www.awb.com.au The Australian Wheat Board
AWB Limited is Australia’s major national grain marketing organization and is one of the world’s largest wheat management and marketing companies. Its core business function is to serve Australian grain growers, and specifi cally wheat growers, by marketing and fi nancing their grain. In particular, AWB has the responsibility for the management and marketing of all Australian export bulk wheat (i.e. it is the single desk export trader for Australian grain).
Around 90% of the grain managed by AWB is wheat, although AWB also competes in the trading and management of non-wheat grains including barley, sorghum, oilseeds and pulses with two other bulk handlers – GrainCorp and ABBGrain. AWB manages the national wheat pool which represents an effi cient mechanism for managing risk through the use of grain market diversifi cation and the creation of economies of scale.
AWB has fi ve business units all of which are heavily information intensive and electronically enabled:
• National pool management services
• Finance and risk management products
• Grain acquisition and trading
• Grain technology
• Supply chain and other investments.
In 2000 a General Manager (eBusiness) was appointed to steer the company through the development of full electronic enablement including ECRM and ESCM. This is an ongoing task.
In 2003 AWB bought the company Landmark, the rural input supply business arm of Wesfarmers Landmark, making AWB the most powerfully vertically integrated agribusiness in Australia.
AWB is a publicly listed company on the Australian Stock Exchange (ASX) under AWB.
Information sourced from the ASX (www.asx.com.au) and the AWB website
Internet Business Models
Electronic business in one form or another has developed at a very rapid rate over the last few years. Each business model that has been thrown up has seemed viable only for a very short time. In truth there is no one model that is ‘right’ – as with the ‘Old Economy’ there are endless combinations of models and themes (Kuhn et al., 2000; Afuah and Tucci, 2003).
The classifi cations commonly used to describe the ‘type’ of business carried out using the internet were listed in Chapter 1. This section looks at internet business models associated with the business to consumer (B2C) and business to business (B2B) classifi cations (Hoque, 2000; Norris et al., 2001; Turban et al., 2004, Ng, 2005).
The B2C Environment
In a B2C buying environment individual consumers purchase goods from a virtual marketplace. The actions of the buyer drive the process and typically (Norris et al., 2001) the buying processes consist of four phases: product identifi cation, catalogue search, product comparison, and purchase. Figure 2.3 illustrates these phases.
Fig. 2.3. The B2C buying process
1. Product identifi cation. This involves a combination of online advertising and one-to-one marketing in a virtual marketplace. To provide personalized service which improves over time e-tailers have to rely on individually targeted product promotions and advertisements for repeat customers. If possible most retailers try to customize content from the very beginning by tracking a consumer’s browsing and customizing content to fi t suspected tastes.
2. Catalogue search. This tends to be focused on the product catalogue itself. The virtual custom catalogue is an essential component of any system that hopes to provide goods and services to either consumers or other businesses.
3. Product comparison. When a catalogue search phase crosses into the product comparison phase, features that enable consumers to navigate catalogues, compare similar offerings, and make product selections are required.
4. Purchasing. When a customer is ready to make a purchase the system must provide authentication and encryption services to ensure that the transaction is confi dential and accurate. Advanced virtual marketplaces can also be connected directly to back offi ce legacy applications and data sources in order to automate the vendor’s fulfi llment process and trigger third party service providers.
While there was a slow start to using the B2C environment in agribusiness – due in most instances to a mix of conservative culture in the ‘way business is done’ and the lack of technology in many rural environments in the world (Amanor-Boadu et al., 2000; Hooker et al., 2001; Bryceson, 2003) – in the last two or three years there has been a greater uptake.
B2C Business Models
B2C business models used during evolution from Brochureware to eCommerce (Hoque, 2000) include: the Content Business or Connect-Time/Revenue Split Business Model, the Advertising-Driven Business Model, the Transaction Business Model or eCommerce, the eCommerce Monetize Business Model and the Portal Business Model.
1. The Content or Connect-Time/Revenue Split Business Model. In this model, people who supplied content to online services got credit for helping keep users online. Since users paid by the minute or hour, this generated connect-time revenues that were allocated according to a negotiated split between content providers and online services. As the number of users increased these deals initially generated riches. However, as more service providers came online offering their content ‘for free’ this model became unviable.
Content-based models, however, are taking off again in 2005 (Blossom, 2005) with the emerging interplay of content, technology and people in the online environment creating value for businesses. Delivery of mobile-based content is another area that is gaining rapid ground in the value creation stakes.
2. The Advertising-Driven Business Model. This model was conceived as a way to generate revenues based on the sheer volume of traffi c that some sites could achieve. The model consists of offering a free service and collecting revenue from advertising. Users of these services see banner ads while accessing the website. Clicking on an ad usually sends the surfer to that advertiser’s web page or displays relevant product information. Appendix 2 defi nes some common advertising terminology associated with the internet. There have been three main diffi culties with this model:
i. Determining appropriate CPM (cost per 1000 impressions) rates (segmented according to banners, buttons and interstitials)
ii. Measuring traffi c with integrity (defi nition of ‘hits’, ‘page views’ and ‘unique users’) iii. Estimating effi cacy of messaging (whether impressions or click-throughs).
While the advertising model has declined in value in terms of revenue production particularly as online users got tired of banner ads, another model that remains current is the Affi liate and Syndication Network Model which developed from the advertising model. This model combines the content-based business model with the advertising- driven model. The underlying premise is that any website can leverage the content of other websites to create new value for itself by linking itself to that content and using a click-through application to bring the reader of the original content back to where they started. Of course appropriate revenue-sharing must be agreed on. In other words, this model views the web as an interconnected network of value in that by using a network of resellers, you increase volume and share the revenue (Laplant and Levine, 1999).
3. The Transaction Business Model or eCommerce. The strategy associated with this model is well known – that is, selling real products for real money through online channels.
The idea is that the internet provides a lower cost channel structure resulting from the
‘disintermediation’ of middlemen such as distributors, wholesalers and bricks-and-mortar
retailers. The subsequent reduction in transaction costs rewards new intermediaries, such as web-based retailers, with fatter margins. Unfortunately such rewards have not eventuated for most e-tailers using this model primarily because the transaction costs associated with doing business – via any medium – are in fact embedded so profoundly into the process of creating the product that they do not get ‘dropped off ’ the cost of selling something e.g. Amazon.com (www.amazon.com). However, there is no doubt that e-tailing is becoming more popular and there are a number of agribusinesses that have developed websites with an e-tailing function e.g. eharvest.com (www.eharvest.com) and Raptis and Sons Pty Ltd (www.raptis.com.au).
4. The eCommerce ‘Monetize’ Business Model. Here the strategy revolves around the idea of never making a profi t selling real products for real money! In other words, Freebies (e.g. affi liate programs) for customers are given in exchange for market relationships.
The monetizing concept argues that online businesses must fi rst capture large audiences of users or shoppers and then ‘monetize’ those audiences through subscription fees, advertising and eCommerce.
5. The Portal Business Model. As discussed in Chapter 3, a portal is generally a single, web- based interface that offers a gateway to a broad array of resources and services that would otherwise be a series of disconnected and incompatible information sets spread across numerous separate applications. Services include email, forums, search engines (e.g.
Yahoo!, Excite and Lycos) and online shopping malls. There are three key characteristics of a portal which make them valuable to users:
i. One stop shopping that provides simplifi ed access to content, applications and collaborative or community building functionality
ii. Personalized views that provide this access in the context of an individual’s preferences and business rules
iii. Flexible navigation including both pre-defi ned roadmaps and powerful free-form search.
Agribusiness specifi c portals are quite well represented – in Australia, Aglinks is an agricultural directory (www.aglinks.com.au) and AgriGate is a portal to ongoing agricultural research in Australia (www.agrigate.edu.au). In Canada, Farms.com is an information portal which is one part of a multifaceted ‘E’ business in Canadian agriculture (www.farms.com). This also exists in India (www.agriwatch.com) and in Holland (www.
agriholland.com). In the UK, Agritrading net (www.agritrading.net) is an agricultural trading portal and AgriFor (www.agrifor.ac.uk) is a free portal to agricultural and food resources. Similar resources can also be found in Latin America (http://lanic.utexas.edu/
la/region/agriculture/), China (www.Farmchina.com) and the European Union (http://
agritrade.cta.int).
B2C Application Models
The applications that ensure that the business model works are important – the vast majority of B2C electronic application initiatives are e-tailers and consumer portals that aim to add value to business and consumers by breaking down barriers caused by time, distance and form. B2C applications can:
• Reduce the cost of selling goods and services and contribute directly to the enterprise’s bottom line (e.g. by empowering consumers with customer self-service which reduces customer service costs and improves the effi ciency of the buying process)
• Have the ability to build personal relationships with customers (e.g. by greeting customers by name as they enter the site or by tracking customer behaviour and preferences in order to present completely customized interfaces and content such as ‘my Yahoo’ page)
• Enable retailers to target customers for individual promotions with one-to-one marketing.
There are four distinct vertical B2C application models: E-Tailing/Consumer Portals, Bidding and Auctioning, Customer Relationship Management (CRM), and Electronic Bill Payment (EBP).
1. E-Tailing/Consumer Portals. These e-tailing or consumer portal applications aim to aggregate consumers, market goods and services, and make transactions from simple static catalogues with fi xed prices. Examples of activities supported in such an application environment include:
• Catalogue management. E-tailers must integrate product and service information from multiple vendors into a single cohesive catalogue that is intuitive to navigate and that presents products in an attractive manner.
• Parametric searching. Consumers often search for product categories (e.g.
‘detergents’) rather than specifi c product names (e.g. ‘Morning Glory’). Parametric searching enables buyers to search product categories incrementally to determine product selections that meet their needs.
• Personalization and profi ling services. Consumer portals should identify visitors individually, wherever possible, in order to collect personal information about the types of products that they research and ultimately buy.
• Advertising or targeted marketing. E-tailers can dramatically increase the instance of impulse buying by targeting advertising banners and special promotions to consumers with identifi ed interests and buying habits.
• The shopping cart. Most e-tailers use a virtual shopping cart metaphor.
• Payment processing. The site must include some form of electronic payment processing to enable users to make purchases using credit cards, online payment methods, etc.
It is unlikely that consumer portals will take the place of conventional retailers because they will never be able to deliver the hands-on instant gratifi cation that the customer receives when making a purchase and taking home a new product from a bricks-and- mortar store. This is particularly the case with products such as food.
2. Bidding and Auctioning. Bidding and auctioning sites sell products and services with non- traditional, fl exible pricing models. Often the host of the auction or bidding application is a third-party intermediary who operates as a link between the buyer and the seller.
Successful bidding and auctioning applications must support a common core functionality in order to provide the basic features and services that customers expect in an auction environment – these include:
• Catalogue integration and management.
• Chat capability. All bidding and auction sites include some sort of chat functionality to allow potential buyers to discuss the relative merits of available products.
• Bid boards. Consumers must be able to place their bid information on a public bid board to keep other potential buyers up to date on the auction process.
• Personalization buyer/seller account management. Many auction sites concentrate on matching buyers with multiple sellers in a buyer cyber-mediary supplier model rather than a simple buyer/supplier model.
• Notifi cation system. Auctions are driven by a series of events (i.e. new item posted for bidding, new higher bid received, auction closed). To ensure that all potential buyers have access to up-to-date information about auctions, the application often utilizes an event notifi cation component to deliver updates by email, fax, web page or text message.
The most famous auction site is eBay but agribusiness auction sites include Farms.com in Canada (www.farms.com) which is a general auction site for the agricultural and agribusiness sector, AuctionsPlus from Australia (www.auctionsplus.com.au) featuring livestock and machinery, and Rangeland (www.rangeland.com.au) which specializes in online auctioning of livestock from around the world.
3. Customer Relationship Management (CRM). CRM applications aim to provide services to customers that add value, either to transactions that have already taken place or long-term customer relationships between the end user and the host of the application. They support a wide range of consumer processes and functionality to deliver a robust relationship building experience. For example:
• Profi le management. Typically includes accessing information that is unique to individual customers. The application must keep track of individual user profi les to ensure that each user has access only to information that pertains to them.
• Customer content delivery. Applications should be able to identify and deliver support information directly to the user for whom it is intended.
• Account management product feedback. E-tailers should aggregate user experiences with products in order to deliver real-time feedback to design teams about each customer’s use of a product. Ultimately this information can be used to automatically provide customer product confi gurations for individual buyers.
• Information gathering. The site should attempt to aggregate a knowledge-based user experience in order to enable customers to engage in self service and self support.
• Interactive community building. Customers who have experienced similar problems are the best source of solutions or advice so services such as online bulletin boards, FAQs and chat rooms are all expected.
4. Electronic Bill Payment (EBP). EBP applications streamline the process of collecting, presenting, and paying repetitive consumer charges such as credit card, telephone and utility bills. They include:
• Bill consolidation. To offer a complete solution, EBP sites must be able to integrate, present, and collect payment for bills from multiple billing organizations. Typically this involves customizable data translations through standards such as XML.
• Payment processing. EBP applications must be able to accept multiple payment methods including credit cards and electronic cash.
• Analysis and reporting. Consumers should be able to automatically analyse and summarize information in charts, graphs, and other formats.
• Integration with bill accounting systems. When a consumer makes a payment it can be automatically integrated into the internal accounting systems of the biller to refl ect the latest, up-to-date information at all times.
In addition to these applications, B2C applications that support the consumer buying process (e-procurement) need to address and provide functionality consistent with the four phases of the B2C buying process outlined at the beginning of this section (product identifi cation, catalogue search, product comparison and purchasing).
B2C Critical Success Factors
Every B2C platform relies on three strategies to bring value to online consumers: branding, one-to-one marketing and online community building.
Branding
In the past branding has almost exclusively been about positioning and product differentiation in advertising. In the old advertising mode the consumer was always the passive recipient of the message (e.g. on billboards it takes quick messages and appealing images to grab the eye of the passers-by). The internet, however, is a two-way medium. Dot.com branding is more about listening to customers than telling them what to believe (Figs 2.4a and b).
Fig. 2.4a. One-way advertising Fig. 2.4b. Two-way information exchange
One-to-One Marketing
One-to-one marketing enables e-tailers to replicate the intimacy of shopping at the corner general store. It is about personalized service, about knowing a customer’s preferences and buying habits. Benefi ts include:
1. Economies of scope – it is more important to own a single customer’s whole business than to have one-time relationships with many customers
2. Close long-term relationships – enable retailers to listen to the needs of their customers and respond directly as well as to prevent defection to competitors
3. Manage customers individually – consumers have individual and highly variable tastes.
Remember though that no single product can please everybody
4. Targeted customers – these are consumers who are highly subject to impulse – don’t wait for them to come to you; take your product to them.
Online Communities
The idea of building communities of interest in order to generate consumer interest is not purely an internet phenomenon (Coat, 1993). However, because it is a two-way medium the internet can enable consumers to easily generate their own content and can turn interviews into conversations, articles into discussions, and editorials into debates. There are fi ve requirements for successful online community building:
1. A shared space – a website
2. Shared values – community members must have some sense of common appreciation and values in order to establish the foundation for discussion
3. Shared language – if the community members do not speak the same language it will be diffi cult to talk
4. Shared experience – communities are normally based around a common experience that members share
5. Shared purpose – there must be a common purpose either as a commerce oriented consumer site or as a community based consumer site.
A good example is the Australian agribusiness Incitec/Pivot’s Big N Community (www.
bigN.com.au). The website was developed around an existing offl ine and specialized user base for the fertilizer anhydrous ammonia – branded as ‘BigN’. Anhydrous ammonia is the most concentrated nitrogen fertilizer available and is stored, transported and applied directly to the soil as a liquifi ed gas. As a product, it is potentially explosive and thus has some very stringent and specialized working conditions associated with it that users have to be aware of and capable of dealing with. The website, which was inexpensively set up (approx.
A$20,000), has become the major space for active dissemination of information and updates on the product, as well as acting as a focus for general discussion and news (M. Maloney, Brisbane, 2003 and 2004, personal communication).
The Dot.com Enterprise
A dot.com organization is one where the majority or all of the business of the enterprise is conducted online via a website on the internet. In the mid to late 1990s it was the quintessential B2C type of eCommerce business and was much vaunted as part of the ‘New Economy’ way