of procurement reengineering Increase purchasing agent productivity Lower purchasing prices of items Improve information flow and management Minimize maverick (unplanned) buying Improve payment process Streamline purchasing process to make it: 7/21/2015 Simple Fast 11 Buy Side: One-from-Many, E-Procurement (cont.) Goals of procurement reengineering (cont.) 7/21/2015 Reduce administrative processing cost per order Find new suppliers and vendors to provide faster/cheaper goods and services Integrate procurement process with budgetary control in an efficient and effective way Minimize human errors in buying or shipping process 12 Buy-Side B2BMarketplace Architecture 7/21/2015 13 Buy Side: One-from-Many, E-Procurement (cont.) Direct vs. indirect sourcing Tools to automate purchasing goods 7/21/2015 Direct or mission critical 80% of manufacturer’s expenditure Long-term relationship with vendor of known quality goods Tight integration with suppliers along supply chain Indirect—use of public exchanges for indirect sourcing 14 Buy Side: Reverse Auctions Pre-Internet Reverse auction process Prepare description of product to be produced Announce project via ads, mail, telephone Send detailed information to interested vendors Vendors prepare proposals Bidders submit document proposals Proposals evaluated Problems: 7/21/2015 Laws Expensive Errors 15 Buy Side: Reverse Auctions (cont.) Web-based reverse auction process 7/21/2015 Buyers prepare bidding project information Buyers post project on portal Identify potential suppliers Invite suppliers to bid Suppliers download project information Suppliers submit electronic bid Reverse auction in real-time, or it can take a few days Buyers evaluate and award contract 16 Buy Side: Reverse Auctions (cont.) Web-based reverse auction process Benefits: 7/21/2015 Electronic process is faster Administratively much less expensive Enables location of cheapest possible products 17 Group Purchasing Group purchasing—orders from several buyers are aggregated Internal aggregation External aggregation 7/21/2015 Economy of scale Reduced transaction processing cost Aggregating demand online Putting together orders from multiple buyers to make large volumes/lower costs 18 Collaborative Commerce (CCommerce) Web-based systems used between and among suppliers for: 7/21/2015 Communication Design Planning Information sharing Information discovery 19 Collaborative Commerce (C-Commerce) (cont.) Reduce design cycle time by connecting suppliers: Adaptec, Inc. Microchip manufacturer supplying electronic equipment makers Solution to the problem 7/21/2015 Outsources manufacturing tasks Delivery times exceeded their competitors Extranet and enterprise-level supply chain integrated software Significantly reduced order-to-product delivery time 20 Collaborative Commerce (C-Commerce) (cont.) Reduce product development time by connecting suppliers: Caterpillar, Inc. Heavy machinery manufacturer uses extranet Request for customized component directly to designers and suppliers ship to buyers Connect engineering and manufacturing division with worldwide 7/21/2015 Suppliers Distributors Overseas Factories Customers 21 Practical categories of E-business Brokerage model Merchant model It is predicated on the power of the web to allow a manufacturer (suppliers/service providers) to reach buyers directly and thereby compress the distribution/service delivery channel) Affiliate model Wholesalers of goods and services. Sales may be made based on list prices or through auction Manufacturing (Direct model) Are market-makers: they bring buyers and sellers together and facilitate transaction e.g. auction broker, marketplace exchange The affiliates provide purchase/service-point-click through to the merchant e.g. banner exchange, revenue sharing Community model 7/21/2015 The Internet is inherently suited to community business models and today this is one of the more fertile areas of delvelopment 22 Managerial Issues B2B marketing—sell-side marketplaces require advertisement and incentives Which models to use and when—need for implementation strategies and prioritization Purchase process reengineering (BPR) Establish buy-side marketplace on its server if volume is big enough to attract major vendors Join third-party intermediary-oriented marketplace if volume is small 7/21/2015 23 Managerial Issues (cont.) Business ethics Accessing unauthorized areas in the tracing system should not be allowed Privacy of partners should be protected technically and legally Auctions—both forward and reverse 7/21/2015 Benefits are substantial Implementation is relatively simple Considerable flexibility in implementation 24