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Management Information Systems

Notes suppliers, the maintenance firm that keeps the printing presses running, the authors who submit
their manuscripts online, and so forth.

4.4.1 Business Models for Conducting B2B E-Commerce

Just as there are different business models for non-electronic businesses, there is also more than
one model for business-to-business e-commerce. In general, a business model is an organization’s
approach to doing business. Although there are many different business models available, most
business models have several core concepts in common.
 At the level of the most basic business model, an organization must have something of
value to offer to the marketplace, whether it be goods, products, or services.

Example: A bookstore may offer books and magazines as well as various services such
as special ordering. To be successful, the thing which the organization offers its customers needs
to be of value – something that the customer either wants or needs (or both).

 Another part of the business model is the customer – the target market to whom the
organization is trying to sell its offering. The business model needs to articulate how the
business will gain, maintain, and foster relationship with customers.
 In order to get the product into the hands of the customer, the organization also needs an
infrastructure in place. The infrastructure includes such things as having the right mix of
people and skills necessary to produce the product as well as to run the business. This may
include not only the people working directly for the organization, but partners as well
who provide skills or services that business does not provide for itself but that are necessary
to get the product into the hands of the customer. This may include companies that provide
complementary skills necessary to make the product (e.g., suppliers) as well as supply
chain partners that provide raw materials, supplies, or components or that distribute,
warehouse or sell finished products.
 The business model also needs to include consideration of the company’s income and cash
flow as well as its cost structure.
4.4.2 Advantages of E-Commerce for B2B Businesses

As shown in Figure 4.2, the traditional business model for business-to-business operations
involves a procurement staff that negotiates with various suppliers.

Example: A bookstore may procure books from several distributors and office supplies
from one or more other suppliers. In the e-commerce business model, a procurement staff
(typically smaller than the staff necessary in the traditional business-to-business model) shops
online for supplies and other items necessary to the business. Just as it does for the consumer in
the business-to-consumer business model, the Internet allows businesses to comparison shop
online in order to find the most appropriate product at the best price. This reduces many of the
front-end costs for finding goods and products that are incurred in the traditional model.

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