Leveraging Internet Technologies

in B2B Relationships
 Growth of the b2b ecommerce

o Prospects for B2B e-commerce were very promising in 1999 and 2000.

oA consultancy firm forecasted more than $6 Trillion online B2B e-

business in 2001.

o Expected 20 fold growth between 2000 and 2005.

o In 2000 beginning, there were 587 B2B exchanges which increased to

1700 by April 2001.

 The dot-com bubble burst
o B2B exchanges were among the hardest hit.

o 120 firms have been shut down or acquired.

o Prediction for B2B e-commerce have been tempered.

o B2B e-commerce solution was predicted to increase from $282

in 2000 to $4.3 trillion by 2005.

Why has B2B sector changed its tune?
o Establishing successful B2B on-line strategies can be tough and
complicated.
o It appears that buying the technology is easy; rethinking and
redesigning work processes and activities to capitalize on these
technologies is not.
o B2B sector remains optimistic and executives still seem to believe
that the promise of B2B e-commerce is real.
 Herman Miller (HM) and Compaq case
o HM – known for its high-end, office
furniture.
o HM used internet to reach new
customers without cannibalizing the
sales of their existing distributors.
o HM began to reach out via the internet to
its individual and SME customers.
o HM were successful in convincing their
dealers that Internet channel will not
erode their existing contract customer
base.
Compaq – known for its computers.
o In order to compete with Dell, Compaq
created Prosignia computers for Internet
only sales.
o Compaq began to reach out to customer
via internet for its new brand.
o The dealers view this activity as a sign of
indifference towards their role and
ultimately stop selling any Compaq PCs.
 Why different results?
o Due to different types of organizational relationships.
o HM and their dealers had a history of working cooperatively.
o The HM dealers worked in collaboration with the company.
o Compaq’s relationship with its dealers were historically controversial,
with Compaq attempting power plays on the dealers.
o With the introduction of Prosignia line, Compaq began to deal in more
rigid fashion with dealers.
o Dealers of Compaq were not convinced that Compaq had their
interests in mind.
How the Internet will raise productivity?
o By designing e-commerce strategies that are compatible
with the types of buyer-supplier relationships.
 RELATIONAL AND TRANSACTIONAL
EXCHANGES
 Transactional exchanges
◦ Firm and its supplier
compete for a fixed pie of
benefits.
◦ Each side focuses on
maximizing its own position
at the other’s expense.
◦ Suppliers are selected by a
competitive bid process and
simply evaluated on price.
◦ Contracts are short-term,
oriented around specific
activities and timelines.
◦ Communication with the
supplier is directive, one-
way, and doesn’t take into
the interests of the supplier.
 Relational exchange
◦ Firms work together to grow
the pie of benefits between
them.
◦ Suppliers are selected on the
basis of their capabilities.
◦ Contracts are long-term and
less specific.
◦ There are considerable
expectations beyond the
contract terms.
◦ The buyer and supplier
work to insure that both
parties make money.
 WEB-ENABLED EFFICIENCIES

Information sharing-The Internet can enable

 improvements in the sharing of manufacturer, supplier, and distributor
information all along the value chain.
 Enabling each firm to better understand end-user needs.

Increase reach-The Internet also can

 Enable manufacturers to increase their reach to new customer
segments in a cost efficient manner.

Dynamic pricing
 Enables real-time, dynamic pricing.
RELATIONSHIP X TECHNOLOGY MATRIX
 Relational X Information Sharing

E.G. Herman Miller & Compaq

Transactional X Information Sharing
Relational X Increased reach
Transactional X Increase Reach
Relational X Dynamic Pricing
Transactional X Dynamic Pricing
Thank You