Semester A 2022/23 Lecture 4:

B2B E-Commerce
 The utility that the product/service has to
offer to customers
◦ Why do customers need our product/service?
◦ What problems will our product/service solve?
◦ Why would customers choose our product/service
over our competitor’s product/service?
 Newness, performance, design, brand/status,
price, cost reduction, risk reduction,
convenience
 E-tailer
 Community provider/social network
 Content provider
 Portal
 Transaction broker
 Market creator
 Service provider
 The way a firm generates income
◦ One-time transaction revenues
◦ Recurring revenues
 Common types:
◦ Sales
◦ Transaction fees
◦ Subscription fees
◦ Advertising fees
◦ Affiliate fees
◦ Licensing fees
 Online version of traditional retailer
 Revenue model: Sales
 Variations:
◦ Virtual merchant
◦ Bricks-and-clicks
◦ Catalog merchant
◦ Manufacturer-direct
 Low barriers to entry
 Online environment where people with similar
interests can transact, share content, and
communicate
◦ e.g., Facebook, LinkedIn, Twitter, Pinterest
 Revenue models:
◦ Typically hybrid, combining advertising,
subscriptions, sales, transaction fees, affiliate fees
 Digital content on the Web
◦ News, music, video, text, artwork
 Revenue models:
◦ Subscription; pay per download (micropayment);
advertising; affiliate referral
 Search + package of content and services
 Revenue models:
◦ Advertising, referral fees
 Process online transactions for consumers
◦ Saving time and money
 Revenue model:
◦ Transaction fees
 Industries using this model:
◦ Financial services
◦ Travel services
◦ Job placement services
 Create digital environment where buyers and
sellers can meet and transact
◦ e.g., Priceline, eBay
 Revenue model: Transaction fees
 Online services
◦ e.g., Google—Google Maps, Gmail, etc.
 Value proposition
◦ Valuable, convenient, time-saving, low-cost
alternatives to traditional service providers
 Revenue models:
◦ Sales of services, subscription fees, advertising,
sales of marketing data
 Intense competition among online providers
 Price competition difficult
 Industry consolidation
 Industry impacted by meta-search engines
◦ Commoditize online travel
 Mobile apps transforming industry
 Increasing influence of social media content
and reviews
 Online Group Buying
 Personalized Event Shopping
◦ event shopping
A B2C model in which sales are done to meet
the needs of special events (e.g., a wedding,
Black Friday).
 Private shopping club
A members-only shopping club, where
members can buy goods at large discounts
 Major service industry groups:
◦ Finance
◦ Insurance
◦ Real estate
◦ Travel
◦ Professional services—legal, accounting
◦ Business services—consulting, advertising,
marketing
◦ Health services
◦ Educational services
 Describe supply chains and
interorganizational business processes
 Define B2B e-commerce
 Describe major types of B2B e-commerce
 A supply chain is a collection of companies
and processes moving a product:
◦ From suppliers of raw materials to
◦ suppliers of intermediate components, to
◦ final production,
◦ to the customer
 Upstream—flow from sources of raw
materials and components
 Downstream—flow to customers
 Suppliers have their own supply chain
◦ A better name: supply network
Simple Traditional Supply Chain

Supplier Manufacturer Distributor Retailer Customer

Supply chain: The flow of materials,

information, money, and services from raw
material suppliers through factories and
warehouses to the end customers

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 Upstream Internal Downstream

2nd Tier Distribution

Suppliers Centers
1st Tier
Assembly/
2nd Tier Suppliers
Manufacturing
Suppliers and
Packaging Retailers
1st Tier
2nd Tier Suppliers
Suppliers

Customers

Key: Information Flow

Physical/ Material Flow
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 B2B involves exchanges between two or more
businesses
◦ B2B does not include end customers (consumers)
◦ Transactions in supply networks
 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
 B2B EC Characteristics
◦ Parties to the transaction
 Buyers
 Sellers
 Online intermediaries
 Types of B2B transactions
 Spot buying
 Strategic sourcing
 Types of materials
◦ Direct materials
 Replenishment purchasing (contract purchasing)
 Spot purchasing
◦ Indirect materials
◦ MRO (maintenance, repairs, and operations)
◦ 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 types of industries
(e.g., office supplies, PCs)
 Corporate portal
A major gateway through which employees,
business partners, and the public can enter a
corporate website
 Examples
 Types of Corporate Portals
 Portals for Suppliers and Other Partners
 Customer Portals
 Employee Portals
 Executive and Supervisor Portals
 mobile portals
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 Portals—access points for business partners.
 Customer Portals / Sell-side e-marketplaces
◦ Single supplier and multiple buyers
◦ MyBoeingFleet, Dell, ….
 Supplier Portals / Buy-side e-marketplaces
◦ Used for procurement
◦ Single buyer and multiple suppliers
◦ HP Supplier Portal
 B2B Marketplaces / B2B exchanges
◦ Operated by third-party vendors
◦ Allow many buyers and many suppliers to interact
◦ Some operate within a vertical market (industry-
specific); for example:
 steellink.com
 paperindex.com
 fibre2fashion.com
◦ Some are not
industry-specific
 Alibaba.com
 Matching buyers and sellers
 Facilitating transactions
 Maintaining exchange policies and
infrastructure
 Different models for different transactions
◦ Highly-specialized purchases: traditional bilateral
relationship between buyers and sellers
 Customization, trust,
 Trend: global sourcing

◦ Commodity: online exchange/electronic auctions

 Liquidity, transparency, price
 B2B version of Amazon’s ecommerce
platform
 Benefits to customers:
◦ Multiple users on one account
◦ Additional payment and credit options
◦ Low prices
◦ Wide selection
◦ Fast delivery
 Benefits to sellers:
◦ Sellers can sell to both businesses and consumers
from the same place, but have the flexibility to
provide different products, content, and pricing to
business buyers.
◦ Sellers can sell large quantities at discounted
prices, provide business-focused product
information, and set up recurring orders.
 B2B-friendly features :
◦ Business-only prices and quantity discounts
◦ Multi-user accounts with a purchase approval
process
◦ Detailed reporting and the ability to connect
purchasing systems
◦ Business purchasing cards, invoice payment terms
and buying on credit
 Sellers
One Many

Reverse
Negotiation,
auctions,
One

Bartering,
RFQ,
Bargaining
Tendering
Buyers

Forward
Dynamic
Many

(regular)
exchange
auctions
 Auction: Market mechanism by which buyers
make bids and sellers place offers
◦ Characterized by the competitive and dynamic
nature by which the final price is reached

 Electronic auctions (e-auctions): Auctions

conducted online
 Using negotiation, bargaining or bartering

 Resulting price is based on each party’s

bargaining power, supply and demand in the
item’s market and business environment
factors
 Forward Auction:
◦ An auction in which a seller offers a product to
many potential buyers

 Seller entertains bids from multiple buyers

 Reverse auction (tendering or bidding)
◦ Buyer places an item for bid (tender) on a request
for quote (RFQ) system,
◦ Potential suppliers bid on the job, with price
reducing sequentially
◦ The lowest bid wins

◦ Used mainly in B2B and G2B e-commerce

 Buyers and their bidding prices are matched
with sellers and their asking prices based on
the quantities on both sides and the dynamic
interaction between the buyers and sellers

◦ Stocks
◦ Commodities
Strengths Weaknesses
• What advantages does your • What could you improve?
organization have? • Morale, leadership…
• What do you do better than anyone • What are people in your market likely
else? to see as weaknesses?
• What unique or lowest-cost resources • Reputation, accreditation,…
can you draw upon that others can't? • What factors cause you to lose sales?
• What do people in your market see as • Supply chain, capabilities,…
your strengths? • Are your competitors doing any
• What is your value proposition? better than you?
Opportunities Threats
• What good opportunities can you • What obstacles do you face?
spot? • Political, legislative, employment
• What interesting trends are you aware market, economy…
of? • What are your competitors doing?
• Changes in technology and markets • Is changing technology threatening
• Changes in government policy your position?
• Changes in social patterns, • How are you vital partners doing,…
population profiles, lifestyle
changes,…

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