B2b Electronic Commerce PrimerB2b Electronic Commerce PrimerInternet and the World Wide Web (WWW) have propelled the world into a new era. The change we are in can be as far-reaching as the Agricultural Revolution and as intense as the Industrial Revolution. Business conducted over the Internet (i.e., e-commerce) implicates not only business costs and productivity, but also world economics at large. New tools, new rules, and new relationships are emerging to face a new order of economy.
E-commerce can be separated into three major categories: B2C (business-to-customer or retail), B2B, and intra-organizational. Here, our focus is on B2B e-commerce.
B2B e-commerce, also called inter-organization e-commerce, stands for business-to-business electronic commerce. It is defined as intercompany buying and selling of goods and services where the final order is placed over the Internet. Besides business transaction, B2B also allows companies to manage customer and partner relationships over the Internet or an extranet (a network that provides pathways into a companys private network (i.e., intranet) for its partners). With e-commerce, companies can eliminate multiple layers of wasted effort from a vast array of transactions –ordering, purchase order preparation, pricing changes, billing, payment, and order tracking.
The market for B2B e-commerce is enormous. Goldman Sachs estimates that the value of transactions conducted on-line between companies could reach $1.5 trillion in the US by 2004, which dwarfed the B2C on-line commerce in the US, estimated by Forrester Research to be $108 billion by 2003. Not only is the B2B e-commerce larger than that for B2C e-commerce (about 10 times larger), it is also growing much more rapidly.
Vertical and Horizontal Procurement OpportunitiesTo understand B2B, it is useful to understand what businesses buy. What businesses buy can be classified into manufacturing inputs and operating inputs. Manufacturing inputs are raw materials and components that go directly into a product or a process, and are usually purchased from vertical, or industry-specific, suppliers and distributors. Usually, different industries have different needs and their needs do not overlap. Steel, electronics, chemicals, and agriculture are good examples of vertical markets. On the other hand, horizontal markets are markets for operating inputs or non-production goods, i.e. services or products for a wide range of industries that are not used as direct inputs in the manufacture of a companys products. Horizontal market opportunities exist where the same service can be provided across different industries. Maintenance, repair and operating (MRO) goods such as office supplies, airline tickets, logistic management, media, and etc., are good examples of horizontal markets.
Classification of B2B business modelsBusiness model is simply the method of doing business by which a company can sustain itself, i.e. to be profitable. Based on the parties involved and the trading mechanism, B2B e-commerce business model can be classified into three major categories: buy-side, sell-side, and electronic hubs (also called Intermediaries, market makers, or electronic marketplaces).
Buy-side systems are simply Internet procurement systems hosted and administered by the buying organizations. This system generally automates the procurement process and to aggregate product information from the buyers preapproved suppliers. It is a good system for buyers with high buying power. Normally, large companies that spend large amount of dollars on the procurement of goods and services will find the system beneficial.
Sell-side systems are installed by companies selling complex non-commodity products that enable the supplier to sell its products to other business over the Internet. Since the products are complex, the buyers find that it is best to have the task of updating the catalog data left to the supplier and sell-side systems.
Electronic hubs are Internet based intermediaries that host electronic marketplaces and mediate transactions among businesses. They are market making websites hosted by an independent third party that buyers and sellers can interact and engage in business. This system is attractive because it may be able to enjoy economic of scale by aggregating transaction volume, so that they can reap higher profit and invest more back in the system than a single company with smaller transaction volume. Another reason for its attractiveness is information custodianship since neither buyers nor sellers want their proprietary information known by others. Buyers may not want to engage in a sell-side system because the seller could analyze their buying pattern and extract more of the buyers information. Sellers, on the other
The blockchain
Another reason to consider a blockchain-based system is to offer protection for transactions that rely on trustless and reliable third parties, because with these systems, it can be very easy for buyers to be cheated. Therefore, a digital ledger which makes use of a user’s wallet or other hardware is the ideal option. In short, the ideal digital ledger is made up of different parts in order to provide security for one of the main components: the transaction log, and also for transactions the ledger represents. When a transaction is reported as completed, it shows up on the main ledger, which has information about the complete amount of money from where it was received. When a transaction is completed, the transaction log shows up on both the block chain, as well. Once a transaction is completed, it’s possible to view the ledger of each transaction, which is then made available to other peers in the network using the blockchain (the “bipeline”).
Transactions
The blockchain can be used by financial, financial market, credit card, insurance companies, and the like to create new money and create new kinds of money. Once the data set has been collected, the new money can be paid in a variety of ways that include the payment of interest, taxes etc., which are stored on the blockchain. According to Mark Zuckerberg, according to his company, he will start collecting this and other data about the people and situations that create his money.
How to Get Started
What cryptocurrencies can help?
Bitcoin is a popular use case because it allows for a new set of financial, commercial, and consumer products and services on a large scale. It’s also widely used as an industrial platform.
Other alternatives include Bitcoin Cash or Litecoin, which both can be used by anyone to exchange digital currency for other currencies. The current price of Ethereum on BCH (the digital currency in circulation of BCH) has dropped in the last year alone and it’s clear that it won’t last forever.
How to Get Started
When the blockchain is created and sent to each of its peers, each peer sends back the blockchain hash to the other peer. These peers can then use the blockchain’s transaction list to provide updates to the other peer’s information about the block chain, which has the information of how many transactions were made on your platform to date. In essence, the blockchain allows you to build a peer-to-peer economy, and use any resources that the other users would otherwise have. As it happens, the protocol of Lightning Network has also been demonstrated to be extremely effective at working with Ethereum, as shown in one of those videos. A lot has been written about how secure and interoperable all of these technologies are, since the proof of work is still lacking.
Conclusion
The Blockchain has been demonstrated that it can be very easily and safely secured and has also been demonstrated (including in China) that it can provide a powerful way to generate and exchange digital currency. It has also been shown that it can provide financial institutions with information about the current and future economic trends and potential solutions for their business, even though none of these possibilities relate directly to the use of digital currency.
The technical details of the system are still sketchy, so it’s worth checking with a technical adviser