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Concepts, characteristics, and models of B2B and sales from catalogs Research Paper

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Updated: Jan 20th, 2020

Abstract

Firms have recognized the ability of B2B e-commerce to act as a hub by connecting businesses in an electronic marketplace. This has led to an increment in the number of firms doing their business operations in electronic way. The e-commerce has transformed business activities that were previously constrained by locations, costs, and time. Business professionals believe that the e-commerce shall eventually transform supply and value chains with effective solutions that can enhance efficiency in specific business processes.

Introduction

Business-to-business (B2B) companies deal directly with other businesses instead of individuals consumers. E-business provides opportunity for firms to handle their operations directly with others in the supply chain because all transactions take place on an online platform.

B2B enhances the relationship between various organizations for mutually advantageous results. The Internet has offered firms the opportunity to connect with other firms anywhere. This has promoted competition and increased delivery of services. The B2B model assists in enhancing the level of efficiency operations and quality in services without extra costs, and it makes transaction simple at any time and place.

The B2B model focuses on four main areas. These include developing strong direct business relationships, improving operational efficiency, promoting business growth, and matching business competition in the marketplace.

An online business model has allowed firms to conduct their operations efficiently and enhance timeliness and correctness of business transactions. Thus, they have been able to eliminate errors that result from wrong inputs and subsequent deliveries. Firms also connect directly to their suppliers, which enable them to develop their relationships and brand images.

B2B Concepts

B2B e-commerce takes place electronically via the “Internet, extranets, intranets, or private networks” (Loshin, 2005). It is also known as “eB2B (electronic B2B) or just B2B” (Loshin, 2005). The three major forms of B2B e-commerce models are mainly transactional, process, and strategic relationships.

The transactional model focuses on a given online approach for doing transactions within the supply chain. In addition, it applies the same approach to the whole system. Process-based B2B model takes place between two firms with a common business process. The process enhances efficiency between the two organizations. Strategic relationship model may comprise of two or more firms that have connected their business systems and processes in most areas of business operations.

Firms have adopted e-business because of the inherent values in the technology. The system saves time, reduces costs, workforce, and eliminates most of the errors in business processes.

B2B e-commerce models.

Figure 1: B2B e-commerce models

Key business drivers for B2B

There are three main factors, which drive e-commerce. These are economic forces, changes in marketing and interactions with customers, and development in technology. Economic forces are mainly evident in areas of cost reduction, efficiency in processes due to availability of technology, low-costs, increased speed in transactions, low costs of sharing and advertising the business, and availability of affordable customer service tools.

Economic integration can take place both inside and outside a firm. Externally, integration involves electronic links with other organizations, suppliers, customers, and other business partners. These entities communicate virtually in a single environment in which the Internet is the mode of communication.

Conversely, internal integration involves a network of different business units within the firm. A networked system of operations and processes provide effective way of document storage in electronic formats, which allow business departments to transmit information instantly. Corporate intranet is the best example of internal integration of operations and processes among various business units in a firm. This is common in major firms like Cisco, Nestle, IBM, and Intel among others.

Marketing forces are responsible for the growth of e-commerce. The aim is to get attention of the global market through marketing and promotion. In this regard, the Internet has been an effective tool for improving customer services and support. Firms have noted that it is simple to provide business information through the Internet to their global customer base.

The innovation in technology has been responsible for the rapid growth of the e-commerce. For instance, the development in document and data manipulation through digitalization, data transformation, integration, and resolution together with rise in open system technologies have strived to provide a single platform for communication.

As a result, communication between partners has become efficient, easy, affordable, and fast as the need to create new forms of communications become irrelevant. For firms, customers, and their partners the possibility of relying on a single platform of communication offers the advantage of a streamed communication method.

Technology has enhanced the concept of universal access, as most communication methods become convergence. High costs of setting communication channels like landline in areas with few customers have been a disincentive to many communication firms who focus on return on investment.

Direct Sales from Catalogs

Businesses usually have “one catalog for all customers and a customized catalog for each large customer” (Loshin, 2005) with aim of providing an opportunity for efficient customization of services. A direct sale is a company-based B2B model that concentrates on selling products and services. The supplier displays products and services on the catalog alongside a site for selling. The seller is a distributor or manufacturer who deals with several clients.

Transactions take place via the Web site, which may be a Web-based platform for large firms or an extranet for small entities. In some cases, small entities have their own secured Web sites for conducting their business transactions. Firms may rely on direct selling through their “electronic catalogs requests for proposal (RFP), and selling via forward auctions, and or one-to-one dealing under a long-term contract” (Nguyen, 2009).

The B2B direct selling allows firms to get the advantage of speedy business processes and elimination of rampant cases of errors. Such firms also have the advantage of reducing “order processing costs, logistics costs, and paperwork, especially the reduction of buyers’ search costs in finding sellers, competitive prices, and the reduction of sellers’ search costs in advertising to interested buyers” (Nguyen, 2009).

Most multinational firms such as Dell and Cisco conduct their business with other organizations through secured online channels in which they can get all the order details as requested by a client.

Businesses have the opportunity to explore the entire catalog, select items, customize the list, save, and send for internal authorization prior to initiating an order. In addition, the platform offers tracking features, which allow customers to track and know the status of their order during the transaction. Still, customers can still track their orders during shipment.

In direct sales catalog, a firm may pay fees or commissions for other entities that provided support and value-added services, but this usually depends on whether the distributor has not catered for such costs.

A direct sale from catalogs has some limitations, which include “attracting buyers, channel conflicts, the method of electronic indication, and the required scale to operate efficiently” (Nguyen, 2009). In addition, there might be costs associated with value-added services and hosting services.

In 2011, Endeca, a part of Oracle since 2012, conducted a study on the state of the B2B e-commerce in order to assist other organizations improve their operations and processes. The study established that the “B2B online catalog and direct sales force continued to be key channels used by customers for decision-making” (Oracle-Endeca, 2012) as mobile platforms also gained a rate of significant growth as compared to previous studies.

Merits of B2B e-commerce

Businesses have touted the B2B business model as an innovative method of conducting business through the Internet. The model offers effective, efficient, and competitive advantages to users. Generally, the B2B e-commerce allows organizations to gain access to the global marketplace. Business transaction through the Internet has provided several opportunities for sellers and buyers to overcome challenges of time and geography.

The system eliminates rampant cases of human errors and support real-time communication between organizations. In addition, Web-based communications have eliminated the need for costly modes of communication because businesses in the e-marketplace can afford the Internet.

This model has addressed efficiently and effectively challenges associated with the supply chain management between entities. Business can control their supply chains in different processes in making the order (Kalakota and Robinson, 1999). It ends in effective coordination of business activities.

The B2B e-commerce strengthens partnership between parties through supply chain management and sharing information for mutual benefits of all parties. In addition, the model has been effective tool for addressing customer relationship management and retention. An effective model helps firms in establishing loyal customers who get value and quality services from the firm.

Limitations of B2B e-Commerce

There are some challenges with the B2B e-commerce model. Some of these challenges include conflicts within the system, justification for high initial costs, integration challenges with partners who may be on different platforms, and issues of trust among organizations because of sensitive information shared (Laudon & Traver, 2007). In addition, Mohanbir Sawhney noted that most businesses executed their B2B models on a wrong concept (Sawhney, 2002).

In most cases, firms already have established networks on managing their supplies. Therefore, if a firm adopts the B2B model, then it must change its operations and systems. Still, the other partners must also change their systems for compatibility. This situation may result in conflicts.

The B2B e-commerce may not optimize its revenue generation due to a limited number of transactions. Thus, firms must generate enough revenues from few clients to cater for expenses. Justifying the need for such technologies may be difficult.

A firm that has a sufficient number of customers, an established brand, and good prices can experience a thriving selling-side e-commerce. On buying-side, the volume of the trade should be enough to cover all costs in the business. Companies can reduce costs by outsourcing hosting services and value-added supports to its clients. This eliminates the need for running expensive systems.

Integration with other systems is also technical aspects that may hinder B2B e-commerce model. Therefore, working with compatible software is necessary to avert operational challenges.

New ventures may require initial a large number of buyers and seller to make them viable. However, this may be a challenge as the volume of transactions may not be enough to sustain and justify the costs. Therefore, a venture must have a substantial liquidity to fund the business before the volume of trade can increase.

The B2B e-commerce involves “a full range of services, such as credit verification, insurance, payment, and delivery, is needed to attract small and medium businesses” (Nguyen, 2009). Verification is necessary because of online trading risks. Therefore, businesses would only trade with online firms, which can provide security of their data. Firms must also promote high standards of business ethics in order to develop trust with partners. This also requires effective security measures for privacy and safety of partners.

Conclusion

Oracle-Endeca research indicated that the growth of B2B e-commerce has grown significantly. However, the model requires innovative approaches in order to thrive. Most businesses have limited their model to buying and selling. However, the model can also cover other areas like “collaborative commerce(c-commerce) and product life cycle maintenance in a Web-based system to meet final consumer demand by sharing information on product design, production planning, and forecasting or coordination” (Nguyen, 2009).

Effective implementation of the model can eliminate challenges associated with the supply chain management and value creation. Most of the B2B e-commerce models face serious challenges of liquidity during initial stages.

While some have been able to find buyers and sellers, the challenge of “improving the efficiency and effectiveness of the processes by which they interact with existing suppliers and partners” (Sawhney, 2002) has emerged. This problem has escalated to other partners in the chain. The solution for B2B e-commerce is in effective software and solutions for improving business transactions in “specific business process” (Sawhney, 2002).

References

Kalakota, R. and Robinson, M. (1999). e-Business: Roadmap for Success. Massachusetts: Addison-Wesley.

Laudon, C., & Traver G.C. (2007). E-commerce: Business, Technology, Society (3rd Ed.). Upper Saddle River, NJ: Prentice Hall.

Loshin, P. (2005). Electronic Commerce. New Delhi: Laxmi Publications.

Nguyen, D.-D. (2009). Business-to-Business (B2B) Internet Business Models – 2008. Retrieved from

Oracle-Endeca. (2012). 2012 B2B E-Commerce Survey: Results and Trends. Redwood Shores, CA: Oracle Corporation.

Sawhney, M. (2002). B2B: Execution of the Concept Is Key to Success. Retrieved from

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