1. business and industrial

Developing a framework for assessing B2C mobile
business models
Mohsen Javdan
Department of Industrial Engineering, Iran University of Science and Technology,
Dr. Mohammad Fathian
Department of Industrial Engineering, Iran University of Science and Technology,
Abstract:
Currently with the help of developing and expanding Mobile and wireless network
technologies, new and numerous opportunities have created for starting mobile business
models. In this field several researches have performed worldwide that want to assess the
mobile commerce environment from different aspects in order to select proper
alternatives.
In this paper, with the aim of assessing content provider mobile business models, firstly
the m-commerce roles, mobile business models, and different classifications and
approaches will be explored. After that by studying current frameworks for evaluating
mobile business models and choosing Osterwalder outline as a base model, we develop a
hierarchical structure for comparing mobile business models. On the bases of this
structure Mobile business models evaluating factors are also extracted from the literature.
Keywords: Mobile commerce, Mobile business models, business model evaluating
framework
1.Introduction
After bursting dot.com bubble in 2000, many researchers have focused on business
models, particularly electronic business models. On the other side communication and
telecommunication network technologies is growing everyday and has created countless
opportunities to start new electronic businesses. Among these technologies, mobile
technology has the most growth and a lot of innovative business models are made to take
advantage of its benefits. So in order to using mobile business models by organizations
and entrepreneurs, we must first evaluate the mobile business models.
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In February of 1999, when i-Mode wireless web service was initiated in Japan, It was
wildly successful, a-racting over 1 million new customers every month for the first two
years (Afuah,2004). DoCoMo, i-Mode launcher Japanese company, had the right business
model, the right technology, the right partnerships, and the right target segment.
Currently in Developed and Developing countries such as Japan, Hong Kong, Taiwan,
South Korea and Singapore, the proper strategies and associated mobile technologies have
provided.
There are a few researches in mobile business model policy making and also assessing
mobile commerce components. Most of the past researches about strategies and mobile
business models just review some parts of the problem. Limited evaluations were
performed in m-commerce applications and services.
Since there are several roles within the m-commerce value chain, developing single
solution for all the m-commerce roles, is not possible. So content provider, one of the
fundamental and important role of m-commerce, is considered to developing a framework
for assessing mobile business models.
This paper designs a proposed framework for assessing content provider mobile business
model basis of a business models evaluating framework and also available factors in
related papers
.
2. Mobile business worldwide status
During these years, mobile and wireless market has been the most attractive one in the
world and moving forward every day. UNCTAD annual report said that in 2005 the
number of mobile subscribers is more than 2 billion consisting of 40% Asian (UNCTAD,
2006). Private researches show that by 2008 the number of worldwide mobile subscriber
will be 3.2 billion. In developed countries Mobile industry growth is due to increasing use
of innovative services such as SMS, roaming, access to internet and music download. For
example, more than one third of European was expected to have cell phones with internet
ability (Kelley & McCarthy2006), Nevertheless currently more than three forth of them
that have such cell phones have not used internet ability. But there are some signs of
potential growth about B2C services. For example 40 percent of music downloads in Asia
and Europe was done with mobile phones in 2005. Based on Juniper researches, mcommerce market will be expected to have 23 billion transactions by 2011.
3. M-Business players and roles
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M-Business is generally characterized by a variety of business partnerships often
involving a large number of organizations from content providers to WASPs to mobile
network operators. While no two value chains are the same. As figure 1 illustrates, the
delivery of m-commerce applications and services involves a number of players. They
generally fall into one or more of the following categories:
Infrastructure equipment vendors, Software vendors, Content providers including
advertisers, Content aggregators, Mobile Network Operators (MNOs) including virtual
ones (VMNOs), Mobile portals, Third-party billing providers, Mobile device
manufactures, Wireless application services providers (WASPs), Location information
brokers(Sadeh, 2002).
Each actor maybe concentrates on the specific part of value creation process. They can aim
to this goal by performing the appropriate business model(s) which provide close
relationship with customers, involves individuals, businesses and business partnerships.
Users with this business models can place themselves at the center of the value chain.
4. Mobile Business Model Classification
Using current e-Business model categorization into M-Business is challenging. Because
wireless channel has its own differences due to communication channel characteristics,
consume patterns, Industry maturity, etc in comparison with traditional channel like
wired Internet. So in this paper the focus is on mobile business models classification as a
separate part of electronic commerce not the subset of it.
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Advertiser
Location
Info Broker
Infrastructu
re Provider
Virtual
Handset
MNO
Manufactur
WASP
e
Customer
Mobile
Software
Network
3rd party
vendor
Operator
billing
provider
Mobile
Content
Portal
owner
Content
Provider
Equipment
vendors
Content
Aggregator
Value
Creation
By exploring mobile business model literature, three categories will be found in general.
The first classification is based on the value chain elements, e.g. Sharma and Nakamura
(2003) and Norman Sadeh (2002) have this approach. In this classification, the actors in
Mobile business value chain are introduced and then for each one, relevance mobile
business model is defined. On the other hand, the second categorization is consistent with
traditional e-commerce business model categories such as Business to Consumer, Business
to Business and Business to Employee. Leem et al. (2004) has this point of view about
mobile business model classification. At last, third categorization has no specific approach.
For example some of them are based on mobile applications and services categories like imode service classification which was introduced in Japan for the first time. The others
ones have their own viewpoint. For instance Componou and Pigneur (2002) presented a
Business model category which is based on m-Commerce needs. Table1 shows the
difference categorization. It can be clearly seen that there are a lot of actors in mCommerce value chain for which we can propose a business model.
In this paper, we focus on B2C mobile business models in order to develop a framework
for assessing such models.
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Author
Norman
Sadeh
Sharma and
Nakamura
Leem et. al.
Camponovo
and Pigneur
Mobile Business Models
Infrastructure equipment vendors, Software vendors, content
providers, content aggregators, Mobile Network Operators,
Mobile portals, Third-party billing providers, Mobile device
manufacturers, Wireless Application Service
Providers(WASPs), Location Information Brokers
Content service provider, advertising and publishing
services, device manufacturers, operators, WLAN operators,
platform services, fixed wireless integration, 3G services
B2C: Commerce, Intermediary, Information
B2B/B2E: Firm infrastructure, procurement & Inbound
Logistics, Operations, Outbound Logistics, Marketing and
Sales, After-sales Service & Supporting Systems
Technology: device manufacturers, equipment and platform
provider
Application: application provider, content provider, content
aggregator, Mobile portal
Access: Mobile Network Operator, Internet Service Provider
Table 1: m-Commerce Business Model categories
Approach
Value Chain
Wired
classification
Customer
Need
4.1. Mobile B2C business model
In general, the current M-commerce applications include B2B, B2C, and Business-toEmployee (B2E). B2C currently dominates these applications (Kannan & Chang, 2001).
Actually m-Commerce services are designed for individual end-users. M-services are
categorized in different groups and cause various revenue sources and business models.
The services form the Business to Consumer model. These services include: news,
directory, guidance, purchase, entertainment, financial, ticketing and so on. In addition,
possible revenue sources are subscription fees, Transaction fees, and different forms of
reference and commission fees. These revenue sources can be combined with each other.
In this paper we consider the classification which is developed by Leem et al. (2004) They
subdivide the mobile B2C business model into commerce, intermediary and information
models. A commerce model provides mobile contents and/or services for direct
commercial transaction. Commerce refers to a business model which provides transactionbased service and/or content such as ticketing, reservation, download, music, etc. The
digital model delivers intangible values – game, mp3, eBook, etc. The physical model deals
with marketing and sales of physical goods – electronic appliances, books – on the mobile
channel, including offline logistics. The service model supplies communication and/or
reservation, etc.
An intermediary model delivers mobile contents and/or services from other sources to
customers such as stock-related sites, news, weather information, etc.
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And an information model provides personalized information to customers’ mobile
terminals generally on a push basis. Each B2C category and its examples are listed in Table
2. In the next part we explore some Business model evaluation framework in order to
determine a basis for assessing B2C mobile business models.
5. Business model Assessing frameworks
A last, but nevertheless very important and challenging field of business model research
concerns the definition of indicators, business model measurement and evaluation
(Osterwalder, 2004). A number of authors have written on this question, attacking the
problem from different angles (Afuah, 2003; Hamel, 2000; Gordijn, 2002; Ng, 2005). The
following sections describe the researches on this field of study.
Table2: Mobile B2C business model and its examples
5.1. Afuah and Tucci assessing framework
Afuah and Tucci (2003) appraise business models on three levels. Namely profitability
measures, profitability predictor measures and business model component attribute
measures. The first level embraces earnings and cash flows, two frequently used indicators
by analysts. If a firm's earnings or cash flows are better than those of competitors, this
would mean that it has a competitive advantage.
The second level comprises profit margins, revenue market share and revenue growth.
Again, a firm has a competitive advantage if these measures indicate a better performance
than competitors. The third and capital level provides benchmark questions for each of
Afuah and Tucci's business model components (see Table 3).
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Profitability
• Earnings
• Cash flow
Level 1
Profitability predictor measures
Level 2
• Margins
• Market share
• Revenue share growth rate
Component attribute measures
• Positioning
• Value
• Scope
• Price
• Revenue
• Activities
• Implementation
• Capabilities
• Sustainability
• Cost structure
Level 3
Table3: Business Model Appraisal Levels (Afuah and Tucci, 2003)
Allan Afuah (2004) stated the business model components including positions, resources,
activities, costs, industry’s factors and cost. Nevertheless he is inspired by Michael Porter
(2001) views about five competitive forces. Afuah believes that a business model includes
the profit-oriented aspects of strategy and operational effectiveness.
5.2. Osterwalder assessing framework
Osterwalder (2002a, 2002b, 2002c, 2003, 2004) believes that the best way for assessing one
business model is to define the measures and indicators in consistent with main
components of that business model. He suggests a framework which emphasizes on the
following four areas that a business model has to address:
Product measures that assess the originality of the value proposition and identify what the
organization has to build for learning, long term growth, and innovation (creativity,
employee capabilities, motivation, turnover, stock options, etc).
Customer measures that evaluate the relationships of the organization with its customers
(retention, acquisition, satisfaction, profitability, etc) and the appreciation of the value
proposition by the customers (functionality, quality, price, timeliness, brand image,
availability, shopping experience, etc).
Infrastructure measures that identify the internal and outsourced activities of the value
chain and processes with the greatest impact on customer satisfaction and financial
objectives (design, build, delivery, service, etc). And finally,
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Finance measures that serve as the focus for the objectives and the measures of all the
other perspectives and concern revenue growth cost management, asset utilization and
market capitalization, etc).
He splits the four pillars of the business model into nine interrelated business model
building blocks or elements which presented in Table4.
5.3. Hamel Evaluation Framework
Hamel (2000) identifies four main business model components that range from core
strategy, strategic resources over value network to customer interface. These components
are related to each other through three bridges and are decomposed into different subelements.
5.4. Gordijn Evaluation Framework
The probably most advanced proposition for evaluating business models is outlined by
Gordijn (2002) and is part of their e3-value method. They propose studying the economic
feasibility of an e-business idea in quantitative terms by creating a profit sheet and
assessing the value of objects for all actors involved. This is possible because their method
is highly actor-, network- and value-centered and focuses and the value exchanges among
business model participants.
5.5. Weill and Vitale Evaluation Framework
Weill and Vitale (2001) have a slightly different approach; they give a systematic and
practical analysis of eight so called atomic e-business models. These atomic business
models can be combined to form an e-business initiative. Every one of these atomic ebusiness models is analyzed according to its strategic objectives and value proposition, its
sources of revenue, its critical success factors and its core competencies.
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Table4: The nine business model building blocks (Osterwalder, 2002)
6. B2C mobile business model evaluation
In order to assess B2C mobile business models, we consider one of the above frameworks
as a basic one. Assessing indicators in explored frameworks have a lot of commons due to
the same approach.
Osterwalder framework is the most complete one and has sufficient citation in comparison
with other framework. So, Osterwalder business model framework is considered as a basic
for assessing B2C mobile business models. We then explore the mobile business model
evaluation indicators and measurements which are extracted from past researches.
6.1. Mobile business model evaluation indicators
There is a little resource in literature about mobile business model evaluation indicators
and the majority of researches in m-Commerce study m-Applications and m-Services. In
spite of that we try to embed these indicators in our basic framework, Osterwalder
Business model Ontology. We then explored papers in online academic journals and
finally two studies with the subject of mobile business model evaluation were selected. In
the next part the indicators in each paper is described.
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6.1.1. Wu and Hisa
Wu and Hisa (2004) investigated the business model differences among Web-based, Mand U-commerce in terms of five attributes: value proposition, market segment, cost
structure, and profit potential and value network. These business model dimensions are
accordance to Afuah and Tucci (2003) business model evaluation Framework. In each
dimension for m-Commerce they proposed some indicators that we use them to embed
into osterwalder framework as a B2C mobile business models evaluation framework.
Table 5 illustrates dimensions and indicators for mobile business model.
Factors
Value proposition
Market segment
Cost structure
1.
2.
3.
4.
1.
2.
3.
4.
1.
2.
3.
Profit potential
Value network
1.
2.
3.
1.
2.
3.
4.
Indicators
Mobility
Localization
Personalization
Convenience
Regional market
Mobile device users
Business mobile workers and young people
Targeted customer base
Technology cost, application development cost, networking
and content delivery cost
Content creation cost
Logistic cost for physical goods and logistic cost for
information goods
Improved efficiency of mobile workforce and task
Revenue of mobile servicing and networking fee
Networking and service charge
Telecom operators
Mobile service, application, and content providers
Mobile device manufacturers
Internet and mobile portals
Table5: m-Commerce business model evaluation factors and indicators
6.1.2. Leem and et al
Leem et al. (2004) suggests a framework for measuring and analyzing mobile B2C business
models and services. The framework is based on four perspectives: use environment,
interface, perception and information which are shown in table 6. In a use environment,
factors related to general customer satisfaction include the mobile service data
transmission level, pricing level, and utility level. The interface index consists of
interaction, information representation, contents and a system to measure customer
satisfaction on the mobile interface. Perception is divided into easiness and usability,
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considering how easy or usable a customer feels when he or she uses a mobile service. The
information index is intended to measure quality of mobile information and service. A
total of four indices – use environment, interface, awareness and information – comprise
the representative indices.
Representative indices
Use environment
Effectiveness indices
Data transmission
Pricing
Utility
Measurement indices
Data transmission level
Pricing level
Variety of service
Convenience of service
Handheld device firmness
Interface
Interaction
Use flexibility/suitability
Information representation
Information readability/harmony
Contents
Content consistency
System
Network speed
Perception
Easiness
Easiness level
Usability
Usability level
Information
Information service/product
Exactness
Update
Table6: Analysis structure for assessing on mobile B2C model (Leem et. al., 2004)
6.2. Developed mobile B2C business model assessing framework
With regard to selecting osterwalder framework as a basis for B2C mobile business model
assessment, we extract the indices from the two previous researches and imbed them into
the basic framework. In the next sections we describe the evaluation framework separated
by building blocks of business model including: customer interface, product,
infrastructure management and financial aspects.
6.2.1. Value proposition
The value propositions for M-commerce are mobility, localization, personalization, and
convenience (Wu & Hisa, 2004). The primary advantage of mobile technology is to provide
a superior value-for-time offering. The agility and accessibility provided by mobile devices
is convenient for users in retrieving information and performing
transactions
from
virtually and location on a real time basis. Additionally, mobile devices are typically used
by a sole individual that is ideal for a personalized target marketing services.
6.2.2. Target customer
The majority of M-commerce services are young people or mobile business workers who
have digital literacy (Clark, 2001; Feldman, 2000; Zhang & Yuan, 2002). Former researches
show that the main parts of most mobile services are young users (Anckar & Incau, 2002).
On the other hand the M-commerce market area is regional and narrower than Web-based
commerce; the customer bases are much smaller (Kannan & Chang, 2001).
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6.2.3. Distribution channel
With respect to target customer combination of B2C mobile business models and how they
access to services, we have following distribution channels: Mobile internet, SMS, software
applications, wireless local networks and ad-hoc networks for end users and traditional
electronic channels including internet and intranet.
6.2.4. Communication
Communication involves infrastructure, bandwidth and customer profile resources.
Hence, a company that attempts to enter the M-commerce market may require high
development and investment costs in negotiating with the mobile operator industry.
Predictably, the emerging ubiquitous technology will create new interoperable network
infrastructure and software platform standards.
6.2.5. Value Confi guration
Providing, producing and delivering the content are performed with the help of following
activities: Gathering customer information about location, profile, preferences and
shopping history etc. This kind of information gathered from different resources including
location information broker, Mobile Network Operator, Traditional portals etc. Value is
configured by repacking and reformatting information for distribution over the mentioned
distribution channels.
6.2.6. Capability
Capabilities in B2C Mobile Business models including access to frequency spectrum, to
data carrier, to customer profile and preferences, and having strong links with mobile
value chain elements especially end-users, large customer base, access to handset first
screen, knowledge and experience in established connection with customer and finally
access to different kind of information resources.
6.2.7. Partnership
Partnership arrangement for providing information and services or revenue sharing with
MNOs, WASP, Mobile Portal, location information broker, content owner, content
aggregator, news agencies and payment agents.
6.2.8. Cost structure
Technology cost, application development cost, access to network and content delivery,
Content production and logistic cost for information product (Wu & Hisa, 2004).
6.2.9. Revenue model
Revenue sources are from customer subscription, customer transaction, revenue share
gathered with mobile operator, various models of guarantee like advertising, reference
and commission fee in addition to syndicate arrangements and revenue sharing of access
to mobile network.
Our proposed framework for assessing B2C Mobile business model with the related
indices is described in Table7.
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7. Concluding
Entering and presence in mobile commerce environment needs continuous assessing and
proper selection of mobile business models. In other words each enterprise with the aim of
delivering mobile information and services, must decide about how performs activities
over one or more mobile business model. In this regard the proposed mobile business
model assessing framework can be a basic for management decision making for startup
enterprises.
Business model
component
Customer
Interface
Business model
building block
Target customer
Distribution channel
Relationship
Product
Value proposition
Financial aspects
Revenue Model
Cost structure
Infrastructure
management
Value configuration
Capability
Partnership
Effectiveness factors
Measurement indices
Young people, mobile
worker, regional
market, portal and
content aggregator
demand,
Interaction,
Information,
representation,
contents,
system
Easiness,
Usability
Mobility, Localization,
Personalization,
convenience
Age and gender
Movement level
Market size
Demand levels
Revenue of mobile
servicing and
networking fee
Providing resources
cost
Activities for
delivering services and
information to endusers
Abilities in value chain
Partnership
arrangement level
Use flexibility/suitability
Information
readability/harmony
Contents consistency
Network speed
Easiness level
Usability level
Exactness
Update
Speed of delivery
Customer Consistency
Depends to business model
Depends to business model
Enterprise position through
the value chain
Access level to channels
Access level to customer
Knowledge level
Bargaining power
Table7: Proposed B2C mobile business model assessing framework
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