Prentice Hall, 2002 1 Chapter 7 E-Marketplaces and B2B Exchanges.
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Transcript of Prentice Hall, 2002 1 Chapter 7 E-Marketplaces and B2B Exchanges.
Prentice Hall, 2002 2
Learning Objectives
Define e-marketplaces and exchangesList all types of e-marketplacesDescribe B2B portalsDescribe third-party exchangesExplain dynamic pricing and describe its trading mechanisms
Prentice Hall, 2002 3
Learning Objectives (cont.)
Distinguish between e-procurement and e-selling consortia
Describe the various ownership and revenue modelsDescribe networks of exchanges and exchange management
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Learning Objectives (cont.)
Describe the critical success factors of exchangesDiscuss implementation and development issues of e-marketplaces and exchangesDescribe the extranet and its role in supporting marketplaces and exchanges
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Opening Case:ChemConnect & Covisint
ChemConnect uses a B2C business model where customers look for:
Lowest priceFast shipmentGood return policyHelpful customer service
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ChemConnect & Covisint (cont.)
ChemConnect—world chemical exchangeProvides free membership in trading marketplaces and information portals
Public exchange floor for anonymous bidsCommodities floor for buying and exchangingCorporate trading rooms—private online auctions
Up-to-the-minute market informationLarge electronic catalogIndependent intermediary
Prentice Hall, 2002 7
ChemConnect & Covisint (cont.)
Covisint—e-market of automotive industry
B2B integrated buy-side marketplaceGeneral MotorsFordDaimlerChrysler
Entire industry gainsLower costsEasier business practicesIncreased efficiency
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ChemConnect & Covisint (cont.)
Covisint (cont.)“Co” stands for
ConnectivityCollaborationCommunication
“Vis” stands for visibility provided by the Internet“Int” stands for integrated solutions
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ChemConnect & Covisint (cont.)
Covisint (cont.)Collaborative commerce
Facilitate product designEnable procurement processProvide broad marketplace of buyers and suppliers
Vertical consortia trading exchangeFew large buyersMany sellers (suppliers to the industry)
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B2B E-Marketplacesand Exchanges (cont.)
Dynamic pricingOwnership of exchangesGains and risks of B2B exchange participationGovernance Organization of exchanges
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Information Portals
Thomas registerAlibaba.com
The databaseThe portal’s featuresReverse auctionsServicesLanguagesRevenue model
More on information portals
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Third-Party (Trading) Exchanges
Suitability of third-party exchanges
Fragmented marketsBuyer-concentrated marketsSeller-concentrated markets
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Consortium Trading Exchanges (CTE)
CTE is a subset of third-party exchanges, the 4 types are:
Vertical, purchasing-orientedHorizontal, purchasing-orientedVertical, selling-orientedHorizontal, selling-oriented
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Consortium Trading Exchanges (cont.)
E-Procurement Consortia can be:Vertical purchasing-orientedHorizontal purchasing-orientedVertical selling-oriented
Selling-oriented consortiaLegal challenges for B2B consortiaSignals that may prompt legal scrutiny
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Consortium Trading Exchanges (cont.)
Critical success factors of consortiaSize of industryAbility to drive user adoptionElasticity—measure of incremental spending by buyers as a result of savings generatedStandardization of commodity-like productsManagement of intensive information flowSmoothing inefficiencies in supply chain
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Dynamic Trading:Auctions and Matching
AuctionsPrivate trading rooms—members conduct auctions at the exchangeAuction services may be one of the activitiesExchange may be fully dedicated to auctions
MatchingMarket makers conduct matching supply and demand (e.g., stocks)More complex than auctions because they match:
PricesQuantitiesTimesLocations
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Building and Integrating Marketplaces and Exchanges
Step 1—Think aheadStep 2—PlanningStep 3—System analysis and designStep 4—Building the exchangeStep 5—Testing, installation, and operationStep 6—System evaluation and improvement
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Building and Integrating Marketplaces and Exchanges (cont.)
IntegrationBetween 3rd-party exchange and back-office systems of participantsAcross multiple, incompatible exchanges
External communicationsWeb/client accessData exchangeDirect application integrationShare process
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Building and Integrating Marketplaces and Exchanges (cont.)
Process and information coordination—how to coordinate external communications with internal information systemsExternal process Internal process
Data transformation Exception handling
System and information management—involves management of:Software Hardware
Information components
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Building and Integrating Marketplaces and Exchanges (cont.)
Shopping carts—allow customers to shop at any participating vendor
Buyer maintains order information on its own site in order to integrate it with its internal e-procurement systemSell-side cannot support this capabilityB-cart approach: cart resides on buyer’s PC instead of seller’s siteInteroperable interface between heterogeneous e-marketplaces and e-procurement system
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Figure 7-7The B-Cart
Source: Lim and Lee (2001). Used with permission of Joe K. Lee, Chairman, International Conference on Electronic Commerce.
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Managing Exchanges
Revenue modelsTransaction feesFee for serviceMembership feesAdvertisement fees
Networks of exchangesCentralized managementFinding a CEO and independent management team
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Critical Success Factors
Early liquidityLiquidity refers to volume of business conductedBusiness’s chance of survival is best when liquidity is achieved early
Right ownersPartner with companies that can bring liquidity to the exchangeBest owner may be intermediary that can push both buyers and sellers
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Critical Success Factors (cont.)
Right governanceGood management and fair /effective operations and rules are criticalGovernance provides:
The rules for the exchangeMinimized conflictsDecision making support
Good management induces necessary liquidity
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Critical Success Factors (cont.)
OpennessExchanges must be open to all from:
Organizational point of viewTechnical point of view
Open standards require:Commitment by all involvedUniversal agreement on the standards
Using the wrong standards can hurt the exchange
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Critical Success Factors (cont.)
Full range of servicesParticipants are attracted by an exchange that helps cut costsExchanges team up with banks, logistic services and IT companies to help
Importance of domain expertiseMarket makers need an in-depth understanding of:
The industryBusiness processes inherent in the industryKnowledge of industry structureGovernment and policy stipulations
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Critical Success Factors (cont.)
Targeting inefficient industry processesContribute to increased costs and time delaysVertical exchanges can add value
Targeting right industriesLarge base of transactionsMany fragmented buyers and sellersDifficulties bringing together buyers and sellersHigh vendor and product search/comparison costsStrong pressure to cut expenses
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Critical Success Factors (cont.)
Brand building is criticalIncrease switching costs by adding features and functionalityInvest in:
Gaining brand awarenessAttracting businesses to exchangeCustomer retention
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Critical Success Factors (cont.)
Exploiting economics of scopeValue-added services make exchange compelling
Industry newsExpert adviceDetailed product specification sheets
Adjacent servicesBanks and financial information providersIdentification supported by sophisticated digital certificate architecture
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Critical Success Factors (cont.)
Garner diverse and multiple revenue streams
Software licensingAdvertisingSponsorship
Critical mass of users will garner more value-added services
Auction servicesFinancial servicesBusiness reportingData mining services
Choice of business/revenue models
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Critical Success Factors (cont.)
Blending content, community, and commerce
Content and community perspective—stimulate trafficEC transaction perspective—creates higher level of customer “stickiness”
Managing channel conflictHostile phase as buyers interact directly with sellers (disintermediation of supply chain)Short-term revenues impacted by backlash from existing fulfillment channels result in price erosion affecting medium-term profitability
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B2B Networks and Extranet
The InternetIntranets—intra-business delivery systemsExtranets
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Implementation Issues
Problems with exchangesProblems with public exchanges
Transaction feesCost savingsRecruiting suppliersToo many exchangesSupply chain improvements
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Implementation Issues (cont.)
Problems with private exchangesLack of trustLiquidity is questionable
Software agents in B2B exchangesDisintermediationEvaluating exchanges
Prentice Hall, 2002 40
Managerial Issues
Plan most secure and economical choice for implementationReview current network and find out if it can be replaced by intranets or extranetsParticipate in which exchange?Determine in which exchange to participate