In recent years business models have played a critical role in the business fields leading to their popularity. Zott et al. (p.1020) state that since 1995 up to 2011 there were several academic articles which gave an overview of the standpoints on the business model. Zott states that despite the popularity of business model in relation to literature there exists not a common definition for the concept of business model. For instance, in 2001 scholars named Zott and Amit defined the business model as the configuration, content, and the governance of business dealings that are designed to develop value via exploiting of organizational opportunities.
On the other hand, an article written by Margetta (n.p), defined a good business model by use of questions which are such as; who is the client? What is the consumers value? How to accrue profits from the business? The economic logic that elaborates how the organization can provide quality products and services at minimal costs? Therefore in this research paper business model is defined as a conceptual model to assist in understanding the nature and significant aspects of business. The core areas of business model literature are the use of e-business and incorporation of technology in the firms.
Zott et al., (p.1020), most of the literature review focuses on e-business models particularly on the mechanisms of e-businesses and tactical advertising in e-businesses. An author named Applegate (p.65) analyzed the entire concept of e-business model by use of a simple framework that comprised of firm capabilities, business concept and value of output delivered in all business stakeholders. While Weill and Vitale (n.p) created a schematic e-business model that was atomic to assist in evaluating an e-business inventiveness via outlining the substantial elements. Thus, the schematic demonstrates the connections and flows of business funds, commodities or services, data between the involved business parties that include the organizations' interest, clients, and suppliers and their partners.
In addition to the discussion of the different components of the e-business model, most of the authors developed ontologies on business models that conceptualized the relationship that existed between different components of the e-business model. For instance, Gordijn and Akkermans (p.11) discussed a modeling approach to the e-business that helped on the definition of how to create economic value and exchange resources within the players in the network. This ontology applies concepts that have been derived from several business and economic literature in order to establish the required conceptual tool in order to effectively analyze the e-business projects and platforms. However, the study that has been through most citations is the Osterwalder business model that provided a highly comprehensive framework applicable in the analysis of the generic business models. Most different industries implemented the Osterwalder ontology to explore and analyze some of the business models. For instance, Tankhiwale (n.p) implemented the Osterwalder ontology in the analysis of a business model interrelationship that exists with changing business processes architecture through the analysis of a major telecommunications service provider. Osterwalders ontology entails four key business areas that include customer interface, product, financial aspects and infrastructure management. These four main areas were further subdivided into other nine building blocks as indicated in the table below (Table 1.1).
Pillar Building Block Description
Product The value proposition This is the valued products and services that the company provides.
Customer Interface The target customers This is the customer segment aimed at in the industry by the company.
Channel of distribution This is the manner in which the company reaches its customers.
Relationships This is the link that exists between the company and the customers.
Infrastructural Management Value Configuration This is the arrangements made and the activities that are needed for the creation of value for the companys customers.
Capability The ability of the company to continuously create value for the customers.
Partnership This is the aspect of coordination and collaboration between the customers so as to create and retain value for the customers.
Financial Aspects Cost Structure These are all the means that are employed in a specific business model in monetary aspects.
Revenue Model This illustrates the manner in which the company makes money through all-rounded revenue utilization.
The Osterwalders ontology of the nine building blocks: Osterwalder (2004, n.p)
This ontology has been implemented in many research and frameworks to analyze business models in different industries. This ontology may be implemented in a wide variety of business models. However, Osterwalder has developed a different ontology for the e-business models that puts into consideration the idiosyncratic aspects of the e-business.
Assessment of Osterwalders e-Business Model Ontology
Osterwalder (p.2) conducted work on the ontology of business model was chosen to develop a framework that is flexible and adaptive so as evaluate the business models in relation to peer-to-peer digital marketplaces. Due to the existence of a comprehensive framework provided by the ontology, it can cover the activity systems and financial elements. The objective of this section is to illustrate Osterwalder (p.2) e-business model ontology to acquire a better understanding of the fitness of this ontology in its usage to create an empirical study framework. There is the need and benefit of the usage of a formalized e-business model because it can be used to gain understanding of the elements of e-businesses. Further, it helps the business managements to facilitate change, create a network platform that allows the flow of communication with differing stakeholders, and identify and incorporate relevant strategies to be followed in an e-business (Osterwalder, p.2). In similar to the generic ontology of business model, there is a division of e-business model ontology on four distinct pillars that include customer relationship, organization managing, monetary factors, and commodity innovation.
The four pillars are further divided into small sections that are in relation to the features of e-business.
This pillar focuses on aspects relating to the companys product that involves value proposition and customers targeted who experience the outcomes concerning the value and capabilities. Therefore, it is essential for an organization it incorporates product elements to deliver the expected customer value.
Due to the existence of a wide range of technologies such as the ICT, the e-business is provided with extensive opportunities to develop and render value to its targeted clients than the prior usage of brick-and-mortal businesses. With this perspective, Osterwalder outlined three major ways e-business can develop value for the organizations clients and differentiate its e-business strategies from competitors. They involve;
By incorporating innovation by use of new and modified or complementary offerings.
Establishing lower pricing model than that of its competitors which result to enabling customer cost saving opportunities.
Offering premium clientele servicing and the connection from, augmented services that are in line with the core offering.
Organizations strategize for a business model and plans that focus on a certain group of customers. The targeted customers vary in that they could be the consumers business-consumers- or businesses business-to- business- from a specified geographic and demographic segment. Therefore, when businesses engage in Internet-based operations, it provides them with a wide scope range of clients as compared to the use of traditional offline business operations because of its virtual features. For instance, the digital market locations usually target particular geographical regions such as providing the classified ad websites that allow customers to swap their used products in New York geographical area. When targeting a demographic group across different and several locations it requires the creation of a platform that outsources for customers of employees that are well equipped for certain tasks from any location in the world. Thus, the opportunities of e-business are extensively abundant. However, each of the business models needs to watch out for the global and local competition threats which are on increasing rate because there is no barrier to entry in the market (Porter n.p).
Capabilities of an organization are significant of the essence because they are the aspects that enable rendering of a value proposition to business clients. Thus capabilities are defined as patterns that are repetitive of actions by use of companys resources to develop, produce and offer services and goods to a market segment (Wallin, p.960). When it comes to the digital peer-to-peer location of markets, the organizations not only do they require to acquire the necessary technical capabilities to certify that the laid out platform to effectively operate and enable carrying out of transactions but also they must possess the technology capacities and the know-how traditional marketplaces. This helps in the creation of sufficient network effects for business prospects.
Infrastructure management refers to configuring the value of a system that is required to develop and convey the value proposition. In accordance to Osterwalder (p.2), the element of infrastructure configuration for e-business consist of the activity configuration of the organization that involves the creation of value and rendering undertakings and the connections involved. Also, the infrastructure management encompasses organizational resources, company's assets, and company's partner network.
The value proposition is defined as the results of a configuration or a set of internal or external activities of a firm and ensures the organization employs the processes. The activity configuration differs from one business to another, nonetheless, in many cases in comprises of a process that develops the value of organizational services, broker, and intermediary services.
Partner network plays a critical role in determining the parts of the activity configuration are disseminated among the organizational partners. Further, the strategic alliance, existing in any form, such as joint ventures or the long-term relationships between the supplier and the buyers, are essential to all business models. This is because partner network allows the company to fully concentrate on its major competencies and outsourcing of its non-core competencies and undertakings to its partner network. Osterwalder also cited other important definitions of partner networks that include b-webs (Tapscott et al., n.p), and fluid firm (Selz, n.p).
Resources and assets
Resources and assets are necessities of a company because they are significantly used develop and render value proposition to the target customers. The resources of a firm are such as the tangible plants, tools, and capital reserves- and intangible elements and human resources. The technology element is often categorized under human assets, and intangible resources includes the copyrights, brands, firm's image, patents, and trading secrets.
Customer relationship is heftily enabled by the use of ICT technologies which creates an e-business opportunity to the building of customer networks. Osterwalder (p.2) stated that the companies could u...
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