A New Definition Of A Business Model

Abstract

This paper discusses the lack of agreement on the definition of a business model which is a recent addition to management literature since the dot com era. An abbreviated literature review was discussed that emphasizes the different perspectives of business model definitions. There are categories such as auction, subscription, or advertising business models which describe the processes between a buyer and seller (Rappa, 2005). Business models have also been defined in the literature as a system with components (Afuah&Tucci, 2001) or a method to make money (Weill&Vitale 2001). They have also been categorized as business to business models or business to consumer models (Haag, 2004) This author has developed a new definition of a business model that focuses on the transaction between the buyer and seller, regardless of whether it is a traditional transaction, an electronic transaction or the type of transaction. The paper has provided six comparisons of the difference between a traditional transaction between a buyer and a seller and an electronic transaction between a buyer and a seller. The direct comparisons of traditional and e-commerce business models illustrate the major component of a business model—the transaction that occurs between the seller and buyer and that the transaction must be included in the definition of a business model.