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Chapter 5
B2B E-Commerce
Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 1
Learning Objectives
1. Describe the B2B field.
2. Describe the major types of B2B models.
3. Discuss the characteristics of the sell-side
marketplace, including auctions.
4. Describe the sell-side models.
5. Describe the characteristics of the buy-side
marketplace and e-procurement.
6. Explain how reverse auctions work in B2B.
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Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 2
Learning Objectives
7. Describe B2B aggregation and group
purchasing models.
8. Describe other procurement methods.
9. Define exchanges and describe their major
types.
10. Describe B2B portals.
11. Describe third-party exchanges.
12. Describe partner relationship management
(PRM).
Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 3
Concepts, Characteristics,
and Models of B2B EC
BASIC B2B CONCEPTS
business-to-business e-commerce
(B2B EC)
Transactions between businesses
conducted electronically over the Internet,extranets, intranets, or private networks;
also known as eB2B (electronic B2B) or
just B2B.
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Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 4
Concepts, Characteristics,and Models of B2B EC
Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 5
Concepts, Characteristics,
and Models of B2B EC
THE BASIC TYPES OF B2B
TRANSACTIONS AND ACTIVITIES
Sell-side
Buy-side
Exchanges
Supply chain improvements and
collaborative commerce
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Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 6
Concepts, Characteristics,and Models of B2B EC
Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 7
Concepts, Characteristics,
and Models of B2B EC
THE BASIC TYPES OF B2B E-MARKETPLACES AND SERVICES One-to-Many and Many-to-One: Private E-
Marketplaces company-centric EC
E-commerce that focuses on a single company’s buyingneeds (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-sidecompany has complete control over participation in theselling or buying transaction.
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Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 8
Concepts, Characteristics,and Models of B2B EC
Many-to-Many: Exchanges
exchanges (trading communities or trading
exchanges)
Many-to-many e-marketplaces, usually owned and runby a third party or a consortium, in which many buyers
and many sellers meet electronically to trade with each
other.
public e-marketplaces
Third-party exchanges open to all interested parties
(sellers and buyers).
Supply Chain Improvers and Collaborative
Commerce
Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 9
Concepts, Characteristics,
and Models of B2B EC
B2B CHARACTERISTICS
Parties to the Transaction: Sellers,
Buyers, and Intermediaries
online intermediary
An online third party that brokers a transactiononline between a buyer and a seller; may be
virtual or click-and-mortar.
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Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 10
Concepts, Characteristics,and Models of B2B EC
Types of Transactions
spot buying
The purchase of goods and services as they
are needed, usually at prevailing market
prices.
strategic (systematic) sourcing
Purchases involving long-term contracts thatusually are based on private negotiations
between sellers and buyers.
Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 11
Concepts, Characteristics,
and Models of B2B EC
Types of Materials Traded
direct materials
Materials used in the production of a product
(e.g., steel in a car or paper in a book).
indirect materialsMaterials used to support production (e.g.,
office supplies or light bulbs).
MRO (maintenance, repair, and operation)
Indirect materials used in activities that support
production.
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Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 12
Concepts, Characteristics,and Models of B2B EC
Direction of Trade
vertical marketplaces
Markets that deal with one industry or industry
segment (e.g., steel, chemicals).
horizontal marketplaces
Markets that concentrate on a service,
material, or a product that is used in all typesof industries (e.g., office supplies, PCs).
Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 13
Concepts, Characteristics,
and Models of B2B EC
SUPPLY CHAIN RELATIONSHIPS IN
B2B
VIRTUAL SERVICE INDUSTRIES IN
B2B
THE BENEFITS OF B2B
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Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 14
One-to-Many:Sell-side E-Marketplaces
SELL-SIDE MODELS ANDACTIVITIES sell-side e-marketplace
A Web-based marketplace in which onecompany sells to many business buyersfrom e-catalogs or auctions, frequently
over an extranet. B2B Sellers
Customer Service
Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 15
One-to-Many:
Sell-side E-Marketplaces
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Chapter 5
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One-to-Many:Sell-side E-Marketplaces
DIRECT SALES FROM CATALOGS
Configuration and Customization
Benefits and Limitations of Direct Sales
from Catalogs
DIRECT SALES: THE EXAMPLE OF
CISCO SYSTEMS
Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 17
Selling Via
Intermediaries and Distributors
Manufacturers frequently use
intermediaries to distribute their
products to a large number of buyers.
The intermediaries (known as
distributors) usually buy products from
many vendors and aggregate them into
one catalog from which they sell.
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Chapter 5
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Selling Via Auctions
USING AUCTIONS ON THE SELL
SIDE
Revenue generation
Cost savings
Increased “stickiness”
Member acquisition and retention
Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 19
Selling Via Auctions
AUCTIONING FROM THE
COMPANY’S OWN SITE
USING INTERMEDIARIES IN
AUCTIONS
EXAMPLES OF B2B FORWARD
AUCTION
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Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 20
One-from-Many: Buy-SideE-Marketplaces and E-Procurement
buy-side e-marketplace
A corporate-based acquisition site that
uses reverse auctions, negotiations,
group purchasing, or any other e-
procurement method.
Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 21
One-from-Many: Buy-Side
E-Marketplaces and E-Procurement
PROCUREMENT METHODS
e-sourcing
e-tendering
e-reverse auctioning
e-informing Web-based ERP (electronic resource
planning)
e-MRO (maintenance, repair, andoperating)
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Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 22
One-from-Many: Buy-SideE-Marketplaces and E-Procurement
INEFFICIENCIES IN TRADITIONAL
PROCUREMENT MANAGEMENT
Procurement management
The planning, organizing, and coordinating of allthe activities relating to purchasing goods and
services needed to accomplish the organization’s
mission. maverick buying
Unplanned purchases of items needed quickly,
often at higher prices, not pre-negotiated.
Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 23
One-from-Many: Buy-Side
E-Marketplaces and E-Procurement
THE GOALS AND BENEFITS OF E-
PROCUREMENT
e-procurement
The electronic acquisition of goods and
services for organizations.
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Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 24
One-from-Many: Buy-SideE-Marketplaces and E-Procurement
Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 25
One-from-Many: Buy-Side
E-Marketplaces and E-Procurement
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Chapter 5
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Buy-Side E-Marketplaces:Reverse Auctions
request for quote (RFQ)
The “invitation” to participate in a
tendering (bidding) system.
CONDUCTING REVERSE AUCTIONS
E-Tendering by Governments
GROUP REVERSE AUCTIONS
Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 27
Buy-Side E-Marketplaces:
Reverse Auctions
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Chapter 5
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Other E-Procurement Methods
internal procurement marketplace
The aggregated catalogs of all approved
suppliers combined into a single internal
electronic catalog.
Benefits of Internal Marketplaces
desktop purchasing
Direct purchasing from internal marketplaces
without the approval of supervisors and without the
intervention of a procurement department.
Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 29
Other E-Procurement Methods
BUYING AT E-AUCTIONS
group purchasing
The aggregation of orders from several
buyers into volume purchases so that better
prices can be negotiated.
Internal Aggregation
External Aggregation
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Chapter 5
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Other E-Procurement Methods
Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 31
Other E-Procurement Methods
BUYING FROM E-DISTRIBUTORS
PURCHASING DIRECT GOODS
ELECTRONIC BARTERING
bartering exchange
An intermediary that links parties in a barter; acompany submits its surplus to the exchange and
receives points of credit, which can be used to buy
the items that the company needs from other
exchange participants.
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Chapter 5
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B2B Electronic Exchanges:Definitions and Concepts
Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 33
B2B Electronic Exchanges:
Definitions and Concepts
dynamic pricing
A rapid movement of prices over timeand possibly across customers, as aresult of supply and demand matching.
FUNCTIONS OF EXCHANGES Matching buyers and sellers
Facilitating transactions
Maintaining exchange policies andinfrastructure
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Chapter 5
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B2B Electronic Exchanges:Definitions and Concepts
Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 35
B2B Electronic Exchanges:
Definitions and Concepts
Revenue Models of Exchanges Transaction fees
Fee for service Membership fees
Advertising fees
Other revenue sources B2B portals
Information portals for businesses.
vortals
B2B portals that focus on a single industry or industry segment; “vertical portals”.
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Chapter 5
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B2B Portals, Directories, andTrading Exchanges
THIRD-PARTY AND DIRECTORIES
EXCHANGES
consortium trading exchange (CTE)
An exchange formed and operated by a
group of major companies in an industry to
provide industry-wide transaction services.
Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 37
Partner and Supplier
Relationship Management
partner relationship management
(PRM)
Business strategy that focuses on
providing comprehensive quality service
to business partners.
E-COMMUNITIES AND PRM
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Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 38
Managerial Issues
1. Can we justify the cost of B2B applications?
2. Which vendor(s) should we select?
3. Which B2B model(s) should we use?
4. What are the ethical issues in B2B?
5. Will there be massive disintermediation?
6. How can trust and loyalty be cultivated in B2B?
7. Will joining an exchange force restructuring?
8. Which exchange to join?
9. What are the benefits and risks of joining anexchange?
Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 39
Summary
1. The B2B field.
2. The major B2B models.
3. The characteristics of sell-side marketplaces.
4. Sell-side intermediaries.
5. The characteristics of buy-side marketplaces
and e-procurement.
6. B2B reverse auctions.
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Chapter 5
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Summary
7. B2B aggregation and group purchasing.
8. Other procurement methods.
9. E-marketplaces and exchanges defined and
the major types of exchanges.
10. B2B portals.
11. Third-party exchanges.12. Good relationship with business partners is
critical to the success of B2B.
Chapter 5
Copyright © 2009 Pearson Education,Inc. Publishing as Prentice Hall 41
All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written
permission of the publisher. Printed in the United States of America.