Overview Ch. 4

Describe the factors that influence consumer behaviour online

Describe how companies are building one-to-one relationship with customers

Discuss the issues of e-loyalty and e-trust in EC Describe consumer market research in EC Describe the objectives of web advertising on

the web Describe various online promotions

Company-Centric B2B and Collaborative

Commerce

Company-Centric B2B and Collaborative

Commerce

Learning Objectives

Describe the major types of B2B models Describe the characteristics of the sell-side

marketplace Describe the sell-side intermediaries models Describe the characteristics of the buy-side

marketplace and e-procurement Explain how forward and backward auctions work in

B2B Describe B2B aggregation and group purchasing

models Describe collaborative e-commerce Describe infrastructure for B2B

Concepts, Characteristics and Models of B2B EC

B2B EC or eB2B (electronic B2B) defined Transaction conducted electronically between business

over the networks• Internet• Extranets• Intranets• Private networks (e.g., EDI)

Automated trading improves the process Market size and content

Expected to grow from $1.1 trillion in 2003 to $10 trillion by 2005

Percentage of Internet-based B2B from 2.1% in 2000 to 10% in 2005

Concepts, Characteristics and Models of B2B EC [2]

How is B2B conducted? Directly between buyer and seller Via an online intermediary: an online third-party that

brokers a transaction between a buyer and a seller; can be virtual or click-and-mortar

With or without intermediaries Types of transactions

Spot buying• Purchasing of goods and services as they are needed,

usually at prevailing market prices, which are determined dynamically by supply and demand

Strategic sourcing• Purchases made in long term contracts that are

usually based on private negotiation between sellers and buyers

Concepts, Characteristics and Models of B2B EC [3]

Types of Materials Direct materials

• materials used in the production of a product (e.g., steel in a car or paper in a book)

Indirect materials• materials used to support production (e.g., office

supplies or light bulbs) MROs (Maintenance, Repairs, and Operations)

• indirect materials used in activities that support production

Concepts, Characteristics and Models of B2B EC [4]

Direction of Trade Vertical marketplaces

• Markets that deal with one industry or industry section

• Examples: electronics, cars, steel or chemicals Horizontal

• Markets that concentrate on a service or a product used in all types of industries

• Examples: office supplies, PCs or travel services

The Basic B2B Transaction Types

Sell side one seller to many buyers

Buy side one buyer from many sellers

Exchanges many sellers to many buyers

Collaborative commerce communication and sharing of information,

design, and planning among business partners

One-to-Many and Many-to-One: Company Centric Transactions

Company-centric EC e-commerce that focuses on a single company’s

buying needs (many-to-one, or buy-side) or selling needs (one-to-many, or sell-side)

Private e-marketplaces markets in which the individual sell-side or buy-

side company has complete control over participation in the selling or buying transaction

Many-to-Many: Exchanges

Exchanges many-to-many e-marketplaces, usually owned

and run by a third party or a consortium, in which many buyers and many sellers meet electronically to trade with each other

also called trading communities or trading exchanges

Public e-marketplaces third-party markets that are open to all

interested parties (sellers and buyers)

Virtual service industries in B2B

Travel and tourism services Real estate Electronic payments Online stock trading Online financing Other online services

Benefits of B2B

Eliminate paper-based systems and reduces administrative costs

Expedite cycle time Lower search costs and time for buyers Increase employee productivity dealing with buying

and/or selling Reduce errors and/or improve quality of services Reduce inventory levels and costs Increase production flexibility, permitting just-in-time

delivery Facilitate mass customization Increase opportunities for collaboration

Sell-Side B2B Marketplace Architecture

Sell-Side Marketplaces: One-to-Many

Sell-side e-marketplace a Web-based marketplace in which one company

sells to many business buyers, frequently over an extranet

3 major methods for direct sale in the one-to-many model: Selling from electronic catalogs Selling via forward auctions One-to-one selling under a negotiated, long-term

contract

Direct Sales from Catalogs

Companies may: Offer one catalog for all customers Customized catalog for each customer Facilitate the B2B direct sale by providing the buyer

with a buyer customized shopping cart Configuration and customization

Efficient customization for direct sales Business customers customize products, receive

price quote, submit order

Direct Sales from Catalogs [2]

Benefits Reduces costs (to buyers and sellers) and errors

during the process Speeds up order cycle Ability to customize products Offer different prices to different customers

Limitations Channel conflicts with distribution systems High cost when traditional EDI used Large number of business partners is needed to justify

system

Selling via Auctions

Using auctions on the sell-side Revenue generation Increased page views

• Stickiness—characteristic of customer loyalty to a Web site, demonstrated by the number and length of visits to a site

Member acquisition and retention• Bidding transactions result in additional registered

members

Buy Side Marketplaces: One-from-Many

Procurement methods Buy from manufacturers, wholesalers, or

retailers at their storefronts, from catalogs,and by negotiation

Buy from the catalog of an intermediary Buy from an internal-buyer’s catalog Conduct a bidding or tendering system Buy at private or public auction sites Join a group-purchasing system

Buy Side Marketplaces: One-from-Many [2]

Procurement management the coordination of all the activities relating to

purchasing goods and services needed to accomplish the mission of an organization

Inefficiencies in procurement management Purchasing personnel spend time and effort on

procurement activities Qualifying suppliers & Negotiating prices and terms

Potential inefficiencies: Delays or Paying too much for rush orders Maverick buying—unplanned purchases of items

needed quickly, often from non-approved vendors or at higher prices

Buy Side Marketplaces: One-from-Many [3]

Goals of procurement reengineering Increase purchasing agent productivity Lower purchasing prices of items Improve information flow and management Minimize maverick (unplanned) buying Improve payment process Streamline purchasing process to make it:

• Simple

• Fast

Buy Side Marketplaces: One-from-Many [4]

Reduce administrative processing cost per order

Find new suppliers and vendors to provide faster/cheaper goods and services

Integrate procurement process with budgetary control in an efficient and effective way

Minimize human errors in buying or shipping process

Buy Side E-Marketplaces: Reverse Auctions

Buy-side e-marketplace Web-based marketplace in which a buyer

opens an electronic market on its own server and invites potential suppliers to bid on the items the buyer needs; also called the reverse auction, tendering, or bidding model

Request for quote (RFQ) The “invitation” to a buy-side marketplace

(reverse auction)

Conducting Reverse Auctions

Reverse auctions administered from a company’s Web site Bidding process lasts a day or more Bidders may bid only once or view the lowest

bid and rebid several timesIncreasing number of reverse auction sites

makes it impossible for suppliers to monitor all of them Online directories list open RFQs Use software search-and-match agents to

reduce the human burden in the bidding process

Conducting Reverse Auctions [2]

Web-based reverse auction process Buyers prepare bidding project information Buyers post project on portal Identify potential suppliers Invite suppliers to bid Suppliers download project information Suppliers submit electronic bid Reverse auction in real-time, or it can take a few

days Buyers evaluate and award contract

Benefits Reverse Auctions

Electronic process is fasterAdministratively much less expensiveEnables location of cheapest possible

products

Aggregating Catalogs

Aggregating suppliers’ catalogs: an internal marketplace Maverick buying to save time leads to high

prices Aggregating all approved suppliers’ catalogs

in one placeReduced number of suppliers

Buyers at multiple corporate locations• Fewer and remote suppliers• Larger quantity/lower costs

Group Purchasing

Group purchasing—orders from several buyers are aggregated Economy of scale Reduced transaction processing cost Putting together orders from multiple buyers

to make large volumes/lower costs

Electronic Bartering

Electronic bartering Exchange of goods or services without the use

of money Exchange a surplus for other need Bartering exchange

• Submit surplus to exchange for points• Points used to buy what company needs

Benefits:• Faster than manually• Easier to match

Collaborative Commerce (C-commerce)

Consisting of activities between business partners in jointly planning, designing, developing, managing, and researching products and services

Web-based systems used between and among suppliers for: Communication Design Planning Information sharing Information discovery

Collaborative Commerce (C-commerce) [2]

Varieties of c-commerce: Joint design efforts Forecasting Between and within organizations

Aids communication and collaboration between headquarters and subsidiaries, franchisers and franchisees

C-commerce platform provides e-mail, message boards, chat rooms, online corporate data access around the globe, no matter what the time zone

Barriers to C-commerce

C-commerce is moving ahead fairly slowly because: Technical reasons involving integration,

standards, and networks Security and privacy concerns over who has

access control of information stored in a partner’s database

Internal resistance to new models and approaches

Lack of internal skills to conduct c-commerce

B2B Infrastructure

Server to host database and applications Software for executing sell-side (catalogs) Software for conducting auctions and reverse auctions Software for e-procurement (buy-side) Software for CRM Security hardware and software Software for building a storefront Software for building exchanges Telecommunications networks and protocols

Integration

Integration with existing information systems issues Intranet-based work flow Database management systems (DMBS) Application packages ERP

Integration with business partners Easy integration with one company-centric

side Not easy to integrate for many buyers or

sellers

The Role of XML in B2B Integration

Companies interact easily and effectively by connecting to their servers, applications, databases

Standard protocols and data-representation schemes are needed

Web is based on the standard communication protocols useful only for displaying static visual Web pages: TCP/IP HTTP HTML

The Role of XML in B2B Integration [2]

XML (eXtensible Markup Language) Standard (and its variants) used to improve

compatibility between the disparate systems of business partners by defining the meaning of data in business documents

Used to increase:• Interactivity• Accessibility

Summary

The B2B is very diversified and it can be divided into the following segments: sell-side marketplaces buy-side marketplaces trading exchanges c-commerce

Auctions play a major role in B2B Increasing the exposure and/or the bargaining

power of companies can be done by aggregating either the sellers or the buyers

Exercise

Why would a company want to decrease maverick purchases?

A firm wants to barter excess goods online for banner ads, but they cannot find a party willing to trade. What other options do they have?