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Business to Business

Business to Business. Where the e-commerce action is…. History. Electronic Data Interchange (EDI) Firm to supplier electronic connection Firms could have such links with only a few suppliers Limited transaction ability

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Business to Business

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  1. Business to Business Where the e-commerce action is…

  2. History • Electronic Data Interchange (EDI) • Firm to supplier electronic connection • Firms could have such links with only a few suppliers • Limited transaction ability • Large buyers and suppliers were using EDI excluding other smaller players

  3. Internet Infrastructure/access Closed/private Open/ Public Public/private E-markets Many to many (Mediated) Nature of transactions E-commerce EDI One-to one (direct)

  4. B2B Exchange • B2B exchanges or hubs are third party intermediaries that match buyers and sellers • Vertical (by industry) • Horizontal (by business function) Advantages: Reduce process costs Reduce product costs Improved discovery Improved visibility

  5. Vertical hubs • Plastics • Steel • Chemicals • Paper • Energy • Cattle • Telecom • Flowers

  6. Functional hubs • Logistics management • MRO procurement • Capacity management • Investment recovery • Human resource management • Project management • Media buying • Credit management

  7. Foodservice market • Food manufacturers (2000) E.g. Kraft, Gen. Mills, Nestle, Kellogg $100 b • Food service distributors (20,000) • E.g., Sysco, US Foodservice, produce, alcohol $ 150 b • Foodservice operators (750,000) • E.g. Applebee’s, Mariott, PizzaHut $ 350 b

  8. E-Procurement solution • Reduce transaction costs Operators Food manufacturers Distributors Purchase Web Web Ordering Multiple vendors Back office integration

  9. Improve coordination Op Distributor Op HQ Op Op Data Warehouse Manufacturer Distributor Op Distributor Op Op HQ Op Op

  10. Improved market information / Sales visibility • Reduce transaction costs Operators Food manufacturers Distributors Mkt. Intelligence Nielsen Data Web access All categories

  11. Matching Mechanisms • Catalog mechanism • Auctions • Exchange • Barter

  12. Catalogs • Aggregates demand and supply • Reduces search costs, transaction costs • Makes many suppliers available • MRO, Pre planned purchases, fragmented supplier base • Prices pre-negotiated and set • Create master catalog, get enough suppliers to participate

  13. Auctions • Better prices • Capital equipment, used goods, perishable capacity • Liquidity, misrepresentation, fraud, fulfillment

  14. Exchange mechanism • Match demand supply over time • Manage peak load, hedge risk • Liquidate excess stock • Commodities, high fixed cost assets, volatile markets

  15. Barter • Manage currency risk • Cyclical demand items • High transportation costs • High inflation regimes • Liquidity, determining exchange rates

  16. What went wrong with B2B companies? • Liquidity dries up • Suppliers fear erosion of margin • Many sign ups but few transactions • Fear of dis-intermediation • Bad business model • Exchange fees not much • Just machine information not enough Capital market Technology woes

  17. B2B as it evolves • Transaction focus to workflow focus • Procurement focus to solution focus • Automation to optimization • Commodities to differentiated markets • Physical product exchanges to service exchanges • From vertical/horizontal to specialized designs • Emergence of megahubs and metahubs • Consolidation of technology platforms • Return of relationship – extranets and private exchanges

  18. B2B designs • Exchanges – transaction focus • Workflow markets – process focus e.g. Chingari • Marketing >> ad agency, market research • Metamediaries – solution focus e.g. Biztro • Auctions, logistics, credit, HRM, marketing, Learning + procurement + link with customers • Industry consortia – e.g. Covisint

  19. Consortia • Buyer sponsored • Concentrated buyers, fragmented suppliers, multi-layered supply chain • Autos, aerospace, hotels, retailing • Supplier sponsored • Few suppliers • Paper, Meat and Poultry, metals, Airlines • Intermediary sponsored • Fragmented industry, strong few channels • Food service, packaged goods, electrical supplies • Startup firm • Fragmented industry, early mover advantage • Steel, chemicals, life sciences

  20. Industry consortia • New century network – Newspapers • Integrion Financial network – banking • Kaleida, Taligent, PowerPC – computers • Spectrum – Electronic bill payment • NOISE – Netscape, Oracle, IBM, Sun

  21. Two choices of consortia models • New Company • Return from equity • Max revenues • Value added collaboration • Transaction fees, service fees, subscription fees • Open access to all • VC funding • Need outside funding + technology and management • Co-op model • Return from effeiciency • Max savings • Supply chain automation • Transfer pricing from sponsors • Limited access • Sponsors only • Need outside technology and management

  22. Issues in managing consortia • Board – size, composition, control • Rules of conduct • Equity stake and commitment • Neutral management team, technology platform • Arbitration and dispute resolution procedures • Antitrust problems -

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