Free Market Online Case Analysis

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FreeMarkets Online
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Introduction of the company
It was Glen Meakem who founded FreeMarkets in Pittsburgh, Pennsylvania in 1995. He always has been attracted by the entrepreneurial adventure. After he finished his degree he get a job in a consulting firm named McKinsey & Co he was specialized in industrial sourcing and commodities trading. There he discovered that it was really difficult for companies to “identify truly high quality suppliers while also established fair market price”. Then, Meakem moved to fortune 500 company as manager of the corporate Business department group. There he experienced the concept of negotiation by “silent auctions”: All the suppliers for a same product gathered together in an Hotel Ball room and set up the price by putting their bid on a flip chart. This experience sparked the idea of FreeMarket online in Meakem’s mind. He decided to launch a startup that would run the inefficient and costly process of the company/supplier partnership over the Internet. Meakem believed there were many reason a buyer would find value this kind of auctions: 0 Many supply industries are fragmented. For example, in the $20 billion U.S. market for injection molded plastic parts, there are 3,000 suppliers.

1 In some industries the productivity variance between different suppliers extremely variable. In some cases suppliers are 80 to 100% more productive than others.

2 Given the problem of fragmentation and production variation, buyers are left with an information problem – too many potential alternatives and no good way to sort them out. Buyers must rely on the biased information from supplier representatives to educate them about the markets.

He started to develop his concept in the company he worked but he quickly figured out that some important groundwork had to be plan and it would be better if he did it by is own. Thus he decided to leave the company and moved to his basement in...
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