Effects of Digitization on Companies : Part V

This part is continuation of part IV. The e-marketplace is an electronic marketplace which, as a virtual platform, relies on the digital networking of market participants. The advantage of electronic marketplaces is that any participant can electronically “enter” an e-marketplace of their choice without actually having to leave the house. Entering the e-marketplace is not tied to any time limit, as it is a continuously open facility. Transactions between a provider and a customer do not take place personally, but via the digitally networked data paths on the Internet at a specific address. In particular, the following problems in real trading led to an increase in electronic marketplaces :

• Capacity limitations: By limiting the trading space in the real market, the marketplace operator has to decide which objects he will allow for trading on his marketplace. As a result, he does not have the opportunity to have every seller appropriately present all objects in his range.
• Mediation restrictions: The marketplace operator normally takes care of the provision of the trading room. The mediation work in real trade is simply to give the customer a collection of trade partners and objects. There is no brokerage service for individual transactions.
• Market opacity: Due to a large number of suppliers and buyers, it is difficult to get an overview of the market. This would result in high costs due to the confusing overall market. Overall, this leads to a lack of market transparency.
• Coordination inefficient: A provider cannot normally maintain direct contact with all potential customers. Conversely, this also applies to the customer: It is not possible for him to identify all providers and to contact them directly. To ensure that he has the best possible offer, the customer would have to obtain an offer from all providers. However, this is not possible.

Depending on the design of the electronic brokerage or coordination service with regard to conceivable system solutions, a distinction is made between two types of electronic marketplaces:

• Vertical marketplaces:
• Focus on a closed group of users, e.g. members of an industry
• Coverage of all stages of the value chain with electronic services

Alignment of the services to the solution of branch internal problems
horizontal marketplaces :

• Focus on an open user group
• Coverage of a certain stage in the value chain, e.g. sales
• Concentration on a specific product group

The question of the system solution for an e-marketplace can be differentiated according to who enables the business processes through the implementation. A distinction can be made between the following three basic models of the e-marketplace solutions.

Provider model:

• Operated by one or more providers
• Objective: to increase the providers’ profits
• Alignment in favor of providers through information-oriented e-marketplaces
• Operator profit depends on the size of the group
• Occur especially in markets with high market power and concentration

Demander model:

• Operated by one or more customers
• Objective: maximizing benefits and reducing costs
• Orientation in favor of the consumer through price-oriented e-marketplaces
• Amalgamation of many buyers in order to obtain a better unit price from the supplier through a large sales volume

Broker model:

• Operated by an independent commercial agent
• Objective: To achieve a monetary advantage
• Orientation in favor of the broker through trade-oriented e-marketplaces
• Brokers must signal an objectivity in the mediation of supply and demand

The term e-procurement stands for electronic procurement and deals with the purchase of products and services via digital networks. The basic idea of ​​e-procurement is the handling of purchasing-relevant processes and the relationship between buyer and supplier via the networked computer and the specified framework conditions. Problems in real procurement mean that more and more companies are opting for electronic procurement. The problems include in particular:

• Routine work: Recurring routine work, such as requesting supplier catalogs, is very time-consuming for employees in the purchasing departments, so that there is little time left for more important tasks, such as negotiations with suppliers.
• Procurement time: The real procurement process is very time-consuming due to the many individual process steps.
• Procurement costs : The costs of real procurement are very high due to individual factors, such as personnel and paper costs, since around 50% of the order is paper-based.

As with the e-shop, the provider has to choose between three different system solutions, which are described in more detail below:

• Sell-side model: The supplier provides the purchasing software and the online catalog. This is a cheap alternative for the purchaser, as the catalog management is taken over by the seller. However, there is a disadvantage for the purchaser, as the sell-side models are not directly linked to the merchandise management systems.
• Buy-side model: the buyer provides the purchasing software and the online catalog himself. It is advantageous here that the purchasing software can be integrated directly into the existing system landscape. Furthermore, rules for procurement can be stored in the purchasing software, which ensures compliance with certain processes.
• Marketplace model: The required functions and online catalogs are operated by a marketplace operator. The main focus here is to find several suppliers on one marketplace.
  The aim of electronic procurement is primarily to achieve cost and time savings. The electronic exchange of documents saves time on the one hand, and on the other hand, the elimination of paper-based orders leads to cost savings.
• Standardizability: Above all, products that can be standardized are suitable because of their low need for explanation.

Continued in next part.

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