## **Learning Outcomes**

After reading this article, you will be able to define and distinguish between e-commerce, m-commerce, and platform business models. You will understand how each model operates, their primary advantages and risks, and how digital technologies change the marketing mix and business strategy. You should be able to explain legal and security considerations, network effects, and the impact of digital business models on traditional business functions.

## **ACCA Business and Technology (BT) Syllabus**

For ACCA BT, you must understand how digital business models transform business operations and marketing. Specifically, you should focus your revision on:

- Defining and describing digital business models: e-commerce, m-commerce, and digital platforms
- Explaining main types of e-commerce transactions (B2C, B2B, C2C)
- Distinguishing m-commerce from other digital models and describing its unique features
- Understanding platform/marketplace models and explaining network effects
- Identifying legal and security risks (including data protection and cyber security) related to digital business activities
- Describing how digital business models influence each element of the marketing mix (4Ps/7Ps)
- Recognising the practical challenges and operational considerations when adopting digital models

## **Test Your Knowledge**

_Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision._

1. State two main differences between e-commerce and m-commerce business models.
2. What is a platform business, and how do network effects influence its value?
3. Identify one legal risk and one technological risk commonly faced in digital business.
4. Give an example of how digital technologies change the "Place" element of the marketing mix.

## **Introduction**

Digital business models have reshaped how organisations deliver products, reach customers, and manage internal operations. E-commerce, m-commerce, and digital platforms allow businesses to access larger markets, offer new services, and operate more efficiently. At the same time, these models bring new challenges in terms of competition, legal compliance, security, and customer expectations. Familiarity with these concepts is essential for accountancy and business professionals in all sectors.

> **Key Term: digital business model**
> A business model based on digital technologies and communication channels to deliver value, transact, or coordinate activities—often via the internet, mobile devices, or online networks.

## Types of Digital Business Models

Organisations typically adopt one or more main digital models:

- **E-commerce:** Transactions via the internet
- **M-commerce:** Commerce via mobile devices and apps
- **Platform businesses:** Marketplaces or apps connecting multiple user groups

Each model presents unique opportunities for value creation and carries specific risks and regulatory requirements.

### E-commerce

E-commerce refers to buying or selling goods and services electronically, usually through websites or dedicated portals.

> **Key Term: e-commerce**
> The trading of goods and services over digital networks, particularly the internet, where orders and payments are executed electronically.

E-commerce models include:

- **Business-to-consumer (B2C):** Retailers selling directly to individuals (e.g., clothing websites).
- **Business-to-business (B2B):** Businesses dealing with other businesses online (e.g., wholesale supplier platforms).
- **Consumer-to-consumer (C2C):** Individuals exchanging goods and services, often via online auctions or classifieds.

#### Typical features

- Broad customer reach, unconstrained by geography
- Lower fixed costs than traditional shops
- Automated order processing and inventory systems

#### Key risks

- High levels of competition with global rivals
- Payment fraud and online transaction security concerns
- Need for robust logistics and after-sales support

### M-commerce

M-commerce is a subset of e-commerce focusing on commercial activities carried out through mobile devices like smartphones and tablets.

> **Key Term: m-commerce**
> The buying and selling of products or services using wireless handheld devices, typically through mobile-optimised sites or apps.

Main features:

- Customers can transact anywhere, anytime
- Connection with mobile wallets and scanning tools
- Location-based offers and personalised push notifications

Challenges include device compatibility, network reliability, and exposure to security threats such as insecure Wi-Fi connections.

### Platform Businesses

Platforms bring together two or more distinct user groups—usually buyers and sellers—enabling value-creating interactions.

> **Key Term: platform business**
> An online service or marketplace that connects different user groups, enabling exchanges without typically owning inventory or products.
>
> **Key Term: network effects**
> The phenomenon where a network or platform’s value increases as more people use it, leading to self-reinforcing growth.

Platforms operate as intermediaries. Examples include online marketplaces (e.g., AirTicketHub, where airlines and travelers connect), ride-hailing apps, and app stores. They can scale rapidly due to network effects—users attract more users, strengthening the platform’s competitive position.

#### Implications for businesses

- Moderate to no stock holding required
- Value is driven by user engagement and volume
- Revenue comes from commissions, fees, advertising, or data

### **Worked Example 1.1**

A company builds a website that hosts freelance designers who offer services to clients globally. The company charges a percentage fee for each completed job but does not directly employ or manage designers.

**Question:** Is this an example of e-commerce, m-commerce, or a platform business?

> **Answer:** This is primarily a platform business. The website connects buyers (clients) and sellers (freelancers) and earns commissions without producing or selling its own goods.

### Digital Business in the Marketing Mix

The expansion of digital business models has significantly changed the application of the marketing mix (4Ps/7Ps):

- **Product:** Greater customisation, introduction of digital-only products or services
- **Price:** Dynamic, real-time price changes based on demand and competition
- **Place:** 24/7 accessibility, international reach with reduced need for physical shops
- **Promotion:** Use of targeted ads, social media marketing, influencer partnerships, and email campaigns
- **People (for services):** Customer support may occur through chatbots or instant messaging
- **Process:** Automation of ordering, delivery, and payment processes
- **Physical Evidence:** Online reviews, digital receipts, app download stats

> **Key Term: digital marketing**
> Marketing strategies that use digital channels and data to advertise, sell, and track products and services.

Digital marketing enables companies to:

- Collect and analyse data for customer segmentation
- Personalise recommendations and offers
- Respond immediately to customer queries via chat or social messages

### **Worked Example 1.2**

A retailer uses data from online sales to send discount vouchers to customers who often purchase children’s clothing, aiming to boost loyalty.

**Question:** Which marketing mix elements have changed, and what additional considerations are there?

> **Answer:** Both promotion (personalised discounts) and product (targeted recommendations) have been affected. Additional factors include compliance with data privacy laws and the need for robust data security.

## Benefits and Risks of Adopting Digital Business Models

Adopting digital models offers several advantages alongside notable threats.

**Main benefits:**

- Wider market access and lower entry barriers
- Streamlined operations through automation and integrated systems
- Enhanced ability to gather and use customer data for business decisions

**Key risks:**

- Greater risk of data breaches, fraud, and cyber attacks
- Challenges in complying with relevant data protection regulations
- Technology failures or loss of service due to system downtime
- High customer expectations for rapid and seamless experiences

> **Key Term: cyber security**
> The protection of digital systems, networks, and data from theft, attacks, or unauthorised access.

Common threats include phishing, hacking, data theft, and downtime caused by denial-of-service attacks.

### **Worked Example 1.3**

A travel company shifts its business fully online, removing all physical stores. It uses a platform allowing customers to book, pay, and leave reviews. Shortly after launch, the company’s user database is compromised due to weak password protocols.

**Question:** What business model is being used, and what risk has been realised?

> **Answer:** The company is using a combination of e-commerce and a platform model. The realised risk is a cyber security incident caused by failure to enforce strong password security.

### **Exam Warning**

Do not assume digital models always result in cost savings. While physical infrastructure costs may fall, spending on IT systems, cyber security, digital marketing, and legal compliance often increases.

## Legal, Regulatory, and Operational Issues

Digital businesses face additional legal and compliance requirements compared to traditional models:

- Ensuring compliance with data protection laws (e.g., GDPR)
- Managing remote contracts and digital consumer rights
- Security of payment processing and protection of customer data
- Responsibilities for third-party content and marketplace liability

Operationally, businesses must monitor:

- Website/app usability and accessibility
- Supplier relationships and service-level agreements
- Staffing for real-time digital customer support

### **Revision Tip**

Regularly review emerging digital risks in business news and consider how regulation and customer expectations are changing.

## **Summary**

Digital business models—e-commerce, m-commerce, and platforms—allow organisations to access new markets, improve efficiency, and respond rapidly to customer needs. However, these models also require strong risk management and compliance with technology, cyber security, and customer protection regulations. Accountants and business professionals must understand both the opportunities and limitations of digital models to effectively contribute to business strategy and compliance.

## **Key Point Checklist**

_This article has covered the following key knowledge points:_

- Define digital business models and distinguish between e-commerce, m-commerce, and platform models
- Outline the main features, benefits, and risks of e-commerce and m-commerce
- Explain how platform businesses operate and the significance of network effects
- Describe changes to the marketing mix brought by digital models and technologies
- Identify legal and cyber security challenges relevant to digital business operations
- Recognise the importance of protecting customer data and complying with digital regulations

## **Key Terms and Concepts**

- digital business model
- e-commerce
- m-commerce
- platform business
- network effects
- digital marketing
- cyber security

Digital business models and marketing - E commerce m commerce and platforms