[attachment=11457]
ABSTRACT
Professional analysts forecast an explosion of the number of business-to-business (B2B)
e-marketplaces, followed by a consolidation process where alliances, mergers and
acquisitions within the B2B e-marketplace space are becoming more important.
This qualitative cross-industry research of 26 cases of electronic B2B inter-marketplace
alliances, mergers and acquisitions has resulted in conclusions regarding motives for, and
obstacles with these B2B inter-marketplace partnerships. A number of trends affecting
the future B2B e-marketplace configuration have also been identified. How to deal with
the implications of these findings for B2B e-marketplaces and brick-and-mortar-
companies are also discussed.
Liquidity was found as a motive for forming B2B inter-e-marketplace partnerships along
with motives related to the market, technology and finance. Identified market-related
motives for forming B2B inter-e-marketplace partnerships include getting access to new
suppliers and buyers; having common suppliers and buyers; getting access to expertise;
enhancing the image of the e-marketplace; sharing or reducing risk; joint marketing
activities; and closing windows of opportunities and higher barriers to entry for
competitors. Identified technology-related motives for forming B2B inter-e-marketplace
partnerships include cross offering and co-development of service applications; exchange
of value-added services; and standards enforcement. Identified financial-related motives
were found to include getting access to capital and raising capital from investors.
Obstacles with forming B2B inter-e-marketplace partnerships are found to be market-,
technology-, financial-, and governance-related. Obstacles include bad timing; time-
consuming negotiations due to lack of focus; anti-trust laws; image focus; user face
obstacles, application layer obstacles; platform/infrastructure layer obstacles; revenue
sharing; take-over price; management; lack of trust; cultural differences; and
collaboration and competition around intellectual property.
Identified trends, affecting the future B2B e-marketplace-configuration, include a
"waiting game"; reluctant investors; partnering as a survival strategy; technology
solutions specialisation; personalised user interfaces and standards for E2E collaboration.
A vision of future partnering models is presented and the future form of e-marketplaces is
discussed along the dimensions bias and ownership. Competition versus collaboration
between e-marketplaces is discussed as well as internationalisation.
Regarding the implications of the research results for e-marketplaces, advise for how to
tackle market-, technology-, financial- and governance-related obstacles, along with
additional guidelines for e-marketplace survival and success is presented. Regarding the
implications of the research results for brick-and-mortar-companies, suggestions are for
them to take an active part in the B2B e-marketplace evolution. Three B2B e-commerce
strategies with different levels of investment commitment are presented
1 INTRODUCTION
The introduction chapter gives a background to the research subject, further discusses the
research problem and finally presents the research questions that this report aims to
answer.
1.1 Background
Business-to-business (B2B) electronic commerce (e-commerce) is not a new concept.
The heritage of Internet-based electronic commerce can be traced back to EDI (Electronic
Data Interchange), which dates back more than twenty-five years. Either point-to-point or
one-on-one linkages were developed, or alternatively third party EDI communication
service like VANs (Value Added Networks) were developed and used, and to a certain
degree they are still being used. (Lankford and Johnson, 2000) The VANs provide a
variety of systems for exchanging information, enabled through a standard set of
transactions. There is though a backside to these technologies. The cost of one-to-one
EDI systems, or the service VANs provide, is of such magnitude that only the largest
companies have been able to find the economic initiative to build and implement EDI
systems with their most important suppliers or customers or to use the service provided
by the VANs.
The successor of the expensive VANs is the Internet. The principle of EDI – reducing the
process costs of inter-company trade - will live on. The relative ease of accessing Internet
for business and trade purpose, due to its dramatic lower cost, allows smaller suppliers
and buyers to meet and through Internet, B2B e-commerce can reach its full potential.
(Blodget and McCabe, 2000)
Today, the larger part of the B2B e-commerce is planned to come to live over Internet-
based electronic marketplaces (e-marketplaces). The idea of e-marketplaces, in which
corporations with common interests get together to procure and provide goods and
services over the Internet, took hold in the United States two years ago, but for many it
was not until last year that the idea became reality. Now e-marketplaces are being hailed
as the most revolutionary development in the way commerce is transacted since the
telephone. (B2B, 2000) Quite often the term “e-market” (electronic market) is used when
referring to an e-marketplace, but it has been left out in this report to the favour of the
more descriptive term e-marketplace.
Business-to-business e-commerce is set to far out weight business-to-consumer e-
commerce. Louis V Gerstner Junior, the chairman of IBM, suggests this analysis of what
B2B offers compared to B2C (business-to-consumer):
“I think of [consumer websites] as
fireflies before the storm: all stirred up, throwing off sparks. But the storm that’s arriving
– the real disturbance in The Force – is when the thousands of institutions that exist
today seize the power of this global computing and communications infrastructure and
use it to transform themselves. That’s the real revolution.”
(Lewis, 1999, p.57)
INTRODUCTION
Depending on the source
(Brooks and Cantrell, 2000; Bydgeson et al, 2000; Henig, 2000),
there was in the end of year 2000 an estimated scope of about 500 to 1200 B2B e-
marketplaces operating in and across various industries. This number has probably grown
during the time elapsed from the publishing of these sources. In the next several years,
there is an estimation of the creation of an additional number of 10, 000 e-marketplaces
across industries, according to Forrester Research. In the “long term”, which in some
industries (depending on industry e-marketplace maturity) might be in simply one, or a
few years time, a maximum of only three e-marketplaces per industry are predicted to
survive – for a total of only 50-100 vertical B2B e-marketplaces (AMR Research).
(Blanchard and Roussière, 2000; Brooks and Cantrell, 2000) Henig (2000) expects that
over the next decade, the total number of B2B e-marketplaces will collapse down to 10 to 30.
To look at the situation from a somewhat different angle; the end game is by some
claimed to been shown by the financial markets. “History suggests an explosion in new
exchanges [e-marketplaces, authors’ note], followed by consolidation. The New York
Stock Exchange had two dozen rival exchanges in lower Manhattan in the early 19
th
Century.” (Meeker and Phillips, 2000)
1.2 Problem discussion
The inter-relational dynamics of B2B e-marketplaces is envisioned in four phases,
graphically illustrated in figure 1. The first phase,
Proliferation
, refers to phase where the
number of e-marketplaces rapidly increases.
The second phase,
Expansion
, refers to the developmental phase where the average scope
of e-marketplaces increases. The expansion of market scope includes extending the range
of products (goods and services) traded through the e-marketplace (which may overlap
with the scope of other e-marketplaces) and increasing the functionality of the e-
marketplace by for example adding collaboration tools or enabling integration to back
office systems. Further, the expansion of market scope includes incorporating transaction
services (e.g., order management, logistics, financing, etc.) or including industry-specific
news and expert analysis.
The third phase is
Consolidation
, the shakeout period predicted by analysts. Once an e-
marketplace achieves critical mass, it consolidates market power by siphoning
participants from the e-marketplaces that compete directly with it. While this fortunate e-
marketplace will likely continue to follow its successful expansion strategy, its
competitors will need to shift strategies away from simply expanding their own scope to
avoid being acquired or dying from lack of cash. They will either need to partner or
consolidate with other competitors to pool their trading volumes and offset the network
effect that benefits the dominant e-marketplace, or differentiate themselves from the
dominant market in a way that is real and sustainable. Inter-marketplace mergers and
acquisitions become important in surviving the consolidation phase. In figure 1 mergers
and acquisitions can be traced to be a part of the illustrated defunct e-marketplaces - those
INTRODUCTION
e-marketplaces that will disappear, either because they are not capable of surviving by
themselves and therefore die, or because they choose to merge with or get acquired by
another e-marketplace. Also in the consolidation phase the importance of alliances
between B2B e-marketplaces is beginning to be realised. (Brooks and Cantrell, 2000)
Finally, as e-marketplaces consolidate, the boundaries between successful e-marketplaces
are reinforced by the network effect and become increasingly stable, moving the B2B e-
marketplace space into the
Collaboration
phase. Smaller e-marketplaces that survived
through partnerships will already be collaborating, and dominant e-markets in one
industry will find that they cannot unseat their entrenched neighbours. Although there
will still be some jockeying between neighbouring e-marketplaces, and the occasional
creation of an e-marketplace in a newly recognised niche, most of the activity at this
point will focus on how to collaborate between the marketplaces to increase the
efficiency and flexibility of participants across market boundaries. (Brooks and Cantrell,
2000) Inter-marketplace alliances are in the collaboration phase of major importance in
the further evolution of what the space of B2B e-marketplaces has to offer brick-and-
mortar industries. Inter-marketplace integration (or inter-marketplace alliances) is in
Figure 1 illustrated by lines connecting the circles illustrating the e-marketplaces.
The speed with which any given industry traverses the phases and the exact configuration
of the e-marketplaces within each phase, will vary according to such factors as industry
characteristics (e.g. degree of fragmentation) or types of products traded (ibid).