Business To Business E Commerce

1. Business to Business eCommerce Dr. Mary Wolfinbarger Internet Marketing

B2B e-commerce refers to the _________of _________ _____processing and Internet communications for ______ services in the production of economic transactions

Many B2B businesses are____________

Include:

__________trade

Purchases by businesses of _______, resources, technology, manufactured parts and components and capital equipment

Services included __________ transactions including insurance, credit, bonds, securities

Overall B2B transactions in US = $11.5T ( 2000 )

$336B are electronic( Jupiter Communications )

(comparison to B2C -- $45B at most)

2005:Predict $6.3T out of $15.1T

( Jupiter, US only )

Or 4.5T worldwide? ( Goldman Sachs )

Anticipated productivity gains:

_____ ________from automating transactions

Economic advantages of ___ market intermediaries

Consolidation of demand and supply through organized________

Changes in extent of _______integration

Can reduce cost of __________before, during and after transaction

At every stage e-commerce avoids the need to translate computer files into paper documents, a process that generally involves errors, delay and costly clerical personnel.(Lucking-Reiley and Spulber 2000)

Both websites and ____(electronic data interchange) are used

Before:May lower cost of _________for suppliers or buyers and making _____and _______comparisons

Sales personnel are freed from _______product availability and pricing; they can concentrate on account management and _________strategy

During:Can ______communication regarding transaction details

After:Lower cost of____________, monitor contractual performance, confirm_________, automatically ______ production and accounting records

The potential cost savings in this area aresubstantial.Processing a purchase order manually, including paperwork, data entry, phone calls, faxes and approval requests, can be quite expensive, so online transactions might easily reduce costs by a factor of five or ten or more.Lucking-Reiley and Spulber 2000

Examples:

British Telecom has reduced external procurement costs from $113 to $8 per transaction

Mastercard costs of processingpurchase orders has fallen from $125 to 40, number of days from 4 to 1.25 days

Lehman Brothers:financial transactions are $1.27 for teller, $.27 for ATM, $.01 online

Intermediairies can reduce __________ _____by

Reducing cost of ______

Certifying product_______

Mitigating ______________ costs

Providing ___________for buyer and seller commitments

Intermediairies can be _______-_____ who create efficiencies by

Creating institutions of________

Adjust and communicate_______

Clear_______

Allocate ______

Provide liquidity and immediacy

Intermediairies can be market-makers who create efficiencies by (continued)

_________ markets

Providing market __________

Offering an _________of goods and services (e.g. credit, supply chain management, appraisal, transportation, and storage, industry news on website)

Bilateral negotiation is replaced w/ ______ bidding mechanisms

Online markets have been established for aircraft parts, agriculture, apparel automotive parts, chemicals, computers and electronics, energy, financial instruments, food and beverages, health care, intellectual property, freelance services, laboratory supplies, industrial machinery, advertising, metals, office supplies, plastics, paper, printing services, telecommunications, shipping, and travel services.Lucking-Reiley and Spulber, 2000

_______ markets:a marketplace targeting a single industry

_________ markets:target manyindustries e.g. maintenance, repair and operations (MRO) sells materials like belts, pumps and light fixtures

www.verticalnet.com

E-commerce intermediaries can be classified into four main categories:

Brokers

Auctioneers

Dealers

Exchanges

Can skip the intermediaries and go direct through proprietary exchanges/networks or buy directly from the company (e.g. Intel.com)

Brokers:

Match buyers and sellers for a____

Some resemble yellow pages directories, but with more comprehensive _________

Brokers generally make money from ______ ___ paid by sellers

Sellers can place product listings that resemble ______ ads

Order fulfillment is typically up to the______

Auctioneers:

In addition to matchmaking, set up a mechanism to determine______

Internet tech. _______ ______of running an auction relative to using posted prices

Auctions useful when there is _________ about market-clearing prices

Some hold auctions of ______ inventory (e.g. One Media Place sells advertising space)

Some hold _______ auctions where sellers compete for a buyers contract

Example:www.FreeMarkets.com(largest reverse auctionneer)

Dealers

Take _______ of goods provided by suppliers and ______them to buyers

Post ____ prices for buyers and ___ prices for sellers

Early development has seen ____dealers as compared to brokers, auctions or exchanges

Dealers are largely extensions of ___ economy distributorsExamples:Grainger.com, EnronOnline ( www.enron.com ) (the worlds largest e-commerce site for global commodities)

Exchanges (also called marketplaces):

______sided markets (like commodity markets)

Provide services:

Rules of trading

Price transparency

Centralized Clearing

Buyers and sellers observe the _____ of transactions as they____ and expect to receive best available price

Buyers settle their ___ position at end of day rather than settling each transaction individually

Examples: Altra Energy (oil and gas), CheMatch ( www.chematch.com )(chemicals), e-Steel (steel)

Exchanges

Many exchanges are ______-sponsored

Examples:1) Sears, Carrefour and several other major retailers started GlobalNetExchange to organize purchases from over 50,000 vendors

2)Boeing, Lockheed Martin, BAE Systems and Raytheon formed an exchange for aerospace parts and services with potential for $70B with 37,000 suppliers

3)Covisint (auto industry exchange GM, Ford, Daimler-Chrysler)

Industry consortia have put many of the independents out of business (also called ISMs _______ _________ __________)

Exchanges

By mid-2000, it was estimated that 60 buyer-dominated consortia, representing over 278 companies and $3 trillion in annual purchasing planned to establish their own electronic markets rather than relying on independent exchanges.(-Roberti 2000 )

Antitrust issues

Competitors can more easily exchange _____ info and thus ______

B2B sites could ________ participation by competitors

In industry-sponsored exchanges so far, ownership tends to be on the side of the market having greatest concentration of market power

Exchanges:Challenges

Competitors arent used to working together __________

Suppliers are _______to sign on (they dont want to be squeezed)

Transparency:posting ______ and contracts where competitors can see them

Companies like buying from tried and true_______

Some companies dont have the ________to participate (e.g. hotel supply exchange failed)

Sensitizing managers to the notion of ________ ______

People hate_______

_________exchanges between businesses

More consistent with the way many businesses are already run

many old-line manufacturersview B2B sites as cost-effective tools to improve and cement [existing] business relationships rather than as a way to attract an entirely new set of buyersthey have balked at aggressively participating in independent trading sites that also feature the wares of rival suppliersInstead, [they] are focusing on building up their own, company-specific sales platforms and techniques, and then helping longstanding customers adapt smoothly to them.--- Wall Street Journal, May 21, 2001

Some firms fall into more than one of these categories

PlasticNet runs auctions for some transactions and acts as a broker by allowing its users to place classified ads for products

MetalSite runs single-sided auctions for some clients, but operates a double-sided exchange as well.

Industry consortia tend to run exchanges with multiple functions and tools

Many Observers predict substantial _______ and market _______as markets become established

Comprehensive up-to-date lists of B2B exchanges appear atwww.line56.com

andwww.nmm.com

B2B buyers want many of the same qualities that B2C buyers desire

Only 41% of B2B companies respond to email inquiries within 6 hours, only 65% in 24 hours (as in B2C, email responsiveness can be used to judge trustworthiness of a site)

FAQ pages and search capabilities at many sites are poor

45% of B2B buyers say they dont go online because they dont trust suppliers

________ sites set expectations difficult to reach since B2B transactions are often more_______

Over 4/5 companies said they would be more interested in buying online if comprehensive services were offered (e.g. collaborative product design or supply/inventory applications)

--Jupiter Media Metrix, May 2001

Supply Chain _______

Replenishment, Demand _________

Online Product _______

Advantages?

Faster to Market

Higher Quality/Fewer Mistakes

Lower Inventories, less working capital

Better, cheaper designs

The early focus was transactions, but win-win business relationships are built from collaboration not just transactions.--Tim Clark, Jupiter Media Metrix

As e-markets develop, supplier _____ and ______ will complement the present focus on price

GEPolymerland.com lured enough customers online to make their venture worthwhile:How?

Customers were involved in planning the site

Site is easy to navigate, fast, customer service is high quality, website customization, access to technical information

Not forcing customers online

Internet direct marketing can be used in combination with mail and telephone

Similar to direct mail, on web can combine ____ and_______

Microsegmentation

___________ direct marketing

5 strategies:

Generate ____on the Internet

Use Internet to provide_______/______

Execute instant _______ fulfillment

Generate______

Enhance customer___________

1.Generating Leads

Typical direct mail response is ___%

Order generation below __%

_______ ______seem to be declining

The Internet can help in generating leads:

Generate leads in first place

Support use of __________ direct marketing media

Track ______of efforts

Support ______organization

_______ (develop own list, rent for $250/300 per 1000 names)

Emails give _______ ______/inside track on products

Email can be used to ______ ___on inquiries or orders (follow-up generates more sales)

Email can also be used to follow up on _______ meetings

Email ________(opt-in) contain info. useful to recipient, but also marketing

Email _______

Email _________/web _________ groups

_________ banner ads

2.Using the Internet to Promote Products/Services

Online _______(cheaper than offline)

Can be ________ for partner/re-seller release

Can use in conjunction with ______ ____

Can be live, pre-recorded or interactive

3.Executing Instant Information Fulfillment on the Net

Fullfillment responding to an information______

Differences online

Dramatically closes need for ______ __________

Leads dont ____ while waiting for information

Customers can try online______

Fullfillment can be________/__________

4.Generating Orders

Internet forms help _______leads so sales effort is better allocated

Straight __________can be handled without using personnel

5.Enhancing Customer Relationships:

Email ___________(as mentioned earlier)

_____and _______on website are appreciated

________websites can be developed for specific businesses

Occasionally, customer ___________ develop (e.g. Cisco)