E-Business: Definition and Models

The internet has initiated a sea of change with regard to how companies and organizations now conduct business through the various opportunities available to them for conducting e-business. E-business is defined as the conduction of business or commerce based activities of purchase and sale through the medium of internet (Rodgers, Yen, & Chou, 2002). Electronic business is one of the most recent opportunities for business purposes due to the developments in technology and the internet. Companies now have the opportunity of conducting their business transactions through the electronic medium which has granted more efficiency and enhanced flexibility to business operations (Beheshti et al., 2006).

E-business operations enable companies to organize their supply-demand cycles in an enhanced manner through efficient planning and valuable input from suppliers, customers and business partners (Beheshti et al., 2006). E- Business enables companies to conduct business 24×7 due to the potential reach to remote geographical locations of the world, which would otherwise have been difficult and sometimes even impossible. This presents companies the ability to improve their service delivery through enhanced customer services facilitated by efficient delivery of services.

Organizations are continuously looking for ways and means of integrating technology in their business processes and strategies, which enables these organizations to enhance their competitiveness by reducing necessities such as personnel, transaction costs and the overall costs to the organization which will ultimately result in improved profitability (Beheshti et al., 2006). Research confirms that companies like General Motors, Ford and Daimler Chrysler profited immensely through the implementation of E-Business models and were able to make overall savings amounting to approximately 3000 USD on a vehicle worth 19,000 USD (Barens-Vierya & Claycomb, 2001; Barua, et al, 2001). E-business can take place through several business models which if implemented appropriately can boost sales and improve profitability.

The five common models of e-business are: (Beheshti et al., 2006)

  • Business to Business model (B2B)
  • Business to Consumer model (B2C)
  • Peer to Peer model (P2P)
  • Consumer to Consumer (C2C)
  • Portals or websites as promotional vehicles

Among these, the most commonly used business models are the B2B and B2C with the former accounting for more than ninety percent of all business transactions taking place in the US in the year 2002 (U.S. Department of Commerce E-Stats, 2004).

Business to Consumer (B2C) MODEL

Businesses organizations which utilize the B2C model make use of the internet to operate and carry out their retail transactions of buying and selling. These companies act as mediators between suppliers and potential customers and gain profit by conducting transactions between the two. The B2C model facilitates convenience for consumers and enables the company to maintain a competitive edge over their competitors. The B2C model has shown a substantial increase due to the augmentation of buying activities over the internet to a phenomenal rate of about 580 percent, which is likely to increase further due to increased use and activity of the internet (Biehn, 2001). The Unite States Department of Commerce, (2004) confirms that business activities related to e-business sales had increased substantially from $44.287 billion in the year 2003 to $55. 996 billion in the year 2004, reflecting a total increase in volume of more than twenty percent.

Business to Business (B2B) MODEL

The B2B model is designed by organizations to streamline the supply chain of business activities by bring about reductions in the expenditures related to procurement which would have direct positive impact on profitability. The B2B model relies upon the internet, intranet and the extranet so that communications between users are enhanced and the overall effectiveness of the business process is augmented due to automated procedures through technological utility (Beheshti et al., 2006). The B2B model has five sub models which companies can use according to their needs and references. These are (Barnes-Vieyra & Claycomb, 2001):

One seller to many buyers

In this kind of a model, companies generally build and maintain their own websites and conduct their business processes internally. In this model, the company serves consumers directly, which makes customer service an essential feature of the model. Companies can use several features to make customer service more efficient by introducing and operating the status of the order, information regarding after-sale services, providing day and night access to the site, having online search catalogue features, and providing technical knowhow and services to their clients (Beheshti et al., 2006). Customer security is an essential and determining aspect of this model.

Many sellers to one content aggregator to many buyers

This model is implemented through an intermediary hub or portal which facilitates business transactions between consumers and sellers. Processes are automated which increase the efficiency of this model, which facilitates reduced costs and increases productivity to the company, while providing negotiation facility to buyers (Beheshti et al., 2006).

One seller to one broker to many buyers

This model is primarily an online auction or commodity market where different buyers perceive the products differently, for instance, perishable goods (Beheshti et al., 2006).

Many sellers to one buyer

This kind of model is frequently used when large scale organization need several suppliers for electronic transaction and the consumers are able to gain rapid deliver and reduced costs of transactions from this model. Sellers place their bids in accordance with the needs and demands of the buyer so that the buyer benefits by accepting the appropriate bid (Beheshti et al., 2006).

Many sellers to many buyers

This model is not simple to implement due to the ability of buyers and sellers to switch positions. This results in elevated price pressures and reduced competitiveness with regard to the distribution process (Beheshti et al., 2006).

Consumer to Consumer (C2C) Model

This model is a system of business transactions which serves as an intermediary for transactions between customers. In the current scenario, this model is believed to be one of the most successful models which facilitate internet based auctions by sites such as e-bay and money transaction sites like PayPal (Bileta, 2003). Another example of the successful implementation of the model is the web money transaction company, PayPal, which has gained immense popularity in recent times. The model enables the exchange of goods and services on the internet through monetary transactions. The model is highly successful because it facilities the exchange of financial and service transactions between geographically diverse locations which would otherwise not have been possible offline.

The model enables customers to pay for transactions of products and services by different methods including cheques, cash, credit card, debit cards and even wire transfer (Sorkin, 2001). This facility has greatly boosted the popularity of the C2C model which enables payments to be made almost immediately following transactions of goods and services.

Thus, it is apparent that business today are taking place through several processes which involve sellers, customers, intermediate business partners which look after several aspects of the transaction processes (Chen, Jihong, and Robert, 2009). With the use of computer technology and the internet business models are being implemented so that businesses are becoming more wide spread and globalized, and managed efficiently to enhance sales and increase profitability.

References

Barnes-Vieyra, P. & Claycomb, C. (2001). Business-to-business e-commerce: Models and managerial decisions. Business Horizons, 44 (3), 13-20.

Barau, A., Konana, P., Whinston, A., & Yin, F. (2001). Driving e-business excellence. MIT Sloan Management Review, 43 (1), 36-44.

Beheshti, Hooshang M., Esmail Salehi-Sangari, and Anne Engstrom (2006). Competitive advantage with e-business: a survey of large American and Swedish firms. Competitiveness Review 16.2: 150(8).

Biehn, G. (2001). Yes, you can profit from e-commerce. Financial Executive, 17 (3), 2627.

Bileta (2003). Paypal and eBay: the Legal Implications of the C2C Electronic Commerce Model. Web.

Chen, Jihong, and Robert J. McQueen (2008) Factors affecting e-commerce stages of growth in small Chinese firms in New Zealand: an analysis of adoption motivators and inhibitors. Journal of Global Information Management 16.1 : 26(35).

Rodgers, J., Yen, D., & Chou, D. (2002). Developing e-business: A strategic approach. Information Management & Computer Security, 10(4), 184-192.

Sorkin, D. E. (2001) Payment Methods for Consumer-to-Consumer Online Transactions”, 35 Akron Law Review 1.

U.S. Department of Commerce E-Stats (2004). Web.

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