Business to Business - Essay Example

Business to Business Assignment 1 Introduction Business to business or simply B2B indicates a commerce system where transactions take place between business houses. Under a B2B system, parties involved can be a manufacturer and a wholesaler or a retailer and a wholesaler. As compared to business-to-consumer and business-to-government transactions, the volume of B2B transactions is very high. Evidently, the fast growing e-business sector has increased the volume and significance of B2B e-business transactions. With the fast growth of internet, many world’s leading business organizations have begun to engage in B2B transactions online. Amazon.com, the world’s largest online retailer, has developed improved mechanisms for promoting its B2B e-business transactions. This paper will analyze Amazon’s B2B arrangements with other companies and the nature of B2B transactions the company engaged in. In addition to discussing Amazon’s technical architecture that supports its B2B transactions, the paper will also identify the benefits and drawbacks of these transactions. Amazon’s B2B transactions Amazon.com has developed B2B arrangements well with firms across the globe. According to the Forbes writer Kanellos, Amazon is under an ongoing evolution process where the organization is transferring from a consumer retailer to a logistics provider to business houses. Amazon allows third parties (or external marketers) to sell their products by means of its online retail services. Firms can display their inventory information, sell their products, and receive payments online once they created an account in Amazon.com. In addition, sellers can also make use of Amazon’s Webstore, which would help them take advantages of search engine optimization and backend organization. As Kanellos points out, the volume of products sold by external marketers on Amazon website increased to 36 percent. Amazon follows an interesting B2B model in delivering services to third party retailers. Traditionally, a store owner or a wholesaler considers the difference between the retail and wholesale price as its profit. In contrast to this conventional business practice, Amazon likes to obtain a commission on its online retail services. Market analysts observe that this business model has greatly assisted the company to advance in B2B marketing. The organization has developed an affiliate program for promoting its products and its online retailers. Businesses can earn income when Amazon products are purchased through clicking those firms’ advertisement link. Publishing is another B2B service offered by the Amazon. The company launched its self-publishing site in 2011with intent to assist individuals to self-publish their movies, music, and books online and thereby to eliminate intermediary costs. Once an individual obtains a copyright on his products like books or movies, he can use the advertisement and payment solutions provided by the Amazon. The company offers free publishing options and finds its revenues through royalty payments and shopping fees. As Smith opines, the fulfillment program is Amazon’s one of the major advancements in its B2B environment; this program allows organizations to store and ship their products through Amazon’s fulfillment center. Once the Amazon fulfillment center receives the items sent by companies, those items are cataloged into the firm’s system. Under this option, companies can either sell their offerings through Amazon.com or complete the sales process using their own techniques. When items are ordered, Amazon fulfills the orders and delivers the products to the end customers directly. Amazon’s back office system assists business houses to track the fulfillment. It is identified that Amazon has B2B relationships with different sizes of businesses ranging from sole traders to corporate giants. As per Amazon’s B2B strategy, new and un-established companies need to commence their operations with personal accounts. Those companies can upgrade their account to business account when their sales volume rises. In the words of Smith, Amazon’s various platforms assist its businesses and affiliates to promote and sell their products and services. The author continues that “these businesses benefit from the customer exposure and increased sales opportunities while Amazon earns income through its own product sales, as well as through earnings from memberships, fees, royalties, and commissions” (Smith). While analyzing the nature of B2B transactions the company engaged in, it seems that Amazon deals with a broad range of B2B operations including order fulfillment, shipping, online payment, and advertising. Like many other leading online B2B operators, Amazon has a ‘sell-side’ and ‘buy-side’ to promote its B2B e-commerce. Under the ‘sell-side’ model, Amazon uses e-commerce to increase its B2B sales and to reduce selling and advertisement costs. In contrast, the company employs the ‘buy-side’ model to purchase needed products and services from external providers electronically. Amazon has recently made a notable achievement in B2B commerce. The company launched the ‘Amazon Supply’, a beta site intended for selling office and industrial products to business houses. According to the company officials, Amazon Supply has currently over 500,000 product lines including ‘hose lamps, roller chain sprockets, drill bits, sheet aluminum, and other items’ (as qtd in Kanellos). Kanellos reflects that Amazon Supply is a strong retail venture which grew explosively over the last years. As the writer points out, even though it operates as a retail venture, it is able to function like full- fledged service provider. Amazon gives specific focus to customer services; and for this, the company has designed a responsive support desk and 365 day return policy for its customers. Undoubtedly, the Amazon Supply has increased the firm’s competitiveness in the online B2B industry. Although the company is still fresher in the B2B industry, current reports indicate that Amazon has a huge growth potential in this sector. Technical architecture Amazon.com has developed an extensive technical architecture to support its B2B transactions. The company is always concerned with keeping functionality standards and delivering better shopping experience to its retailers. The Amazon Mechanical Turk is one of the most fascinating techniques used by the Amazon to support its B2B operations. The Amazon Mechanical Turk is an internet based crowdsourcing marketplace where businesses or individuals can pay workers (or more commonly Turkers) to perform a variety of simple tasks known as Human Intelligence Tasks or HITs. Using this technical architecture, it is very easy for computer programmers (or Requesters) to manage the human intelligence to perform tasks that cannot be performed by computers currently. Requesters can post HITs that could be completed using human intelligence. The HITs can help writing product information, choosing the best photograph from a store, or identifying performers on movie or music CDs (Amazon Mechanical Turk). Then Turkers (or Workers) can take up the task and complete them timely for a particular rate fixed by the Requester. Since majority of such tasks are easy to perform, Turkers would be happy to do them for cheap rates. Evidences suggest that Turkers complete hundreds of those repetitive tasks each hour and earn an attractive remuneration a month. Evidently, the Amazon Mechanical Turk greatly assists its online retailers to perform their different HITs timely and successfully. Therefore, this technical architecture better supports Amazon’s B2B initiatives. The Amazon Web Services, commonly referred to as AWS, is another comprehensive technical framework developed specifically to support the firm’s B2B activities. The AWS is a set of web services provided by Amazon.com in order to offer a cloud computing platform over the internet. The Amazon EC2 and Amazon S3 are the two most important and prominent services among them. Amazon CloudFront, Amazon CloudSearch, Amazon CloudWatch, Amazon DevPay, Amazon DynamoDB, Amazon Elastic Block Store, Amazon Virtual Private Cloud, and Amazon Flexible Payments Service are some other examples of AWS (Amazon Web Services). The AWS was launched in 2002 and its major goal is to provide online support for external websites and other client-side applications. Instead of directly meeting the needs of end users, most of the Amazon Web Services try to offer functionality which in turn would be usable for other developers in their applications. AWS offerings are accessible over HTTP. These services are charged based on the usage rate and the methods used to measure the usage rate may vary from service to service. According to Amazon executives, over 330,000 developers used Amazon Web Service in 2007 (Press Releases). Despite some major outages occurred over the past few years, the AWS are still serving the needs of millions of customers. Amazon Webstore is another major technical infrastructure developed to promote the firm’s B2B transactions. This website offers eCommerce solutions to individual sellers, small/medium businesses, and large businesses separately. “The Amazon Webstore delivers ongoing feature upgrades and support for complementary services from Amazon and third party solutions, including social media storefronts, financial integration, SEO and email marketing” (Amazon Webstore). Benefits Amazon.com is experiencing a range of benefits from the B2B arrangements the firm has made with other companies. Amazon’s B2B arrangements provide the company with a better way to increase its revenues. Obviously, when a company purchases products/services from Amazon, the volume of sales will be higher than individual sales. Therefore, the B2B eCommerce and thereby the expanded purchases greatly assist the company to quickly improve its revenues with less operating expenses. Another benefit achieved by Amazon from its B2B arrangements is the expansion of the firm’s brand presence. As discussed earlier, many online marketers ranging from sole proprietors to corporate tycoons rely on Amazon Web Services to market their products/services. Undoubtedly, such a situation would assist the company to improve its brand image and hence to make its brand easily recognizable to all. In addition, B2B arrangements are helpful for Amazon to create and maintain better business relationships across the globe. Market analysts indicate that B2B relations have greatly benefited the organization to find new potential customers and thereby to develop new sources of revenues. The 24/7 online ordering helps the company to lower its operational costs to a great extent and hence to improve profitability. Since Amazon finds its revenues from royalty payments and other commissions instead of charging the difference between the wholesale price and the retail price, more and more companies are becoming interested in making B2B arrangements with the firm. The B2B eCommerce is a better way to reduce promotional costs to some extent. In addition, this type of arrangements help the company to be less concerned about the end customer services because it does not directly sell to individual customers under the B2B system. Market studies also indicate that B2B business activities aid Amazon to speed up its product/service development activities and to foster innovation. Drawbacks As compared to the benefits the Amazon gains from its B2B arrangements, the drawbacks identified are negligible. Possible antitrust violations are likely to affect the business of Amazon when it performs B2B activities. Such events may lead the company to lawsuits and legal proceedings and hence hurt the firm’s operational efficiency. In addition, it is clear that the Amazon needs to deal with a range of B2B transactions each hour and therefore the firm may face difficult challenges if its technical architecture compromises functionality. Such a situation may cause the firm to suffer from huge losses. To illustrate, some major outages occurred over the past few years affected many websites such as reddit, Pinterest, Netflix instant video, and Foursquare that rely on Amazon Web Services (as qtd in Rastogi). As a result, some major online marketers terminated their B2B arrangements with Amazon and the situation adversely affected the firm’s market stature. Another disadvantage is that the Amazon’s extensive B2B transactions reduced the competitiveness of many small and medium businesses. However, frequent system failures appear to be the most potential threat to the firm’s B2B operations. Conclusion Amazon has developed extensive B2B arrangements to provide services to online marketers and other client-side applications. Amazon engages in a broad range of B2B transactions including product ordering, order fulfillment, and online payment solutions. The organization has a well developed technical architecture to support its B2B activities. The Amazon Web Services and the Amazon Webstore support the firm’s B2B initiatives. This business arrangement greatly assists the company to quickly improve its revenues and to generate new sources of revenues. Frequent system outages challenges the operational efficiency of Amazon’s supply chain to some extent. Works Cited Amazon Web Services. Web 30 Dec 2012 http://aws.amazon.com/products/ Amazon Mechanical Turk. Web 30 Dec 2012 https://requester.mturk.com/ Amazon Webstore. Web 30 Dec 2012 http://webstore.amazon.com/ Kanellos, Michael. Amazon Takes Another Step Toward B2B With Amazon Supply. Forbes. Web 30 Dec 2012 http://www.forbes.com/sites/michaelkanellos/2012/04/25/amazon-takes-another-step-toward-b2b-with-amazon-supply/ Press Releases. Amazon.com. Web 30 Dec 2012 http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-newsArticle&ID=1012590&highlight Rastogi, Raju. Netflix blames Amazon for Christmas Eve outage. Tecgig.com. Web 30 Dec 2012 http://cepta.techgig.com/tech-news/editors-pick/Netflix-blames-Amazon-for-Christmas-Eve-outage-16527 Smith, Charmayne. How Amazon Uses E-Business for B2B. Small Businesses; Chron. Web 30 Dec 2012 http://smallbusiness.chron.com/amazon-uses-ebusiness-b2b-34155.html Read More