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B2B E-Commerce: Business Models and Revenue Generating Activities

Randall D. Harris Department of Management, Operations & Marketing California State University, Stanislaus 801 W. Monte Vista Avenue Turlock, CA 95382 Phone: (209) 667-3723 Fax: (209) 667-3210 E-mail: raharris@toto.csustan.edu

September 2000

Running Head: B2B E-Commerce

B2B E-Commerce

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B2B E-Commerce: Business Models and Revenue Generating Activities

Abstract The connectivity offered by the Internet has opened up the possibility of frictionless interaction between businesses. This article reviews the current state of the art in business to business (B2B) electronic commerce business models. Transactions on these B2B platforms take a variety of forms, and this article also reviews the current transaction platforms for these activities. The article concludes with a review of current revenue generating activities that occur on B2B websites.

B2B E-Commerce B2B E-Commerce: Business Models and Revenue Generating Activities

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Business to business (B2B) transactions over the Internet have risen sharply. From the $100+ billion level in 1999, B2B E-commerce transactions are anticipated to top $1.3 trillion by 2003 (Weller, 2000). One reason for this explosive growth is that the Internet infrastructure represents a common platform for all business, and the foundation for this common infrastructure is largely in place (Phillips & Meeker, 2000). The result for business has not necessarily been a smooth transition. The potential for the global economy to be streamlined, disintermediated and then reintermediated (Austrian, et. al., 2000) has placed a tremendous strain on established business practices. “While the common belief was that the Internet would do away with many intermediaries, the exact opposite is occurring, as a new crop of intermediaries is emerging” (Weller, 2000, p. 4). A number of arguments have been articulated to justify the shift to an electronically intermediated model of business. The first is operational efficiency for the business (Trepp, 2000). Several analysts have argued that the reduced transactions costs and improved operational efficiencies alone justify the move to electronically mediated transactions (Lessons from the Past, 1999; Austrian, et. al., 2000; Weller, 2000). While study of the impact on transactions cost is ongoing, one study has reported large reductions in the time that organizational members must spend to complete a typical procurement transaction (Gebauer & Buxman, 2000). The next is information liquidity (Teflian, 1999). Although it is difficult to identify and quantitatively measure, one analyst argues that information is the currency of the new economy. Teflian (1999) identifies information liquidity as the ability to acquire, understand and make use of information when it is needed, where it is needed and in the appropriate context of content and

B2B E-Commerce meaning (p.1). While difficult to measure, Teflian (1999) argues that the increased information liquidity of transactions on the Internet increases value tremendously on both sides of a transaction. In support of this argument, analysts have pointed out that the increased transparency of electronically mediated transactions has in some cases dramatically reduced procurement costs for buyers (Phillips & Meeker, 2000). Finally, there is the possibility of network effects (Trepp, 2000). Given the explosive

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growth of B2B transactions on the Internet, the distinct possibility of several dominant players in the B2B transaction space looms. Given such a scenario, it is quite likely that these major market makers could exploit the B2B space as the technology becomes more widely adopted. Following Metcalfe’s Law (Trepp, 2000; Austrian, et. al., 2000) the utility of a network is the square of the number of participants. “Simply stated, any business that does not eventually join in will cut itself off from the network, and will over...
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