People Innovation Excellence

E-BUSINESS MODEL

by : Darjat Sudrajat, SE., MM.

Business model is a method of how a company will generate revenue, identifying its product offering, value added services, revenue sources and target customers to sustains itself (Strauss and Frost, 2014; Turban et al., 2012; Chaffey, 2015). E-business model is a method by which the organization sustains itself in the long term using information technology, particularly the internet, which includes its value proposition for partners and customers as well as its revenue streams. (Strauss and Frost, 2014; Baltzan, 2014). E-business model is composed of the following elements:

  • A description of the customers, their relationships, and their value proposition.
  • A description of all products and services.
  • A description of the business process
  • A list of the resources
  • A description of the organization’s supply chain
  • A list of the major competitors, their market share, and strengths/weaknesses
  • The competitive advantage offered by the business model
  • The anticipated organizational changes and any resistance to change
  • A description of revenue model, anticipated costs, sources of financing, and estimated profitability.

The functions or objectives of e-business model encompass describe the major business processes of a company, describe the business model’s (the venture’s) positioning within the value network linking suppliers and customers, formulate the venture’s competitive strategy and its long-range plans, articulate customers value proposition, identify a market segment define the venture’s specific value chain structure, estimate the cost structure and amount and profit potential. E-business model can be classified as follows:

  • Activity Level: Order processing, online purchasing, e-mail, content publishing, business intelligence, online advertising and public relations, online sales promotions, dynamic pricing strategies online, and social media communication.
  • Business Process Level: Customer relationship management, knowledge management, supply chain management, community building online, database marketing, enterprise resource planning, and mass customization
  • Enterprise Level: E-commerce, direct distribution, portal, social networking, online brokers, manufacturer’s agents, purchasing agents.

E-business model is essential in an increasingly dynamic and uncertain business environment for the following reasons:

  • The process of modeling social systems or an ontology, such as an e-business model, helps to identify and understanding the relevant elements in a specific domain and the relationships between them.
  • The use of formalized e-business models helps managers easily communicate and share their understanding of an e-business among other stakeholders.
  • Mapping and using e-business models as a foundation for discussion facilitates change.
  • A formalized e-business model can help identifying the relevant measures to follow in an e-business.
  • E-Business models can help managers simulate e-businesses and learn about them.

References:

Baltzan, P., 2014, Business Driven Information Systems, 4th Edition, McGraw-Hill/Irwin, New York

Chaffey, D., 2015, Digital Business and E-Commerce Management: Strategy, Implementation, and Practice, Sixth Edition, Pearson Education Limited, United Kingdom.

Osterwalder, A., Pigneur, Y., 2002, An E-Business Model Ontology for Modeling E-Business, 15th Bled Electronic Commerce Conference, Slovenia

Strauss, J., Frost, R., 2014, E-Marketing, Seventh Edition, Pearson Education, Inc., New Jersey

Turban, E. et al., 2012, Electronic Commerce 2012: A Managerial and Social Networks Perspective, Seventh Edition, Pearson Education, London


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