COMMERCIAL EXCHANGES IN B2B MARKETSfor the Internet marketers is that access to information empowers the buyer in the purchas-
ing decision-making process, as online information becomes available to assist purchasing
from all of a company’s competitors. Therefore, each business needs to make an effort to
provide betterinformation than its competitors if it wishes to retain customers. An example
of a business that uses such a tool to help assist the buying decision is Marshall Industries,
which provides an on-screen tool that helps show customers the range of products avail-
able that meet their needs. Regardless of such innovations, Croom (2001) suggests that in
the future, especially in ‘routine purchasing’ situations, companies will be more inclined to
completely outsource the purchasing function and in doing so will make the quality of the
information and its search facilities largely irrelevant.Streamlining of the purchasing function
Another change to the buying process, which may occur as a result of adoption of Internet-
based technology, is a change to the people involved in the buying decision. Internet
solutions are in certain instances enabling organisations to streamline the purchasing func-
tion both in terms of the number of supplier contacts (electronic data interchange via the
Internet facilitates access to increasing numbers of suppliers) and the empowerment of com-
pany individuals involved in the buying decision through access to consistent and coherent
information. The adoption of Internet technologies can have far reaching implications for
purchasing practices. Some key initiatives which B2B organisations might consider are:
E-procurement: Timmers (2000) suggested that e-procurement, defined as ‘tendering and
procurement of goods and services’, is a business model that has effectively been imple-
mented by businesses around the globe. Kalakota and Robinson (2000) advocate that
increasing an organisation’s profitability through cost reduction makes online procure-
ment an important strategic issue. For example, Marshall Industries (a large American
electronic components company) was one of the first companies to recognise the advan-
tage of information systems, computer networking, collaborative tools, intranets and the
Internet. These new technologies continue to play a key role in helping Marshall differ-
entiate its offering from that of its competitors and establish a competitive advantage in
what is basically a commodities market. Marshalls demonstrate the strategic relevance of
moving to online e-procurement and whilst many others have undoubtedly made signif-
icant cost savings by shifting many previously manually processed paper-based tasks to
the web, it is important to consider whether this is a ‘quick-fix solution’ to satisfy share-
holder aspirations in the light of the turbulent ‘dot-com boom and bust era’, showing
that Internet technologies can make a real difference to profitability, or whether such
models can produce long-term benefits. See Mini Case Study 11.4.The National Health Service Purchasing Agency works with around 400 NHS trusts and health authorities
and manages 3000 national purchasing contracts. The NHS spends approximately £11 billion per annum
on purchasing goods and services for the health service.
The aim is for the Agency to develop and implement an e-commerce strategy that will:
embrace and integrate all business processes from ‘demand’ through to payment;
embrace all key players in the NHS supply environment;
expect the NHS to ‘act’ on a once only basis in programme design and application;
change the function of purchasing from transactional to strategic.Mini Case Study 11.4 NHS Purchasing and Supply Agency