The rapid growth of internet related technologies over the last decade has made many companies resognise the potential benefits of the internet as a new source of B2B trade. This has lead to the establishment of new ‘virtual intermediaries’ that trade products/services between businesses. These intermediaries are represented on the internet as complex web-sites, commonly referred to as ‘marketsites’ they provide buyers and sellers with a place to exchange products and services (Baratt, 2001).
The relative success of these marketsites has been down to the ability of these new intermediaries to offer increased visibility in terms of product information availability and price The principle objective of all marketsites is to drive out the inefficiencies within the industry. Kalin (2000) estimated that by the end of 2003 the removal of these inefficiencies will benefit marketsite participants with savings up to $60bn Buyers and Suppliers Both buyers and sellers have seen the potential benefits that these ‘virtual intermediaries’ have to offer.
However the motivation to join such a market place could not be more different. Whilst buyers tend to focus on the cost savings and improved processes, servers are often more concerned with expanding the market they were in. Buyer Benefits Access to multiple Suppliers – Buyers are given access to a global market, this gives them instant access to multiple suppliers around the world Easier comparison of supplier products – the WWW and internet technologies have improved search capabilities, using navigator sites makes it easier to compare and select the right product/service.
Lower prices through aggregate buying – this allows multiple buyers to aggregate their spending, thus reducing the price through purchasing larger quantities. Decreased inventory levels – Manufacturers have instant access to all the raw materials. This allows for a reduction in inventory levels thus lowering working capital requirements Supplier Benefits On-line presence – marketsites gives smaller firms an introduction to e-commerce without high investment Access to broad markets – gives suppliers access to a wider range of buyers
Disintermediation – marketsites remove the need for a middle man thus giving supplier the choice of a higher profit margin or the ability to offer lower prices. Better forecast ability – as demand is real on the marketsite, it offers supplier up to the minute forecast ability Classification of B2B Marketsites With this new industry still at a relatively early phase of its development, there is a clear need to classify the electronic marketsites in order to gain a deeper understanding of these new businesses Vertical B2B Marketsites
The main factor of a Vertical marketsite is that it only operates within one specific industry, which means that both buyers and sellers come from the same industry to exchange “known” products (for example, e-Steel–bringing together buyers and sellers in the steel industry). Such marketsites are often very specialised in terms of products, and a deep knowledge about the products and how the industry operates, is vital to the success of these marketsites. Horizontal marketsites Horizontal marketsites are categorised as operating with cross-industry buyers.
Typical horizontal marketsite’s sell non-production-related products to a wide range of buyers. Since non-production related goods are different in each industry, these marketsites must also have suppliers from different industries. The products on these sites are, however, often standardised products. Centricity “Centricity” is a terminology used to actually describe where the power resides between buyers and sellers of the marketsite, as well as how many buyers and sellers the marketsite has.
Centricity also refers to those who set up, own and control the marketsite, and often reflects the existing power structure within the industry. Since the buyers set up these marketsites, they tend to start out with the buyers and their existing suppliers as members. Most of these buyer-centric marketsites involve partnerships between several buyers, and in some cases even between the fiercest competitors. An example of this type of marketsite is “Covisint”–the automobile exchange set up by Ford, GM, and Chrysler