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Information management (Business to Business (B2B) e-Business)

Updated on May 26, 2011

Business to Business (B2B) e-Business

Business to Business (B2B) e-Business
Business to Business (B2B) e-Business | Source

Business to Business (B2B) e-Business

Business to Business (B2B) e-Business

     Business-to-business refers to a wide number of inter-firm transactions, containing wholesale business in addition to firm purchases of services, resources, technology, manufactured parts and elements, and capital tools (Blanshay, 2002). Business-to-business also contains several kinds of financial dealings between firms, such as reinsurance, commercial credit and electronic networks for trading bonds, securities and other financial assets. Business-to-business dealings exclude those engaging families, such as retail sales, inter-consumer exchange, and employment. (Blanshay, 2002)

     Firms in Business-to-business e-commerce present innovative economic dealings. Acting as intermediaries, several Business-to-business firms offer to intend innovative dealings between a firm and its several suppliers; that is, they reorder supply chains (Sadeh, 2005). For instance, some Business-to-business organizations offer centralized online auctions. Such centralized marketplaces are designed to replace decentralized marketplaces in which purchasers and venders search for each other and involve in bilateral compromise. Centralized marketplaces make efficiencies by decreasing search expenses, enabling purchasers and venders to encounter each other through the central exchange. When there are several purchasers and venders, centralized marketplaces also can decrease time expenses by restoring bilateral compromise with proper bidding mechanisms and knowledge about transaction prices. (Blanshay, 2002)

     Furthermore, by partly supplanting the procurement function of purchasers and the sales function of suppliers, Business-to-business intermediaries influence firm decisions about procurement and inter-company transfers of products and services (Blanshay, 2002). Firms may select to rely more on outside intermediaries for procurement and sales actions, and less on inside buying and sales staff. Also, firms can rearrange organizational procedures for distributing and manufacturing intermediate products and services, at times referred to as value chains, by implementing Internet technology to the administration of inside operations. (Haig, 2004)

     Business to Business e-commerce is directed toward improving transaction inefficiencies in the supply chain. firms in production, mining, building, transportation, public utilities, and other segments all purchase from and sell to other companies (Haig, 2004). There is significant inter-company exchange in the economic sector as well, in such areas as securities trading, investment banking and reinsurance. Such transactions use significant efforts engaging marketing and sales, buying, financing, technology procurement, and accounting. (Haig, 2004)

     E-commerce pledges to decrease the costs of inter-business dealings by automating several individual steps in the procurement procedure. Usually, inter-business dealings begin with a firm assessing the input buying needed to perform its business policies or a provider looking for purchaser for its products and services (Sadeh, 2005). Next, purchasers search for providers, via advertising, trade exhibitions, brokers, and dealers. Purchasers then discuss with possible venders about product specifications and rates, and perhaps end a spot dealing or form a lasting agreement. After the contract has been reached, the transaction itself still engages ordering, billing, arrangements for transportation, verification of payments, and acceptance of supply. (Sadeh, 2005)

     E-commerce innovations purpose to decrease the expense of procurement before, during and after the deal. Before the deal, Internet technology may decrease the cost of searching for providers or purchasers and making price and product evaluations. The Business to Business intermediary coordinates the actions of purchasers and venders by acting as a central meeting place, therefore, decreasing search expenses. Search expenditures can be considerable relative to the value of the product, specifically for small dealings. Alf Sherk, the owner of e-Chemicals, argues that “When you are trade with one or two drum quantities, the expenses of contract shopping can be more than the value of the product” (Samtani, 2004). Intermediaries decrease search expenses by consolidating marketplaces, giving a variety of products and services that provides purchasers the cost efficiency of one-stop shopping. (Haig, 2004)

     Online intermediaries’ additional lower search expenses by giving information. By only giving a full list of possible providers of specialized goods, the intermediary can considerably decrease search expenses for a purchaser (Raisch, 2002). Second, costs can be decreased by giving catalogs of product information from various providers, allowing easy product contrasts, rather than requiring the purchaser to use up expensive time to contact the providers for the information. Third, intermediaries can give price data for each goods. The intermediary may even give dynamic pricing mechanisms, such as auctions or automated cooperation regulations, which cause rates to react rapidly to differences in need and supply. (Raisch¸ 2002)

     Moreover, Business to Business e-commerce efforts to make marketplaces that will replace intra-company transfers of products and services (William, 2004). Vertically incorporated companies involve in considerable internal sales and procurement actions. Business to Business e-commerce can allow outsourcing of the administration of these inside and outside dealings; that is, specialized intermediaries may manage several of these dealings. For firms that buy externally, these intermediaries would alternate for several of the activities of firm buying departments (Samtani, 2004). Vertically incorporated firms might rearrange to outsource manufacture of products and services that were formerly produced internally, and again rely on intermediaries to support with procurement. The end consequence would be a basic change in the way that businesses transact with each other in addition to the way in which businesses are planned. (Samtani, 2004)

     Such innovations in financial dealings depend on advances in computer networking technology that considerably decrease the expenses of data interaction. The Internet and its related hardware and software technologies can lower the expenses of interacting data, both data communication between firms and within companies (Smith, 2003). Although advances in computer networking technology offer the impetus, advances in Internet business depend on innovations in the method that dealings are organized. Lowering dealing expenses often entails intend of novel types of dealings. For instance, the oil firms BPAmoco, Royal Dutch/Shell Group and Totalfina Elf Group along with economic services firms Deutsche Bank, Goldman Sachs, Morgan Stanley Dean Witter and Societé Generale have declared a modern electronic market for over-the-counter energy, metal, and other goods called the Global Exchange, that will reinstate dealings that were largely carried out by telephone (Samtani, 2004). The International Exchange marketplace will have numerous novel aspects containing the provision of information to traders about their counterparties, such as their credit worth, and knowledge about market aggregates. (Haig, 2004)

     Internet trade presents several of the advantages of electronic data interchange without its high expenses. Like electronic data interchange, Internet commerce presents the advantages of speed and correctness (Sadeh, 2005). By connecting their computers, firms can interact without the expenses of translating computer files into paper documents, a procedure that involves mistakes, delay and expensive clerical staff. Electronic data interchange given these advantages years ago for some firms, but expenses were comparatively high because electronic data interchange engages proprietary software and point-to-point interactions. By comparison, Internet technology usually engages open standards on an international network. In order to add a new provider to their electronic data interchange buying system, for instance, a company would have to set up a new network connection with that provider, and have new software installed on that provider’s computer systems (Smith, 2003). By comparison, Internet-based electronic buying links can be much less expensive to establish, since they engage hardware links that the firm is probably previously using for other aims, and can likely be established employing off-the-shelf software rather than customized proprietary solutions. Regardless of the relative benefits of Internet commerce, the installed base of electronic data interchange links will likely coexist with the Internet for some years into the upcoming years. (Smith, 2003)

     After the deal, electronic commerce may enable firms to interact at very little cost to verify delivery and to observe contractual performance. Additionally, firms will more readily be capable to employ the information made by the deal to update their inventory and accounting records. Firms can automatically connect their transactions to software used for supply chain administration, enterprise resource planning, and last client sales. (Sadeh, 2005)

     A major technology anticipated to help business to business e-commerce is the application of Extensible Markup Language. The language is a refinement of the Standard Generalized Markup Language, which is a language utilized to describe languages (Sadeh, 2005). The Extensible Markup Language enables documents to be treated as information, so that computers can exchange information more successfully, thus aiding the automation of data exchange between firms. Standardized Extensible Markup Language data-description tags are being evolved for various market applications, in order to capture the forms of information that are most significant in each market (sizes, rates, material qualities, colors, delivery ways, etc.) (William, 2004). If the standards are usually implemented, this will facilitate producers, providers and distributors to exchange commercial data without making customized formats for each partner. Hypertext Markup Language speeded the growth of Internet websites by establishing a standard format for documents that enables users to use a standard browser to view styled text, graphics, and hyperlinks to other Web pages. The Extensible Markup Language standard promises same benefits for exchange of data between companies, containing data on sales, inventory, manufacturing, payments and transportation. (William, 2004)

     Using Extensible Markup Language, an individual can get and analyze information attained on the Internet without the want to go back to the host server on which the information is stored, therefore vastly speeding up interaction and making more competent employ of scarce server ability and decreasing Internet traffic (Sadeh, 2005). For instance, a user can get data from a travel agency about flights on a given day and then evaluate airfares and itineraries without depending on data processing by the travel agency’s server. Because of its flexibility, Extensible Markup Language should enable each business to establish simple norms for the exchange of information and the implementation of commercial dealings. (Sadeh, 2005)

     In conclusion, the massive growth forecasts for B2B e-commerce must meet the truths of rearranging industry. It is clear that advancements in computers and interactions hold great promise for decreasing transaction expenses between companies. Furthermore, some of the several innovative suggestions for market reform by intermediaries and market makers should facilitate to decrease the expenditures of search, contracting, and observing performance in market for inputs. On the other hand, it will take time to apply the considerable changes in the merchant works of companies that are required to understand these cost savings. Furthermore, some of these savings are to be obtained not simply by altering market transactions but by altering the make-or-purchase decisions of firms. As a consequence, the advantages of lower transaction expenses might not be obtained without considerable changes in the production activities of firms through outsourcing and growth of external providers. Eventually, allocating inter-firm transactions through electronic intermediaries will need enhanced infrastructure for transportation and logistical harmonization.


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