What Are E-Business Models?

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E-business models developed around unique competencies help companies stand apart from the competition.
E-business models developed around unique competencies help companies stand apart from the competition. (Image: Comstock Images/Comstock/Getty Images)

E-business models refer to the methods a company employs to grow into a profitable Web-based business. The basic design describes how an organization operates, the types of services an organization provides, strategies for generating revenue, plans for market penetration and plans for technology deployment. E-business models fall under four categories: customer to business, business to business, customer to customer and business to customer. Generally, all e-business models have four basic components.

Concept

The concept component of an e-business model concerns the overall principle behind the company's formation. It takes into account the company's vision and goals and the services or products it offers. Usually, the company conducts various analyses to identify the customer profile, how much customers pay for products or services and the competition. E-business concepts are based on goals, for example, a company might wish to become a major shoe retailer or a top destination for vehicle auctions. Objectives -- the other foundation of concepts -- give the company specific and quantifiable direction. For example, capture 20 percent of the online market for women's shoes.

Value Proposition

The value proposition component of an e-business model identifies the value that a company will deliver to its customers. Value proposition centers on customers receiving the most benefit from a company's product or service. Some examples of value propositions include lower prices, better service and prompt delivery. Products that create greater productivity or efficiency also come under the umbrella of value proposition.

Source of Revenue

The revenue component of an e-business model can take different forms. Some Internet businesses may have three or four sources of revenue. Common sources of revenue include advertising, licensing, sponsorships and affiliations. Sales commissions, sales profits, subscription fees and user fees are also forms of Web-based revenue sources. Affiliation mean a company, such as Amazon pays the e-business site owner a commission for sales originating from the site. A sponsorship occurs where a firm pays to “sponsor” a section or channel on the website.

Competencies and Competitive Advantage

The competency component of an e-business model concerns attracting workers with the necessary skills and capabilities that a company requires. Competencies entail certain activities the business executes better than the competition. Often, competencies result from highly talented personnel with skills and capabilities that add significant value to a company's product or service. When rivals cannot duplicate these competences, the company gains competitive advantage.

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