The B2B Matrix

1
The B2B Matrix
What Business Buy
How Businesses Buy
2
How E-hubs Add Value
What Business Buy
How Businesses Buy
3
Mechanisms Used by E-Hubs
What Business Buy
How Businesses Buy
4
Aggregation

• Brings together large number of buyer and
  supplier
• Reduces transaction cost by providing one-stop
  shopping
• Adding another buyer/seller benefits only
  sellers/buyers
• Works best
• When processing cost is relatively high compared
  to product cost
• Products are specialized, not commodities
• The number of SKU is very high
• Buyers are not sophisticated to under dynamic
  buying mechanism
• Purchasing is done through pre-negotiated
  contracts
• A meta-catalog of products carried by a large
  number of suppliers can be created

5
Matching

• Brings together buyers and sellers to negotiate
  price on a dynamic and real-time basis
  (bids/asks can take the form of auction)
• Buyers can be sellers and vice-versa
• Adding new members benefits both buyers and
  sellers
• Works best in the following scenarios
• Products are commodities and/or near commodities
  and can be traded without being seen
• Trading volumes are massive relative to
  transaction costs
• Buyers and sellers are sophisticated enough to
  deal with dynamic pricing
• Companies are spot purchasing to smooth the peaks
  and valleys of supply and demand
• Logistics and fulfillment can be conducted by
  third parties, often without revealing the
  identity of the buyer or seller
• Demand and prices are volatile

6
Aggregation vs. Matching

• Matching more powerful than aggregation
• Matching more complex than aggregation

7
Types of E-Hubs

• Neutral E-Hubs
• Biased E-Hubs

8
Neutral E-Hubs

• True market makers equally attractive to both
  buyers and sellers
• chicken and egg problem
• Sellers channel conflict
• Conflict resolution through partnership
• Can lead to perception of bias
• Likely to succeed in fragmented markets on both
  seller and buyer sides

9
Biased E-Hubs

• Biased Sellers forward aggregators
• Biased Buyers reverse aggregators
• Biased e-hubs can exist as aggregators in
  systematic markets or as matchers in spot markets
• No chicken and egg problem
• Can focus on small buyers/sellers using
  aggregation
• Not attractive to large buyers
• Higher sales and marketing costs
• Benefits in fragmented demand or supply, not both

10
Forward Aggregation

• Biased toward sellers
• Amass supply and operate downstream in a supply
  chain
• May host auctions for buyers

11
Forward Aggregator Model
Small Resellers
Large Suppliers
E-hub
Buyers
Compaq
Ingram Micro
IBM
Cisco
Microsoft
Fulfillment Call Center Financing Configurators
Direction of Aggregation
12
Reverse Aggregation

• Biased toward buyers
• E-hubs attract a large number of buyers and then
  bargain with suppliers on their behalf

13
The Reverse Aggregator Model
Small Buyers
Large Suppliers
Distributors
E-hub
Dupont
FOB.com
Dow
Ashland
Fulfillment Inspection Receivables Financing
Direction of Aggregation
14
Workflow Redesigner

• Redesigns workflow across businesses in specific
  industries
• Combine the efficiency of work automation and
  effectiveness of process redesign

15
Syndication

• Involves the sale of same good to many customers,
  who integrate with other offerings and
  redistribute it

16
Three Syndication Roles

• Originators
• Syndicators
• Distributors

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The Structure of Syndication
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How Syndication Differs?