Business to business exchanges - Essay Example

Running Head: B2B EXCHANGES Introduction Business to business exchanges can be defined as business to business online or internet based marketplaces to buy and sell various goods and services. Researches have shown that business is undergoing a process of paradigm shift as a result of the development of the internet based B2B exchanges. The three types of B2B exchanges that have emerged includes; third party industry specific or independent B2B exchanges, buyer or supplier coalition based B2B exchanges and corporate B2B exchanges (Iyer and David, 2004).

Development of B2B exchanges main advantage is that there is a reduction of prices due to open market conditions. There is also a reduction in costs of transactions due to use of internet while conducting transactions. The growth of internet therefore, has led to development of B2B exchanges. Third party or Neutral B2b Exchanges They are electronic market places that buyers and sellers do meet. Buyers get a lower price due to open bidding and sellers understands better the movements of the market.

The buying firms are envisioned to provision from a variety of relational or transactional and domestic or global sources. Some of B2B exchanges are specific to industries and some of them, marketplaces for a variety of industries business. An example is Verticalnet which is repositioning itself to be a leading supply chain solution provider through the internet. Information provided through industry-specific exchanges included technical manuals to the industry, job placement and training information.

Buying networks These exchanges were established by buying consortia. They provided buyers an advantage over sellers in that the buyers became the focal point in these buying networks. They were created to get the gain from the buying power of firms so as to obtain lower costs. Processing over the internet gave the expectations of reduction of transaction costs. Examples of the exchanges are Exostar.com from defense industries and aerospace, Novopoint from the food and beverage industry. Another good example is Covisint which was created by the auto majors for the auto industry.

(Iyer and David, 2004). Corporate B2B exchanges Firms such as Cisco, IBM and Dell were the first firms to adopt this technology. These firms implement platforms for supply chain example being SAP that found it easy to extend the platform to the web. Firms developed selling agencies that could be tied in an easy way into their buying exchanges. A good example is GE Polymer land buying and selling corporate exchange for Dell and GE. The main strength of buying and selling corporate exchange is a reduction of cost through lower costs of transactions processing.

The other strength is better control of costs though better management of demand and supply. According to sheth and Sharma (1997), the reasons for enhancing the relationship between buyers and suppliers and their increased dependence are; most firms have fewer suppliers and maintaining these suppliers relationships is expensive, enhanced buyer -supplier relationships lead to better market positioning as a result of enhanced local and global competition, and lastly supplier commitment is critical with the lean inventories often associate with tools such as just-in-time or manufacture that is demand driven.

Due to the large volume of high-value transactions being processed in B2B exchanges, it requires provision of security at different levels. Correct name –password combination should be provided by the user for identity purposes. Conclusion This paper explains the three types of B2B exchanges, the role internet to every type of exchange and also applies relationship to B2B exchanges. In order for buyer group exchanges to survive, there is need to ensure reduced government costs through maintaining privacy of the data to be disseminated and also screening the suppliers in the best way possible.

B2B exchanges radically reduce buyer’s costs as well as allowing the sellers to reach out to new and existing customers. Buyers and sellers are henceforth interconnected by exchanges and these exchanges acts as a source and media for instantaneous information in an enterprise as well as to the consumers of goods and services. References: R. Iyer, B. David (2004) Customer Relationship in Electronic Markets. Illustrated. Routledge Publishers Sheth, Arun Sharma (1997) Supplier Relationships: Emerging Issues and Challenges.

Industrial marketing management. .