The Internet is increasing the capacity of people and companies to connect, interact, share information, and do E-Business at a pace that would scarcely have been credible just three years ago. It is a new channel that potentially links anyone to anyone, enabling companies to build interactive relationships with customers, suppliers, and others in the value chain.
The opportunities appear to be enormous, but determining how and when to take advantage of them is not so obvious or easy for most companies, especially the large well-established companies.

“Electronic commerce can offer your company both short-term and long term benefits.
Not only can it open new markets, enabling you to reach new customers,
but it can also make it easier and faster for you to do business with your existing customer base.
Moving business practices, such as ordering, invoicing, and customer support,
to network-based systems can also reduce the paperwork involved in business-to-business transactions.
When more of your information is digital, you can better focus on meeting your customers’ needs.
Tracking customer satisfaction, requesting more customer feedback, and presenting custom solutions
for your clientele are just some of the opportunities that can stem from electronic commerce.”
(Kosiur,1997: 20)

E-Commerce offers great potential growth to companies, but there are a lot of things companies need to be aware of before they attempt to make profit on the net.

“The fact is that too many companies have rushed to establish Web sites with only the vaguest notion of what they expect to gain.
Most have built defensive «me-too» sites that add little or no value for the consumer (or, for that matter, for the company itself).
As a result, many corporations have ended up with expensive, stake-in-the-ground Web sites
that are not integrated with their business systems and are largely unsuccessful with their customers”
(Booz – Allen & Hamilton, n.d.)

Given the market and opportunity no company can afford to ignore the Internet in its planning process. However, in order for the Internet to deliver on its promise, managers must step back and devote time and attention to assessing the unique opportunities and threats the Internet poses to their own business, both near and long-term. After this analysis, a company can set a realistic goal for itself on the Internet and then follow an investment program to achieve that goal.

A well-thought Internet strategy comprises two perspectives:

Supply side: Understanding the threats and opportunities that the Internet presents to the individual business
Demand side: Understanding the timing and intensity of companies response to those threats and opportunities based on consumers’ appetite for what the companies are offering

Further companies need to ask themselves some questions: (Bolton, n.d.)

What is the impact of the Internet on our products and our role in the value chain?
Will there be significant demand near term for our products and services to be delivered online? (now and 3-5 years out)
How well is our company positioned to deliver our products and services over the Internet?
What is the impact of moving some (or all) of our delivery systems online?
Market impact?
Organizational impact?
Revenue and cost?
How will e-commerce change a company’s customer priorities?
How can a company construct a business design to meet these new customer priorities?
What technology investments must a company make to survive, let alone thrive?

A Deloitte Research study envisions a new age of price wars, the disappearance of money, a solution to the language barrier and a queue system for the world wide wait.

By 2002, according to The New Economics of Transactions Internet revenues will top $1.1 trillion, more than 70 percent of large companies will adopt the Web as a sales medium, and, time and distance will cease to be a barrier between buyer and seller.

Source: Cunningham and FrÖschl (1999:176)

Figur 2.1 Use of E-Commerce by US businesses, 2000-2010 (INPUT)

Concerning the expected growth in Business-to-Consumer and Business-to-Business the figur below shows that.

Source: Cunningham and Fröschl (1999:138)

Figur 2.2 Worldwide value of products bought electronically (INPUT)

Concerning Agents a lot will happen in the future. Both for the supply side as well as for the demand side.

To aid consumers, «shop-bots», software agents currently used to search the Web
and find the lowest-priced products will evolve into cyber negotiators that will
actually haggle with other agents to get the best deal. In addition to price, these «smart-bots»
will have the intelligence to evaluate several factors,
such as warranty, delivery time and return policy—as well as the power to complete transactions automatically.
According to the study, such capabilities will cause companies to radically alter their marketing blueprints
as «bots» from competing companies develop into armies creating sporadic price wars.
(Deloitte Research, n.d.)

According to the study, one of the «killer applications» that will occur in the next three years will be the replacement of traditional Internet Service Providers (ISPs) with more powerful «Commerce Service Providers» (CSPs) that can conduct transactions. «Cross-industry mergers that today are unthinkable as banks and ISPs for example are likely just around the corner.

By the year 2000, over 200 million users will be connected to the Internet, already called the «world wide wait» by regular users. The distribution of multimedia such as video and audio over the Internet will soon slow Internet traffic to a snail’s pace.

One solution suggested in the study is the development of a «priority pricing system» where consumers pay different prices for varying transport speeds, access and quality levels.

The study also shows that another solution to the growing Internet traffic jam is a shift in programming language from the popular HTML (Hypertext Markup Language) to XML (Extensible Markup Language).

Six significant forces emerge from the analysis: (Deloitte Research, n.d.)
For many retail products, Internet-based software agents called «shop bots» will search for products, compare prices, conduct transactions, and arrange for delivery-all based on instructions that consumers provide them.

Certain types of products will «morph» into digital bits in order to be transported from producer to consumer. These products will adapt their form so they can be delivered over the Internet in order to minimize transactions and transportation costs.
Internet transactions will alter the traditional form of money as security and privacy solutions allow for extensive use of digital cash; shop-bots as well as humans will begin to use «electronic» wallets to complete their purchases.
Over the next several years Internet e-commerce information technology will be dominated by three themes: First, CSPs («commerce service providers») will replace ISPs («Internet service providers»). Second, the move to implement priority service pricing protocols on the Internet will introduce economically sound resource allocation logic to differentiate between important economic transactions and lower-priority entertainment uses of the Internet. Third, it is likely that XML and XSL will replace HTML as the universal language of e-commerce on the Internet.
The desire for security, «seals of approval,» and privacy will lead to markets for «trust.»
Governments will revise the taxation of transactions to deal with the inadequacy of traditional assessment and collection methods as companies and markets seek to use cyberspace to save money.

Today’s traditional business models have changed little since they first emerged during the Industrial Age. Virtually overnight, however, the Internet and user-friendly technology have empowered a new generation of customers, who are challenging this long-accepted structure of business. The result is a fundamental shift from a seller-driven to a buyer-driven world. The Internet is changing the way people do business and it is creating new businesses models.

Source: Cunningham and Fröschl (1999:212)

Figur 2.3 Electronic Business processes within the customer organisation

Internet-based e-commerce will skyrocket, but only companies that develop and implement entirely new business models will succeed, according to a report by Datacomm Research and Techvest International (1999).

The report, «Portals to Profit: E-Commerce Business Models and Enabling Technologies,» predicts much experimentation with new e-commerce business models. Many businesses will sell products at cost, making money off advertising, shipping and handling charges, membership fees, and cash flow, the report finds. Auction sites will continue to evolve, and shopping bots will make the entire Internet into one, big real-time auction, the report predicts. Further traditional business models will be replaced by new models based on electronic information chains. Big portals will likely merge with ISPs and telecomm access providers, and the portals will begin to emulate AOL’s subscription model.

Wireless technologies will extend e-commerce to everywhere business transactions are conducted, and high-speed access will allow merchants and advertisers to deliver richer content and a more compelling shopping experience.

The literature about Internet electronic commerce is not consistent in the usage of the term ‘business model’, and, often authors do not give a definition of the term.

Timmers (1998) suggest to define a business model in the following way:

An architecture for the product, service and information flows, including a description of the various business actors and their roles; and
A description of the potential benefits for the various business actors; and
A description of the sources of revenues.

Further he observes from the business on the Internet and different projects, that:

information and communication technology enables a wide range of business models;
the capability of the state-of-the-art technology is just one criterion in model selection;
technology in itself provides no guidelines for selecting a model in commercial terms;
guidance to technology development can come from the definition of new models;
many of the conceivable models have not yet been experimented with commercially

According to Timmers (1998) we have eleven business models that was in use in 1998 or being experimented with. These are:

E-shop promotion, cost-reduction, additional outlet, (seeking demand)
E-procurement additional inlet, (seeking suppliers)
E-auction electronic bidding (no need for prior movement of goods or parties)
3rd party marketplace common marketing front end and transaction support to multiple business
E-mall (collection of e-shops), aggregators, industry sector marketplace
Virtual communities focus on added value of communication between members
Value chain integrator added-value by integrating multiple steps of the value chain
Information brokers trust providers, business information and consultancy
Value chain service provider support part of value chain, e.g. logistics, payments
Collaboration platforms e.g. collaborative design
Trust brokerage

Hoffmann (1999) defines six functional categories of Commercial Web pages. Each can be considered as an element in an integrated marketing program in the context of digital commerce.

Online Storefront
Internet Presence ( Flat Ad, Image and Information)
Content (Fee-Based, Sponsored, Searchable Database)
Mall
Incentive Site
Search Agent

Bock (1998) suggests that there are six basic models for increasing profits on the Web that he has discovered in his research.

The six basic models are:

Direct Sales — completing sales transactions on the Net.
Subscriptions/Memberships — specialized information available to people who pay for it.
Advertising — delivering an audience in return for payment.
Net Related Services — consulting, Web design, etc.
Cost Cutting — using the Net and the Web to automate business processes and save money.
Enhancing Other Operations — using the Net and the Web to improve things that you do elsewhere.

Siegel (2000) describes the following new models:

Auctions
Vortals
Purchasing Groups
Delivery Services

According to (Lawrence, 1998: 20-35) the methods for building a commercial presence on the Internet include the following models:

Poster/Billboard model
On-line Yellow Pages model
Virtual storefront model
Subscription model
Advertising model
5.7 model
Internet commerce customer service life cycle
Integrated Internet marketing model

It is essential that to be successful as an E-Business companies must not only understand what compels Internet consumers to go online but at the same time it is critical to master the new business models made possible by the Internet. Companies have to watch up for new partnerships which will be the fact over night and which will create new business models and eventually destroy traditional thinking company quite fast. For the future oriented company, which is willingly to make conversation with the E-Customer and let them participate or decide the vision for the company it will be a lot of possibilities to create new partnerships and new business models in the future.

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Kunnskapskilden – E-Business

Kunnskapskilden – E-Business – E-Business, E-Customer, Relationship and Interactivity

Dissertation The E-Business, the E-Customer, their Relationship and Interactivity

Jan Vig

Dissertation av Jan Vig om E.Business, E-Customer, Relationship and Interactivity (286 sider) i forbindelse med Masterstudie i Information Technology and Communication Juni 2000.

The E-Retailer Business, the E-Customer, their Relationship and Interactivity

Table of Contents

Chapter 2

Business in Cyberspace

2.5

Business in Cyberspace

Siegel (2000) describes the following new models:

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Kunnskapskilden – E-Business –
E-Business, E-Customer, Relationship and Interactivity

Dissertation
The E-Business, the E-Customer,
their Relationship and Interactivity

The E-Retailer Business, the E-Customer,
their Relationship and Interactivity