Challenges for the Collaborative Electronic Markets - Essay Example

? E-COMMERCE & IT Table of Contents Introduction 3 Challenges for the Collaborative Electronic Markets 4 Managing Conflicts in e-Marketplace 4 Lessons to be Learnt from different Electronic Marketing Sectors 5 Covisint (Automotive Sector) 5 Elemica (chemical Sector) 6 Agoratrans (Road Haulage Sector) 7 The Future of Electronic Markets 8 References 10 Bibliography 12 Introduction Electronic Markets are the recent online trading network platform that links the sellers with the buyers together for exchanging goods and services, without any mandatory face to face interaction during spot trading. Most of the EMs are two-way networks or collaborative in nature. Thus, when different companies working in same line of business meet at a place, which are willing to exchange goods to target customers, we get an association of market places. Such market place is called the electronic market if the parties to transaction mainly communicate online or through some private networks. The concept of EM has its origin from Electronic commerce, the fundamental purpose of which is to execute transactions that are supported electronically. Some of the top e-commerce developments of last decades include eBay, Amazon, Google Ad Words, PayPal, etc. The business model may be B2B, B2C, or C2C. In all these models, automating transactions drastically reduces the amount of paper works and need for human intervention which consequently leads to minimization of overall cost of the firms (Andreini, 2003, pp.15-16). Any transaction involves the exchange of goods and services and the electronic medium is used to keep record of such transactions, such as inventory, track location of goods despatched, quantity, price, etc. Online transactions that take place at the point of sale need to critically focus on time sensitive transactions whose delay might cause huge losses for companies (Huang, Wolf, and Sycara, 2001, pp. 2-9). The evolution of internet increased the speed of data transfer and, hence, provided an ideal platform for conducting EDI (Electronic data Interchange) transaction and E-commerce. Challenges for the Collaborative Electronic Markets When any business plans to launch the Electronic market, its main objective is to bring the buyers and sellers together through a network by realising a need for exchange of goods. But such a business model can sustain in the long run only if there is sufficient trust among the business partners on the entire system. Not to mention that security, reliability and privacy is a must for any sort of online transaction. These issues must be addressed very seriously if the company is planning to sustain (Wielki, 2002, p.129). The Electronic market has huge scope form demand planning, analysing and forecasting, to supply chain management, logistics and demand fulfilment. The business partners do not only look for cost efficiency but also expect specialization from Electronic Market companies (Furrenr and Sudharshan, 2001, p.127). The cost consideration has to be taken into account along with the timely delivery. This is because very often it is found that carrying goods for third party reduces direct cost per kilometre of running the trucks for the companies but at the same time it increases time of delivery by spending significant amount time on roads. Many e-Markets have only focused on the cost aspect ignoring the time which ultimately lead to their downfall. Very often the larger-than-life ambition, lack of clearly defined long term goals, distrust among partners, reluctance of the suppliers to join common platform also lead to failure of e-business models (Gupta, 2007, p.4). In order for the e-commerce companies to sustain in the competitive market, it needs to specialize on a particular field and then expand the business gradually with time. Thus, the mentality of entrepreneurs of trying to achieve ‘too much’ in ‘less time’ may ultimately take their ship down and shorten their long term sustainability. Managing Conflicts in e-Marketplace The emergence of Electronic Marketplace has lead to the concept popularly known as the ‘Death of distance’. This impact is mostly influenced by the evolution of the internet and its increase in the speed of data transfer. There is, however, questions regarding the conflict management and cooperation between the businesses partners in a collaborative e-Markets. This is mainly due to fact that even though these networks provide an online platform for market participants, but only the agent common to all parties can create the platform. Here we need to distinguish between the horizontal and the vertical B2B model on the basis of target platform (Henseler, 2006, p.3). While the former deals with indirect goods transfers and services across multi industry, the latter is a more specialised marketplace focusing on specific domains like supply chain management, procurements, etc. An example of vertical marketplace is supplyon.com and example of horizontal marketplace is employease.com. In most of the cases, it is found that conflicts seemed to arise when the companies participating in the e-Markets platform assume one self-sufficient entrant as monopolistic or cartelising in vertical or horizontal marketplace. Market cartelisation is considered as negative signal to fair competition which leads to price manipulations. Other major sources for conflicts include dissimilar pricing schemes, group or segment specific entrance fee, hesitation of market participants to enter market due to lack of trust, etc. Some of these problems can be managed by implementing a two-sided network that involves bidding process. The bidding process gives both the buyers and the sellers’ fair price estimation as it is purely based on the demand-supply equation; limit segment specific pricing to the extent of demand for product and services; restrict participants forming cartelisation; introducing multi-agent platform to register the participants (Civic Consulting, 2011, pp.104-126). Lessons to be Learnt from different Electronic Marketing Sectors Covisint (Automotive Sector) Covisint was one of the most impressive e-commerce businesses-to-business platforms for the supplier in the automotive industry in the last decade. But despite the involvement of some of the best players in the automotive industry, the company failed to live up to the expectation. It had to struggle for some years but finally, it was acquired by Compuware corp. in the year 2004 (Arbin and Essler, 2002, p.283). The company started its operations with the objective in mind to provide services in e-procurement, product development and product supply using the e-Market. Such an ambitious business model requires specialization in the entire three fields which the company failed to achieve. The company failed to keep its focus since it lacked clear strategic goals. The company failed to execute its operations efficiently and the variety of services it offered became too much for the company to handle. It even offered e-auction facilities to the car manufacturers and their suppliers. This gave the feeling to the automotive industry that the company was trying to eliminate competition in the process and subsequently the hesitated to participate in the network which led to its failure. It failed to win the faith of its industry peers which is very essential for the sustainability for any business. While some critics say that the company had extravagant ambitions, its business model was not sustainable. The main reason for its failure was its unclear business model. Along with that, the company also lacked support from its promoters. Over the time the company’s major suppliers also started losing faith from the company’s objectives and goals that ultimately led to its failure (Luise and Berlin, 2004, pp.2-4). Elemica (chemical Sector) Elemica is an e-business company which supplies more than 3500 chemical products to customers across 175 countries using the online platform. The company’s e-Business philosophy aims to achieve automation through process improvements by improved data quality, reduced clerical errors and business efficiency (Sectoral e-Business Watch, 2008, P.2). The company connects with its customers, suppliers, vendors and distributers through the electronic market. When Elemica started in the year 2000 by a consortium of 22 chemical companies, its main focus was on raw material supply and packaging. The company gradually extended the concept of EM when it realized that by using e-commerce, it can reduce its cost of procurement and improve its supply chain and logistics. The e-business model eliminates complexity and provides better sourcing knowledge and improves delivery lead times. Thus, the company can be considered as an agent connecting the chemical industry. It enables planned data transactions between various businesses in the same industry. The company provides business-2-business model to its customers and acts like a hub that connects suppliers with the customers. The company uses the web connectivity to supply its products to global chemical industry by providing an electronic market network (Rehn, 2007, p.15). Their services also concentrate on supply chain management and ERP solution. The company claims that it is only a ‘facilitator’ to transactions and is not directly involved in buy/sell/own of chemicals. Its similarity with other e-Market platforms is that it also charges a technical fee that finances its operations. Thus, it may not be considered as a complete e-Market but only an IT service platform that helps its customers to trade with their partners cost effectively. Agoratrans (Road Haulage Sector) In the year 2000, the brewer Damm joined forces with the consultancy Accenture and BT Ignite; the data networks arm of BT, to create Agora Europe, the joint venture which has developed Agoratrans e-marketplace. It focuses on Spanish freight and logistics. The company faced many challenges and was criticized when launching an e-market network for the logistics industry. But its focus on value added services made a difference and provided a sustainable business model. The concept of e-market place is to reach customers across the globe, but Agoratrans’ focus on a specific geographic area like Spain was an intelligent decision by the company to pilot test it then gradually increase the focus. The company’s model can be wisely tested through its logistics operations in Spain. This is because the population in Spain is widely dispersed and moving goods from one location to another can be very expensive, as well as complex. The lead time must be taken into account in logistics planning since if proper routes are not planned in advance the trucks may have to spend days on roads, thus, delaying delivery (Ven and Long, 2011, p.4). Damm is one of Spain’s largest brewers and has sufficient knowledge and expertise in serving the Spanish market. It also shares the core technology with US Company Manugistics which provides Agoratrans SCM software. Since its inception in 2001, the company was able to acquire over fifty logistics and distribution firms of marketplace. It handles close to three thousand truck load per month through its SCM. It primarily focuses on matching demand and supply by offer a wide range of specialized products and services for its customer. The main focus in e-Markets is the cost effectiveness of their model that determines its sustainability over time (Chagas, 2011, pp.3-4). Carrying goods indirectly for third party reduces cost but may increase time of delivery. Many e-markets tried to tackle this problem but failed in the long run which puts a question mark on the sustainability of such models. Agoratrans strategy includes partnership with shippers, carriers, various private communities on the same line of business, and then gave them a common platform to exchange goods with each other as their business requires. Thus, Agoratrans was able to provide a platform of sustainable e-commerce network to the automotive industry. The Future of Electronic Markets Launching an e-Market and sustaining it in the long run requires clearly defined set of goals and specialisation in the field of work that the business is in (Youll, 1999, pp.1-2). Over ambitious expectation from the market by entrepreneurs may lead to disruption in the system by creating an atmosphere of distrust between the business partners as seen in the case of Covisint. Also, the company attempting to achieve dominant position in the industry by offering a vast variety of services ignoring the specialization may lead to their failure. This proves that the company failed to perceive the hidden dangers for such ambitious business model. This teaches us a valuable lesson that the companies which enter the e-Market with the expectation to gain market control without having sufficient knowledge and expertise will not be able to win the trust of their business partners and subsequently fail to sustain independently (Wang, Cheng, and Zhao, 2004, p.22). References Andreini, D., 2003. Internet Marketing. [Pdf]. Available at: http://www.unibg.it/dati/corsi/16007/26823-Introduction%20to%20Internet%20Marketing.pdf. [Accessed on February 04, 2013]. Arbin, K. & Essler, U., 2002. Emerging Industrial eMarkets: The Case of Covisint in Europe. [Pdf]. Available at: https://domino.fov.uni-mb.si/proceedings.nsf/0/0645203044a447d1c1256e9f0033f229/$FILE/arbin.pdf. [Accessed on: February 4, 2013]. Chagas, E., 2011. Holistic Mobility Management. Sustainable Mobility in Europe: setting the scene. [Pdf]. Available at: http://www.etuc.org/IMG/pdf/ETF_on_holistic_mobility_ETUC_projectChagas.pdf. [Accessed on February 04, 2013]. 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