Analyzing. the. Effectiveness. of.B2B

After the fallout of the dot-com companies and some unfulfilled expectations of the �B2B
hype,� the analysis of the effectiveness of B2B is important as it builds a base for understanding
the problems and actual trends in the area. Kaplan and Garciano (2001) state that B2B�s
key role is that of reducing transaction costs faced by buyers and sellers. They identify the
following five ways in which B2B e-commerce can potentially decrease transaction costs
and effectively operate in the post dot.com crash era:
1. By.changing.or.improving.processes:.Ariba reduces the costs of purchasing used
automobiles by not having to physically ship the product to an auction site.
2. By.changing.the.marketplace:.For both buyers and sellers it is less costly to search
for products over the Internet than having to conduct a physical search.
3. By.changing.decisions:.Indirect benefits may arise due to the reduced transaction
costs. As transaction costs decline, the buyer might decide to outsource a product as
opposed to producing it himself. Furthermore, �better information about future demand
through B2B e-commerce may allow a seller to improve its demand forecasts and
change its production decisions� (Kaplan & Garciano, 2001, p. 5).
4. By.changing.information.incompleteness.and.asymmetries:.The Internet changes
the asymmetric information buyers and sellers have about each other and their products,
leading to a transformation in the marketspace.
5. By.changing.the.ability.to.commit:.By standardizing processes and by providing an
electronic trail, the Internet has the potential to increase the ability to commit, thus
reducing imperfect commitment costs.
Finally, Kaplan and Garciano (2001) conclude that in order to succeed future B2B business
models must include �measurable benefits and charge customers as a function of those benefits.�
Similarly, if a company cannot secure a customer�s commitment when allowing or
facilitating price discovery, it is likely to fail since its customers will likely use its services
to define a market for the product/service and go elsewhere to complete the transaction.