Business_Models_for_Internet_Based_E-Commerce

BusinessModelsforInternetbasedE-CommerceAnAnatomyBMahadevanAssociateProfessor,Production&OperationsManagementIndianInstituteofManagementBangalore560076,INDIA.e-mail:[e-mail]&DOLIRUQLD0DQDJHPHQW5HYLHZ6XPPHU9RO1RAbstractThesuccessofInternetbasedbusinessesintheBusinesstoCustomersegmentinrecentyearsisanindicationoftheeventstounfoldatthedawnofthenewmillennium.ItiswidelyprojectedthattheBusinesstoBusinesssegmentispoisedforaspectaculargrowth.However,aconsistentdefinitionandaframeworkforabusinessmodelfortheInternetbasedbusinessisstillnon-existent.Thispaperisanefforttofillinthisgap.Weproposeathreedimensionalframeworkfordefiningabusinessmodelandapplyittotheemergingmarketstructure.Furthermore,wealsoidentifycertainfactorsthatwouldguideorganizationsintheirchoiceofanappropriatebusinessmodel.Wealsoidentifypossibilitiesforfurthertheorybuildinginthisarea.BusinessModelsforInternetbasedE-CommerceIntroductionThegrowthofInternetbasedbusinesses,popularlyknownasdotcomsisanythingbutmeteoric.Overyears,severalorganizationsdoingbusinessthroughtheInternethavecomeoutwiththeirownsetofuniquepropositionstosucceedinthebusiness.ForinstanceAmazon.comdemonstratedhowitispossibletodis-intermediatethesupplychainandcreatenewvalueoutofit.CompaniessuchasHotmail,andNetscapemadebusinesssenseoutofprovidingfreeproductsandservices.OntheotherhandcompaniessuchasAOLandYahooidentifiednewrevenuestreamsfortheirbusinesses.ItisincreasinglybecomingclearerthatthepropositionsthattheseorganizationsemployedintheirbusinesscouldcollectivelyformthebuildingblocksofabusinessmodelforanInternetbasedbusiness1.SeveralvariationsoftheseearlyinitiativesaswellassomenewonesbeinginnovatedbyrecentInternetventureshaveunderscoredtheneedforsometheorybuildinginthisarea.Agoodtheoryisastatementofrelationsamongconceptswithinasetofassumptionsandconstraints.Thepurposeoftheoryistwofold2:toorganize(parsimoniously)andtocommunicate(clearly).Wallace3outlinedasystematicapproachtotheorybuilding,whichbroadlyconsistsofobservation,inductionanddeduction.Theorybuildinginanewareaoftenbeginswithindividualobservationsthatarehighlyspecificandessentiallyuniqueitemsofinformation.Bycarefulmeasurement,samplesummarizationandparameterestimation,itispossibletosynthesizeempiricalgeneralizations.Thenextstageintheorybuildinginvolvesconceptformation,propositionformationandpropositionarrangement.Usingsamplingthehypothesis1thatoccasionedtheconstructionofthepropositioncouldbetested.Eventually,theresultsofhypothesistestingenablesconfirmation,modificationorrejectionofthetheory.Inthispaperwefocusonobservationandinductionaspectsoftheorybuilding.Anotherkeyaspectoftheorybuildingistheuseofalternativeclassificationschemesoftenemployingtypologiesandtaxonomies4.Typologicalclassificationhasatwo-foldfunction:codificationandprediction.Atypologycreatesorderoutofthepotentialchaosofdiscreteandheterogeneousobservations.Butinsocodifyingthephenomena,italsopermitstheobservertoseekandpredictrelationshipbetweenphenomenathatdonotseemtobeconnectedinanyobviousway.Thisisbecauseagoodtypologyisnotacollectionofundifferentiatedentitiesbutiscomposedofaclusteroftraits,whichinrealityhangtogether.Indeedsystematicclassificationandtheexplicationofrationaleforclassificationaretantamounttothecodificationoftheexistingstateofknowledgeinadiscipline5.Thispaperisaneffortonthetheorybuildingprocessthatincorporatesseveraloftheabovefeaturessuchasobservation,inductionandclassification.WeparticularlyidentifyandfocusontwobroadissuesconcerningorganizationengaginginInternetbasedbusiness:Isthereabasisonwhichonecanclassifythesenewpropositions?andarethereanyfactorsthatcouldpotentiallyinfluenceanorganizationinidentifyinganappropriatesub-setofthesepropositionsforitsbusiness?Weproposetoaddresstheseissuesinthispaper.Baruaetal.6proposedafour-layerframeworkformeasuringthesizeoftheInterneteconomyasawhole.TheInternetinfrastructurelayeraddressestheissueofbackboneinfrastructurerequiredforconductingbusinessviathenet.Expectedly,itis2largelymadeupoftelecommunicationcompaniesandotherhardwaremanufacturerssuchascomputerandnetworkingequipment.TheInternetapplicationslayerprovidessupportsystemsfortheInterneteconomythroughavarietyofsoftwareapplicationsthatenableorganizationstocommerciallyexploitthebackboneinfrastructure.Overyears,severalapplicationsaddressingarangeofissuesfromwebpagedesigntoprovidingsecurityandtrustinconductingvariousbusinesstransactionsoverthenethavebeendeveloped.TheInternetintermediarylayerincludesahostofcompaniesthatparticipateinthemarketmakingprocessinseveralways.Finally,theInternetcommercelayercoverscompaniesthatconductbusinessinanoverallambienceprovidedbytheotherthreelayers.Werefertotheirpaperformoredetailsonthefourlayersandthetypeoforganizationsincludedinthefourlayers.TheInternetinfrastructurelayerandtheapplicationslayerplayacrucialroleinmoderatingandtrendsettingthegrowthofInterneteconomy.However,inthispaper,wedrawourattentiontothenotionofabusinessmodelasapplicabletothelasttwolayers.Thefocusonthelasttwolayersstemsfromseveralreasons:(a)Thegrowthofth