BUSINESS UPDATE TODAY
eBay, the world's largest online auction site, is one of the better known examples. Like most auction companies, eBay does not actually sell goods that it owns itself. It merely facilitates the process of listing and displaying goods, bidding on items, and paying for them. It acts as a marketplace for individuals and businesses who use the site to auction off goods and services.
Several types of online auctions are possible. In an English auction the initial price starts low and is bid up by successive bidders. In a Dutch auction, multiple identical items are offered in one auction, with all winning bidders paying the same price -- the highest price at which all items will be sold (treasury bills, for example, are auctioned this way). Almost all online auctions use the English auction method.
[edit] Strengths of the business model
The strategic advantages of this business model include:
- No time constraints. Bids can be placed at any time (24/7). Items are listed for a number of days (usually between 1 and 10, at the discretion of the seller), giving purchasers time to search, decide, and bid. This convenience increases the number of bidders.
- No geographical constraints. Sellers and bidders can participate from anywhere that has internet access. This makes them more accessible and reduces the cost of "attending" an auction. This increases the number of listed items (ie.: number of sellers) and the number of bids for each item (ie.: number of bidders). The items do not need to be shipped to a central location, reducing costs, and reducing the seller's minimum acceptable price.
- Intensity of social interactions. The social interactions involved in the bidding process are very similar to gambling. The bidders wait in anticipation hoping they will "win" (eBay calls the successful bidder the "winner"). Much like gambling addiction, some bidders may bid primarily to "play the game" rather than to obtain products or services. This creates a highly loyal customer segment for eBay.
- Large number of bidders. Because of the potential for a relatively low price, the broad scope of products and services available, the ease of access, and the social benefits of the auction process, there are a large numbers of bidders.
- Large number of sellers. Because of the large number of bidders, the potential for a relatively high price, reduced selling costs, and ease of access, there are a large number of sellers.
- Network economies. The large number of bidders will encourage more sellers, which, in turn, will encourage more bidders, which will encourage more sellers, etc., in a virtuous circle. The more the circle operates, the larger the system becomes, and the more valuable the business model becomes for all participants.
- Captures consumers' surplus. Auctions are a form of first degree price discrimination. As such, they attempt to convert part of the consumers' surplus (defined as the area above the market price line but below the firm's demand curve) into producers' surplus. On-line auctions are efficient enough forms of price discrimination that they are able to do this
[edit] Companies that use the model
eBay headquarters in San Jose.
- Amazon.com
- Bidorbuy
- DoveBid
- eBay
- eBid
- Overstock.com
- Oztion
- Prosper (web site)
- QXL
- SalvageSale, Inc.
- TradeMe
- uBid
- Yahoo! (Yahoo! Auctions is now defunct in America, but remains active in other countries such as Japan.)[citation needed]
[edit] See also
- Auction sniping
- Bidding fee scheme
- Car dealer auctions
- Marketing
- Reverse auction
- Strategic management
- Tenders
[edit] Further reading
- Nissanoff, Daniel (2006). FutureShop: How the New Auction Culture Will Revolutionize the Way We Buy, Sell and Get the Things We Really Want. The Penguin Press. ISBN 1-59420-077-7. (Hardcover, 246 pages)
Business ecology
Current Definitions of Business Ecology
The use of the term “business ecology” is not new. Yet, previous conceptualizations of the term have not yielded a meaning that sufficiently represents the fullness of either word. Rather, “business” is addressed in a narrow economic sense rather than relational one. “Ecology” is used more metaphorically than literally as much of this section illustrates. Furthermore, “business ecology” has not been well defined. As a result, it is subject to different uses, most of which are not grounded in ecological theory or method. The term “business ecology” is used in one of two ways:
1. To define tightly knit, inter-company relationships, or “business ecosystems”
2. To survey businesses’ impacts on natural systems
With regard to the first definition, several web sites and articles have appeared espousing the importance of developing business ecologies and creating business ecosystems in order to offer better and faster service particularly within the computer industry. This idea appears to have emerged from James F. Moore’s The Death of Competition (1996) and was further developed by Moore’s later work. In The Death of Competition, Moore examined the importance of the company’s context – its ecosystem. Moore (1996) defined the business ecosystem as follows:
“An economic community supported by a foundation of interacting organizations and individuals – the organisms of the business world. The economic community produces goods and services of value to customers, who are themselves members of the ecosystem. The member organisms also include suppliers, lead producers, competitors, and other stakeholders. Over time, they coevolve their capabilities and roles, and tend to align themselves with the directions set by one or more central companies. Those companies holding leadership roles may change over time, but the function of ecosystem leader is valued by the community because it enables members to move toward shared visions to align their investments, and to find mutually supportive roles.” (p. 26)
In his book, Moore used several ecological metaphors. For example, he suggested that the firm is embedded in a (business) environment, that it needs to coevolve with other companies, and that “the particular niche a business occupies is challenged by newly arriving species” (1996, p. 3). Moore’s later work has included consulting to companies, such as Intel, and informing them that “they would have to construct new webs of relationships and help seed emerging business ecologies” (Reinhardt, 2000, section Digital Rebar, para. 1). This meant that companies need to move out of their comfort zones, so to speak, and become proactive in responding to and taking part in changes that are happening in their industries and economies.
Using ecological metaphors to describe business structure and operations without discussing a company’s relationships with the natural environment appears to be increasingly common especially within the field of information technology (IT). For example, J. Bradford DeLong, a professor of economics at the University of California – Berkeley, has written that business ecology is “the pattern of launching new technologies that has emerged from Silicon Valley” (DeLong, 2000, para. 1; also see Cohen, DeLong, and Zysman, 2000). He has defined business ecology as “a more productive set of processes for developing and commercializing new technologies” that is characterized by the “rapid prototyping, short product-development cycles, early test marketing, options-based compensation, venture funding, early corporate independence” and other qualities exhibited by Adobe Systems (DeLong, 2000, para. 6 & 4, respectively). DeLong has explained that the new business ecology greatly differs from the older, time-consuming method of developing new products and technologies.
DeLong also has expressed that the business ecology model is likely to last “because it's a better business ecology than the legendarily lugubrious model refined at Xerox Parc – a more productive set of processes for rapidly developing and commercializing new technologies” (DeLong, 2000, para. 6).
On its web site, Mangrove Software has defined business ecology as “(t)he interaction and correlation of economic conditions, technology, customers, employees, corporate partners, shareholders, and competitors forming the environment under which a business operates” (Mangrove Software, Inc., 2001, para. 1). The Montague Institute (1993), a company that focuses on information technology and management, has defined business ecology as “interacting systems consisting of companies, their customers and suppliers, and other players in the business environment” (para. 1). Kenneth L. Kraemer, director of the University of California – Irvine’s Center for Research on Information Technology and Organizations, has explained, “It is the applications that firms buy or create themselves that bring value-added to the firm and to its business ecology of customers, suppliers and business partners” (UCI Communications Office, 1999, para. 11). Meanwhile, Stephen Abram, Vice President of Micromedia, Ltd., has asserted that the Web is “maturing as a business ecology” (Abram, 2000, section on Stephen Abram, para. 4).
In another web article, Tom Gruber, co-founder and CTO of Intraspect Software, has speculated that the economy of 2021 will become even more of a business ecology. Gruber, using business ecological metaphors extensively, has stated, “Imagine that companies are like organisms in an evolutionary landscape” (para. 4). Following Darwin's logic, the fittest companies survive as the business ecology changes” (para. 4). For example, Gruber has explained, over a century ago, Ford Motors did well using methods of mass production, an assembly line, and insourcing. However, Ford began to outsource its production “[w]hen the ecology evolved.” Gruber (n.d.) has stated that such evolution in the ecology of the business world is “punctuated now and then by radical changes in the environment” and that “globalization and the Internet are the equivalents of large-scale climate change. Globalization is eliminating the traditional advantages of the large corporation: access to capital, access to markets, and economies of scale” (Gruber, n.d., para. 5-6). Thus, business ecology merely reflects the ever-changing business context.
The superficial link between business and ecology is made by others as well. Vinod K. Dar, Managing Director of Dar & Company, a Maryland-based firm that specializes in business strategy for energy and utilities companies, has written, “Evolution on the Internet is no different from physical evolution but with vastly compressed life cycles and faster genetic mutation” (Dar, 1999, para. 1).
Meanwhile, the article “ASPs – Creating a New Business Ecology” (Kaminsky, 2000) reflects the move within the application service provider (ASP) industry toward creating relationship networks and focusing on core competencies. As its author has written, “According to the gospel of Cisco Systems, companies inclined to exist together within an “ecosystem” facilitate the imminence of Internet-based application delivery” (Kaminsky, 2000, para. 1). Books such as Corporate DNA (Baskin, 1998) also use natural systems metaphors without discussing the real interfaces between human business and ecological systems.
This concept of business ecology – focused, in part, on the speed of production and without an ecological grounding – does not embody the full depth of meaning that this term could engender. None of these uses of the business ecology term reflects an ecological relationship between business and nature. Ecology, it appears, is used increasingly as a metaphor detached from its literal roots.
The second use of the term business ecology is less common but has a stronger basis in the relationship between business and the natural environment. However, it has not been defined in a way that differentiates it from the green business literature or that indicates that ecology is a cornerstone element in its meaning or approach.
In Business Ecology: Giving Your Organization the Natural Edge, the first book on the subject, business ecology is defined as “a new field for sustainable organizational management and design,” one “that is based on the principle that organizations, as living organisms, are most successful when their development and behavior are aligned with their core purpose and values – what we call “social DNA’” (Abe et al., 1998, pp. xii-xiv). The authors have suggested that business ecology focuses on systems thinking, building strong relationships, natural systems, commitment to local and global communities and environments, and ecological efficiency, among other things. The need for companies to attend to ecological health is indicated by the following: “Business ecology is based on the elegant structure and principles of natural systems. It recognizes that to develop healthy business ecosystems, leaders and their organizations must see themselves, and their environments, through an “ecological lens” (Abe et al., 1998, 19). Although the authors have espoused the importance of considering environmental issues in business, the book did not explore ecological systems in detail or provide an approach to carrying out business ecology.
The Cooperative Bank, established in the United Kingdom in 1872, launched its National Centre for Business Ecology in 1995. This Centre is advertised as “a low cost, high quality environmental advisory service to small and medium sized UK businesses” (The Cooperative Bank, About the Bank – Highlights from Our History, 2001, section 1995, para. 1). The bank has reported that it in keeping with its Ecological Mission Statement, it will not invest in businesses that focus on fossil fuel extraction, the manufacture of harmful chemicals, or the non-sustainable use of natural resources (The Cooperative Bank, 2001b). Yet, exactly what business ecology means to the bank and how it differs from current approaches to greening business are unclear.
The same can be said of another company, Kinetix, which has advertised that it provides sustainable business solutions to companies by working with them on strategy, design, and project management. Located beneath its name on the company’s web site are the words “business ecology,” which the company defines as “the effective use of material, social and financial resources – the key to sustainability” (Kinetix, 2002, para. 2). The company cites pollution, climate change, the need for corporate transparency, and the 2001 economic downturn as creating a market opportunity that is being met by firms involved in renewable energy, working toward creating zero waste, attending to product life cycles, and using the triple bottom line in their accounting practices. In its online brochure, the company has explained that it offers resource audits, workshops for organizational change, environmental management systems, and other services (Kinetix, 2002). Again, however, it is uncertain how these activities differ from current approaches or goals of green business.
[edit] An Alternative Definition of Business Ecology
This section provides an alternative definition of business ecology, seeking to capture both the depth and the potential for the two words in relation to one another. According to Townsend (2006), business ecology is the study of the reciprocal relationship between business and organisms and their environments. The goal of business ecology is ecological sustainability through the complete ecological synchronization and integration of a business with the sites that it inhabits, uses, and affects (Townsend, 2006). The goal of business ecology has several implications that require some articulation. These implications are discussed below.
A Complete Ecological Synchronization – To begin with, the business ecology stresses a complete ecological synchronization with sites (discussed below), meaning that a firm using a business ecology approach would coordinate all five of its business elements with its sites. This will require quite a stretch for most businesses, even those inclined to be green, because, as was mentioned in Chapter 1, most businesses committed to greening focus only on a limited part of themselves. When they do seek to coordinate with sites, firms typically try to match the sites to their needs (e.g., tree farms replace forests) and not the other way around.
Integrating with Sites – Business ecology’s goal also indicates that a business would integrate intentionally and carefully with its sites. A site is not merely a specific geographic location but is a suite of simultaneous, overlapping, and multi-scaled relationships among biotic and abiotic ecological components that occur within a spatial-temporal framework. In any site, some of these relationships fall within and some extend beyond the site’s conceptually constructed boundaries.
Sites fall into one or more of three categories – primary, secondary, and tertiary.
Primary sites are those that a company inhabits through its facilities. They are the specific locations of corporate headquarters, storage facilities, and even non-terrestrial or temporary facilities, such as boats or spacecraft. Primary sites are generally easy to identify, as they are demarcated by the boundaries of property ownership or leased space – rather terrestrial or aquatic.
Secondary sites refer to the places that businesses use for their resources. Similarly, secondary sites might be identified by the boundaries of land/aquatic ownership or use. Some of these sites might be owned or leased, such as government land used for mining or grazing or aquatic areas used for fishing or other marine activities. They might include a bauxite mine, a river used for hydropower, or a forest from which the firm takes some of the materials that it uses in production or for facility construction or renovation.
Firms should recognize that their primary and secondary site boundaries are not likely to correspond directly to ecosystem boundaries.
Tertiary sites are those locations that are affected by businesses. Tertiary sites are typically far more difficult to identify. They might include such diverse locales as the global climate, the ozone layer, and a frog’s reproductive organs. Tertiary sites include every place on Earth and beyond, including communities living downstream or downwind from company activities, Earth’s ozone layer, the global climate, and outer space (e.g., anthropogenic waste from spacecraft). In fact, it is impossible to identify all of a company’s tertiary sites because they occur on multiple spatial and temporal scales simultaneously. Yet, identifying tertiary sites to the extent possible is an essential part of business environmental accountability.
The goal of business ecology implies that the criteria and priorities for a company’s integration with its primary, secondary, and tertiary sites would be derived from the specific characteristics of those sites rather than from a non-place-based set of business desires, values, or priorities. Therefore, the specific sites, rather than the economic market, provide the contexts to which companies adapt and with which they change and evolve.
Although it is beyond the scope of this book to address economies in depth, it is important to note that as businesses begin to make this shift toward integrating with sites for mutual benefit, they will need the support of the world’s economic markets. Otherwise, some companies will be working to rebuild natural capital by regenerating sites, while others might become free riders that, now or in the future, take advantage of increases in natural resources that result from regenerated ecosystems.
According to this definition, a business would become an integral part of and accountable to its primary, secondary, and tertiary sites. In order to do this, the company would embed itself within and learn about those sites. It also would seek to understand how its sites interact with and connect to others sites through energetic and material flows and processes, such as inherent in weather patterns and watersheds. Successful businesses already practice such integration with the economic markets in which they function; however, business ecology requires them to integrate with and be informed by “ecological markets” first – and for economic markets to reorient themselves to do the same.
Business ecology acknowledges that all business activities must be conceptually and actually tied to, informed by, and driven by the opportunities and constraints of industrial sites. Thus, business ecology occurs when a company learns everything that it can about its sites and incorporates its activities with those sites in order to regenerate ecosystems rather than harm them. For a company to be ecologically benign, it must return the materials that it takes to the ecosystems from which they were sourced; otherwise, source ecosystems will become increasingly depleted over time. Therefore, integrating fully with sites will require a fundamental shift in the way that companies are run, view their relationship with their sites, and interact with the environment in general. This shift will need to be accompanied by underlying changes in cultural paradigms, industries, economies, and the infrastructures in which they are embedded among other things.
In business ecology, a company’s sites become explicit business partners, and the company intentionally connects with, supports, and feeds into the ecosystems and ecological landscapes within which they are embedded. Thus, the role of the company is not merely to reduce its harm; instead, the company acts as a co-creator with the other organisms in its sites on multiple levels of spatio-temporal scale to enhance the site’s health in the short-term and long-term, thereby increasing its evolutionary opportunities. This is a crux of business ecology.
Thus, the goal of business ecology is not about environmental management – it is about human management in an ecological context, a management that demands awareness and the creation of mutually sustaining business-ecological relationships. It is about developing mutually beneficial relationships with the rest of the living and nonliving world. Companies that want to be sustainable must begin to work with nature in intentional ways that benefit both.
This represents a considerable paradigm shift. However, a small but growing body of literature suggests that only through fundamental organizational changes and paradigm shifts will sustainability be possible (Hutchinson, 1995; Senge, 1990). Yorque et al. (2002) have explained, “There will be a paradigm shift from approaches emphasizing optimal solution and control over limited temporal and spatial scales toward approaches emphasizing cross-scale interactions and living with true uncertainty and surprise” (p. 435). This has tremendous implications for business, which traditionally has ignored ecological specifics, could largely be defined as ecologically illiterate, and has sought constant, predictable command-and-control approaches and goals of continuous growth rather than learning, flexible, adaptive ones that recognize both ecological opportunities and constraints. Yorque et al. (2002) have stressed the importance of “adaptation and response to changing conditions” (p. 436).
[edit] References
Abe, Joseph M., Patricia E. Dempsey, and David A. Bassett, 1998, Business Ecology: Giving Your Organization the Natural Edge. Boston: Butterworth-Heinemann.
Abram, Stephen, 2000, "What's Ahead for 2000? Prognostications from 13 Information Industry Leaders." Online source: http://www.infotoday.com/it/jan00/ahead.htm. Access date: August 6, 2002.
Baskin, Ken, 1998, Corporate DNA: Learning from Life. Woburn: Butterworth-Heinemann.
DeLong, J. Bradford, 2000, para. 1, “Why the Valley Way is Here to Stay.” Online source: http://www.business2.com/articles/mag/0,1640,7823,FF.html. Access date: August 6, 2002.
Cohen, DeLong, and Zysman, 2000, “Tools for Thought: What is New and Different about the E-conomy.” Online source: http://econ161.berkeley.edu/OpEd/virtual/technet/TfT.html. Access date: October 30, 2003.
Cooperative Bank, The, 2001b, “About the Bank - Highlights from Our History.” Online source: http://www.co-operativebank.co.uk/about/about_history.html. Access date: August 6, 2002.
Dar, Vinod K., 1999, “The Web as Business Ecology.” Online source: http://www.energyecomm.com/bsneco.html. Access date: August 6, 2002
Gruber, Tom, n.d., “2021: Mass Collaboration and the Really New Economy.” Online source: http://www.next20years.com/newsletter/futures/archive/v01-05business.html. Access date: November 1, 2003.
Hutchinson, Colin, 1995, Vitality and Renewal: A Manager's Guide for the 21st Century. London: Adamantine Press.
Kaminsky, Ilene, 2000, “ASPs - Creating a New Business Ecology.” Online source: http://www.hte8.com/artEcol.html. Access date: August 6, 2002.
Kinetix, 2002, “Kinetix Business Ecology.” Online source: http://www.kinetixllc.com/Kinetix_[business_ecology].pdf. Access date: August 6, 2002
UCI Communications Office, 1999, “UC Irvine Graduate School of Management professor named to Taco Bell® Chair in Information Technology Management.” Online source: http://www.today.uci.edu/releases/99releases/022aa99.html. Access date: August 7, 2002.
Mangrove Software, Inc., 2001, “Our Vision - Understanding the Ecology of Business.” Online source: http://www.click4systems.com/corpvision.htm. Access date: August 6, 2002.
Moore, James F., 1996, The Death of Competition: Leadership & Strategy in the Age of Business Ecosystems. New York: HarperBusiness.
Montague Institute, 2003, “Ecology of competition.” Online source: http://montague.montague.com/abstracts/ecology.html. Access date: November 1, 2003.
Reinhardt, Andy, 2000, section Digital Rebar, para. 1, “The New Intel.” Online source: http://www.businessweek.com/2000/00_11/b3672001.htm. Access date: August 7, 2002.
Senge, Peter, 1990, The Fifth Discipline: The Art & Practice of the Learning Organization. New York: Currency/Doubleday.
Townsend, Amy K., 2006, Green Business: A Five-Part Model for Creating an Environmentally Responsible Company. Atglen, PA: Schiffer Publishing.
Yorque, Ralf, Brian Walker, C.S. Holling, Lance H. Gunderson, Carl Folke, Stephen R. Carpenter, and William A. Brock, 2002, “Toward an Integrative Synthesis.” In Panarchy: Understanding Transformations in Human and Natural Systems, edited by Lance H. Gunderson and C.S. Holling, pp. 419-438. Washington, DC: Island Press.