E-Business Models

The term E-business (electronic business) is similar to terms like e-mail, e-commerce, helping not only in buying, selling but also in servicing customers and collaborating with business partners. Today, major corporations are rethinking their businesses in terms of the internet and its new culture and capabilities. Companies are using web to buy parts and supplies from other companies, to collaborate on sales promotions, and to do joint research. Exploiting the convenience, availability, and world-wide reach of the Internet, many companies, have discovered how to use the Internet in a better way.

After the first wave of e-business, ‘bricks and clicks’ businesses – those with both a traditional and e-commerce approach – find that, while they already have sound financial resources, they, too, must find the right e-business model(s) for generating profitable revenue streams from the Internet.

In terms of operationalising the e-business strategy a variety of e-business models are now in use. New business models that modify the nature of company interactions with outside entities have appeared in electronic markets. From one industry to another, these new business models have dramatically altered management techniques. It is important, therefore, to acknowledge the importance of e-business models. They are the conduit to increasing a company’s competitiveness in the e-marketplace by improving core business processes. The following are a few e-business models currently in use:

  1. Portals model: During the initial days of the Internet, e-commerce was the bull’s eye and portals were the arrows. Websites such as Yahoo, were the first stop for users going online. Analysts projected revenues based on banner advertising being strategically placed on websites. It was anticipated that users would click through to electronic stores. Venture capitalists were happy to provide cash for portals with entrepreneurs impressing ventures capitalists with their ‘elevator’  pitches.
  2. E-tailer model: The e-tailer model is a popular model utilised by retail organizations for transactions. Organisations can act as intermediaries between producers and potential buyers to create added value. They manage the platforms where their virtual brochures are presented. E-business enables good effective management practices since managers can use technology to make faster business decisions, such as the selection and realisation of products and rates. In this type of model, prices are determined by the e-business but variations are allowed according to predefined criteria.
  3. Auction model: The auction model plays an intermediary role between buyers and sellers. This type of ‘one seller to one broker to many buyers’ model is more concerned with filling a gap in the marketplace than with content. Communication is faster and made easier as it takes place in real time between buyers and sellers. This model eliminates both distance and time, and allows a continual updating of catalogues without expensive printing costs. Access is provided to a wide variety of goods and services grouped together by areas of commercial activity or personal interest.
  4. Value chain model: This business model groups together partner companies that consult each other in the making of a product with very high added value, through an organised process. The main objective is to maximise the creation of added value through an efficient operational process. These partnerships meet the specific needs of third parties by offering customized products. These types of firm do not use online intermediaries such as content aggregators in their e-commerce processes. Instead they attempt to build and maintain their own ecommerce infrastructure.
  5. Barter model: The barter model allows goods and services to be exchanged without money. Here the Internet enables a business owner to barter tangible or intangible products with another company. For example, a company can make its warehouse space profitable by offering another company the possibility of storing its products temporarily. Or a company that manufactures wooden furniture can barter sawdust and old wood with a company that produces plywood. The second variation of this model is the most virtual. In this case, the companies or people with access to this e-business model are members of different associations or companies. This type of site favours shared expertise and knowledge.
  6. Buying groups model: This model is a buying group for several business owners, and thus allows greater negotiating power. The model is especially useful for the smaller business unable to get the benefits provided by economies of scale. When joined together into a buying group, the new entity plays the role of intermediary for research and negotiation with suppliers. It can also provide the distribution of product catalogues as well as the management of commercial and financial transactions and the delivery of merchandise.