The evolving B2B e-commerce adaptation for SME suppliers

Issue:
The document analyses how buying behavior is impacted by B2B e-commerce strategies and how buying behavior impacts these strategies. The e-commerce is playing an important role in todays B2B transaction, as it makes the transaction faster and easier. Some of the influential buyers have made it very important, and now has become inescapable. So the small SMEs are forced to follow the process influential buyers are following and adapt to different buyers accordingly. The concern for SMEs is that either SME suppliers adapt the e-commerce method and strategies or loose the sale. But all the buyer market is shifting towards the e-commerce, so it has become almost compulsory to look for e-commerce transaction and technologies.

Why the adapting speed of SME towards B2B e-commerce is so slow and unresponsive?
There are several reasons for the adaptation to be slow, the first being that the different buyers have almost similar electronic business process; but the platform on which they must be conducted is different, and this result in conflicting requirement from different buyers. A supplier have to interact with different buyers, therefore will require new adaptation, new demands from every buyer. This multi-faceted demand creates more complexity for the small suppliers. Another reason being the cost of implementation is very high, every supplier can view any buyer as short-term transaction (if it is for 2-3 transactions only) or as long-term transaction (more number of transactions). The implementation can be fruitful for long-term transaction, but are very difficult to be worthy for short-term transaction. But in todays era with vast no of buyers and suppliers, buyer-supplier keep on changing, making it short term transaction. These factors are the discouraging factors for the SMEs, therefore, even after understanding the need of adapting towards the b2b e-commerce, the suppliers are slow to adapt.

Importance of previous relationship:

The transitions to e-commerce are challenging the existing relationship to change and even compelling to modify their relationship between buyer and supplier, however some relationship remain same. But facing the new reality to change to e-commerce and sometime to end it completely, some suppliers think that now the previous relationship investment with the

suppliers has now became worthless, but this is not the case. Buyers prefer the sellers with previous relationship as compared to the new seller, having all other things same. And even the previous buyers help the suppliers adapt to new platform and technology. Sometime buyers form a coalition, and help supplier in different ways, so that supplier is able to supply them at new platform, which is a good return on investment for sellers from previous investment. However the previous relationship are valuable, but if the existing supplier do not adapt to changes then the supplier may lose its sales, as it may be replaced by new supplier following the e-commerce methodology. The buyer in contractual relationship with previous supplier can boycott the supplier if supplier is not adapting to e-marketplace. And in the case of on-spot relationship the buyer may favor the new entrant, if it adapts to electronic auctions better. Having implemented e-commerce platforms, it doesnt mean that human interruptions are not important. The pre-relational level processes have to be done by some other means like phone, or direct contact; which skips the part of electronic interaction like advertising about the product or services on website.

Is it right to use power to induce collaboration?

According to the study, it has been noted that it is easier to collaborate when buyers and sellers are both at same level of power, but becomes difficult as the power becomes unbalanced. When the buyer is dominant and is more influential, then the buyer will tend to oppose the close-relationship while the seller may be in favor of close-relationship. In power in-balanced case the major factor of collaboration can be trust, on which several organizations depends. The organizations are not able to collaborate because the previous relationship was not as rewarding as expected by the system. Another factor necessary for the collaboration is commitment. If the commitment is high then use of power wont be required for collaboration. The using of power is not right phenomenon observed for collaboration as it may hamper the existing relationship, and it may be hazardous if the weaker partner is not able to match up the requirement in long run. The groups can perform the collaboration, if not electronically. These activities are complex than the regular activities. So need a little experience. These groups can go to electronic collaboration any time after more experience. The use of power is not needed in this case to induce collaboration.

How can a SME supplier remain competitive?

The first step to be taken by SME is to realize that the threat is real, as there are many cases in which the relationship has been discontinued. The supplier should see beyond its shortterm requirements, and make goals about the future long-term adaptation of e-commerce and Industrial Marketing Page 1

should make their own B2B strategies. As the buyers are reducing no of suppliers, suppliers will also have less client to focus, resulting in less diversification in demand. The sellers can make decision on which relationship to continue (in order to reduce clients), rather than later buyers making decision, and then their initial investment become worthless. The supplier should have different strategy at different relationship (pre-relationship, spot relationship, contractual relationship) levels. In pre-relationship level, it should present itself as a potential supplier, while at spot relationship level, its primary aim should be winning electronic auction and acquire a relationship and while moving to contractual relationship level, the focus of supplier should be linking to the supplier to the extent, including its information system, so that it can resist a new entrant in market.

What are different goals at different relationship?

The goal of supplier should shift while moving from one kind of relationship to another. All three levels are discussed below: A) Pre-relationship level: At this level the supplier should be well informed about the requirement of the buyer. The requirement known should be correct and can be validated directly by buyer. Sometime the information is available directly at their website. And according to this knowledge and suppliers capacity, supplier should decide its long-term strategies. Supplier should support electronic interaction as well as human interaction to speed up the process. B) Spot-relationship level: The SMEs should prepare well to acquire spot-relationship level. Before the bidding is done, the supplier has already calculated the ratios and profit margin of project. And as the bid proceeds it analyzes the situation. The excel sheet is used to make fast changes in the situation and decide on future strategy. All the decision makers are present at bid. And if any case any other material is required they contact other supplier immediately for availability if the material. This is also known as Dynamic decision-making. C) Contractual-relationship level: Usually the buyers prefer to take its existing supplier for contractual relationship, but if none of supplier is available with electronic catalog, then there are two options left with buyer. First one is to look for new supplier, and integrate its system with new supplier and second option is to train and help existing supplier to meet the requirements. The supplier can know the intension of buyer while participating in training programs. Another option available with the supplier is- consortium, where various suppliers pool in and make electronic catalog for their buyers.

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References:
Evolving B2B e-commerce adaptation for SME suppliers The Journal of Business & Industrial Marketing 24. 8 (2009): 561-574. http://search.proquest.com/ Google

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