Discuss the main obstacles to B2B (business-to-business) e-commerce. Justify your answer with examples.

Paper instructions:
Approaching the question

This question asks you to focus on B2B electronic commerce and to discuss the obstacles to the successful development of these electronic business solutions. This question can be approached from two different angles.

One possible approach is to discuss the technical, legal and security problems of B2B exchanges.

An alternative and probably more valuable approach is to discuss the different B2B marketplaces (buyer oriented; supplier oriented; intermediary oriented) and highlight the challenges that each of the marketplaces faces when implemented. You have to reflect on the fact that an investment in setting up electronic links is normally justified in financial terms by the possibility of modifying the market structure to a company’s advantage (Porter and Miller, 1985). It is in fact very expensive and demanding to implement and maintain a B2B marketplace and these costs are only justifiable if they are generating economic advantages for the company. While an investment in ICT can generate advantages for the investor in the technology it can also create disadvantages for the counterparties in the transaction and therefore making it difficult to sustain that specific marketplace.

Take for example the case of the buyer oriented marketplace. In this case the buyer invests in ICT to gain advantages over the suppliers. Investments in e-procurement (subject guide, Chapter 6) are made to exploit the buyers’ power. In this case the advantage of exploiting the competition between suppliers can create a situation where no suppliers are willing to participate in the marketplace as the increased competition is jeopardising their chances to make minimal profits. In this case the use
of technology by the buyers to exploit the competition between suppliers is potentially leading to a situation that is not sustainable for the suppliers. The competitive effect of ICT on suppliers can be discussed as an obstacle to the deployment of buyer oriented B2B marketplaces.

Similar reflection can be done for the supplier oriented marketplaces.

A different argument can be offered to explain the obstacles to intermediary oriented marketplaces. These marketplaces are only sustainable if they maintain a neutral position in the market.

To answer this question you have to discuss the challenges which companies face when they engage in electronic trading and highlight what are the obstacles that can jeopardise the sustainability of the different B2B strategies.

A good answer will discuss the main characteristics of B2B electronic commerce and identify the main obstacles. An excellent answer will discuss in detail the obstacles of one of the different B2B marketplaces.