Business Strategies: Business-to-business Marketing

 

Business-to-business marketing is considered by companies to be a sound business strategy and more so when the electronic means is utilized (Ramsdell, 2000). For buyers, B2B marketplaces promise not only to deliver more competitive prices but also to rid the supply chain of a host of inefficiencies. For sellers, B2B creates a channel for their product distribution thus minimizing the cost of transaction attained when they themselves engage with the end-users of their products.

In business-to-business trade among buyers and sellers, the relationship involves complex products traded where there are high levels of inter-dependencies. In these situations it is necessary to co-operate in order to maximize the opportunities for the network of companies, and to build in protection measures against opportunistic behavior, either through trust developed over time, contracts, or a combination of both (Agrawal and Pak, 2001; Ramsdell, 2000; Hollad, 1996).

Factors such as trust and reputation are critical, and there is also the notion of cooperative strategies based on mutual benefit rather than the simplistic idea of maximizing revenues to individual organizations (Farrely and Quester, 2003; Archer and Yuan, 2000; Abramson and Ai, 1999). There is widespread research and anecdotal evidence of the importance of relationships in business-to-business markets and concepts such as the virtual value chain (Rayport and Sviokla, 1995) and cooperative supply chain structures (Holland 1996) extend the theory to market networks of separately owned organizations choosing to work closely together.

In practice, relationships in business-to-business marketing have come to mean trust that results in protective and complementary relations in Asia, and will thus include the sharing or pooling of resources (Hamzah-Sendut et al, 1990 in Abramson and Ai, 1999, p.10). These factors are all part of the Asian concept of guanxi, the six key constructs of which being: Mutual trust between parties; Commitment towards mutual benefit; Empathy towards all parties; Maintenance of relationship; Provision of favors to partners; and Full reciprocation of favors; (Abramson and Ai, 1999, p.10).

Two adjacent players--the buyer and the seller--usually share information at each stage of the supply chain and transaction process, and the nature and amount of what they share depends on the quality of their relationship (Agrawal and Pak, 2001). Thus, the successful exchange of information in the transaction of B2B reflects the amount of investment and trust buyers and sellers bestow to each other.

The B2B relationship is even more controversial in the emerging market of B2B retailing. The business is lucrative where Internet business-to-business sales will reach $1.3 trillion by 2003 and; by 2004, business-to-consumer sales will reach $100 billion (Lord, 2000). Aside from the potentially huge market offered by the internet, E-commerce technologies provide effective and efficient ways in which corporate buyers can gather information rapidly about available products and services, evaluate and negotiate with suppliers, implement order fulfillment over communications links, and access post-sales services (Chaston and Mangles, 2003). From the supplier side, marketing, sales, and service information is also readily gathered from business partners. Building and maintaining B2B relationships is the key to success in e-commerce and, unless service is maintained, customer loss may result, more than offsetting any cost efficiencies due to introducing e-commerce technology (Archer and Yuan, 2000). Since the core of e-commerce is information and communications, support for managing customer relationships particularly trust is of primary consideration in the buyer-seller relationship (Archer and Yuan, 2000).

Although there is some evidence of a move towards electronic markets, there is also strong evidence to support the hypothesis that electronic communication technologies will forge closer relationships rather than create more fragmented ones. This is particularly true in business-to-business markets where the levels of interdependencies between buyers and sellers are typically extremely high compared with business to consumer markets (Johnston and Lawrence, 1988, Konsynski and McFarlan 1990).