Two Live cases on Business Model: E-Bay & Dell
eBay Business Model:
eBay Business model is considered to be one of the most compelling and most economically viable internet or web based model.eBay was created on September of 1995 by Pierre Omidyar with a vision to create a virtual marketplace where buyer and seller can exchange goods and services.When the site was launched it became popular for selling collectibles, later on it was expanded to other market segments such as consumer electronics and automobiles where the average sale price or ASP was more. eBay’s earning is derived as a percentage from each sales so, the main focus is on increasing the ASP so that percentage of earning on each transaction that is facilitated is increased. There are two kind of fee which is charged by eBay, one is charged when a buyer lists its product to eBay which is known as insertion fee other one is charged when final sale of the product happens called a final value fee. The percentage of final value fee ranges from 1.25 to 5 percent.
Before eBay was introduced such commerce were done either through classified advertisements, flea markets or trade shows. When eBay was launched it pioneered in automated online auctioning by creating an online market place which facilitated buyers and sellers in exchanging goods and services in a short span of time (allBusinessn.d.) .In eBay once environment for transaction is created the buyers and sellers are left to do their own transactions, those who are very active are given an opportunity for building permanent stores. Help for financial services come from Banks and moneylenders, thus creating an environment quite similar to a medieval city with trading marketplace placed at the center which is also depicted below(eBay Business Model n.d.)
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The Dell Business Model
Dell business model enables consumers to place order through internet or telephone. The manufacturing process reduces waste and improves productivity by only having required inventory in hand. The process involved in meeting the order is known as just- in- time or Lean manufacturing.Under this just in time process, Dell places an order for parts of the computer only when it receives a firm order and hence, it operates with a very low inventory. As soon as the products are manufactured their shipping is done. Items that are not built by Dell are shipped directly from manufacturer to the customer which helps Dell in reducing production cost. The process followed by Dell helps in customizing and designing the systems as per customer’s requirement. Rather than offering a single system, dell offers a range of items to its customer’s which can be assembled to make a system. Figurative description of business model of Dell is shown below (EBSCO Research Starters 2008)
(Source: EBSCO Research Starters 2008)
The features which give Dell a competitive advantage over others are:
Customer Focus: Dell’s concept to provide customized offerings to its customer’s has helped in becoming favorite of his customer.
Reduced Inventory Cost: Just-in-time process reduces forecasting problem and overstocking.
Relationship with suppliers: Dell maintains a very close relationship with few of its suppliers which build a relationship of trust and hence reduces testing time of product and shipping
Component price advantage: Dell keeps supply of only two weeks at the supplier’s logistic center and Dell’s obligation is to purchase parts worth for two weeks only, price is not set till the stocks reach Dell’s loading dock. This helps dell in gaining advantage from decreasing cost of component and incorporating new technology.
Internet Adaptability: More than 50% of order of Dell is channelized through web. The adaptability of Dell with web helps in building relationship with suppliers and smoothens the process of direct supply to customers (Hindustan Times 2002)
Creating and adopting a business model helps an organization to align its various arms in order to work efficiently in a systematic & process oriented environment to reach towards its goal of profit maximization.There are number of Business Models which present their own unique framework.However, as each Business model is derived from its own of set of unique challenge or market dynamics, one Business model can’t be the panacea for all kind of Business opportunities & challenges. These Opportunities & challenges are the key for all the innovations which in-turn is the breeding ground for new Business Model. As there always will be new market explored, whether it’s the Apple’s way of launching the IPOD or the e-bay’s model of online shopping, every new challenge will help a business model to evolve and innovate.
In this changing time and highly competitive market the companies which still remain uncertain and unsure of their business model would remain unsure of their future existence. The current time demands a robust business model which can withstand all economic and market uncertainties and can earn maximum profitability.
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