E-commerce and Digital

Marketing
IT0041
 MODULE 4

Business To Business
E-Commerce
Upon the completion of this module, the students are
expected to:
• Describe one-to-many: sell-side e-marketplaces, selling via e-auctions
• Describe one-from-many: e-procurement at buy-side e-marketplaces
• Describe reverse auctions at buy-side / e-marketplaces (e-tendering)
• Describe other e-procurement methods
• Discuss the b2b exchanges(e-marketplaces):definition and concept
• Discuss b2b exchanges(e-marketplaces):definitions and concepts
• Describe b2b in web 2.0 and social networking
• Understand some b2b support mechanisms
• Define concepts, characteristics, and models of b2b e-commerce
Business-to-business e-commerce (B2B EC) , also known as eB2B ( electronic B2B ), or just B2B, refers to
transactions between businesses conducted electronically over the Internet, extranets, intranets, or private
networks.

The Basic Types of B2B Transactions and Activities

The number of sellers and buyers and the form of participation used in B2B determine the five basic B2B
transaction activity types:

1. Sell-side. One seller to many buyers.

2. Buy-side. One buyer from many sellers.
3. Marketplaces or Exchanges. Many sellers to many buyers.
4. Supply chain improvements
5. Collaborative commerce
Business-to-business e-commerce (B2B EC) , also known as eB2B ( electronic B2B ), or just B2B, refers to
transactions between businesses conducted electronically over the Internet, extranets, intranets, or private
networks.

The Basic Types of B2B Transactions and Activities

The number of sellers and buyers and the form of participation used in B2B determine the five basic B2B
transaction activity types:

1. Sell-side. One seller to many buyers.

2. Buy-side. One buyer from many sellers.
3. Marketplaces or Exchanges. Many sellers to many buyers.
4. Supply chain improvements
5. Collaborative commerce
The Basic Types of B2B E-Marketplaces and Services
The following are the descriptions of the basic types of B2B e-marketplaces.

One-to-Many and Many-to-One: Private E-Marketplaces - Also referred to as company-centric EC. One company does
either all the selling ( sell-side market ) or all the buying ( buy-side market ).

Many-to-Many: Public Exchanges (or E-Marketplaces) - In many-to-many e-marketplaces, many buyers and many
sellers meet electronically to trade with one another.

Supply Chain Improvers and Collaborative Commerce

B2B transactions are conducted frequently along segments of the supply chain. Therefore, B2B initiatives need to be
examined in light of other supply chain activities such as procurement of raw materials, fulfilling orders, shipments,
and logistics
Parties to the Transaction: Sellers, Buyers,
and Intermediaries

B2B commerce can be conducted directly between

a customer and a manufacturer or it can be
conducted via an online intermediary . An online
intermediary is a third-party entity that brokers the
transactions between the buyer and seller; it can be
either virtual or click-and-mortar.
Types of Materials Traded: What Do Firms Buy?
Two major types of materials and supplies are traded in
B2B markets: direct and indirect . Direct materials are
materials used in making products, such as steel in a car
or paper in a book. Indirect materials are items, such as
Office supplies or light bulbs, which support operation
and production. They normally are used in
maintenance, repair, and operation (MRO) activities.
Collectively, they are also known as nonproduction
materials .
B2B marketplaces can be classifi ed as vertical or horizontal.

• Vertical marketplaces are those for one particular industry or industry segment. Examples include marketplaces specializing in
electronics, cars, hospital supplies, steel, or chemicals.

• Horizontal marketplaces are those in which trading is in a service or a product that is used in many types of industries.

• The strategy of providing such comprehensive, quality e-services for business partners is sometimes called partner relationship
management (PRM ).

The Benefits and Limitations of B2B

The benefits of B2B are for buyers, sellers, or for both, and they depend on which model is used.

In general, though, the major benefits of B2B (the beneficiaries are marked after each benefit: S = seller, B = buyer, J = joint)
are that it:
• Creates new sales opportunities (S)
• Eliminates paper and reduces administrative costs (J)
• Expedites processing and reduces trading cycle time (J)
• Lowers search costs and time for buyers to find products and vendors (B)
• Increases productivity of employees dealing with buying and/or selling (J)
• Reduces errors and improves quality of service (J)
• Makes product configuration easier (B)
• Reduces marketing and sales costs (S)
• Reduces inventory levels and costs (J)
• Reduces purchasing costs by cutting down on use of intermediaries (B)
• Enables customized e-catalogs with different prices for different customers (J)
• Increases production flexibility, permitting on demand delivery (S)
• Reduces procurement costs (B)
• Facilitates customization via self configuration(J)
• Provides for efficient customer service (B)
• Increases opportunities for collaboration (J)
• Web-based EC is more affordable than traditional EDI (J)
• Allows more business partners to be reached than with EDI (J)
• Reaches a more geographically dispersed customer base (S)
• Provides a better means of communication with other media (J)
• Provides 24/7 coverage of the shop front (J)
• Helps equalize small enterprises (B)
In a B2B sell-side e-marketplace , a business sells products and services to business customers electronically, frequently
over an extranet.
The one-to-many model has three major marketing methods:

(1) selling from electronic catalogs with fixed prices;

(2) selling via forward auctions ; and (3) one-to-one selling,
usually under a negotiated long-term contract.

The Benefits of Auctions on the Sell Side

• Revenue generation
• Cost savings
• Increased “stickiness.”
• Member acquisition and retention
The term procurement refers to the purchase of goods and services by organizations. Procurement is usually done by
purchasing agents , also known as corporate buyers .
Procurement management refers to the process of planning, organizing, and coordinating of all the activities pertaining to
the purchasing of the goods and services needed by an organization.

The following are the major activities that may be included in a single purchase:
• Search for items using search engines, catalogs, virtual fairs and showrooms, and sellers’ sales presentations.
• Learn details of items and buying terms using comparison engines and quality reports, and research industry report and
vendors’ information.
• Negotiate or join group purchasing using software support (if available).
• Determine when and how much to order each time . Authorize corporate buyers.
• Join business-oriented social network such as linkedin.com .
• Sign agreement or contract using e-contract management (e.g., from Ariba, Inc. ariba.com ; a SAP company); arrange
financing, escrow insurance, etc.
• Create specific purchasing order(s) using a computerized system.
• Arrange packing, shipments, and deliveries using electronic tracking, RFID, etc.
• Arrange invoicing, payments, expense management, and purchasing budgetary control using software packages (e.g., from
ariba.com ).
Maverick buying occurs when a buyer makes unplanned purchases of items needed quickly, resulting in buying at non-
pre-negotiated, and usually higher, prices.

Procurement Methods

The major procurement methods include the following:

• Buy directly from the catalogs of manufacturers, wholesalers, or retailers, and possibly by negotiation.
• Buy at private or public auction sites in which the buying organization is one of many where suppliers compete
against each other.
• Buy from the catalog of an intermediary (e-distributor) that aggregates sellers’ catalogs
• Buy from the company’s own internal buyer catalog. Such catalogs usually include agreed upon
prices of items from many suppliers.
• Join a group-purchasing system that aggregates participants’ demands, creating a large volume. • Buy at an exchange
or industrial mall.
E-procurement (electronic procurement)
is the online purchase of supplies,
materials, energy, work, and services.

Four major methods of e-procurement

are available:

(1) Buy at own website

(2) buy at sellers’ store,
3) buy at exchanges, and
(4) buy at theirs’ e-market sites.

• Reverse Auctions at Buy-Side

• E-Marketplaces (E-Tendering)
The Benefits of E-Procurement

By automating and streamlining the procurement process, corporate purchasing buyers can focus on more strategic
activities that result in:
• Increasing the productivity of purchasing agents, providing them with more non-routine time and reducing job
pressures; possibly reducing purchasing departments’ overhead.
• Lowering purchase per item prices through activities such as product standardization, reverse auctions, volume
discounts, and consolidation of purchases from fewer suppliers.
• Improving information flow and its control (e.g., price comparisons).
• Reducing the frequency and cost of maverick buying.
• Improving the payment process, and sellers’ savings due to expedited payment cycle.
• Establishing more efficient and collaborative partner relations due to information sharing.
• Improving the manufacturing process for the suppliers.
• Ensuring delivery on time, and fewer stock outs.
• Reducing the skill requirements and training needs of purchasing agents.
• Reducing the number of suppliers.
• Streamlining and expediting the purchasing process.
• Controlling inventories more effectively at the buyers’ end.
• Streamlining invoice reconciliation and dispute resolution.
• Reducing the administrative processing cost per order by as much as 90% by reducing purchasing overheads and
intermediary fees.
• Finding new suppliers that can provide goods and services faster and/or less expensively (e.g., by going global and
use online price comparisons).
The Limitations and Challenges of E-Procurement

Unfortunately, e-procurement practices have some limitations and risks such as:
• The total cost (TCO) may be too high.
• It may be subject to hacker attacks.
• It may be difficult to get suppliers to cooperate electronically.
• The system may be too complex (e.g., when it uses a traditional EDI; see Online Tutorial T2).
• It may be difficult to have internal and external integration (sometimes it involves different standards).
• The technology may change frequently.
A reverse auction is a process in which many sellers (suppliers) compete to fulfill orders requested by one
buyer.
The major benefits of the technology to a buyer are:

(a) lower cost of items purchased,

(b) reduction of administrative costs of procurement,
(c) reduction of corruption and bribes, and
(d) decrease in time to receive the goods, which may result from the suppliers’ ability to produce its
products and services faster
Desktop purchasing refers to purchasing by employees without the approval of supervisors and without the
involvement of a procurement department.
Many companies, especially small ones, are moving to group purchasing . With group purchasing , orders
from several buyers are aggregated so that better prices due to larger quantities purchased can be
negotiated.

Acquisition Via Electronic Bartering

Bartering is the exchange of goods or services without the use of money. The basic idea is for a company
to exchange its surplus for something that it needs.

Bartering intermediary can use a manual search-and-match approach or it can create an electronic
bartering exchange. With a bartering exchange , a company submits its surplus to the exchange and
receives points of credit, which the company can then use to buy items that it needs.
The term B2B exchange , or simply exchange , implies the existence of many potential buyers and many
potential sellers in B2B e-marketplaces.
Functions of and Services Provided by Exchanges
Exchanges have the following four major sets of functions:

(1) Matching and connecting buyers and sellers,

(2) facilitating transactions,
(3) Developing and maintaining exchange policies and infrastructure, And
(4) providing services to buyers and sellers.
Exchanges, portals, and directories are usually owned by a third-party operator. Both sellers and buyers
prefer such an arrangement. Alternatively, exchanges may be owned by a few very large sellers or buyers.
This kind of arrangement is referred to as a consortium .
Dynamic pricing refers to the rapid movement of prices over time and possibly across customers.

Stock exchanges are a prime example of dynamic pricing. Another good example of dynamic pricing occurs in
auctions, where prices vary all the time.

The potential gain and risks of B2B

exchanges for buyers and for sellers are
summarized in the right table:
B2B portals are information portals for businesses. They usually include lists of products offered by each
seller, lists of potential buyers and what they want to buy, and other industry or general information.

 Corporate portals - facilitate collaboration with suppliers, customers, employees, and others.
 Customers portals - can use these customer-facing portals to view products and services and to place
orders, which they can later track.
 Employee Portals - are used for training, dissemination of company news and information, discussion
groups, and more.
 Mobile portals - are portals accessible via mobile devices, especially cell phones, smartphones, tablets,
and so forth.
The opportunities of B2B social networking depends on the companies’ goals and the perceived benefits and
risks involved.
E-communities connect employees, partners, customers, and any combination of the three. E-communities
offer a powerful resource for e-businesses to leverage online discussions and interactions in order to maximize
innovation and responsiveness.
Companies that use B2B social networking may experience the following advantages:
• Use the network to advertise to large audiences and create brand awareness.
• Discover new business partners and sales prospects.
• Enhance their ability to learn about new technologies, competitors, customers and the business
environment.
• Generate sales leads via ‘contacts,’ especially on linkedin.com and by tweeting ( twitter.com ), or engaging on
facebook.com .
• Post questions and facilitate discussions on linkedin.com by searching the “Help Center,” asking the community a question
through the “Help Forum,” or by using the posting module on your homepage to ask your network a question.
• Post questions on the question and answer forums on other social networks.
• Improve participation in industry association activities (including lobbying).
• Create buzz about upcoming product releases.
• Drive traffic to their Facebook page and other social sites and engage visitors there (e.g., provide games, prizes,
competitions, etc.).
• Word of mouth also may increase traffic.
• Create social communities to encourage discussions among business partners (e.g., customers and suppliers) about their
products.
• Use social networks, such as facebook.com and linkedin.com to recruit new talent.

Virtual games, or gamification , refer to virtual games designed to support B2B training and decision making. Players
compete against each other and make market predictions.

Virtual trade shows are an application of virtual worlds. A virtual trade show , also known as a virtual trade fair, is the online
analogy of a physical trade show.
Interpersonal influences, such as authority, and the
possibility of group decision making must be considered.

B2B marketing refers to marketing and sales made

by manufacturers and wholesalers along the sell-
side of the supply chain.

Collaboration Networks and Supply Chain Facilities

Collaboration is about the relationships among
organizations. Many companies provide tools that
facilitate collaboration.
Payments for B2B transactions differ from B2C.
While credit cards are used for smaller purchases,
larger purchases are paid for by other methods.
A model of organizational buyer behavior
If you have any question, kindly leave a
comment on the discussion for Module 4.