B2B Business-to-Business marketing and e-commerce

(2013 Feb 13) this page has not been updated for several years because the content has been eclipsed by newer 
developments in how businesses do business with other businesses - which are discussed in a conventional lecture
(Nabeela noted that the fastparts.com link is broken cause the company no longer is extant)
 

.	This page used in the following courses taught by Prof. Richardson . MGT D06 CCT 322

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INTRODUCTION

Beginning in November through December 1999 and into January and February 2000 there were a lot of newspaper and magazine reports, offline and online about B2B being the new focus of e-business and how this area would grow very fast. We can find many newspaper articles about B2B issues and many of them include projections as to how big the market will grow - which may not be meaningful since since whether it is $5 trillion or $7 trillion - it's still a lot of money In the following space, you will find separate articles on B2B at three separate times from E-commerce Times. Each story has a different perspective on B2B. Why? WTGR

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By Mary Hillebrand  E-Commerce Times  January 27, 2000  "Forecasters Fuel Feeding Frenzy on B2B Projections" Mary Hillebrand wrote an article in E-Commerce Times in January 2000  www.ecommercetimes.com/news/articles2000/000127-5.shtml in which she noted several of these B2B projections and also commented on how important it would be in the business commuity in general. "The Stamford, Connecticut-based GartnerGroup sees the online B2B market reaching seven percent of a predicted $105 trillion in total global sales transactions.... The study reports that companies who develop B2B  marketplaces -- so-called "e-market makers" -- will be a key  driving force for B2B e-commerce."

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By Staff Writers E-Commerce Times February 23, 2000  Interestingly, following on the heels of Hillebrand's story in January, is a story in February 2000 which says "Study: U.S. Manufacturers Not B2B E-Commerce Ready" - this story  http://www.ecommercetimes.com/news/articles2000/000223-6.shtml is based on a report by a U.S. trade association called National Association of Manufacturers WTGR "A nationwide poll of U.S. industrial firms  shows that most are not engaging in extensive business-to-business (B2B) e-commerce, according to the National Association of Manufacturers (NAM). .. The study echoed a recent report from Deloitte and Touche showing that 70 percent of U.S. retailers lack a cohesive e-commerce strategy." "No one questions the importance of B2B e-commerce, yet relatively few manufacturers are participating in it," said NAM president Jerry Jasinowski. Jasinowski added "our survey shows that most manufacturing companies are still at a rather basic level when it comes to integrating the Web into their corporate business activities. While 80 percent claim they have a Web site, the vast majority offer only an information storefront."

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By Mick Brady  E-Commerce Times  March 16, 2000  "More Glitter Than Gold in B2B Portals"  http://www.ecommercetimes.com/news/articles2000/000316-1.shtml Brady writes "companies in nearly every industry are  launching slick new Internet portals -- but  many have failed thus far to rise above the functionality of plain old Web sites ... As the list of new portals continues to lengthen, it is nevertheless becoming increasingly clear that a portal launch does not necessarily augur immediate B2B success. Customers are not flocking to the portals as quickly as expected and even  those who make the trip are often unwilling or unable to make transactions."

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By Chet Dembeck E-Commerce Times Columnist April 11, 2000 "B2B Ventures Losing Their Allure"  http://www.ecommercetimes.com/news/viewpoint2000/view-000411-1.shtml Dembeck writes in a more "sober" way about the B2B hype, noting "when a leading Web incubator announced earlier this week  [11Apr2000] that it would stop investing  in business-to-business (B2B) companies, it reinforced concern that the dot-com shakeout in the business-to-consumer arena may be spreading to the realm of B2B." "What seems like a sudden about face was actually expected by some industry analysts. In general, valuation and the projected size of the B2B market have gotten so big they have become hard to fathom...,"  Geoffrey Bock, an analyst with Boston, Massachusetts-based  Patricia Seybold Group told the E-Commerce Times. "...the proliferation of B2B marketplaces is being fueled by the desire to improve business processes, it is also being driven by hype" George Reilly, research director for GartnerGroup, as quoted by Dembeck

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By Beth Cox  August 17, 2001 "Market for B2B Apps Still Soft"  www.internetnews.com/ec-news/article/0,,4_867951,00.html An indication of how B2B is progressing is information on the computer software applications that are used by companies in B2B circumstances. Cox writes, "Sales of B2B software, the applications needed to establish online marketplaces, bolster supply chains and allow for  collaboration among companies, continue to be soft, and Goldman, Sachs analysts are lowering estimates for some of the prime players in the field."

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By Erika Morphy September 24, 2001 "Easy Payments Crucial for B2B Success"  www.ecommercetimes.com/perl/story/13696.html#story-start "... with many B2B payments: Oftentimes, a buyer has to tie up its line of credit before the goods are even shipped just to provide the seller with the assurance that the bill will be paid. Other payment mechanisms, such as credit insurance or letters of credit, can be very costly -- and still, a buyer's credit line is usually hamstrung for the duration of the transaction."  "An easy payment process is the foundation of any customer-friendly operation."  "In the B2B community, however, payment is still largely paper-based despite -- or perhaps because of -- the large amounts of cash exchanged."

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By Keith Regan October 01, 2001 "B2B E-Commerce Takes a Global View, Cautiously"   www.ecommercetimes.com/perl/story/?id=13761 "Smart companies are using the Internet to shorten the time it takes to get materials from suppliers,   to communicate with third-party manufacturers and, in some ways, to turn business culture on its   head, Deloitte & Touche e-commerce consultant Aran Nathanson told the E-Commerce Times." "But for many businesses, the motivation to overcome those hurdles is greater than the obstacles posed. Analysts have predicted that the fastest growing markets in coming years will be the overseas markets. For example, Gartner has estimated that B2B sales in the Asia-Pacific region will rise from US$9 billion in 1999 to $992 billion by 2004." Where is B2B "Even though the overseas markets are expected to boom, U.S. companies thus far still dominate   the online B2B landscape, as they do in the business-to-consumer (B2C) e-commerce realm. An Andersen survey of the B2B landscape last year [2000] found that U.S. companies generated 67 % of global B2B e-commerce revenue, with Europe accounting for 14 %."

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KEY POINTS

So, what we can conclude from these 2000-2001 B2B articles ? B2B seems to be getting a lot of hype and the expectation among IT oriented people is that it should grow rapidly as a business forum In this fast paced e-world, best thing to do when an issue surfaces, is wait three or four months to see if it has "sustaining" power before jumping on the bandwagon The reality among medium sized businesses is that they may believe B2B is great - but they are still slow in implementing it. The B2B market is effected by many of the environmental forces challenging business in general WTGR

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By Lesley Hensell October 2003 "The True Path of B2B E-Commerce"   www.ecommercetimes.com/story/32000.html Hensell explains "When it comes to buying and selling products, companies seem to have turned away from each other -- and the bigger the companies are, the less they want to talk. This decline in personal interaction during the sales process may be due partly to the rise of business-to-business, or B2B , exchanges. These automated online marketplaces have moved past early stumbles and now can help companies reach new levels of accuracy, efficiency and profitability. In fact, many large corporations have begun requiring their trading partners to conduct sales ordering, payment and fulfillment online or not at all. However, although conducting B2B transactions online has become standard operating procedure, the way these exchanges are designed and run is anything but standardized." Hensell further explains that there is a wide variety of platforms and software within which companies conduct B2B and therefore there is little standardization. Hensell suggests B2B exchanges have grown and improved since the early 2000's, but that "...B2B exchanges are not entirely problem-free. While the front-end trading portion of such marketplaces has been refined over time, in many cases the back-end processes -- ranging from handling purchase orders and credit references to billing and shipping -- have not lived up to their potential."

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During our discussions of B2B aspects we refer to an article written by Mohanbir Sawhney and Steven Kaplanw, titled " Let's Get Vertical . This article appeared in Business 2.0 in 1999.

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B2B Business to Business

Sawhney and Kaplanw explain that "The great untold story of online commerce is that business-to-business sales have already eclipsed the higher-profile business-to-consumer market by a long shot. Annual B-to-B ecommerce is projected to soar from $43 billion in 1998 to $1 trillion by 2003, according to Forrester Research, while the consumer market swells from $7.8 billion to $108 billion in the same period."     business-to-consumer business-to-business 1998 $7.8 billion $43 billion 2003 $108 billion  $1 trillion *** 2005 . $10 trillion ** So, if the B2B market is growing so fast, we need to know what are some of the successful characteristics business models so that we can "conduct E-commerce successfully" in a B2B situation. ** - from page 217 in Turban Text - 2nd ed. ***- Turban Text - 2nd ed. says B2B will grow to the range of $ 1.1 - $ 4 trillion

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Business-to-Business Electronic Commerce  How is B2B conducted? B2B commerce can be conducted directly between a buyer and seller or via an online intermediary. The intermediary can be  a person  or an organization  or an electronic system

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Business-to-Business Electronic Commerce  Types of Transactions Spot Buying buying goods and services at market prices often facilitated by a third party exchange Strategic Sourcing long-term contracts that are usually negotiated to get a good cost advantage often this is done by streamlining your supply chain

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Business-to-Business Electronic Commerce  The key entities in B2B EC,  Selling Company Buying Company Electronic Intermediary Deliverer Network Platform Protocols and communication Back-end information system - including ERP - Enterprise Resource Planning

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Business-to-Business Electronic Commerce  The Information Processed in B2B - meaning what you have to expect will be sent back and forth between the buyer, seller and intermediary product details customer profile supplier conditions product process - capacities transportation, times, costs

Business-to-Business Electronic Commerce  B2B Models   Company Centric Models  which would include Supplier Oriented Marketplace  Buyer Oriented Marketplace Intermediary Oriented Marketplace Many-to-many Marketplaces  also known as Trading Communities or Trading Exchanges or Exchanges

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Supplier Oriented Marketplace

common examples are manufacturers of electronic products
example companies are

• Cisco
• IBM
• Intel

Cisco Connection Online

Customer Service

Software downloads

defect tracking

technical advice

Online Ordering

Cisco builds most of its products for custom orders

Custom orders can be facilitated more precisely through online menus

Finding Order Status

empowers the customer to know when order is arriving and specific details

This is usually for large companies that buy a large volume, and wide variety of products, so they open up a web site to inform companies what they require, and invite businesses to submit bids on what they wish to supply. A lot of this is being done in the form of an Extranet.

One of the new terms used in this consideration is "Procurement Management" - which is a fancy way of "figuring out best how to buy stuff"

example companies are

• General Electric
• Federal government agencies
• Automotive assemblers and Tier 1 parts companies

Boeing's PART case  demonstrates the intermediary oriented B2B marketplace. Boeing plays the role of intermediary in supplying maintenance parts to airlines (most of which own Boeing planes)

"Boeing views the Internet as an opportunity to encourage more of its customers to order parts electronically"
 

CASE STUDY of a B2B e-commerce business model: FastParts.com

(In Dec 2005 student Nabeela noted that the domain name for fastparts.com appeared to be inactive and all the other links do not work.
A Google search reveals little, their founding President left the company in 2001.)

FastParts.com:
FastParts.com was founded in 1991 to bring buyers and sellers of semiconductors and other electronic components together directly and anonymously to negotiate 'trade' transactions. The company brought its trading expertise onto the Internet upon receiving venture capital funding in 1996. OEMs, contract assemblers, part makers, and distributors can trade components quickly and cost effectively at www.fastparts.com. They offered exchange brokerage between buyers and sellers, and an auction service. They also sell memory and some equipment of an authorized distributor/reseller of certain manufacturers. In 2005 their URL was no longer active.

In FastParts words www.fastparts.com
"FastParts.com is a leading business-to-business e-commerce net marketplace for the  Electronics manufacturing industry. We facilitate the global trading of electronic  inventory over the Internet with our ComponentConnectTM and  EquipmentConnectTM trading exchanges, SOLD! AuctionTM and Century Catalog services. Membership assures participants they are dealing with pre-qualified  trading partners."

from formerly www.fastparts.com/about/about_us.html
"It was founded in 1991 as an electronic bulletin board-based trading exchange, to serve the needs of procurement professionals who faced the dual challenges of excess inventories on cancelled jobs and inventory shortages  for unforecasted orders." "became an e-commerce pioneer in 1996 launched the first B2B Internet marketplace for buyers and sellers of electronic inventory"

"Business-to-business (B2B) EC is the engine behind the EC revolution. The genesis of B2B EC was technologies such as Electronic Data Interchange (EDI)  and Electronic Fund Transfer, which were typically the exclusive domain of larger  organizations. However, with the advent of the Internet and its open network,  small and medium size companies are now also able to start participating in B2B  EC."
formerly from http://www.fastparts.com/about/b2b.html

"Key benefits of B2B EC [according to FastParts.com]  include:

• Strengthen and globalize your corporate brand
• Increase customer satisfaction and loyalty
• Create flexible, dynamic business models
• Enhance cost structure and profit margins
• Create a virtual networked enterprise that transcends the time and   geographic boundaries imposed by the globe
• Build highly coordinated communities with business partners and customers"

Just how diverse can the B2B market be? It does not have to be limited to conventional manufacturing and service industries. Many other aspects of business can be involved, such as the "business of" sports and entertainment. WTGR journalist Patricia Zyska at Plesman wrote a story in the August 2000 issue of the eBusiness Journal  http://www.plesman.com/Archives/eb/2000/Aug/0208/eb020804b.html "NHL looks at online B2B"

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On this page there are several quotes from ecommercetimes.com. Permission was given by Richard Kern, Associate Publisher of the E-Commerce Times,  in an email to Prof. Richardson 2004 Dec 10th, a hard copy of the email is kep on file in Richardson's permissions binder.
 

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