The B2B Market Place: A Review and a Typology

The B2B Market Place: A Review and a Typology

George Mangalaraj (Western Illinois University, USA) and Chandra S. Amaravadi (Western Illinois University, USA)
DOI: 10.4018/978-1-4666-9787-4.ch064
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Abstract

In the E-commerce literature different types of Electronic Marketplace (EM) strategies have been articulated. EM strategies vary from public exchanges to private extranets and from auction sites to sites providing just information. This article builds on the earlier work of the authors in classifying the B2B e-marketplace strategies into five dominant strategies using two dimensions: relationship and product's level of value addition. In this chapter authors further extend the strategies to incorporate findings from recent research in terms of the B2B e-marketplace classifications and also on the individual strategies outlined earlier. We present illustrative examples that reflect recent developments in the B2B e-marketplace arena.
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Introduction

Business-to-Business ecommerce has been in existence ever since GM introduced Electronic Data Interchange in the 1980’s as a technology to do business with its suppliers (Premkumar, 2003). The introduction of the worldwide web has spurred the growth of B2B e-commerce. The arena in which B2B commerce takes place is called an Electronic Marketplace (EM). B2B is a more significant component of e-commerce than B2C and correspondingly of more interest. While there are different perspectives of interest in this area, such as technological innovations, information visibility etc., and this research focuses on EM strategies or approaches by B2B companies towards E-commerce business. These strategies they follow revolve around various dimensions such as industry focus, market mechanisms, product, relationship etc. Existing research on B2B electronic marketplace has provided various classifications of these marketplaces. In our earlier paper, we reviewed this literature and provided a parsimonious framework for classifying the marketplace strategies (Mangalaraj & Amaravadi, 2010). In this chapter we further examine the proposed framework and discuss developments since then.

The volatility of B2B companies underscores the need for such study. During our earlier research we reviewed a directory of 75 B2B companies that was developed by the American University in 2000 (Management of Global Information Technology, 2000). Of the 75 listed businesses in 2010 only 37 were functional. In 2015, when we further reviewed the directory, we found only 21 were still in existence to provide B2B services. The immense mortality of these B2B marketplaces itself warrants closer examination of the strategies used by B2B organizations. There must be a framework for practitioners to identify successful B2B strategies and to position their organizations effectively within the full range of strategies (Chatterjee & Ravichandran, 2004). The topic is thus of importance to IS researchers.

Over the years, there is a growing body of research in classifying the B2B marketplace strategies. Malone, Yates, and Benjamin (1987) who developed theirs based on research of others is one of the earliest of such classifications. According to them, there are two forces controlling the flow of products and services in an economy: markets which regulate flow of goods through supply and demand and hierarchies or managerial structures that regulate steps of the value chain (i.e. production decisions are internal). Their hypothesis is that products supplied by markets are cheaper (because markets are efficient), but have higher co-ordination costs (due to large number of sellers) while the case is reversed for hierarchies i.e. production costs will be higher (due to a lack of scale economies) but co-ordination costs will be lower (because of internal or captive supplier). Based on this framework, they successfully predicted the proliferation of electronic markets. In their words, “Some firms will be able to benefit directly from this shift by becoming “market makers” for the new electronic markets.” Moreover, developments in information technologies also allowed organizations to take a middle path wherein they deal with fewer number of stable suppliers through outsourcing contracts due to the reduced transaction costs, coordination costs, and operations risk (Clemons, Reddi, & Row, 1993). In this “move to the middle” space where logic and modalities of markets and hierarchies intermingle and all in one electronic markets help in resolving the various conflicts that arise in the middle space (Koch & Schultze, 2011).

Over the years, additional frameworks have been proposed. This research reviews existing classifications of B2B/Electronic marketplaces and synthesizes a typology that can be used for selecting a suitable B2B strategy. The result is a strategic grid that organizations can utilize to select a particular strategy based on their unique requirement.

Key Terms in this Chapter

Electronic Market Place: Place where industrial buyers and sellers conduct transaction by electronic means. There is no restriction here on buyer-seller cardinality i.e. there can be one buyer and multiple sellers, one seller and multiple buyers etc.

Supply Chain: Refers to the suppliers for a given organizations.

Exchange: Exchange is a specialized version of an Electronic Market Place where the number of buyers and sellers is large.

EM Strategy: Refers to the specific approach taken by an e-commerce business in terms of products, markets, infrastructure etc.

Market Mechanism: Is the method used to determine pricing. It could be auction, reverse auction, fixed pricing, etc.

Operational inputs: Refers to raw materials.

MRO: Maintenance, Repair and Operational inputs – used to characterize the “product” dimension.

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