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									       Computing and Information Systems



               ISYS90034
Business-to-Business Electronic Commerce


         Assignment 1 Overview




           Dr. Sherah Kurnia
    Overview of Assignment 1 (Group)

 Worth 20% - due in week 8
 Based on the Beer Game played in weeks 4-6
 A group consists of 4-5 students and should play one of
  the available roles:
    factory, distributor, wholesaler or retailer
 Each role is played by 2 or 3 students
 There are 2 supply chains involved




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   Group and Supply Chain Structures
                                  Group 1                Group 2       Group 3      Group 4




Supply chain 1                      Factory
                                    Factory              Distributor
                                                         Distributor   Wholesaler
                                                                       Wholesaler   Retailer
                                                                                    Retailer




Supply chain 2                      Factory
                                    Factory              Distributor
                                                         Distributor   Wholesaler
                                                                       Wholesaler   Retailer
                                                                                    Retailer



    Computer
     Student



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                                                         Tasks
 Part 1: Playing the Beer Game (Hurdle)
    Three parts: Normal LT, shorter LT, information sharing

 Part 2: Data Analysis (2 marks)

 Part 3: Interpretation of the Beer Game (15 marks)
    Five questions to answer

 Part 4: Presentation – 15 minutes (3 marks)




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  Part 2: Data analysis of the beer game
                                                          (2 marks)


 Each group must have two complete data sets from two
  supply chains.
   a. Plot all order quantity placed. Calculate the average
      order size for each single role in each supply chain.
   b. Plot the stock
   c. Plot the cumulative costs




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                                               Example




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Part 3: Interpretation of the beer game
                                                       (15 marks)




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Part 3: Interpretation of the beer game
                                                       (15 marks)




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                                            Assessment

 Written Work (Parts 1-3): 17 marks
    Quality of analysis
    Clarity of explanation
    1000 (+10%) words

 Presentation (Part 4): 3 marks
    Clarity of presentation
    Ability to engage audience
    Time management



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                                             Submission

 Due date: Monday 10 September, 5pm (week 8).
 Two submissions:
    Online submission through LMS
    Hard copy submission – to be submitted in the class
      before presentation.
 What to submit?
    A group assignment cover sheet, signed by all members
    Results of the data analysis for both supply chains
    Interpretation of the results by answering the five questions



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         Computing and Information Systems




               ISYS90034
Business-to-Business Electronic Commerce

                Week 3:
     B2B E-Marketplaces


             Dr. Sherah Kurnia
                                    Reading Material

 Bakos, Y., (1998), "The emerging role of electronic
  marketplaces on the Internet", Communications of the
  ACM, 41(8), pp. 35-42
 Mahadevan, B. (2003), “Making Sense of Emerging
  Market Structures in B2B E-Commerce”, California
  Management Review (Fall), Vol 46, No 1, pp 86-100.




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                                                     Outline

 B2B Exchange vs Procurement
 Function of Market
    Impact of Internet/EC technologies
 E-Marketplaces:
    Alibaba.com case and discussion
    Concepts, definitions and classifications




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B2B Exchange vs Procurement




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                                                          Adapted from Van Weele (2002)
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Key procurement activities within an organization
                                                    (Chaffey 2011)




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        The Broad Aim of Procurement

To obtain the required products/services:
   •   at the right price
   •   at the right time
   •   of the right quality
   •   of the right quantity
   •   from the right source




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Why managing procurement is important?

            Industry                                       Procurement costs as a percentage of
                                                                   cost of goods sold
 Consumer electronics                                                    60-70%

 Mini and personal                                                       50-70%
 computers
 Consumer goods                                                          50-70%

 Automotive                                                              50-60%

 Pharmaceuticals                                                         25-50%

 Service industry                                                        10-40%


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         Major Stages in B2B Exchange


                   SOURCING


                  ORDERING
Seller                                  Buyer

                  DELIVERY


                  PAYMENT
Function of Market
                                                             Market
   Place where buyers and sellers meet and make transactions

   Three main functions (Bakos 1998):

    1. Matching buyers and sellers
              Product offerings
              Search
              Price discovery


    2. Facilitation of transactions

    3. Institutional infrastructure: legal and regulatory


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            Matching Buyers and Sellers:
        1. Determination of Product Offerings

 Should be based on:

    The gap in the market

    Opportunity (customers, competitors)

    Competencies




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     EC/Internet Effects on Product Offerings
 Personalisation and customisation
    Customer tracking technology to discover preference
    Customization of information-rich products
    One-to-one marketing
 Aggregation and disaggregation
    Bundling/unbundling products/services
    Costs to consider:
        production costs
        Transaction and distribution costs
        Binding costs
        Menu costs


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     EC/Internet Effects on Product Offerings
 Personalisation and customisation
    Customer tracking technology to discover preference
    Customization of information-rich products
    One-to-one marketing
 Aggregation and disaggregation
    Bundling/unbundling products/services
    Costs to consider:
        production costs
        Transaction and distribution costs
        Binding costs
        Menu costs


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         Matching Buyers and Sellers:
                  2. Search

                                         Contact

                                         Price Discovery

                                         Product Evaluation
Seller                                                        Buyer
                                               ORDERING


                                             DELIVERY

                                              PAYMENT
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   ISYS90034 Business-to-Business Electronic Commerce
             Contact

         Reaching Customers

          Being Found


Seller                        Buyer
 Traditional Market Communication Options

 Mass Marketing
                                                              Low Cost
    Billboards
    Radio                                                    Only simple message
    Television                                                 Brand creation / reinforcement
    Print                                                      Product Promotion
    Mail
                                                              One - way                  RICH
                                                                                    REACH
 Direct marketing                                            High Cost
    Telemarketing                                            Complex message
    Sales Force                                                Product info
    Sales representatives                                      Product matching
                                                              Interactive

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                               Richness vs. Reach


Richness                                                   Increased
                                                           Processing Power
                                                           :
                                  Direct
                                                           Increased
                                                           Connectivity


                                                          Mass


                                                                 Reach
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                               Richness vs. Reach


Richness




                                                          Reach
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Communication Models
      Chaffey (2011)
Characteristics of New Communication Model

 Interactivity

 Intelligence

 Individualization
                                                          Compare with EC
                                                          opportunity (reach,
 Integration                                             richness, affiliation)

 Industry restructuring

 Independence of location
                                                                      Chaffey (2011)
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            EC/Internet Effects on Search
 Lowering seller’s cost to communicate information
    Links to manufacturers’ websites for detailed information
    Search engine compares prices (www.shopbot.com.au)
 Lowering buyer’s search costs
    lower costs to obtain information
    find products that better match needs
    increase economic efficiency
 Lower seller’s’ search costs and global reach
    new markets
    new intermediaries emerging (lastminute.com, priceline.com)


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            EC/Internet Effects on Search
 Lowering sellers’ cost to communicate information and
  lowering buyers’ cost to obtain information
    Links to manufacturers’ websites for detailed information
    Search engine compares prices (www.shopbot.com.au)
 Lowering buyer’s search costs
    increased economic efficiency
    find products that better match needs
 Lower sellers’ search costs and global reach
    new markets
    new intermediaries emerging (lastminute.com, priceline.com)



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                   Matching Buyers and Sellers:
                        3. Price Discovery

 Fixed offers

 Negotiation
    Limited buyers and sellers

 Auction
    one seller and many buyers

 Brokerage
    sub-negotiation of fixed prices by a third party



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   EC/Internet Effects on Price Discovery

 Increase price transparency

 Increase price sensitivity - commoditization

 New types of price discovery

    Last-minute auction

    Web-based auction

    Reverse auction

    Dynamic pricing / price discrimination
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                      Facilitation of Transactions

 Logistics
    Delivery of information, good of service to buyer

 Settlement
    Transfer of payment to seller

 Trust
    Credit system, reputation

 Physical Infrastructure
    Trading floors, ICT networks and transportation systems



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             EC/Internet Effects on Facilitation of
                         Transactions
 Lowered logistics costs
     Improved information sharing, reduced inventory, etc

 Transformation of distribution of information goods

 Weaker position of traditional intermediaries
     New intermediaries emerge: Bizzrate, Verisign

 Delivery providers emerging
     e.g. FedEx, UPS: logistics expertise, economies of scale in distribution

 Electronic payment systems emerging
     Micro-payment systems lower the cost of small transactions.
     Need to protect market participants from opportunistic behaviour


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                  Institutional Infrastructure

 Legal
    Commercial code, contract law, dispute resolution, IP
      protection

 Regulatory
    Rules and regulations, monitoring, enforcement



         How does EC/Internet affect this function?



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E-Marketplaces
        Introduction to E-Marketplaces:
                  Alibaba.com

 The world’s largest B2B e-marketplace
   http://www.youtube.com/watch?v=JMXYFuxURPI&feature=related
 US entrepreneur finding his perfect supplier through
  Alibaba
   http://www.youtube.com/watch?v=evW3lx1cCuY&NR=1
 Read the fraud case studies




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                           Discussion Questions

 How does Alibaba.com overcome the limitations of the
  traditional B2B marketplaces?
 Knowing various fraud cases with the use of
  Alibaba.com, would businesses be reluctant to use
  Alibaba.com?




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                                                 Sourcing


                                        Contact

                                        Price Discovery

                                        Product Evaluation
Seller                                                       Buyer
                                                ORDERING


                                              DELIVERY

                                               PAYMENT
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    ISYS90034 Business-to-Business Electronic Commerce
                             Sourcing Problems

 Sub-stage                                             Vendor        Customer
   Contact                              Reaching customers      Finding required
                                                                products

    Price                               Getting the highest     Getting the lowest
Determination                           price                   price


  Product                               Making product          Getting the right
 Evaluation                             features known          utility for price




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            E-Marketplace – Basic Idea
         The “Market-maker”


                                         3rd Party Web Site




   Vendor                                                     Customer

                                    The Market Participants


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                                  “e-Marketplaces”

 E-Marketplaces are Internet-based intermediaries who make
  money by supporting various aspects of the sourcing of goods
  (and services) for purchase by one business from another (B2B)

 They may also support the ordering, delivery, and payment
  stages of transactions

 Related Terms:
    E-Hubs
    E-Exchanges, B2B Exchanges
    E-Marketspaces, B2B Market Spaces
    E-Catalogues, B2B Catalogues
    E-Procurement

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                          Two Basic Strategies

 Matching
   Buyer-seller
   Price-utility
   Market making
          Use auction to determine true market price
 Aggregation
   Bring parties together to reduce transaction costs
   Increase bargaining power




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  The Value Proposition of E-Marketplaces

Sub-stage                                     Value      How

Contact



Price Determination



Price Determination




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  The Value Proposition of E-Marketplaces

Sub-stage                                     Value                How

Contact                                       Reduce Search Costs The “Hub Effect”
                                                                  (reach)




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How Hubs Reduce Searching Costs

   Vendors                                           Customers




                                                                 No of
                                                                 Connections
                                                                 = N2




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 How Hubs Reduce Searching Costs

Vendors                                                 Customers




                                                                    No of
                                                                    Connections
                                                                    =2XN




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  The Value Proposition of E-Marketplaces

Sub-stage                                  Value                  How

Contact                                    Reduce Search          The “Hub Effect”
                                           Costs                  (reach)

Price Determination                        Reveals “True” Price   Market Liquidity
                                                                  (reach, richness)




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                 Types of Auctions

          3rd Party                             3rd Party


 Seller                                                 Buyers

Auction               Buyers          Sellers          Reverse
                                                       Auction
                          3rd Party
                                                 Double
                                                 Auction -
                                                 Exchange

                Sellers               Buyers
  The Value Proposition of E-Marketplaces

Sub-stage                                  Value                  How

Contact                                    Reduce Search          The “Hub Effect”
                                           Costs                  (reach)

Price Determination                        Reveals “True” Price   Market Liquidity
                                                                  (reach, richness)


Product Evaluation                         Allows Choice of       Product Comparison
                                           “Right” product        (richness)




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                                         Revenue Models

   Membership fee
   Percentage of the value of the transaction
   Flat fee per completed transaction
   Fee for hosting a company's product catalogue
   Fees for further exposure over and above basic product
    information
   Advertisement (banners and links)
   Leasing or sale of software for e-commerce
   Sale of industry information compiled
   Additional services like logistics and financial services
   Consulting fees




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            Classifying E-Marketplaces

 Type of Product
    Production Inputs
    Operating inputs

 Product Specificity
    Commodities
    Non-commodities
    Customer-specific products




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                                Types of Products
 Production Inputs (things that go into the main products the
   business produces) - PARTS
     Raw materials
     Fabricated components
     Packaging

 Operating inputs (things that are consumed in the course of
   producing) - CONSUMABLES
     Often called MRO (Maintenance, repair, and operating)
     Stationary
     Office equipment
     Machinery
     Energy
     Labour                          What are their
                                                          characteristics?
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           Vertical means industry specific
           Horizontal means general purpose
                           Up-stream
Vertical




                     Down-stream
                              Horizontal
                                   Product Specificity

  How specialised is the product?
  How specific is it to a particular customer and a
      particular purpose?




Low                                                      Medium   High




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                                      Product Specificity
   Commodities
      Can be used for many purposes
      Can be used by many customers
      Generally unprocessed or partly processed raw materials
      Easily described
      Price largely set by supply and demand (market forces)
   Non-commodities
      More-purpose specific
      Can be used by many customers
                 Product
      Manufactured items
      Often many variations of utility (eg. size) and quality
                Specificity
      Relatively complex to describe
      Price largely set by production technology
   Customer-specific products
      Purpose specific
      Made to order for one customer
      Require detailed drawings / standards
      Usually repeat orders
      Much negotiation over price

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                                     Price and Utility
 Price is how much the customer pays
    Not to be confused with Cost which is what it costs the
     selling firm
    Depends on supply, demand and production technology

 Utility is the value or usefulness that the product has to
  the customer
    It depends on customers needs and product features




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                                      Price vs. Utility
Specificity                                Price                Utility
Commodity                                  Set buy Supply and   (Nearly) Uniform
                                           demand



Non-Commodity                              Largely set by       Many variants
                                           production
                                           technology

Customer-Specific                          Negotiated           Purpose Defined




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                     Price vs. Utility
Specificity            Price                    Utility
Commodity              Price Determination      Product Evaluation
                       is main problem          not a problem




Non-Commodity          Price Determination      Product Evaluation is
                       is a secondary           main problem
                       problem


Customer-Specific      Price and Utility need to be negotiated
                       simultaneously


= problem area   = not main problem area   Utility = usefulness to customer
                     Price vs. Utility
Specificity            Price                    Utility

Commodity              Set buy Supply and       (Nearly) Uniform
                       demand




Non-Commodity          Largely set by           Many variants
                       production
                       technology


Customer-Specific      Negotiated               Purpose Defined




= problem area   = not main problem area   Utility = usefulness to customer
         Input
         Type     E-Marketplace Matrix
Product          Operating        Production
Specificity


 Customer-
 specific



 Non-
 Commodity



 Commodity
         Input
         Type            E-Marketplace Matrix
Product                Operating           Production
Specificity

 Customer-
 specific

                 Horizontal (Generalist)
                    e-Marketplaces
 Non-
 Commodity


 Commodity
         Input
         Type
                  E-Marketplace Matrix
Product          Operating        Production
Specificity


  Commodity



                                Vertical (Industry
 Non-                               Specific)
 Commodity                       e-Marketplaces



 Customer-
 specific
         Input
         Type             E-Marketplace Matrix
Product                 Operating               Production
Specificity


 Customer-
 specific



 Non-
 Commodity


                 Will create a market to facilitate price discovery
 Commodity
         Input
         Type         E-Marketplace Matrix
Product             Operating               Production
Specificity


 Customer-
 specific


                 Will create a market to facilitate product
 Non-                location, comparison, evaluation
 Commodity



 Commodity
         Input
         Type            E-Marketplace Matrix
Product                Operating                Production
Specificity

                 Will create a market to facilitate negotiation of
 Customer-        price for a particular product specification
 specific



 Non-
 Commodity


 Commodity
          Input
          Type                                    E-Marketplace Matrix
Product
Type                       Operating                    Production
                  MRO Reverse Auctions            Reverse Auctions
                     Japher.com (Computer             Freemarkets.com (taken over)
                     Networking –defunct)             MfgQuote.com
  Customer-          Programmingbids.com
  Specific           Elance, Smarterwork.com
                     (Professional services)

                  Horizontal E-Marketplaces       Vertical E-Marketplaces
                  (E-Procurement Hubs)            (Catalog Hubs, Vortals)
                       Ariba                           Chemdex, e-Chemicals
 Non-                  Alibaba                         SciQuest.com
 Commodity                                             PlasticsNet.com

                  E-Auctions                      E-Exchanges
                      Adauction.com (defunct)         E-Steel (Now NewView)
                      CapacityWeb.com (defunct)       PaperExchange.com
 Commodity            Youtilities.com (defunct)       (defunct)
                      TransCore.com                   Fordaq.com (timber)
                                                 Summary
 There are three main functions of markets: matching
  buyers and sellers, facilitating transactions and providing
  institutional infrastructure.
 Electronic commerce technologies affect market
  functions significantly leading to more efficient markets,
  establishment of new industry structures and a higher
  level of competition.
 E-marketplaces are internet-enabled intermediaries that
  support various aspects of sourcing activities.
 Different types of e-marketplaces are introduced to
  support different types of products purchases by
  companies.

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