Chapter 5

B2B Exchanges, Directories,

and Other Support Services

© 2008 Pearson Prentice Hall, Electronic Commerce 2008, Efraim Turban, et al.
Learning Objectives

1. Define exchanges and describe their

major types.
2. Describe the various ownership and
revenue models of exchanges.
3. Describe B2B portals.
4. Describe third-party exchanges.
5. Distinguish between purchasing
(procurement) and selling consortia.
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Learning Objectives
6. Define dynamic trading and describe B2B
auctions.
7. Describe partner relationship management
(PRM).
8. Discuss integration issues of e-marketplaces
and exchanges.
9. Discuss B2B networks.
10. Discuss issues in managing exchanges,
including the critical success factors of
exchanges.

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business-to-business (B2B)

 business-to-business (B2B)
E-commerce model in which all of the
participants are businesses or other
organizations.

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B2B Electronic Exchanges—
An Overview
 Public e-marketplace (public exchange)
A many-to-many e-marketplace. Trading venues
open to all interested parties (sellers and
buyers); usually run by third parties. Some are
also known as trading exchanges

 Market Maker:
The third party that operates an exchange (and
in many cases, also owns the exchange)

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B2B Electronic Exchanges—
An Overview
 Vertical exchange.
An exchange whose members are in one
industry or industry segment. It trades only
in materials/services unique for that industry
 Horizontal exchange.
An exchange that Produce materials used by
companies in different industries

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B2B Electronic Exchanges—
An Overview
 Dynamic pricing
A rapid movement of prices over time and
possibly across customers, as a result of
supply and demand matching

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B2B Electronic Exchanges—
An Overview
 The typical process that results in dynamic pricing in
most exchanges:
1. A company posts a bid to buy a product or an offer to sell
one
2. An auction (forward or reverse) is activated
3. Buyers and sellers can see the bids and offers that usually
remain anonymous
4. Buyers and sellers interact with bids and offers in real time
Sometimes group purchasing is used to obtain a volume
discount price
5. A deal is struck when there is an exact match between a
buyer and a seller on price, volume, and other variables,
such as location or quality
6. The deal is confirmed, and payment and delivery are
arranged

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B2B Electronic Exchanges—
An Overview
 Functions of Exchanges
 Matching buyers and sellers
 Facilitating transactions
 Maintaining exchange policies and infrastructure

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B2B Electronic Exchanges—
An Overview
 Ownership of Exchanges
 One company, usually an industry giant
 A neutral entrepreneur
 The consortium (or co-op)
 Governance and Organization
 Membership
 Site access and security
 Services provided by exchanges

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B2B Electronic Exchanges—
An Overview
 Advantages of Exchanges
 Making markets more efficient, providing
opportunities for sellers and buyers to find new
business partners
 Cutting the administrative costs of ordering
MROs
 Expediting trading processes
 Facilitating global trade
 Creating communities of informed buyers and
sellers

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B2B Electronic Exchanges—
An Overview

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B2B Electronic Exchanges—
An Overview

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B2B Electronic Exchanges—
An Overview
 Revenue Models:
Description of how the company or an EC project
will earn revenue.
􀁺The major revenue models are:
Transaction fees
Fee for service
Membership fees
Advertising fees
Sales
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B2B Portals and Directories
with the growing use of internet ,many organization
encounter information overload. Finding relevant and
accurate information is often time-consuming and
requires access to multiple system. One solution to this
problem is to use portals
A Portal :
Is an information gateway. It attempts to address
information overload through an internet based
environment to search and access relevant information
from separate IT system

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B2B Portals and Directories

 B2B portals:
Information portals for businesses

 vertical Portals:
B2B portals that focus on a single industry
or industry segment;

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B2B Portals and Directories

 Directory Services and Search Engines

 Directory services: can help buyers and sellers
manage the task of finding specialized products,
services, and potential partners.

 Specialized search engines : are becoming a

necessity in many industries due to the huge
amount of information.

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Third-Party
and Directory Exchanges
 Third-party exchanges are characterized
by two contradicting properties

 They are neutral because they do not favor

either sellers or buyers
 They do not have a built-in constituency of
sellers or buyers, they sometimes have a
problem attracting enough buyers and sellers to
attain financial viability

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Third-Party
and Directory Exchanges
 Market liquidity
The degree to which something can be
bought or sold in a marketplace without
significantly affecting its price.

It is determined by the number of buyers

and sellers in the market and the transaction
volume

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Consortium Trading Exchanges

 Consortium trading exchange (CTE)

An exchange formed and operated by a group of
major companies in an industry to (provide industry-
wide transaction services)

 Markets operate in three basic types of

environments:
 Fragmented markets
 Seller-concentrated markets
 Buyer-concentrated markets
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Consortium Trading Exchanges

 Legal Issues for Consortia

 Legal challenges for B2B consortia
 Critical success factors for consortia
 Appropriate business and revenue models
 Size of the industry
 Ability to drive user adoption
 Elasticity
 Standardization of commodity-like products
 Management of intensive information flow
 Smoothing of supply chain inefficiencies
 Harmonized shared objectives

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Consortium Trading Exchanges

 elasticity
The measure of the incremental spending
(demand) by buyers as a result of price
changing

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Dynamic Trading:
Matching and Auctions
 Matching
 The matching process may be more complex
than buying and selling in regular auctions due
to the need to match both prices and quantities,
and many cases, quality, delivery times, and
locations
 Auctions
 An exchange may offer auction services as one
of its many activities

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Dynamic Trading:
Matching and Auctions

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Partner and Supplier
Relationship Management
 Partner relationship management (PRM)
Business strategy that focuses on providing
comprehensive quality service to business partners
 Supplier relationship management (SRM)
A comprehensive approach to managing an
enterprise’s interactions with the organizations
that supply the goods and services it uses

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Partner and Supplier
Relationship Management
 E-Communities and PRM
 B2B applications involve many participants: buyers
and sellers, service providers, industry associations,
and others, which creates a community
 E-communities connect personnel, partners,
customers, and any combination of the three.
 E-communities offer a powerful resource for e-
businesses to leverage online discussions and
interaction in order to maximize innovation and
responsiveness

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Building and Integrating
E-Marketplaces and Exchanges

 The Integration Issues of e-

marketplaces and exchanges
 External communications
Web/client access
Data exchange
Direct application integration
Shared procedures

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Building and Integrating
E-Marketplaces and Exchanges

 The Integration Issue of e-

marketplaces and exchanges
 Process and information coordination in
integration
 Use of Web services in integration
 System and information management in
integration

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B2B Networks
 Company-Centered (Private) Networks
 Provide the infrastructure for e-marketplaces
 Allow suppliers to communicate effectively and efficiently with
sub-suppliers along several tiers
 Increase the visibility of buyers, sellers, and other partners
along the supply chain and around the globe
 Operate on a large scale
 Foster collaboration and closer relationships among business
partners
 Enable industry-wide resource planning
 Provide support services, especially financial ones for the
benefit of trading partners
 Provide insurance, financial derivatives, and so on to reduce
risks in certain markets

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B2B Networks

 Public Industrywide (Vertical)

Networks
 Transindustry And Global Networks
 Networks of exchanges (E2E)
 Global networks

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Other B2B Implementation Issues

 Private Marketplaces versus Public

Exchanges
 private marketplaces
E-marketplaces that are owned and
operated by one company. Also known as
company-centric marketplaces

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Other B2B Implementation Issues

 Problems with Public Exchanges

 Transaction fees
 Sharing information
 Cost savings
 Recruiting suppliers
 Too many exchanges

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Other B2B Implementation Issues

 Software Agents in B2B Exchanges

 Software agents provide an efficient
infrastructure to provide real-time, tighter
integration between buyers and sellers and
to facilitate management of multiple trading
partners and their transactions across
multiple virtual industry exchanges

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Managing and the
Future of Exchanges
 Evaluating Exchanges
 Centralized Management
 Critical Success Factors for
Exchanges
1. Early liquidity
2. The right owners
3. The right governance
4. Openness
5. A full range of services

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Managing and the
Future of Exchanges
 Critical success factors for exchanges
 Importance of domain expertise
 Targeting inefficient industry processes
 Targeting the right industries
 Brand building
 Exploiting economies of scope
 Choice of business/revenue models
 Blending content, community, and commerce
 Managing channel conflict
 Maximize the benefits for all participants
 Other factors

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