EC CH 4 B2B Note

Electronic Commerce
A Managerial and Social Networks Perspectives
Chapter 4
Business-to-Business E-Commerce
Professor Grace Bae

Learning Objectives
1. Describe the B2B field.
2. Describe the major types of B2B models.
3. Discuss the models and characteristics of the sell-side marketplace,
including auctions.
4. Describe sell-side intermediaries.
5. Describe the characteristics of the buy-side marketplace and e-
procurement.
6. Explain how reverse auctions work in B2B.
7. Describe B2B aggregation and group purchasing models.
8. Define exchanges and describe their major types.
9. Describe third-party exchanges.
10. Describe how B2B can benefit from social networking and Web 2.0.
11. Describe collaborative commerce.
Concepts, Characteristics,
4-1
and Models of B2B E-Commerce
 Basic B2B Concepts and Process
- refers to transactions between businesses conducted electronically over
the Internet, extranets, intranets, or private networks
Key business drivers for electronic B2B:

- cost reduction
- gaining competitive advantage
- availability of a secure Internet platform and private and public B2B e-
marketplaces
- collaboration between business partners,
- reduction of transaction time and delays along the supply chain,
- emergence of effective technologies for interactions and systems
integration
4-2
1-2
 The Basic Types of B2B Transactions and Activities
Five basic B2B transaction activity types:

1. Sell-side.
2. Buy-side.
3. Marketplaces or Exchanges.
4. Supply chain improvements
5. Collaborative commerce
Internet Marketing
and Modelsand B2CE-Commerce
of B2B Electronic Retailing 1-3
4-3
Figure 4.1 The role of Alibaba.com in B2B

Concepts, Characteristics, 4-4
The Basic Types of B2B E-Marketplaces and Services
One-to-Many and Many-to-One: Private E-Marketplaces
- One company does either all the selling or all the buying.
Many-to-Many: Public Exchanges (or E-Marketplaces)

• Many buyers and many sellers meet electronically to trade with one another.
• * Exchanges are usually marketplaces owned and run by a third party or by a
consortium.
• Public e-marketplaces are open to all interested parties (sellers and buyers).
Supply Chain Improvers and Collaborative Commerce

• 2B transactions are conducted frequently along segments of the supply chain.
• B2B need to ensure that supply-side improvements( procurement of raw material,
fulfilling orders, shipments, logistics) will have the greatest impacts
Collaborative commerce
4-5
Fig.4.2 Five Types of B2B E-Commerce

4-6
 Market Size and Content of B2B
B2B EC is now in its sixth generation.

This generation includes:
- collaboration with suppliers, buyers, government, and other business partners via
extensive use of mobile computing
- use of blogs, wikis, and other Web 2.0 tools
- deployment of in-house social networks
- use of public social networks
- An increased use of intelligent system.
The seven’s generation of B2b will rely on technologies that are common for B2C:
greater links with professional social networks and larger reliance on mobile applications.
IT advances will both help grow the demand side and streamlining the supply side of a
company’s operation.
4-7
Fig.4.3 Generations of B2B E-Commerce
and Models of B2B E-Commerce 4-8
 B2B Components
Parties to the Transaction: Sellers, Buyers, and Intermediaries
- B2B commerce can be conducted directly between a customer and a manufacturer
or via an online intermediary.
- Online intermediary is a third-party entity that brokers the transactions between the
buyer and seller; it can be either virtual or click-and-mortar.
Types of Materials Traded: What Do Firms Buy?

- Direct materials
- Indirect materials
B2B Marketplaces and Platforms

- Vertical marketplaces
- Horizontal marketplaces
4-9
Fig. 4.4 The Components of B2B

Online service Industries Online in B2B
- Travel and hospitality services. Corporations arrange their travel electronically

through corporate travel agents.
- Real estate. The Web can help businesses find the right properties, compare
properties, and assist in negotiations.
- Financial services. Transaction fees over the Internet are less costly than any other
alternative method.
- Banking and online financing. Business loans can be solicited online from lenders.
- Recruiting and staffing services. Companies provide services to businesses to assist
them in finding full-and part-time employees.
- Other online services. Consulting services, law fi rms, medical services, and others
sell enterprise knowledge and special services online.
Concepts, Characteristics, 4-11
 The Benefits of B2B
Seller
• Creates new sales opportunities
• Decreases the time and cost of managing customer accounts
• Reduces marketing and sales costs
• Increases production flexibility, permitting on demand delivery
https://aeo.langdonsystems.com
• Reaches a more geographically dispersed customer base
Buyer
• Lowers search costs and time for buyers to find products and vendors
• Makes product configuration easier
• Reduces purchasing costs by cutting down on use of intermediaries
• Reduces procurement costs
• Provides for efficient customer service
• Data collected can help make operations more efficient
• Helps equalize small enterprises
 The Benefits of B2B

Joint
• Eliminates paper and reduces administrative costs
• Expedites processing and reduces trading cycle time
• Increases productivity of employees dealing with buying and/or selling
• Reduces errors and improves quality of service https://aeo.langdonsystems.com
• Allows for enhanced customer service

• Reduces inventory levels and costs
• Enables customized e-catalogs with different prices for different customers
• Facilitates customization via self configuration
• Increases opportunities for collaboration
• Web-based EC is more affordable than traditional EDI
• Allows more business partners to be reached than with EDI
• Provides a better means of communication with other media
• Provides 24/7 coverage of the shop front
B2B: Sell-Side E-Marketplaces 4-13
B2B marketing refers to marketing by manufacturers and wholesalers along

the sell-side of the supply chain.
 Sell-Side Models
B2B sell-side e-marketplace.
- a business sells products and services to business customers electronically,
frequently over an extranet.
- The seller can be a raw material producer selling to manufacturers, or a
manufacturer selling to an intermediary ( wholesaler, retailer, individual business)
- both individual consumers and business buyers might use either the same
private sell-side marketplace
One-to-many model.
Three major marketing methods:
1. selling from electronic catalogs with fixed prices
2. selling via forward auctions
3. one-to-one selling, usually under a negotiated long-term contract
B2B Sellers
Sellers in the sell-side marketplace may be click-and-mortar manufacturers or
intermediaries (may even be pure online companies)
 Sales from Catalogs: Webstores

- offer one catalog for all customers or a customized catalog for each large customer
- Companies can use the Internet to sell directly from their online catalog.
- might encounter conflict with the regular distribution channels
- To avoid conflicts, some companies advertise online but sell only in physical stores.
Distributors’ Catalogs
- Webstores are used by manufacturers or by distributors.
- They can be general or they can concentrate on one area
Self Service Portals are used for enabling business partners to conduct self- services.
Benefits of Online Sales from Catalogs :
- The benefits of direct online sales are similar to that of B2C
- Companies can be successful as long as they have a solid reputation in the market
and a large enough group of loyal customers.
Limitations of Online Sales from Catalogs :
- Finding buyers.
- Experiencing channel conflicts with their existing distribution systems
- customer's reluctance to pay for the cost of electronic data interchange (EDI)- the
computer-to-computer direct transfer of business documents.
Comprehensive Sell-Side Systems must provide several essential functionalities that :

- enable B2B vendors to execute sales efficiently
- provide outstanding customer service
- allow integration with existing IT systems
- provide integration with non-Internet sales systems.
Selling via Distributors and Other Intermediaries

- Manufacturers can sell directly to other businesses, if the customers are large
buyers.
- Manufacturers frequently use intermediaries to distribute their products to a
large number of smaller buyers.
- The intermediaries buy products from other manufacturers and combine those
products into one catalog from which they sell to customers or to retailers. Many
of these distributors also are selling online via webstores.
Selling via E-Auctions 4-16
 The Benefits of Auctions on the Sell Side

Forward auctions are used to liquidate their surplus product or capital assets. Items
are usually displayed on an auction site (private or public) for quick clearance.
Benefits:
• Revenue generation. Forward auctions support and expand online and overall
sales. And also offer businesses a new venue to easily dispose of excess,
obsolete, and returned products
• Cost savings. E-auctions reduces the costs of selling the auctioned items, which
helps increase the seller’s profits
• Increased “stickiness.” Stickiness is a characteristic that measures customer
loyalty to a site that eventually results in higher revenue.
• Member acquisition and retention. Registered members of auctions can invite
their business contacts. Auction software aids enable sellers to search and report
on virtually every relevant auction activity.
Selling via E-Auctions 4-17
 Auctioning from the Company’s Own Site

• if a company decides to auction from its own site
> it will have to pay for infrastructure, and operate and maintain the auction site.
• if the company already has an electronic marketplace for selling from e-catalogs
> the additional cost for conducting auctions might not be too high.
 Using Intermediaries in Auctions

Intermediary can conduct private auctions either from the intermediary’s or the
seller’s sites. Alternatively, a company can conduct auctions in a public marketplace,
using an intermediary.
Benefits of using an intermediary to conduct auctions:
- no additional resources required (hardware, engineering resources)
- no hiring costs for using corporate resources
- fast time-to-market, as they are capable of running the auction immediately
- payments handled by the intermediary.
Examples of B2B Forward Auctions:

Yahoo! conducts both B2C and B2B auctions in Hong-Kong, Taiwan, Japan.
One-From-Many: E-Procurement at Buy-Side E-
Marketplaces 4-18
Procurement refers to the purchase of goods and services by organizations.

Procurement is usually done by purchasing agents , also known as corporate
buyers .
Buy-side e-marketplaces – a marketplace opened by large buyers to attract sellers
to browse and offer to fulfill orders.
 Inefficiencies in Traditional Procurement Management

Procurement management - the process of planning, organizing, and coordinating
of all the activities pertaining to the purchasing of the goods/services needed by
an organization.
Maverik buying – inefficiencies, ranging from delays in deliveries to the high cost
of rush orders. Occurs when a buyer makes unplanned purchases of items needed
quickly, resulting in buying at non-pre-negotiated, and usually higher, prices.
Marketplaces 4-19
The major activities that may be included in a single purchase:
Search for items using search engines, catalogs, virtual fairs and showrooms, and
sellers’ sales presentations.
Learn details of items and buying terms using comparison engines and quality
reports, and research industry report and vendors’ information
Negotiate or join group purchasing using software support (if available).
Determine when and how much to order each time . Authorize corporate buyers.
Join business-oriented social network such as linkedin.com
Sign agreement or contract using e-contract management ; arrange financing,
escrow insurance, etc.
Create specific purchasing order(s) using a computerized system.
Arrange packing, shipments, and deliveries using electronic tracking, RFID, etc.
Arrange invoicing, payments, expense management, and purchasing budgetary
control using software packages
Marketplaces 4-20
Fid. 4.5 Traditional (Manual) Procurement Process

4-21
Marketplaces
 The major procurement methods include the following:
• Buy directly from the catalogs of manufacturers, wholesalers, or retailers, and
possibly by negotiation (B2Bmarketing: sell-side e-marketplaces, selling via e-auctions)
• Buy at private or public auction sites in which the buying organization is one of
many (reverse auctions at buy-side e-marketplaces (E-Tendering))
• Conduct bidding in a reverse auction system where suppliers compete against each
other. This method is used for high value items or when large quantities are involved
(reverse auctions at buy-side e-marketplaces (E-Tendering))
• Buy from the catalog of an intermediary (e-distributor) that aggregates sellers’
catalogs (other e-procurement methods)
• Buy from the company’s own internal buyer catalog. Desktop purchasing allows the
users to bypass the procurement department. (other e-procurement methods)
• Join a group-purchasing system that aggregates participants’ demands, creating a
large volume. Then the group may negotiate prices or initiate a tendering process
(other e-procurement methods)
• Buy at an exchange or industrial mall (B2B exchanges (E-marketplaces): definitions and
concepts)
Marketplaces 4-22
E-Procurement Concepts
E-procurement (electronic procurement) is the online purchase of supplies, materials,
energy, work, and services. It can be done via the Internet or via a private network
such as electronic data exchange (EDI).
- Some activities include enabling buyers to search for suppliers, facilitating reverse
auctions for buyers, and automating paperwork and documentation.
- Some activities are done in private marketplaces, others in public exchanges.
The Goals and Process of E-Procurement

- frequently automates activities in the purchasing process from multiple suppliers
via the Web for better execution and control.
- automates the process of auctions, contract management, vendor selection, and
management, etc.
4-23
Marketplaces
Fig.4.6 E-Procurement Methods

4-24
Marketplaces
 Types of E-Procurement
 Four major methods of e-procurement
1. Buy at own website
2. Buy at sellers’ store
3. Buy at exchanges
4. Buy at others’ e-market sites.
 Seven main types of e-procurement

1. e-sourcing
2. e-tendering
3. e-reverse auctioning
4. e-informing
5. Web-based ERP (enterprise resource planning)
6. e-market sites
7. E-MRO (maintenance, repair, and operating).
4-25
Marketplaces
 The Benefits of E-Procurement
E-procurement has the ability of improving supply chain management visibility of the
supply chain, starting with the customers’ needs.
 Benefits of E-Procurement
• Increasing the productivity of purchasing agents, providing them with more
non-routine time and reducing job pressures; possibly reducing purchasing
departments’ overhead.
• Lowering purchase per item prices through activities such as product
standardization, reverse auctions, volume discounts, and consolidation of
purchases from fewer suppliers.
• Improving information flow and its control
• Reducing the frequency and cost of maverick buying.
• Improving the payment process, and sellers’ savings due to expedited payment
cycle.
• Establishing more efficient and collaborative partner relations due to
information sharing.
4-26
Marketplaces
 Benefits of E-Procurement
• Improving the manufacturing process for the suppliers.

• Ensuring delivery on time, and fewer stock outs.
• Reducing the skill requirements and training needs of purchasing agents.
• Reducing the number of suppliers.
• Streamlining and expediting the purchasing process
• Controlling inventories more effectively at the buyers’ end.
• Streamlining invoice reconciliation and dispute resolution.
• Reducing the administrative processing cost per order by as much as 90% by
reducing purchasing overheads and intermediary fees.
• Finding new suppliers that can provide goods and services faster and/or
less expensively
• Integrating budgetary controls into the procurement process
• Minimizing human errors in the buying or shipping processes.
4-27
Marketplaces
 The Limitations and Challenges of E-Procurement
• The total cost (TCO) may be too high.
• It may be subject to hacker attacks.
• It may be difficult to get suppliers to cooperate electronically.
• The system may be too complex.
• It may be difficult to have internal and external integration.
• The technology may change frequently.
Reverse Auctions at Buy-Side
4-28
E-Marketplaces (E-Tendering)
A reverse auction is a process in which many sellers (suppliers) compete to fulfill
orders requested by one buyer.
- It is a tendering system where suppliers are invited to bid on the fulfillment of an
order, and the lowest bid wins.
- In B2B usage of a reverse auction, a buyer may open an e-market on its own server
and invite potential suppliers to bid on the items.
A request for quote (RFQ) is a form of document(“invitation”) to such reverse
auctions is a form or document
The Major Benefits of Reverse Auctions
For buyers : For suppliers:
1. lower cost of items purchased 1. time required to find customers
2. reduction of administrative costs of 2. administrative costs
procurement 3. time needed by managers to
3. reduction of corruption and bribes conduct manual bids.
4. decrease in time to receive the goods, which
may result from the suppliers’ ability to
produce its products and services faster
4-29
 Conducting Reverse Auctions
• Creation of online directories that list open RFQs
• Use of monitoring software agents. Software agents also can aid in the bidding
process itself.
• Use of third-party intermediaries. They can run the electronic bidding as they do in
forwards auctions.
Group Reverse Auctions

- When companies, or individuals, can buy in a group to increase bargaining power,
get price discounts or to get a better deal than quantity discount.
- B2B reverse auctions can be done in private exchange or at an aggregator’s site
for a group of buying companies.
The reverse auction process

• the first step for the would-be buyer is to post bid invitations
• When bids arrive, contract and purchasing personnel for the buyer evaluate the
bids and decide which one(s) to accept
4-30
Fig.4.7 The Reverse Auction Process

Other E-Procurement Methods 4-31
 Desktop Purchasing -purchasing by employees without the approval

of supervisors and without the involvement of a procurement
department.
- is usually done by using a Purchasing card (P-card)
- reduces the administrative cost and the cycle time involved in purchasing
urgently needed or frequently purchased items of small dollar value
 Group Purchasing – aggregation of orders from several buyers so

that better prices due to larger quantities purchased can be negotiated.
 Internal Aggregation of Purchasing Orders
 External Aggregation for Group Purchasing
Fig. 4.8 The Group Purchasing Process

 Buying from Other Sources

When buying small quantities, purchasers often buy from an e-distributor. Another
option for e-procurement is to buy at a B2B exchange.
 Acquisition Via Electronic Bartering

- Bartering is the exchange of goods or services without the use of money.
- A company exchanges its surplus for something that it needs.
- Bartering exchange , a company receives points of credit, which it can use to buy
items that it needs (office spaces, idle facilities and labor, products)
 Selecting an Appropriate E-Procurement Solution

Success factors : cost reduction, increased agility, managing complete commerce,
and fulfilling tactical requirements.
Questions to be considered to make a decision:

• Who is buying? What are you buying? How much information do you need to
make the decision? What is the reputation of the vendor(s)? What testimonials are
available?
B2B Exchanges (E-Marketplaces):
Definitions and Concepts 4-34
Fig. 4.9The Community of an Exchange: Flow and Access to Information

 Functions of and Services Provided by Exchanges

1. Matching and connecting buyers and sellers
2. Facilitating transactions
3. Developing and maintaining exchange policies and infrastructure
4. Providing services to buyers and sellers.
 Functions and Services of B2B Exchanges

1) Matching buyers and sellers.
1. Presentation of product offering
2. Aggregating and posting different products for sale – to meet buyers’ need
3. Providing price comparisons
4. Organizing bids (bartering) and (auctions)
5. Providing sellers’ profiles and product information
6. Matching suppliers’ offerings with buyers’ requests
7. Supporting negotiations between buyers and sellers
8. Providing directories of sellers
9. Maintaining security, privacy, and anonymity
2) Facilitating transactions by optimizing the purchasing and sales processes
1. Allowing for efficient trading between participants

2. Providing for B2B auctions
3. Providing the trading platform with mechanisms
4. Providing escrow services
5. Arranging for group (volume) purchasing and other discounts
6. Defining terms and other transaction values, including negotiation
7. Inputting searchable information, including industry news
8. Granting exchange access to users and identifying company users eligible
to use exchange
9. Collecting transaction fees and providing the necessary software and its
integration with buyers and/or sellers systems
10. Providing analysis and statistics of products’ transactions
11. Registering and qualifying buyers and suppliers
 Ownership of B2B Exchanges

Consortium – when exchanges are owned by a few very large sellers or buyers.
 Third-Party Independent Exchanges

- are electronic intermediaries
- presents catalogs,
- tries to match buyers and sellers
- provides electronic trading tools and rooms
 Consortium Trading Exchanges (CTE/Consortia)

- an exchange formed and operated by a group of major companies in one industry.
- can be suppliers, buyers, or both.
- The major goal of is to provide services that support trading activities.
 Dynamic Pricing in B2B Exchanges

Dynamic pricing- are based on changes in supply and demand and to the rapid
movement of prices over time and possibly across customers. (stock exchange)
 Advantages, Limitations, and the Revenue Model of Exchanges
 Benefits of Exchanges for buyers and sellers:
• making markets more efficient
• providing opportunities for sellers and buyers to find new business partners
• reducing the administrative costs of ordering MROs
• expediting trading processes
• facilitation of global trade
• creation communities of informed buyers and sellers
 Potential risks
• Unknown vendors( may not reliable)
• Loss customer service quality
• Competition for value-added services
• Must pay transaction fee(possible loos of customers to competitors)
B2B in Web 2.0 and Social Networking 4-39
 E-Communities in B2B
B2B applications E-communities
- involve many participants: buyers and - connect employees, partners,
sellers, service providers, industry customers
associations, and others - offer resources for e-businesses to
- provide community services, such as leverage online discussions and
chat rooms, bulletin boards, and interactions in order to maximize
possibly personalized Web pages. innovation and responsiveness.
It is therefore beneficial to study the tools, methods, and

best practices of building and managing B2B e-communities.
 The Opportunities of Social Commerce in B2B
Companies that use B2B social networking may experience the following advantages:
- Use the network to create brand awareness.

- Discover new business partners and sales prospects.
- Enhance the ability to learn about new technologies, competitors, customers and the
business environment.
- Generate sales leads via ‘contacts’.
- Post questions on the question and answer forums on other social networks.
- Improve participation in industry association activities.
- Create buzz about upcoming product releases.
- Drive traffic to their Facebook page and other social sites and engage visitors there.
- Create social communities to encourage discussions among business partners about
their product
- Use social networks to recruit new talent.
 The Use of Web 2.0 Tools in B2B

Many companies are using blogs, microblogs, wikis, RSS feeds, video ads, podcasts,
and other tools in B2B EC.(YouTube for B2B)
B2B games (Gamification)
Virtual games / gamification - to virtual games designed to support B2B training and
decision making. Players compete against each other and make market predictions.
 Virtual Trade Shows / Trade Fairs

Virtual trade show /virtual trade fair, is the online analogy of a physical trade show.
These are temporary or permanent showplaces where exhibitors present their new
products to potential customers.
 Social Networking in B2B

- Both small and large businesses are using social networks quite successfully to
find and retain new businesses.
- Some businesses have found new customers via social networks.
- Some companies include social networking activity to both acquire and retain
customers in the market budget.
 Using Twitter in B2B

Twitter is a communication tool for customer service advertising, customer
engagement platforms, CRM, and market research.
 Examples of Other Activities of B2B Social Networks

 Location-based services. They may provide opportunities to B2B.
 Corporate profiles on social networks. LinkedIn and Facebook include
significant information on companies and their individual employees.
 Convergence of B2C, B2B and Social Networking

Leveraging organizational capacities across all different distribution networks and
marketing methods will be a defining characteristics of successful business.
Collaborative commerce. 4-43
 Collaborative commerce (c-commerce) – electronic support for business

collaboration.
- Enables companies to collaboratively plan, design, develop, manage and research
products, services and innovative business processes, including EC applications.
- Implies communication, information sharing, collaborative planning dome online by
using groupware, blogs, wikis and specially designed EC collaboration tools.
- Related to e-collaboration, which is collaboration using digital technologies among
people for accomplishing a common task.
 Elements and Processes of C-Commerce

- may vary according to situation
- Is based on the analysis of internal and external data that are made visible via a
visualization portal.
Collaboration hub is the central point of interaction and of company’s supply chain. A
single hub can host multiple collaborations spaces, in which trading partners transact,
collaborate and share information.
Fig. 4.10 Elements and process of c-commerce system
Enterprise Analysis
ERP,SCM,KM
Systems
BI, DSS, Workflow,
Engineering CAD Drawings Data Repository, Intelligent Systems
Systems Blueprints Data Warehouse
Bill of Materials
Website Product/Process
Data Surfing Logs Displays
Visualization
Portal
Product/Service
design
Collaboration Suppliers
with Component-
Strategy Business partners Customers
Designers
decision (suppliers, Government
making customers,
Distributors)
Demand visibility
Supply chain And forecasting
Visibility and Manufacturers, Assemblers
planning Retailers, Engineers
Marketers, HRM, Finance
 Representative Examples of Collaborative Commerce

 Vendor-Managed Inventory Systems (VMI)- a process in which retailers make their
suppliers responsible for monitoring the inventory of each item they supply and
determining when to order each item and how much to order each time. Then orders
are generated electronically and fulfilled by vendors.
As the result: administrative costs are reduced, inventories are low, stockout become
rare.
 Retailer-Supplier Collaboration
H.Paulin&Co is a distributor and manufacturer of fasteners, fluid system product,
automotive parts and screw machine components. It is important to keep stock level
above zero. The company uses a supply chain management system form Askuity
(askuity.com). The system allows to have accurate real-time information on stock levels
and compare it to historical depletion rates. That data helps the retailer and distributor
to collaborate on restocking levels and timelines.
 Reducing Transportation and Inventory Costs.

Collaboration between Amazon and UPS. Amazon delivers millions of items every
week from its distribution centers. Rapid delivery is critical and collaboration with the
shippers is essential.
 Reduction of Design Cycle Time
Clarion Malaysia manufactures audio electronic system for cars.Using computerized
technologies such as computer-aided design and cycle management, the company
reduced the time to market by 40% and improved the design of products( engineers
have more time to create innovative design).
 Elimination of Channel Conflict: Collaboration with Dealers and Retailers.
The conflicts between manufacturers and distributers/retailers/dealers may arise when
customer orders online from the manufacturer. Collaboration between manufacturer
and local vendor (order from manufacturer and pick-up the product from a local
retailer or dealer)would help to solve the problem.
 Social Collaboration refers to the process where people, individually or in groups,
interact and share information and knowledge while in social networks when
pursuing social goals. It is should be social enough to enable employees to be more
productive and not distracted in their work.
 Barriers to C-Commerce
• Lack of internal integration and standards
• Network security and privacy concerns, distrust
• Internal resistance to information sharing
• Lack of skills to conduct c-commerce
 Overcoming Barriers
• Specialized c-commerce software tools
• Use of cloud computing and Web services
• Collaborative Web 2.0 tools based on open source
• Collaborative culture within and among the organizations
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Managerial Issues 4-48
1. Which B2B model(s) should we use for e-procurement?

2. Which B2B model(s) should we use for online B2B sales?
3. Which solutions and vendor(s) should we select?
4. What is the organizational impact of B2B?
5. What are some ethical issues in B2B?
6. Which type of social network should we use—private (proprietary) or
public?
7. Which business processes to automate?
8. How difficult is to introduce e-collaboration?
9. How much can be shared with business partners? Can they be trusted?
10. Who benefits from vendor-managed inventory?
11. What is our expose suing social networks?
Summary 4-49
1. The B2B field. The B2B field comprises e-commerce activities between businesses. B2B activities
account for85% of all EC. B2B e-commerce can be done by using different models.
2. The major B2B models. The B2B field is quite diversified. It can be divided into the following segments:
sell-side marketplaces (one seller to many buyers), buy-side marketplaces (one buyer from many sellers),
and trading exchanges (many sellers to many buyers). Each segment includes several business models.
Intermediaries play an important role in some B2B models.
3. The characteristics and models of sell-side marketplaces. Sell-side B2B EC is the online direct sale by one
seller (a manufacturer or an intermediary) to many buyers. The major technology used is electronic
catalogs, which also allow for efficient customization, configuration, and purchase by customers. In
addition, forward auctions are becoming popular, especially for liquidating surplus inventory. Sell-side
auctions can be conducted from the seller’s own site or from an intermediary’s auction site. Sell-side
activities can be accompanied by extensive customer service. E-commerce allows customization of
products and services in personalized catalogs.
4. Sell-side intermediaries. The primary role of intermediaries in B2B is to provide value-added services for
manufacturers and business customers. Intermediaries can also group buyers, conduct auctions, and
aggregate catalogs of many sellers.
5. The characteristics of buy-side marketplaces and e-procurement. Today, companies are moving to e-
procurement to expedite purchasing, save on item and administrative costs, and gain better control over
the purchasing process. Major procurement methods : reverse auctions (bidding systems), buying from
webstores and catalogs, negotiation, buying from an intermediary that aggregates sellers’ catalogs,
internal marketplaces and group purchasing, desktop purchasing, buying in exchanges or industrial
malls, and e-bartering. E-procurement offers the opportunity to achieve significant cost and time savings.
Summary 4-50
6. B2B reverse auctions. A reverse auction is a tendering system used by buyers to get better prices
from suppliers competing to fulfill the buyers’ needs. Auctions can be done on a company’s website
or on a third-party auction site. Reverse auctions can lower buyers’ costs dramatically, both in product
costs and in the time and cost of the tendering process.
7. B2B aggregation and group purchasing. Increasing the bargaining power and efficiency of companies can be
done by aggregating either the buyers or the sellers. Aggregating suppliers’ catalogs into a buyer’s catalog
gives buying companies better control of purchasing costs. In desktop purchasing, employees are
empowered to buy up to a certain limit without the need for additional approval. Employees view internal
catalogs with pre-agreed-upon prices with the approved suppliers and then buy within their budget.
Industrial malls or large distributors specialize in one industry or in industrial MROs. They aggregate the
catalogs of thousands of suppliers. A purchasing agent can place an order for parts or materials and shipping
is arranged by the supplier or the mall owner. Buyer aggregation through group purchasing is very popular
because it enables even SMEs to get better prices on their purchases. In addition to direct purchasing, items
can be acquired via bartering.
8. Exchanges defined and the major types of exchanges. Exchanges are e-marketplaces that provide a trading
platform for conducting business among many buyers, many sellers, and other business partners. Types of
public e-marketplaces include B2B third-party trading exchanges and consortium trading exchanges.
Exchanges may be vertical (industry oriented) or horizontal.
9. Third-party exchanges. Third-party exchanges are owned by an independent company and usually are
operated in highly fragmented markets. They are open to anyone and, therefore, are considered public
exchanges. They try to maintain neutral relations with both buyers and sellers.
Summary 4-51
10. B2B in Web 2.0 and social networks. Although considerable B2C social networking activities exist,
B2B activities are just beginning. A major success has been seen in the use of blogs and wikis to
collaborate with suppliers and customers. Large companies use social networking to create and foster
business relationships. Smaller companies use social networking for soliciting expert opinions. Other
companies use it for finding business partners, cultivating business opportunities, recruiting
employees, and finding sales leads.
11. C-commerce. Collaborative commerce refers to a planned use of digital technology by businesses
partners. It includes planning, designing, researching and servicing various partners and tasks,
frequently along the supply chain. C-commerce can be conducted between different pairs of business
partners or among many partners participating in a collaborative network,. Collaborations with Web
2.0 tools and in social networks adds a social dimension that could improve communication,
participation and trust. There are many new tools, some of which are being added to traditional
collaboration tools. Better collaboration may improve supply chain operation, knowledge
management, and individual and organizational performance.
References 4-52

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Electronic Commerce

A Managerial and Social Networks Perspectives

Professor Grace Bae

Key business drivers for electronic B2B:

 The Basic Types of B2B Transactions and Activities

Five basic B2B transaction activity types:

Figure 4.1 The role of Alibaba.com in B2B

Many-to-Many: Public Exchanges (or E-Marketplaces)

Supply Chain Improvers and Collaborative Commerce

Fig.4.2 Five Types of B2B E-Commerce

B2B EC is now in its sixth generation.

Types of Materials Traded: What Do Firms Buy?

B2B Marketplaces and Platforms

Fig. 4.4 The Components of B2B

Online service Industries Online in B2B

- Travel and hospitality services. Corporations arrange their travel electronically

 The Beneﬁts of B2B

• Allows for enhanced customer service

B2B marketing refers to marketing by manufacturers and wholesalers along

 Sales from Catalogs: Webstores

Comprehensive Sell-Side Systems must provide several essential functionalities that :

Selling via Distributors and Other Intermediaries

 The Beneﬁts of Auctions on the Sell Side

 Auctioning from the Company’s Own Site

 Using Intermediaries in Auctions

Examples of B2B Forward Auctions:

Procurement refers to the purchase of goods and services by organizations.

 Inefﬁciencies in Traditional Procurement Management

The major activities that may be included in a single purchase:

Fid. 4.5 Traditional (Manual) Procurement Process

The Goals and Process of E-Procurement

Fig.4.6 E-Procurement Methods

 Seven main types of e-procurement

• Improving the manufacturing process for the suppliers.

Group Reverse Auctions

The reverse auction process

Fig.4.7 The Reverse Auction Process

 Desktop Purchasing -purchasing by employees without the approval

 Group Purchasing – aggregation of orders from several buyers so

Fig. 4.8 The Group Purchasing Process

 Buying from Other Sources

 Acquisition Via Electronic Bartering

 Selecting an Appropriate E-Procurement Solution

Questions to be considered to make a decision:

Fig. 4.9The Community of an Exchange: Flow and Access to Information

 Functions of and Services Provided by Exchanges

 Functions and Services of B2B Exchanges

2) Facilitating transactions by optimizing the purchasing and sales processes

1. Allowing for efﬁcient trading between participants

 Ownership of B2B Exchanges

 Third-Party Independent Exchanges

 Consortium Trading Exchanges (CTE/Consortia)

 Dynamic Pricing in B2B Exchanges

It is therefore beneﬁcial to study the tools, methods, and

 The Opportunities of Social Commerce in B2B

- Use the network to create brand awareness.

 The Use of Web 2.0 Tools in B2B

 Virtual Trade Shows / Trade Fairs

 Social Networking in B2B