Business Object Aggregation – BOA

E-commerce is a business running model in open Internet environment based on browser and server utilizing mode to realize consumers shopping on net, commerce bodies trading on net and electric payment on net. Discussions at present recognize two forms for E-commerce: trade between corporation and individual (B to C mode) and trade between corporations (C to C mode). We think that those two modes in fact artificially divide business agents who have the same business need, which is not the most suitable organizing mode for E-commerce. Different from usual study point of view, this article will interpret E-commerce from a fire-new point of view: Business Object Aggregation.

Ⅰ. Business Object

Business Agent, BA

Business agent means every party taking part in business activity. Such as customers (individual consumers or corporation group), commerce bodies (including sellers, producers and deposit and transport businessmen), banks (including banks issuing cards and banks taking receipts) and other agency service businessmen, etc.

Business Object, BO

Business Object means Business Agent having special business need in every stage of commercial activity. To be specific, Business Agent + business need = Business Object. If one business agent have many different business needs, the needs of this Business Agent can be divided into several Business Objects.

Business Objects concerned in every stage of business activity may be different. For example, in a complete business activity, a consumer with special business need in initial stages is one Business Object; in delivering, the businessman with the request of delivering the commodity to a designated place is one Business Object. Therefore, Business Object can be divided into Subset of Business Object from different stages of business activity.

Subset of Business Object, SBO

A complete E-commerce should include stages as follows: collecting and discriminating information of products and services, shopping and trading, paying, delivering and after service. Of course usual E-commerce does not have to include all stages above. Subset of Business Object can be divided as follows according to discussion of E-commerce stages:

(Picture 1  Subset of Business Object)

Because those Subset of Business Object all involve two sides of supply and demand, the five Subset of Business Object can be explained from the two sides of supply and demand. For example, businessman expecting to deliver commodity from Beijing to Shanghai is a Delivering SBO, and a delivery center being able to provide delivery service from Beijing to Shanghai is also a Delivering SBO.

Ⅱ. Business Object Aggregation

In traditional business activity, business object is separated, which means every business object usually lack purposeful connection. The result of this separation is large information redundancy and scale broken, in other words is that the total trade cost is high. The high trade cost influences business activity’s efficiency on one side, and on the other side, it set a rather high entrance bulwark for later comers. Both sides are disadvantageous for E-commerce’s realization. Then how to reduce the trade cost of business agent during business process? Business Object Aggregation provides an effective way.

Business Object Aggregation is to aggregate same or similar business objects in every stage of business activity into one whole to engage in business activity. On one side, information redundancy can be reduced, trade cost can be restrained and trade indefiniteness and risk can be reduced by sharing information; on the other side, scale effect can be realized by integrated Customized-Mass (CM), in order to make main bodies who take part in integrated business activity be able to enjoy personal service by mass price.

Usual procedure of Business Object Aggregation is:

Decomposing: decompose several business agent’s needs into several business objects.

Usual procedure of Business Object Aggregation is:

• Decomposing: decompose several business agent’s needs into several business objects.
• Aggregating: uniting and aggregating these business objects to form several congeners according to business parameters (mainly including price, quantity, quality, prescription, etc.).
• Trading: these business objects aggregated into batch were trade objects and trade was made according to certain trade rules.
• Restituting: at last, decompose trade result again into several business objects on BOA platform and send to every business agent after restitution

(Picture 2  BOA principle chart)

Picture 2 explains BOA’s theory and process. Decomposition and aggregation and even trade of every business agent’s business object can be done on BOA platform.

BOA’s efficiency core comes from sharing information and Customized-Mass. Sharing information can be realized by Internet, which is base for Customized-Mass. Customized-Mass aggregates several individuation business objects into mass business objects by decomposing and aggregating. After this conversion, need is still individual for buyer and mass for seller. Thereby solve the contradiction between individual service during traditional business process and scale benefit.

Electric time and Internet means provide great convenience for obtaining information and information searching cost reduces in great range in certain extent. But on the other hand, information’s dependability also becomes a big obstacle for business development in Internet time. Asymmetry of quality information is possible to result in conversing choice in business activity, even no market. So information finitude and information validity are two different concepts, which is one reason of agent existing in Internet time. In following part we will primarily discuss information validity under BOA frame, pointing out that BOA business model provides a better solution for information validity.

BOA platform can be a suppositional and free Internet platform, it can also be a high professional middleman. Researches of Coase, Demnsetz and John Fingleton show that whether middleman is needed lies on balance of trade fee. When every business agent shares information, trade fee is rather low, and BOA’s function may be finished by connecting business agents directly together. Under condition of high trade fee caused by strong indeterminacy of quality, trade and others, BOA function should be achieved by professional middleman.

Although Internet’s appearance reduces traditional trade fee and makes traditional middleman struck and decline, it also causes new trade fee at the same time, which cannot be eliminate completely. This means in current E-commerce circumstance, in order to realize market balance, kinds of new type service middleman is necessary and need. Choosing from direct trade and trade through middleman lies directly on basic trade fee caused by market structure and middleman’s own efficiency. Effective middleman participating in trade will increase welfare of buyer, seller and middleman, and realize Palato improvement of whole society’s welfare. In following part, we also do primary discussion of necessity of middleman’s existence.

Ⅲ. BOA Applying Example

Now we will explain BOA application by an example of middle-small corporation purchasing raw materials.

company 1 wants to buy certain amount of raw material A and B, another company 2 also wants to buy certain amount of raw material A and B (supposing the two business agents’ other requests of raw material A and B are same). According to traditional business model, company 1 and 2 are two business agents without any contact during purchasing process: they will gather information of concerned products alone and finish process of gathering information and discriminating, then choose certain provider to contact, and finish trading with provider by negotiation. Because of restriction of production scale, both companies purchase amount of the two kinds of products cannot reach certain scale. So the companies’ orders for provider A and provider B are small batch order and cannot get corresponding discount. During negotiation, business agent 1 and 2 will not get favorable station because they are small clients. While for provider, first he faces high trade cost brought by trading with two different clients; second, his organizing production and supplying goods cannot realize scale economy because of small batch.

While on BOA platform, the trade will go in a completely different way from traditional business. First, company 1 and 2 give parameters such as kind and quantity of raw material purchased to purchasing platform separately. Purchasing platform decomposes business agent 1 and 2’s requests into several business objects according to commodity kind. Then system unites and aggregates these business objects according to business parameter, product kind (A, B), to form two aggregating business objects of the same kind, A=(1A+2A) and B=(1B+2B). Purchasing platform gives the two aggregated business objects to provider. Trade object provider sees will be aggregated business object A and B, not separate business agents 1 and 2 with different needs. After aggregation, aggregated business object A and B both have customized scale (as previous discussion, this scale does not exist before decomposing and aggregating business objects), aggregated business object A and B can get corresponding discount of large quantity orders and favorable negotiation position. Business agent 1 and 2 can share business profit brought by BOA, which is not available before aggregation. For provider, negotiation expense on aggregated business objects is distinctively less than negotiation on two separate business objects. Thereby trade cost is reduced enormously. In addition, although giving larger discount to clients, reduction of producing and managing cost brought by scale effect will be enough to make up profit lost of discount. So customizing scale is also advantageous for provider.

That is a BOA trade example. For different Subset of Business Object, BOA idea can be applied in fields of business information, payment, delivery and after service.

• Business Information BOA: Business agents are consumer and manufacture. Consumer has some potential need of commodity or service, but price, quality and trade time are all unsettled. Manufacture has ability and need to provide commodity and service, but does not find certain consumer. Business Information BOA platform can aggregate business object from two sides to form certain trade need of commodity and service. To be specific, Business Information BOA can classify commodity and service that manufacture can provide, and estimates impersonal, which makes consumer to get all-sided information. In other side, Business Information BOA can also allow consumers to bring forward their own requests in order to make manufactures to get elaborate potential market information and guide production and improvement of commodity and service.
• Trading BOA: Business agents are consumer and manufacture having definite request of commodity and service (or request of providing commodity and service). Every business agent’s business object is aggregated by trade BOA platform, forming aggregated business object of customized scale, and trading according to certain trade rules.
• Paying BOA: Business agents are consumer (manufacture) and financial agency. Business objects with same paying request are aggregated on Paying BOA and realized by certain financial agency.
• Delivering BOA: Business agents are manufactures with delivering request and delivery agency. Business objects with same delivering request are aggregated on delivering BOA and realized by certain delivery agency.
• After Service BOA: Business agents are consumer and manufacture with after service request. Business objects with same after service request are aggregated on delivering BOA and realized by certain after service agency.

These five kinds of BOA are five modules independent and tied up in business process. When trade fee is high and middleman is needed, every BOA can be an independent service provider. Like, Business Information BOA platform can be Internet advertisement agency, and BBS system specially for announcing information, and third side estimating institution of commodity and service; Paying BOA can be professional service institution and platform of Internet bank payment; Delivering BOA can be special delivery service center; After Service BOA can be special Internet after service institution.

Every combination of BOA platform can form new business service institution. For example, some large scale E-commerce service provider will aggregate five BOA platforms. While some will aggregate Business Information BOA and Trade BOA.

Ⅳ. BOA’s Influence to Business Model

BOA trading model exists for a long time. Its advantage has not been brought forth only because business means restriction. With Internet time comes, this business model’s efficiency will get full show. It has characteristics compared with common E-commerce.

BOA bands together efficiently traditional business model and E-commerce and providing an E-commerce model adapted with Chinese social economy development status in quo. From micro level, every business agent can benefit from BOA Customized-Mass; from macro level, it can realize social work division in Internet time, improve business efficiency, and will not cause huge surge of social structure for its similarity to traditional business model, which is propitious to employment structure transiting smoothly.