The Internet changes the fundamental nature of doing business and competition. As new ways of building and delivering products and services online emerge, your competition goes beyond established competitors to include new companies, in addition to new innovations, ideas or ways of improving existing processes or products
The wired world is a world in constant flux. Bill Gates, the Founder of Microsoft, describes the new Internet era as an environment of constant change, or "punctuated chaos." As all financial players are digitally connected, "any downturn or upturn in a major market creates overnight reverberations in other markets... The digital world is both forcing companies to react to change and giving them the tools by which to stay ahead of it". IT helps you connect your business strategy with organizational response. Without IT there will be no fast response – and no company, as today "it's not the big that eat the small... it's the fast that eat the slow."
Internet commerce gives rise to new kinds of business models. But the web is also likely to reinvent tried-and-true models. Auctions are a perfect example. One of the oldest forms of brokering, auctions have been widely used throughout the world to set prices for such items as agricultural commodities, financial instruments, and unique items like fine art and antiquities. The Web has popularized the auction model and broadened its applicability to a wide array of goods and services.
In the most basic sense, a business model is the method of doing business by which a company can sustain itself – that is, generate revenue. Business models are perhaps the most discussed and least understood aspect of the web. The web changes traditional business models. Internet business models continue to evolve. New and interesting variations can be expected in the future. But there is little clear-cut evidence of exactly what this means.
Professor Michael Rappa of the Alan T. Dickson Distinguished University, United States, describes nine basic categories of business models on the Web: brokerage, advertising, infomediary, merchant, manufacturer (direct), affiliate, community, subscription, and utility. The models are implemented in a variety of ways, as described in the table below. Moreover, a firm may combine several different models as part of its overall Internet business strategy. For example, it is not uncommon for content driven businesses to blend advertising with a subscription model.
Some models are quite simple. A company produces a good or service and sells it to customers. Other models can be more intricately woven. Broadcasting is a good example. The broadcaster is part of a complex network of distributors, content creators, advertisers (and their agencies), and listeners or viewers. Who makes money and how much is not always clear at the outset. The bottom line depends on many competing factors.
Business models have taken on greater importance recently as a form of intellectual property that can be protected with a patent. Business models (or more broadly speaking, "business methods") have fallen increasingly within the realm of patent law. A number of business method patents relevant to e-commerce have been granted
"Successful organizations must balance bureaucratic processes at one extreme with the fluid chaos of relationships, interests and transactions, which enable it to be innovative and alive, at the other." -Robin Wood
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