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Electronic Business Models: B2C, B2B

Ana Paula Rocha

Electronic Business Technologies

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Electronic Commerce

• Market Transaction– finite set of processes of interaction between participants with

different goals (eg, buyer / seller)– establishment of an agreement among participants to exchange

products or services (goods)

• Electronic Commerce (EC)– B2C

• transaction between individual buyers and sellers• subject of the transaction is a final good

– B2B • transaction between enterprises• subject of the transaction is an asset to be used in production processes

(not a final good)

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B2C e B2B

Delivery Centers

Retailers

ManufacturingClient

Suppliers

B2BB2C

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Electronic Market

• Network of interactions where occurs an exchange of information, products, services and payments– supports all necessary transactions

– local where buyers and sellers meet electronically

– buyers and sellers negotiate, submit bids, establish an agreement

• Prices are set dynamically– by mapping between demand and supply in real time

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Incentives for EC

– Technological infrastructure is low cost, electronic transactions are accurate and low cost

– External integration with suppliers and independent contractors

– Integration of internal operations

Economic

Technology– Innovation and new technologies

– Rapid decline in technology cost vs. performance

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Incentives for EC

– New marketing channels in order to achieve micro-segment or small audience

– Improving customer satisfaction: creation of new service channels and customer support

– New marketing strategy :• Development, at low cost, of methods for customer

survey

• Establishing closer relationships with the customer

Marketing

Market

– High competition

– Global economy

– Frequent and significant changes in the markets

– Growing requirements of consumers

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Limitations to EC

• Technical– Security– Need for standards– Need for integration of EC systems with existing applications and

databases

• Other– Trust; consumers do not trust:

• Unknown suppliers or “paperless” transactions

– Many unresolved legal issues– Human relations cease to exist

Changing from a physical world to a virtual world can be difficult...

Agents and Electronic Commerce

Are agents a right paradigm for EC?

• Autonomy– Agents act pro-actively, reactively, without human intervention (can

wait for good deals or opportunities)

– Personalization

– Agent profile reflects the human preferences

• Sociability– Ability of communication between agents used to discuss the terms of

the deal

• Intelligence– Agents can learn from past experiences in order to achieve better deals

in the future

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B2C

Life Cycle

• Information– Product search (Jango, PersonaLogic, Firefly)

– Suppliers search (Bargainfinder, Jango)

• Negotiation– Agreement on the terms of the transaction

• Resolution– Payment vs. Delivery

– After-sales service

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Information Negotiation Resolution… …

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Information search (recommendation systems)

• Content based filtering– Search multiple sources; extract information from content

• search based on keywords

• extraction of semantic information

• Collaborative filtering– Use comments and ratings from different consumers with similar profiles

• Constraint based filtering– Problem and state space formulated in terms of variables, domains and

constraints

– Assign values to variables satisfying all constraints (strong and weak)

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Content based filtering

Search CD prices from nine different vendors, and provides this information

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Collaborative filtering

Recommendation based on the opinions of "similar” consumers

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Negotiation

• Commerce imples interaction:– Between buyers and sellers (B2C), between business partners (B2B)

• Negotiation is the key of interaction in EC:– "key" because the individuals / agents are autonomous, need to be

convinced to be influenced

– The process by which groups of entities communicate with each other trying to reach an agreement acceptable to all

– Several kinds: auction, contract net, argumentation, …

• Negotiations carried out by formulating proposals, adding various business options, offering concessions,…

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Negotiation

• Several markets allow simple negotiation– www.miau.pt : simple auction

– www.ebay.com: simple auction, possibility of automatic bidding with predetermined increments

– ....

• Research work:– Kasbah (1999): multi-agent system for trading goods, built on

negotiation tactics

– FishMarket : dutch auction, as comprtition(até 1999)

– Negociação-Q: multi-agent system for trading in B2B, multi-attributenegotiation, made by proposals and counter proposals using learning

– ....

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Negotiation

• Kasbah– Decision-making where two or more parties together (sometimes

competitive) look for a space of possible solutions to reach a consensus

– Protocols: Valid actions (rules of the game)

– Strategies: Plan of action that attempts to maximize the utility function

A negotiation mechanism:

Auction

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Auction mechanism

Value of the good under negotiation

• Private value– depends only on the preferences of participants

• Public value– depends entirely on the values of others

– ex: treasury bonds

• Correlated value– depends on both the preferences of the participant and the values of

others

– ex: transport task in which the bidder can make it or re-auction to others

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Auction mechanism

• English auction (multiple rounds, open auction)– Protocol

• Bidders must increase its proposals

• It ends when no bidder is willing to increase

• Bidder with highest bid wins (at the price of its proposal)

– Best strategy:• Propose slightly higher than the highest at the moment, and stops when it

reaches its private value

• Dutch auction (multiple rounds, open auction)– Protocol

• Auctioneer is decreasing the value until it is accepted by a bidder

– Best strategy: does not exist

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Auction mechanism

• “first-price” auction (one round, closed auction)– Protocol

• Bidders submit a proposal without knowing the bids of the others

• Bidder with highest bid wins (at the price of its proposal)

– Best strategy: does not exist

• “Vickrey” auction (one round, closed auction)– Protocol

• Bidders submit a proposal without knowing the bids of the others

• Bidder with highest bid wins (at the price of the second highest bid)

– Best strategy• Propose your private value

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Auction mechanism

• Features– Advantages: Simple, with well-defined rules

– Disadvantages• Negotiation held on a single attribute (usually the price)

• Possibility of fraud– Phantom bidders

• Placed by auctioneers

• Offer very high prices, to raise the market price

– Associations of bidders• Group of bidders

• Agree not to bid against each other

– Auctioneer not sincere

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Amazon.com (case study)

• Sale of several goods:– Books, CDs, videos, electronic, software

• Features:– Easy search

– Recommendation, customization• Send customer purchase recommendations (via email) based on its

history

– Product selection

– Department offers (marketing)

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Amazon.com

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Amazon.com

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Amazon.com

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Enterprise 1Enterprise 4

Enterprise 3Enterprise 2

B2B – Virtual Enterprise

• Client requirements change constantly, implies a rapid reconfiguration of business corporations

• Virtual Enterprise(VE)– Temporary

corporation of enterprises

– Individual enterprises are excellent (expertise)

Virtual Enterprise

Module w Enterprise 3Module y

Enterprise 2

Module z Enterprise 4

Module x Enterprise 1

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The Virtual Enterprise

Network of Enterprises

Network Organization- do not necessarily share skills or resources

Extended Enterprise - one enterprises is the dominant

Virtual Organization- participants are any organization (enterprise or not)

Virtual Enterprise

EnterprisePlanet-Satellite

Strategic Alliance

Virtual EnterpriseInternal VE (X)- autonomous teams

Stable VE- main enterprise:

performs contract

Dynamic VE- opportunism; there is

no main partner

“Web” Company- entirely based on IT

level of mutual dependenceor

gani

zati

onal

st

ruct

ure

typology

- enterprises have interest in the success of each other

- final product depends on the skills of partnership

- participants are enterprises

- planet enterprise subcontracts satellites enterprises

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The Virtual Enterprise

Stable VE

Strategic Alliance

Planet-Satellite/ Extended Enterprise

“Web” Company

Virtual Enterprise/ Dynamic VE

Virtual Organization

Network Organization

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The Virtual Enterprise

temporarysharing ofskills andresources

flexibilityinformation &

communicationtechnology

excelenceequal

division ofpower

[Amberg, 97] √ √ √[Arnold et al., 95] √ √[Byrne et al., 93] √ √[Camarinha et al.,99] √ √ √ √[Cole e Gamble, 97] √[Hardwick et al.,98] √ √[Jagers et al., 98] √ √ √[NIIIP, 98] √ √[Ott e Nastansky, 97] √ √ √ √[Reid et al., 96] √[Sims, 96] √Sriram et al., 96] √

• Network of independent enterprises

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AIMSNet – case study

Support the rapid organization and operation of a network of suppliers that meet the requirements of a customer, with high quality

Clients

Database

AIMSNet server

Support for collaboration

Security Services

INTERNET

Lockheed Martin Missiles and Space

Palo Alto, CA

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AIMSNet – case study

• Support for collaboration– Catalogs of suppliers and search

• Collection of data on suppliers (meet a specified ontology)

• Search for potential partners

– Getting partners• Submission of requirements, proposals and sending of orders

• Client sends a requirement:

• Requirement is made available to the list of selected suppliers

• Suppliers submit their proposals

• Client receives proposals and select

– Document specifying terms and conditions– Fill form RFQ (Request For Quotation)– Other information (CAD project, video, ...)

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AIMSNet – case study

Website, where client places:

- Product specifications

- Graphical representation of the product

Panel of energy distribution for a satellite launch vehicle

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AIMSNet – case study

• Support for collaboration (more)– Collaboration services

• Collaboration, in real time, among geographically dispersed members: “hypermedia notebooks”

– Contracting services• Creation of formal documents necessary for the VE formation

– Coordination services• Obtaining information on specified events (VE operation)

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AIMSNet – case study

• Security services– Privacy

• Encryption of messages

– Integrity• Ensures that messages or files are not changed

– Access Control• Different permissions are assigned to different people

– Authentication• Verifies the identity of persons or organizations participating in an

electronic transaction

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Croosflow – case study

Supports dynamic partnerships between organizations

Lab. Investigação IBM Zurich

D

E

D

E

A

B

C

F

G

D+

E+

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Croosflow – case study

• Matchmaking service:

advertising and search for business partners- sends templates of contracts

• Establishment and monitoring of contracts- fills the template”

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Supplier

A

B

C

Client

Crossflow – case study

F

G

Proxy Gateways

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E

Dn+

D1+

Em+Results

E1+

Monitoring

Control

Activation

Proxy Gateways

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Crossflow

DTD specification of a contract (partial)

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Crossflow – case study

• Application example: car insurance– Insurance company contracts outside services to handle

complaints:• External call center (partnership usually static)

• Agency for damage evaluation

• Car repair (partnership usually dynamic)