Page 64 - DMGT505_MANAGEMENT_INFORMATION_SYSTEM

Unit 4: Electronic Commerce and the Digital Organization

Notes
Example: H-E-B Food Stores, a $7-billion supermarket chain, purchases its wholesale
supplies via Inc2Inc.com (www.Inc2Inc.com), a new electronic marketplace, instead of using
proprietary extranets. H-E-B Food Stores does this because it has suppliers who do not have
automated computerized systems, but still they can be integrated for purchasing via the Internet
and a Web system. In this way, H-E-B Food Stores is still able to transact with those suppliers,
even when the company is in the midst of automating its purchasing processes. Recognizing the
benefits from its initial testing, the firm plans to move 80% of its procurement online.
B2B electronic markets function as digital intermediaries that focus on industry verticals or
specific business functions. They set up virtual marketplaces where firms participate in buying
and selling activities after they obtain membership.

Example: CheMatch.com (www.chematch.com) is a B2B exchange for buying and selling
bulk commodity chemicals, polymers and fuel products. Firms subscribing to CheMatch.com
can log onto its virtual exchange floor, and then post requests to buy and offers to sell, and
respond to offers. When two firms agree to transact, the transacting terms are faxed to both
parties and the deal is settled. The marketplace creates value by bringing buyers and sellers
together to create transactional immediacy and supply liquidity, and by supporting the exchange
of demand and supply information.
E-procurement systems are usually integrated with corporate enterprise systems and
organizational intranets. They typically consist of two parts. One part resides on the top of the
company’s intranet behind its firewall, where employees can search and place order for desired
supplies. The purchase orders, after they have been approved and consolidated, are sent out to
a third party, usually a neutral electronic marketplace. This is where the second part of the
e-procurement system resides. At the electronic marketplace, these orders are transformed into
various formats according to different protocols so that they can be received and processed by
different suppliers. The major benefits of adopting e-procurement systems are reduced operating
costs and searching costs, which lead to high returns on investments.

Did u know? Full form of IOIs

Inter-organizational Information Systems

4.3.1 How Internet Business Models Work

While there are many e-commerce business models, most depend on two fundamental building
blocks: businesses (B) and consumers (C). From this foundation, you can derive four basic
models: B2B, B2C, C2B, and C2C. Somehow, most businesses (both online and off) fall into one
or more of these categories, although they use a wide variety of ways to link buyers, sellers, and
manufacturers. A business might sell goods it has manufactured itself, resell those made by
another company, or simply act as a middleman, connecting the buyer and seller. The revenue
streams flowing between these parties is potentially even more complex, because one company
might (and should!) have numerous sources of revenue, ranging from product sales to affiliate
commissions and advertising income.
The various model of Internet business are:

Business-To-Consumer
The business-to-consumer (B2C) business model is perhaps the most familiar e-commerce model.
Vendors sell goods and services over the Web to connected consumers.

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