Overview Ch.

 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
 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 times
Increasing 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 faster

Administratively much less expensive
Enables 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 place
Reduced 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?