Business-to-Business Transactions
Business to business (B2B) refers to business transactions between two or more businesses unlike in business-to-consumer where the transactions are between businesses and consumers. The transactions can occur between a manufacturer and a supplier or a wholesaler or between a supplier and a retailer. B2B is also used in communication as many businesses have turned to social media to communicate with other businesses. The communication between employees of two businesses is referred to as B2B communication. The B2B term was invented so as to illustrate the electronic communication between enterprises. B2B was later used in the company's marketing process to illustrate the products and services used by businesses.
Many sales and marketing personnel focus more on the B2B rather than business to consumer (B2C). B2B services and products are sold from one business to another and are usually purchased to be used by the company’s manufacturing process so as to produce goods that are later sold to consumers. The quantity of B2B transactions is always higher as compared to business to consumer transaction as in a supply chain; there are many purchases that involve raw materials and one business to customer transaction of the final product (Rodenborg). In E-commerce, B2B involves the website selling products to a buyer who then sells the same product to a final customer. It covers a large number of applications that make it easy for businesses to carry out transactions with their distributors, suppliers and the resellers. B2B e-commerce began in the 1960s with the Electronic Data interchange. The people involved in the supply chain network are the main participants, and they will swap electronic documents to support the transaction process.
In E-commerce, B2B can be categorized into two: company websites and product supply. Company websites are used to reach other companies and their employees. The website will act as an entrance to an extranet for customers and other registered users or as an intranet used internally only. The company can also use the website to sell its products directly to its customers. The product supply category also known as e-procurement serves a wide range of industries and usually focuses on a niche market. For example, a company can obtain supplies from vendors, make bids for certain purchases or request for proposals using the website. They facilitate the exchange of procurement and product supplies.
Amazon.com operates entirely through its website. It does not have physical stores. In its search to provide its customers with a personalized and satisfying experience, the company is always trying out new technological innovations. The company started out as a manually written list of products but has since evolved into a high technology based engine. It sells a lot of products on a daily basis. This will include clothing, beauty products, books, food, computers, garden supplies, toys, bedding and CDS or DVDs among others.
The website is able to capture the user’s recommendations and comments. It is also able to track user traffic, how long the users stay on the website and the pages they visit. This information is later used to determine the buying and sell patterns. The website has features that help it retain its customers. These features include online customer reviews, one stop shop where the customers are able to find everything they are looking for, personalized recommendations and the amazon.com Marketplace where used items are sold. Amazon.com has since become on of the most successful e-business globally. With these features, the website helps the company offer its customers almost everything in just a click of the mouse. The B2B model is implemented by allowing other businesses to use the Amazon's website to sell their products while Amazon earns a commission.
Amazon has created strong business relationships with all kinds of businesses including small businesses, corporations and sole proprietorships. This is according to Charmayne. The company’s online retail service allows other businesses to sell their products on the company’s website just like the Amazon retailer. The businesses have to create an account first so as to be able to upload their products, sell the products and be able to receive transactions online. They can, however, start with personal accounts, which can later, be upgraded to business accounts with an increase in sales. Amazon provides businesses with payment options. The businesses may opt to make use of the company’s Web Store that will allow them to capture the advantages of the backend organization and search engine optimization (Rodenborg). Amazon.com also offers an affiliate program that enables businesses to gain income when they advertise Amazon’s products and its retailers. When a customer purchases an Amazon product by clicking on the advertisement, the business owning the advertisement earns a referral fee. By associating themselves with Amazon.com, the businesses are able to gain exposure and increase in their sales while Amazon is able to earn income through the membership fees, commissions and royalties (Charmayne)
In the year 2011, Amazon developed its first self-publishing website. The website allows other businesses to publish and sell their books, music and movies online. Before publishing, the businesses are required to copyright their products. The options on the website include payment solutions and advertisement mirroring the Amazon’s retailers. The company offers free publishing opportunities and is able to earn by charging royalty fees and shipping fees (Para. 4). Another Amazon’s business to business is the fulfillment program. The program offers businesses with storage space at the Amazon’s fulfillment center where they can store and ship their products. The businesses will send the products to the fulfillment center where they are entered into the Amazon’s database. The businesses will then be able to sell the products through Amazon.com or opt to complete the transactions on their own. When a customer orders a product, Amazon takes the order and ships the product to the customer. The businesses can be able to track the whole process through the company’s back office system (Para. 4).
Amazon recently purchased Kiva systems a company that produces warehouse robots. This led to an increase in volume of the products sold by over 36%. When these services are provided to the customers, Amazon earns a profit on the difference between the retail price and wholesale price just like an owner of a store would earn (Charmayne). When it came to conducting financial transactions, Amazon Flexible payment Service (Amazon FPS) was the first payment service originally designed for Amazon by developers. The service allows Amazon to carry out financial transactions with millions of its customers. The customers and other businesses are able to pay for the services using their login information, the credit card information and the shipping address they provided when creating an account on the website. The Amazon FPS offers flexibility so that the company can structure instructions on how to pay. The instructions will also include conditions and constraints involved in money movement. For the sponsored products, one must provide a valid credit card after enabling the seller account for the sponsored products. Amazon will be able to charge for every click on the advertisement.
Architecture and technology
Business-to-business systems are becoming very popular and important in the B2B market. B2B technologies aim at providing customers with increased value by offering information that will help level other organization’s capabilities and coordinate the supply chain. These technologies have the ability to alter the modern industrial activities. The availability of many B2B technologies has made it difficult to categorize them. The B2B systems offer an interaction with all the participants of the supply chain (Charmayne). They will also include communication technologies that are more basic like the extensible mark-up language (XML), Web services and electronic data interchange.
B2B exchanges application refers to sites that are hosted on E–networks. The exchanges will entail interaction between participants. They will set up electronic markets, provide back end services which may include processing of orders, maintaining collaboration between the supply chain participants and providing business tools such as designing and planning support services. Generally, B2B exchanges will increase information sharing, offer the ability to serve new markets while making profits and identifying low cost suppliers so as to reduce the prices of the products. The different B2B exchange models being used differ due to the ownerships, user concentration, functionality and focus. B2B technology does have a major effect on how the supply chain functions and on the company’s boundaries.
The company started as monolith system that used a web server and communicating with a database at the back. The application was known as Dubois and has since evolved to hold the company’s business, the displays and all its functionalities (Charmayne). The company was dedicated to making the databases hold more items, customers, orders and be able to support multiple websites. The front end application could not be improved any more as it consisted of different software’s combined into one system. For it to be evolved, the company decided to tie the parts that needed improvement independently. However, the back-end database continued to raise more problems. This made the company switch to service oriented architecture (SOA). SOA would allow the company to build more software components independently and rapidly. The company moved from a monolith system to a distributed, decentralized system with the ability to serve many applications.
The company was the first to make this kind of change and a lot of innovation was required. This has since become one of the major strategic advantages as the company can now build complex applications out of ancient services that are now seen to be easy. The company does not prefer middleware as, unlike the SOA it is a framework and not a tool. When a middleware package is used, you are forced to use the software outlines they have provided, and you will be restricted to use their software only. Amazon is forced to build its own communication technology infrastructures as they very hard to level to the company’s size. They only work up to a certain level, and then they fail. Amazon is not restricted to one approach; therefore, it uses java/jboss, C++ and Perl/Mason. C++ is used to process requests while Perl is used to build website content (Charmayne).
The company desired to build an open community around its services, therefore, web services were chosen due to their simplicity, but it is still service oriented architecture internally. The data can only be accessed through the interface. Making Amazon.com available to developers through the web service interface freely has contributed to a lot of innovation that the company could not have produced.
The kind of technology that keeps amazon.com Running is running now is Linux based. In 2005, Amazon had the largest Linux based databases in the whole world. The three databases had a storage capacity of 24.7 terabytes, 18.5 terabytes and 7. 8 terabytes. The company’s data warehouse consists of 28 HP servers’ with four central processing units running oracle database software. The data warehouse has been divided into three categories: ETL (extract, transform, and load), historical data and query (Charmayne). In 2005, the 24.7 TB query servers consisted of 15TB raw data the 18.5 TB historical servers held 14 TB raw data while the 7.8 TB ETL servers held 5 TB of raw data.
The company’s technology is able to handle millions of back-end applications and operations on a daily basis including third party seller queries. Security is a major concern for Amazon as millions of customers send their credit card information to the servers daily. The company encrypts the card numbers during checkout. It also gives customers the option of encrypting every personal detail sent to the servers like their name, home address, and their gender. The company also utilizes the Netscape Secure Commerce Server by using the secure socket layer (SSL) protocol. This helps store all the credit card information in a separate database which is not connected to the internet. This helps ensure that the server is not accessible through the internet by hackers. For cautious customers, they can choose to provide a partial credit card number through the website and the rest through the phone when submitted with the online number.
Apart from the usual security concerns, just like eBay and PayPal, the company has suffered from phishing problems. The company, therefore, has warned its customers to be aware of fake e-mails asking them to provide their account and credit card information.
Advantages of B2B model
B2B provides a way for businesses to sell their products to other businesses. According to Rachel, advantages of this model include:
Scalability- It offers an effective way for that enables the business to grow and level up easily so as to meet market needs as well as the customer’s demands. This is done by creating new sales channels and reaching new markets (Rodenborg)
Gaining more customers- the B2B model is a powerful way to gain more customers if the website has public facing catalog. More customers are turning to websites to look for more products with better prices, the distributors and manufacturers can make use of the ability of the searchable and index their pages so as to lure more customers to their business websites and convert them into loyal customers.
Improved brand awareness- B2B not only helps businesses gain more customers, but it also help improve its brand awareness in the market. Developing web pages that are indexed helps the search engine crawlers find the website faster which increases the probability of the website being accessed by many visitors (Rodenborg).
Better Efficiency- Through the back end business systems such as enterprise resource planning (ERP), B2B provided efficiencies to businesses. The customers are able to order any products they want online at any time. The customer service is able to focus on the actual customer service related functions instead of taking orders. The task of keying in data is also eliminated, therefore, minimizing the probability of having errors.
Increased sales- The model will help the business gain more customers. This in turn, increases the sales. B2B e-commerce also helps the business implement the computerized up-sell and cross-sell program that helps offer the customers relevant suggestions on the website. This will help them purchase the relevant items leaving them satisfied and willing to come back.
Analytics- The model presents businesses with the ability to launch an analytic campaign. /the business will also be able to evaluate the campaign comprehensively, effectiveness of the customer sales, inventory turns, and product mix (Rodenborg)
Excellent customer service- The model enables businesses to offer the best customer services. The websites offer the customers with self-serving accounts, and any order information once the customer has logged in the website. Through the ERP system, the website is able to display only the products, their prices and services based on the customer’s login information.
Capability of multisite- With the right B2B model, a business is able to launch a co-branded website which enables the business to offer its customers co-branded websites to its customers or it most important customers. This will also allow the business to present the website in other languages so as to cater for the customers not able to read English (Rodenborg)
Disadvantages of B2B model
The businesses embracing the B2B model tend to gain significant growth and increased profits; however, the model still offers some disadvantages to the businesses. According to Eric, these include:
Limited market- The businesses targeting to sell their products to other businesses usually have smaller markets than those selling directly to consumers. The buyers are in low numbers as compared to potential millions of customers for a customer based products. The limitation makes every potential customer for these businesses very valuable and losing them may make the business very devastated (Dontigney).
Long purchase Decision Time- Most of the decisions made undergo a complicated process where different stakeholders are involved making the process long. The process may take months before a decision is made unlike in customer related decisions that take less time and fewer stakeholders (Dontigney)
Sales process- A typical B2 sales process requires face to face conversations, multiple meetings, and is sometimes driven by experimental factors instead of emotional and qualitative factors. This is mainly because B2B involves purchasing products worth a lot of money and that impacts a lot of people. The sale process usually depends on the person involved the ability to convince the buyer of the products abilities to solve the problem the buyer is looking to fix and purchase it (Dontigney).
Reversed power structure-Unlike in Business-to-consumer model, B2B buyers has more power. The buyer has the power to ask for product customization, enforce desired specifications and negotiate the price. This is because the seller depends much more on the buyer and on the will to retain the buyer (Dontigney).
Works Cited
Charmayne, Smith. How Amazon Uses E-Business for B2B. 2013. 11 Dec 2013.
< http://smallbusiness.chron.com/amazon-uses-ebusiness-b2b-34155.html>
Dontigney, Eric. The Disadvantages of a B2B. 2013. 11 Dec 2013.
< http://yourbusiness.azcentral.com/disadvantages-b2b-25507.html>
Rodenborg, Rachel. 10 Benefits of B2B to E-Commerce. 2012. 11 Dec 2013.
< http://www.info.insitesoft.com/Insite-Software-Blog/bid/91349/10-Benefits-of-B2B-E-Commerce>
