Overview Ch. 4 Describe the factors that influence consumer behaviour online Describe how companies are building one-to-one relationship with customers.

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

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

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

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
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

Using auctions on the sell-side Revenue generation
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

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

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
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 , 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?

Overview Ch. 4 Describe the factors that influence consumer behaviour online Describe how companies are building one-to-one relationship with customers.

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Overview Ch. 4 Describe the factors that influence consumer behaviour online Describe how companies are building one-to-one relationship with customers.

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