Strategic Design of B2B e-Marketplace Business Models

Diplomarbeit von Birgit Hartmann

Abstract:

Due to the enormous analyst projections on worldwide B2B e-commerce, and additionally forced by the low barriers to entry, races to implement e-marketplaces have started since everyone was keen to get a share out of this large opportunity.

However, as the recent e-marketplace shake-out demonstrated, many e-market makers have often concentrated on Internet Technology, forgetting that once it comes down to its base, e-business it not about bytes, but still about pure business. Often, the first-movers business models grounded on great ideas, but were not sustainable.

e-Marketplaces base on complex business models that present key strategic issues which must be addressed prior to the creation and implementation of any technology infrastructure.

With the help of the 10 Strategic Design Considerations Guideline for the creation of a B2B e-marketplace business model, the reader –firms that are considering becoming e-market makers, and firms interested in participating in an e-marketplace as buyer, seller or service provider- should be able to formulate a complete e-market strategy for an e-marketplace initiative.

The 10 key strategic steps to consider on the way to create the Business Model Design are as follows:

1. Market and Stakeholder Analysis: Which are the quantitative and qualitative attributes of the market: market segmentation, fragmentation of the sell-and buy-side, existing and competing industry channels, complexity of product/ process? Who are the buyers and sellers, service providers, transaction influencers and competing marketplaces? Who are the key stakeholders that are needed to gain critical mass for the marketplace?

2. e-Marketplace Models: What forms of eMarketplaces do exist? Which trend of model can be identified? Should the e-marketplace be proprietary or open? Which roles does an e-marketplace take?

3. Value Proposition: What does the marketplace offer the key players? How will this value proposition gain differentiation in the market? What value proposition will attract and retain those players? How will this value proposition evolve over time?

4. Key Parameters & Value-Added Services: Which technology capabilities and key functions are required to fulfill the offering and maintain the market?

5. Functional Architecture Model: How does the logical construct of the functional requirements look like? What is actually behind the platform?

6. Pricing Mechanism: How is price determined for items being bought and sold? What different pricing mechanisms exist?

7. Revenue Model: How does the e-marketplace owner capture value from his business? Where do the revenue streams from successful e-marketplaces derive from?

8. Equity Structure: What are possible ways of sharing out the equity?

9. Strategic Roadmap: How is the plan of the roadmap for the evolution of the e-marketplace, including key partnerships and alliances? Which is the reaction plan in case of emerging competition?

10.Business Plan: How sustainable is the business model? What are the anticipated reactions from competitors and other major players in the market? Who will likely react positively or negatively and why? What are the economic implications of the business model for the market makers and key stakeholders?

Presentation of the Business Case. By addressing those 10 steps, the e-marketplace management will be well positioned to capture optimum market opportunity and sustain the market position as competitive pressures emerge, due to a well-built strategic roadmap. Meanwhile creating the B2B e-marketplace business model guided by the Strategic Design Considerations, the e-marketplace designer should take into consideration a number of tactical obstacles that must be overcome and the key success factors as listed in the report that will help to position the e-marketplace on the winners’ side. The added checklist for the Business Model results as a very useful instrument. In addition, the e-market designer has to bear in mind industry-specific requirements since obviously not every e-Marketplace Business Model goes along with the respective industry. A solid strategic design is critical to attracting members, to create interest and achieve momentum that will encourage others to join an e-marketplace. As only a few e-marketplaces are expected to survive in each industry, those design choices that are made to address industry problems or to otherwise create a high value-add as well as their excellent execution will make or break an e-marketplace. As the author stresses throughout the report, what matters isn’t just selling products via the Web site or offering a transaction platform for order matching. A model that will succeed will utilize the e-marketplace platform as a mechanism to provide higher levels of integration and solutions that make industry processes become more efficient. Those collaborations give the exchange more relevant context, community attributes, and value and constitute the „stickiness” for B2B sites as opposed to convenient dating services or simple order matching tools which exchanges that lack these collaborations will end up running. From today’s point of view, most probably only a few Business Models will survive the B2B Internet battle. For the majority of the B2B market, the following business models will prove to be successful:

Few vertical e-trading exchanges will form the main players in the B2B market, because their participants will integrate their systems with the aim to establish one strategic interface and have access to other key services through the e-market’s connection to third-party marketplaces. Horizontal e-marketplaces are starting to face an expanded shake-out. Only the fittest will survive, presenting a broad offer and execute efficiently. Industry leaders will partner specialized business services are for example financial settlement, fulfillment and delivery services offered by logistic e-marketplaces, and Business Intelligence services. This enables enterprises to outsource some services and reduces cost. Some e-marketplaces with special know-how or expertise that position themselves intelligently, providing value-adds which would imply inconvenience for the big players to set up, will be on the winner’s side. Those niche players can successfully partner with verticals, covering the weak spots of the latter on highly specialized products or services. The consolidation of the e-marketplaces will go on, since fewer, larger e-marketplaces will be required to realize significant value. Due to the limited offerings by the running e-marketplaces to date, as well as the uncertainty at the current development stage to rely on one single e-marketplace, companies join multiple e-marketplaces to trade in multiple private and publics, verticals and horizontals in order to satisfy their needs for different products and services. However, this constellation named e-Trading Network is rather transitive and will eventually evolve into a more solid and effective model of inter-market integration: the e-Trading Communities. e-Marketplaces will build integration gateways among themselves and partner with verticals, horizontal and value-added e-Marketplaces, so that companies can rely on a single connection; this way, the players will benefit from the broader partnering community available through this network of e-marketplaces. This way, the e-marketplace becomes a strategic partner for the individual business.

Table of Contents: