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Business-to-business

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The "electronic components district" of Guangzhou, where numerous shops sell electronic components to other companies that would use them to manufacture consumer goods

Business-to-business (B2B or, in some countries, BtoB) is a situation where one business makes a commercial transaction with another. This typically occurs when:

  • A business is sourcing materials for their production process for output (e.g. a food manufacturer purchasing salt). Example: Providing raw material to the other company that will produce output.
  • A business needs the services of another for operational reasons (e.g. a food manufacturer employing an accountancy firm to audit their finances).
  • A business re-sells goods and services produced by others (e.g. a retailer buying the end product from the food manufacturer).

B2B is often contrasted with business-to-consumer (B2C). In B2B commerce, it is often the case that the parties to the relationship have comparable negotiating power, and even when they do not, each party typically involves professional staff and legal counsel in the negotiation of terms, whereas B2C is shaped to a far greater degree by economic implications of information asymmetry. However, within a B2B context, large companies may have many commercial, resource and information advantages over smaller businesses. The United Kingdom government, for example, created the post of Small Business Commissioner under the Enterprise Act 2016 to "enable small businesses to resolve disputes" and "consider complaints by small business suppliers about payment issues with larger businesses that they supply."[1]

Business-to-Business companies represent a significant part of the United States economy. This is especially true in firms of 500 employees and above, of which there were 19,464 in 2015,[2] where it is estimated that as many as 72% are businesses that primarily serve other businesses. [3]

Comparison with B2C

The principle difference between B2B and B2C is that the first one refers to commerce transaction between manufacturer and retailer, and the second one it is the manufacturer supplying goods to the retailer.[4]

In B2B there are business men in both sides, but in B2C there are one business man and one consumer. In the first case the decision is pursued by need, because the other business needs it, and in the second case they are expectatives much more than needs. B2B have many sellers and different stores, whereas B2C usually have one supplier. B2B is concentrated on raw data for another company, but B2C focus on producing something for consumers. When there is a B2B transaction, it entails direct-sourcing contract management, which involves negotiating terms that establish prices and various factors as volume-based pricing, carrier and logistics preferences, etc. B2C transaction is clearer, it has spot sourcing contract management that offers a flat retail rate for each item that has been sold. The time is also a difference, because B2B has a lower process than B2C which is concluded in shorter periods (could be minutes or days). Business-to-business needs an upfront investment generally, and business-to-customers does not need a business to spend money on infrastructure. The last difference mentioned here is that in B2B they have to deal with back-office connectivity and invoicing a number of different partners and suppliers, meanwhile B2C results in more seamless transactions as options such as cyber-cash allows the business to accept a wider variety of payment options. B2B, as there are bigger amounts usually have higher costs than B2C, which are dedicated to daily transactions. In B2B the brand the reputation depends on the personal relations between the businesses. On the other hand, in B2C the reputation is fulfilled by publicity and media.

In many cases, the overall volume of B2B (business-to-business) transactions is much higher than the volume of B2C transactions.[5][6][7] The primary reason for this is that in a typical supply chain there will be many B2B transactions involving subcomponents or raw materials, and only one B2C transaction, specifically the sale of the finished product to the end customer. For example, an automobile manufacturer makes several B2B transactions such as buying tires, glass for windows, and rubber hoses for its vehicles. The final transaction, a finished vehicle sold to the consumer, is a single (B2C) transaction.

Matesourcing

"Matesourcing" is the phenomenon where businesses seek business support from family and friends rather than obtaining business services from other businesses on a commercial basis. In 2011, UK business PC World published research commissioned from Trends Research which found that British SME's are increasingly asking family and friends for IT problem-solving and purchasing advice services.[8]

Business to business model

Vertical B2B model

Vertical B2B is generally oriented to manufacturing or business. It can be divided into two directions -- upstream and downstream. Producers or commercial retailers can have a supply relationship with upstream suppliers, including manufacturers, and form a sales relationship.[9] As an example, Dell company is working with upstream suppliers of integrated circuit microchips and computer printed circuit boards (PCBs).

A vertical B2B website can be similar to the enterprise's online store.[9] Through the website, the company can promote its products vigorously, more efficiently and more comprehensively which enriches transactions as they help their customers understand their products well. Or, the website can be created for business, where the seller advertises their products to promote and expand transactions in an intuitive and convenient way.

Horizontal B2B model

Horizontal B2B is the transaction pattern for the intermediate trading market. It concentrates similar transactions of various industries into one place, as it provides a trading opportunity for the purchaser and supplier, typically involving companies that do not own the products and do not sell the products. It is merely a platform to bring sellers and purchasers together online.[10] The better platforms help buyers easily find information about the sellers and the relevant information about the products via the website.

Advantages and Disadvantages of B2B

As advantages we can indicate 3. [11] As the business has to negotiate with other businesses, not with a big number of customers, it is easier to convince one person o a group of them rather than a lot of customers. The second advantage to bring up is that transactions, hence sales volume is going to be bigger than doing negotiation with customers, who only buy once at a time. Last one is that the loyalty is more interesting in cases of big businesses rather than in customers, because they move around more money. When a business starts to negotiate with another one, it will provoke bigger incomes than a new customer in cases of B2C.

The disadvantages are also 3: this type of commercialization has a limited market space, because their objective is specialized businesses, meanwhile in B2C the scope is much bigger. It is important to know that in this case the businesses have power of negotiation, because they buy big amounts, so the other party has to offer discounts due to wholesales. Customers usually do not have this power. After all, B2B has a slower process, which means that there is a lot of time spent. In B2C the sales are much quickly, because the decision made by the customer is less important because it is less amount.

Top used B2B platforms

B2B platforms seemed to gain a lot of momentum in last few years. The Ecommerce giant Alibaba paved way for many such websites who came forward with innovation in the trading world. The Business to Business marketplaces now offer a more personalized experience. Top used B2B platforms[12] of all time include many big names who have been around for years, with some new additions.

Alibaba

Alibaba[13] was founded by Jack Ma in 1999 and since then we have watched it pave way for the B2B portals present now. It is the most trusted platform for global trade among wholesalers, suppliers, distributors and retailers. Currently, it holds the title of being the biggest B2B portal[14]. Its key features include online payment services, price comparison search engines and cloud data storing services.

Made-In-China

Made-In-China is a leading online B2B marketplace that connects global buyers with qualified manufacturers and suppliers. Due to its experience in the Ecommerce world, it is cited as the most distinguished site adept in providing the quality based services in a wide range of products ranging from Agriculture to Toys and Textile products.

Globalsources

Globalsources was founded in Hong Kong. It is one of the most used B2B platform and traders across the globe swear by it. Globalresources has provided effective trade solutions to a number of online traders from United States, United Kingdom, China, Europe and Asia.

Tradewheel

Tradewheel.com is serving as a prominent e-commerce stage for small and medium enterprises. It is one of the leading B2B portal[15] where millions worth of products are being bought and sold every day. Tradewheel is one of the few online destinations where trustworthy and dependable suppliers, exporters and reliable manufacturers from international regions are taking part in trade.

Indiamart

Indiamart is an India based B2B portal with its head office situated in New Delhi. It is having millions of registered users who are globally buying and selling goods in bulk quantity. Its prominent categories include Agriculture, Health & Beauty, Food & Beverage, Industrial Supplies, and machinery.

The development trend of B2B (business-to-business)

Along the way, B2B has matured but despite the good momentum, it still has an immature side. The majority of the immaturity is in online price negotiation and online collaboration. These have not been fully developed. [16][17]

Boston Consulting Group (BCG) conducted a survey through in-depth interviews with online traders. BCG believes that the current B2B online trading model cannot completely simulate the traditional B2B offline trading model. Almost half of the survey group indicated online transactions still need to coordinate with traditional offline communications to complete the entire transaction process. [18]

The report pointed out that with the maturity of the B2B and the improvement of the price comparison mechanism, pressure on the sellers will increase. The survey found that some of the sellers already felt a lot of pressure brought on by the price comparison.

This report presents another valuable analysis of the development trend of the B2B market. It pointed out that each party in the B2B market expects a simplification in each trading field. They do not expect diversification of the trading platforms. This is the same perspective as the trading platforms. The trading platforms hope to integrate instead of having more competitors.[19]

See also

References

  1. ^ Small Business Commissioner role, 26 July 2015, accessed 22 October 2017
  2. ^ Bureau, US Census. "2015 SUSB Annual Data Tables by Establishment Industry". www.census.gov. {{cite web}}: |last= has generic name (help)
  3. ^ "Fortune 500 2015". Fortune.com. Retrieved 2018-10-18.
  4. ^ Kumar, Vinod; Raheja, Gagandeep. "Business to business and business to consumer management".
  5. ^ Sandhusen, Richard (2008). Marketing. Hauppauge, N.Y: Barron's Educational Series. p. 520. ISBN 978-0-7641-3932-1.
  6. ^ Shelly, Gary (2011). Systems analysis and design. Boston, MA: Course Technology, Cengage Learning. p. 10. ISBN 978-0-538-47443-6.
  7. ^ Garbade, Michael (2011). Differences in Venture Capital Financing of U.S., UK, German and French Information Technology Start-ups A Comparative Empirical Research of the Investment Process on the Venture Capital Firm Level. München: GRIN Verlag GmbH. p. 31. ISBN 978-3-640-89316-4.
  8. ^ Matesourcing IT support could create small business headaches, 25 February 2011, accessed 15 April 2017
  9. ^ a b E-COMMERCE, AN INDIAN PERSPECTIVE. P.T. Joseph, S.J. 2015. pp. 43–45. ISBN 978-81-203-5154-7.
  10. ^ E-commerce: Formulation of Strategy. Robert T. Plant. 2000. pp. 26-27. ISBN 0-13-019844-7.
  11. ^ Iankova, Severina; Davies, Iain; Archer-Brown, Chris; Marder, Ben; Yau, Amy (August 2019). Industrial Marketing Management. pp. 169–179.
  12. ^ https://tweakyourbiz.com/sales/b2b-sales/top-portals
  13. ^ https://en.wikipedia.org/wiki/Alibaba_Group
  14. ^ https://www.scmp.com/tech/e-commerce/article/3022982/alibaba-posts-42-cent-gain-quarterly-revenue-defying-slowdown-china
  15. ^ https://business.fandom.com/wiki/TradeWheel
  16. ^ Anna, Brzozowska (March 15, 2018). "E-business as a New Trend in the Economy". Procedia Computer Science. 65: 1095–1104. doi:10.1016/j.procs.2015.09.043.
  17. ^ Claycomb, Cindy (March 15, 2018). "Predicting the level of B2B e-commerce in industrial organizations". Industrial Marketing Management. 34 (3): 221–234. doi:10.1016/j.indmarman.2004.01.009.
  18. ^ Andersen, Phillip (March 15, 2018). "How Digital Leaders Are Transforming B2B Marketing". BCG.COM.
  19. ^ Brown, Brian (March 15, 2018). "When do B2B brands influence the decision making of organizational buyers? An examination of the relationship between purchase risk and brand sensitivity". International Journal of Research in Marketing. 28 (3): 194–204. doi:10.1016/j.ijresmar.2011.03.004.
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