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B2B Markets

Making Sense of Emerging

Market Structures in B2BE-Commerce

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The 12 market structures

3 distinctive categories:

Collaborative mechanisms

Quasi-market mechanisms

Neutral market mechanisms.

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Benefits of B2B Sites

Increased reach

Reduction in transaction costs

Deep customization capabilities.

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Collaborative Market Mechanisms

Market structures that fundamentally

enable the market participants to gainfullyexploit electronic integration.

They are enabled when inter-organizationalinformation systems are networked through

Internet infrastructure for the purpose ofsharing vital data of interest to the networkmembers.

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Collaborative Market Mechanisms

These market structures

Increase the collaboration capability of the

network members

Help in speeding up business processes

Help eliminate duplication of resources Cut costs

Improve responsiveness of the supply chain.

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Quasi-Market Mechanisms One or a small group of either the buyers or the sellers

will initiate the marketplace, host and monitor, enroll

market participants, and moderate the market behavior ifrequired. Buyer-centric marketplace, buyers take the initiative to host the

market Forward (buyer-bid) auctions: Buyers compete to obtain the

business of the seller

Seller-centric marketplace, sellers take the initiative to host themarket

Reverse (seller-bid) auctions: Sellers compete to obtain thebusiness of the buyer

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Neutral Market Mechanisms

Neutral market mechanisms include

Exchanges

Catalogue Aggregators

Online Communities

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Classification of B2BMarket Structures

Factors used for classification

Fragmentation

Asset specificity

Complexity of product assessment

Complexity of value assessment

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Degree of Fragmentation

The degree of fragmentation in a market is defined bythe number of players and the geographical spread. When the degree of fragmentation is high on both the supplier

and the buyer side, the market tends to be open and competitive.

When there is less fragmentation, there is an opportunity forcontrol-oriented mechanisms to characterize the market.

When the degree of fragmentation is very low, organizations

tend to benefit from collaborative practices as opposed to cont

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Degree of Fragmentation

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Asset Specificity

Asset specificity is a function of the costs of

setting up a relationship between two marketparticipants in order to manage business

transactions in a cost-effective manner.

The costs arise because of specific resources

(assets) that the two market participants have todeploy a priori in order to transact business.

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Asset Specificity

When asset specificity is high, market participants arebetter off by engaging in collaborative practices andsuperior coordination mechanisms.

When the asset specificity is very low, competitivemarket practices and relationships based on pricebenefit both the buyers and the suppliers.

In the medium asset specific situations, quasi-marketmechanisms that blend both collaboration andcompetition are a viable alternative for the marketparticipants.

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Asset Specificity

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Classification of Neutral Markets

Neutral markets have poor market liquidity

because Complexity of product descriptions: the amount ofinformation a buyer needs to understand thefunctional and technical specifications of the productor service.

Complexity of value assessment: the amount ofinformation needed to estimate accurately the worthof an item and to either arrive at a price or selectitems offered at a price.

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Classification of Neutral Markets

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Conclusions

Organizations have to strategically identify how

they will derive value by exploiting a variety ofmarket structures

To do this, firms must examine Fragmentation

Asset specificity Complexity of product assessment

Complexity of value assessment