Business Models- The manner in which a business organizes itself so as to achieve its objectives, which normally involves the generation of profits.

“The method by which a firm builds and uses its resources to offer its customers better value than its competitors and to make money doing so.”-Afuahand Tucci

Business Model ComponentsEdit

  • External Forces
  • PEST–create opportunities or erect barriers
  • Markets/formats
  • Domain and locations
  • Customers
  • individuals and/or organizations
  • Core Business Processes
  • That develop, produce, market, and distribute products/services
  • Core Products and Services
  • Alliances
  • Expand business opportunities and reduce/transfer business risk
  • Strategic Management Process
  • Resource Management Process

External Forces: The Impact of the Internet on BusinessEdit

  • Mediating technology
  • Universality
  • Network externalities
  • Distribution channel
  • Time moderator
  • Information asymmetry shrinker
  • Infinite virtual capacity
  • Low cost standard
  • Creative destroyer
  • Transaction-cost reducerkjhob
  • hioghgv

Opportunities Presented by BusinessEdit

  • Virtual organization
  • Products and Services
  • Add value to products and services
  • Marketing
  • New pricing models New pricing models auction, reverse auction
  • New markets, advertising and marketing
  • Market segmentation
  • individualized products/pricing
  • Market Intelligence
  • Developing new sales channels online
  • Transaction processing
  • Operations
  • Promoting efficiency of business processes
  • Streamlining SCM (supply chain mgmt)
  • Disintermediation, re-intermediation
  • Trading Exchanges and Marketplaces
  • E-Procurement Customer Support
  • New service models
  • direct access
  • Public Relations
  • Communicating with stakeholders

Brokerage**General Types

    • Exchange (eBay)
    • Auction
    • Reverse auction (Priceline)
    • Buyer aggregator (Freemarkets)
    • Classifieds (Workopolis)
    • Mall/Portal: single URL (Yahoo)
    • Shopping agents (
    • Verticals
    • Automotive (Cars4U)
    • Travel (Expedia)
    • Event Tickets
    • Jobs (Monster)


  • enabled by internet: reduced overhead for buyers and sellers
  • types:

-open-cry (English); e.g., e-bay model

-Dutch; (auctioneer driven; suitable for perishable items) e.g.,; Adauction (perishable online & print advertising)

-single and multi-round sealed bid; 2nd price sealed bid

-issues: duration, anonymity, disclosure of supply level

  • Brokerage –B2B, B2C, C2C ... usually charges a fee for each transaction (or commission)

Business to Consumer e-Commerce (B2C):Edit

  • One of the trading partners is an end user of a product/service
  • Authentication is optional
  • Base catalogues and prices are identical for all users
  • Payment is largely through card credit

Examples of B2C:

Retail: Online store

Services: Online travel reservations

Financial Services: ATM, Online Banking, Telephone Banking, Online trading, online credit approval

Business to Business e Commerce (B2B):Edit

  • Both trading partners are businesses
  • Authentication is required
  • Catalogues and prices are account specific
  • Multiple payment methods/payment terms

Examples of B2B:

  • Manufacturing
  • Line of business document exchange
  • Supply chain management
  • Retail: Online procurement, Online catalogue from distributor/manufacturer
  • Services: Airline reservation system

Financial Services: Wire transfers, Brokerage services

  • marketplace exchange
  • buy/sell fulfillment
  • demand collection system
  • auction broker
  • transaction broker
  • distributor
  • search agent
  • virtual marketplace


  • Portal
  • Classifieds
  • User Registration
  • Query-based Paid Placement
  • Contextual Advertising / behavioural marketing
  • content-targeted advertising (google is a good example)
  • intromercials (animated, full screen, before user reaches intended content)
  • ultramercials (interactive online ads)


  • Advertising Networks
  • Audience Measurement Services
  • Incentive Marketing
  • Metamediary


  • Virtual merchant (e-tailer)
  • Catalog Merchant
  • Click and Mortar
  • Bit Vendor (strictly digital products/services. Both sales and distribution via net)
  • Manufacturer (Direct)
  • Purchase
  • Lease
  • License
  • Brand Integrated Content
  • Affiliate
  • Banner Exchange
  • Pay-per-click
  • Revenue Sharing
  • Community
  • Open source
  • Open Content
  • Public Broadcasting
  • Social Networking Services
  • Subscription
  • Content Services
  • Person-to-Person Networking Services
  • Trust services
  • Internet Services Providers (AOL)
  • Utility
  • Metered Usage
  • Metered Subscriptions

Rappa's Business Models ChartEdit





-Connecting buyers and sellers

-Marketplace exchange covering trans. Process

-buy/sell fulfilment

-demand collection syst. (name your price)

-auction broker (charges fee)

- Transaction broker (3rd party pmt sys.)


-Search agent – robot search out price

-Virtual marketplace (online mall)

-Service mixed with banner ads

Portal – search engines, high volume traffic


-User Registration – free but require registering demographic data

-Query based Paid Placement – like adwords stuff, linked to search

-Content Targeted adv. – all media returned after search result

-Intromercials - full screen animated ads –pre content

- Ultramercials – user must respond intermittently through message before reaching content

Collecting information for marketing

-Advertising Networks (feed banner ads to a network of sites)

-Audience Measure Service (online research agencies)

-Incentive Marketing (loyalty program, points or coupons in exchange for surveys and such)

-Metamediary (facilitates transaction by providing info and ancillary services

Wholesalers and Retailers

-Virtual (solely over the web)

-Catalog (mail order bus with web presence) Dans Comp

-Click and Mortar (Brick and Mortar with web front

-Bit Vendor (Mercahnt dealing strictly digital products)






Reaching customers directly, compress supply chain

-Purchase (ownership trans to buyer)

-Lease (rental, with option to purchase)

-License (usage rights only)

-Brand Integrated Content (created by manufacturer for product placement only)

Pay for performance model

-Banner Exchange (trades banner placement around network of affiliates )

-Payperclick (pay affiliates for click-through)

-Revenue sharing (% of sale commission based on click through to purchase)

Based on loyalty, user investment and

Open Source – users contribute to site

Open Content – users add content to enrich site

Public Broadcasting – user supported

Social Networking Service (allows individual to cnnnect with others based on common interest)

-Content Services (netfilx)

-P2P network such as Classmates

-Trust services (members abide by code of conduct, pay subscription fee

-Internet service Provider (offers connectivity and related)

-Metered Usage(bills based on actual usage)

-Metered Subscription

(able to purchase access to content in portions)

Differences between eCommerce and eBusinessEdit

  • e-Commerce: “Exchange of economic value facilitated by electronic media”
    • Ex: Credit cards networks, PayPal, “buying and selling over digital media”
    • Differences from traditional commerce:
      • Always open
      • Speed based competition
      • Enhanced interface for customer (mass customization)
      • Customer controlled interactions
      • Online behavior traceable/measureable (new metrics)
    • Dimensions of e-Commerce:
      • Brick and Mortar (Physical location entirely)
      • Pure Play (Online only)
      • Click-and-Mortar (Some online, but focused on physical sales)
    • e-Commerce Drivers:
      • Expand universe of potential buyers
      • Increase sales
      • Meet customer expectations
      • Increase brand/product recognition
      • Ease of doing business
      • Competitive pressure
      • Cost effectiveness
      • Provide more information to customers
      • Improve customer service
      • New sales channel

  • e-Business: includes e-Commerce functions, but also involved activities not directly related to direct exchange of economic value
    • Front office (Customer facing) activities:
    • Attracting/keeping customers, User authentication, Catalog display, Availability, Price comparison, Order taking, credit check
    • Back office:
    • Sourcing (finding/pricing/ordering/paying), logistics/delivery, billing, collection
    • B2C (business-consumer), B2B (business-business), G2C (government: utilities, taxes), G2B (permits, taxes), B2E (employees: benefits, pensions) C2C (eBay)
    • EDI (Electronic Data Interchange): Standard way of electronically encoding and exchanging Line of Business documents

Different ways of Businesses Analysis:Edit

PEST-Political, Environmental, Social, Technological

Industry Analysis (Analysis of competition)-Suppliers, Potential Entrants, Buyers, Substitutes, Industry Rivalry

SWOT (Situational Analysis)-Strengths, Weaknesses, Opportunities and Threats


-the internet has changes business models-Crowd Sourcing-Wikipedia is 12times bigger than Britannica-the new web changes the structure of business and business processes.

Technology Revolution (Web 2.0):

-everything is connected to the internet and has an IP including keys for hotel rooms, cell phones, etc… WiFi internet

-The old web was based on html-the new is based on xml, SOAP, etc…

-The web is no longer a platform for merely presentation-it’s a platform for computation.


the location of where things are according to the internet (GPS)-For example-> Socialight-allows users to put a digital sticky on a location so if a friend of loved one is near they will get that note.

-use of geometry and cell phone location to tell you the fastest route home.


talking over the internet

The Net GenerationEdit

The 1st generation that grew up with computers, a generation that processes differently. We are creating a structural underclass-those that have access to internet and those without access.

The Social RevolutionEdit

down with html and the rise of xml-self organizations like Wikipedia instead of Britannica

The Economic RevolutionEdit

the corporation’s hierarchy is changing-more peering and collaboration than ever before.

The Naked CorporationEdit

Transparency, integrity, “undress for success”-where more info. is accessible to the general public-and companies are under much stricter public scrutiny.


embrace and share companies for example IBM works with Linux they have a shared IP portfolio.

ACT GlobalEdit

Global business practices ex. Cambrian House

Mass CollaborationEdit

ex. Goldcorp.->posted an online challenge with a half a million dollar prize to get anyone to find where the gold was on Gold Corp.’s land-3.6 billion in gold was found.

The 7 Wonders of Mass Collaboration:Edit

  1. Peer Pioneers-work together to find creditable results.
  2. Ideagoras-open markets for uniquely qualified minds.
  3. Prosumers-consumers became producers-ex. selling a WOW character for real $.
  4. The New Alexandrians: The Sharing of Science-ex. the human Genome project.
  5. Open Platforms-All the world is a stage-everyone works together.
  6. Global-the global plant floor-mass collaboration-treating suppliers like partners
  7. The Wiki Workplace-a more level playing field style workplace where everyone ideas are valid-and help build a better goods/services

Core Competence Strategy:Edit

-Competitiveness is derived from being able to build faster and at a lower cost than competitors.

Tests of CC are…

  1. Provides potential access to a wide variety of markets
  2. Should make a significant contribution to the perceived customer benefits of the end product
  3. CC should be difficult for competitors to imitate

Competitive advantage: Theory suggests that states and businesses should pursue policies that create high-quality goods to sell at high prices in the market. Porter emphasizes productivity growth as the focus of national strategies. Competitive advantage rests on the notion that cheap labor is ubiquitous and natural resources are not necessary for a good economy. The other theory, comparative advantage can lead countries to specialize in exporting primary goods and raw materials that trap countries in low-wage economies due to terms of trade. Competitive advantage attempts to correct for this issue by stressing maximizing scale economies in goods and services that garner premium prices (Stutz and Warf 2009).

Value ChainEdit

Products pass through all activities of the chain in order and at each activity the product gains some value. The chain of activities gives the products more added value than the sum of added values of all activities. It is important not to mix the concept of the value chain with the costs occurring throughout the activities. A diamond cutter can be used as an example of the difference. The cutting activity may have a low cost, but the activity adds much of the value to the end product, since a rough diamond is significantly less valuable

Porter's 5 forces