Viable Business Models for M-Commerce: The Key Components

Viable Business Models for M-Commerce: The Key Components

Jiaxiang Gan (University of Auckland, New Zealand) and Jairo A. Gutiérrez (Universidad Tecnológica de Bolívar, Colombia)
DOI: 10.4018/978-1-60960-042-6.ch052
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Abstract

As mobile applications increase in popularity, the issue of how to build viable business models for the m-commerce industry is becoming a clear priority for both organizations and researchers. In order to address this issue, this chapter reports on five mini cases used as a guideline, and applies the theoretical business model from Chesbrough and Rosenbloom (2002) to each of them to find out the most important components of viable business models for their m-commerce applications. The study then uses cross cases analysis as a research tool to compare and contrast each of the mini cases and to find out how the different organizations fit within the researched theoretical business model. Finally, this chapter confirms that there are 7 important components of viable business models for m-commerce which are: value proposition, market segment, value chain, profit potential, value network, competitive strategy and firm capabilities. This study also highlights the fact that the public visibility of these 7 components is uneven. Some components such as value proposition, value chain, value network and firm’s capabilities are more likely to be presented in public by organizations. However, aspects such as cost structure and profit potential, market segment and competitive strategy are more likely to be hidden from the public due to their commercial sensitivity.
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Background

M-Commerce

Mobile commerce (m-commerce) deals with the use of mobile electronic devices such as mobile phones, smart phones or PDAs to access computer-mediated networks to conduct any business transaction that involves the rights to use goods and services or transfer of ownership (Wikipedia, 2009; Slyke and Belanger 2003). Using mobile devices to make payments (m-payment) and therefore obtain the right of using goods and services is the foundation for m-commerce; in fact, m-commerce is the next generation of e-commerce.

There are many different types of products and services available in the m-commerce industry such as mobile ticketing (e.g. using mobiles to purchase a ticket, and the ticket will be sent to buyers’ mobile phone so it can be used immediately), information services (e.g. using a mobile phone to get online in order to gather information such as news, sports results, etc.), content purchase and delivery (e.g. purchasing “wallpaper” applications or downloading MP3 files), location-based services, mobile purchases, mobile vouchers, and mobile banking (Wikipedia, 2009).

Viable Business Model

A viable business model is a blueprint for the extension of a full business strategy and plan, and it provides direction for business processes. Business models are used by organizations to help them create value in the industry in order to achieve business strategies (Ulhoi and Jorgensen, 2008; Moen, 2006). A business strategy sits on top of the business model, it provides direction for the business model to help the organization make money (Pateli & Giaglis, 2003). The relationship between strategy and business models is shown below.

A viable business model will explain the relationship between technical inputs (goods and services) and economic outputs (business value, profit and price). The most important thing for a viable business model is to transform these technical inputs to economic outputs in order to make money for the organizations. Therefore, the question: “how to make money for the business?” is the key question that must be answered by a viable business model (Seppanen and Makinen, 2009).

Key Terms in this Chapter

Value Chain: It is an activities’ chain which consist of a string of players who work together as partners to provide a particular product or service in order to meet and satisfy market demands.

Competitive Strategy: The business strategies that help organizations obtain competitive advantages in a particular industry.

Cost structure and Profit Potential: The use of cost and benefit analysis to assess how the organizations are going to make money.

M-commerce: It deals with the use of mobile electronic devices to access computer-mediated networks to conduct any business transaction that involves the rights to use goods and services or transfer of ownership.

Viable Business Model: It is a blueprint for the extension of a full business strategy and plan, and it provides direction for business processes. It is used by organizations to help them create value in the industry in order to achieve business strategies.

Business Process Model: It is a model of integrating business processes in single or multiple levels, it has one or more business processes in the model in order to achieve specific objectives for the business.

Firm Capabilities: The description of key aspects of the firm (ability, experience and reputation) required to take innovative actions (e.g. provide new goods and services to their customers) in order to create value for their customers.

Value Network: The description of the relationship between suppliers and customers within the network, and it identifies the potential competitors and complementors.

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