ITS 380: Global E-commerce Systems

John Bergstrom

CH12 HW

1.      If you were a small chemical company, what concerns would you have about joining Elemica?

Since the chemical industry in itself is a little special with the fact that organizations that operate in the chemical industry are both competitors and customers of each other because they buy a lot of their ingredients in the products from each other. This makes the sharing of information a little bit tricky since you don’t just want to give your competitor the “secret ingredient” or your competitive advantage. Therefore, if I was a small company in the chemical industry I would be very careful with what type of information I was sharing, if we were to utilize a service like Elemica I would also establish company-wide guidelines on what type of information we would let Elemica and partnering companies have access to. I would do this before implementing the system so that it is “error proof” from sharing vulnerable information as it is has little to no human intervention.

2.      Elemica provides a community for participants where they can transact, coordinate, and cooperate to produce products for less. Yet these firms also compete with one another when they sell chemicals to end-user firms in the automobile, airline, and manufacturing industries. How is this possible?

This is because the chemical industry is a very specialized industry, and when firms are producing a certain product or making modifications to their current “recipe” they require very special ingredients that only other companies within the chemical industry would possess. This is why players in the chemical industry acts as both competitors and customers to each other.

3.      How does the purchase of Elemica by Thomas Bravo, a private equity firm, change how Elemica fits into the B2B framework illustrated in Figure 12.9?

I think that the acquisition of Elemica by Thoma Bravo will only affect Elemica in a positive way that hopefully keeps Elemica’s position as an industry leader in providing communication, coordinating, and information sharing for B2B transactions. I don’t think that their strategy will change, the only difference with the acquisition will be that Thoma Bravo will work even harder for Elemica to attract new customers and possibly expand their service into new areas. The CEO of Elemica said that “Thoma Bravo’s exceptional track record and proven expertise in our industry will enable Elemica to further capitalize on its growth and leadership” (Elemica.com).

Project questions

1.      Assume you are a procurement officer for an office furniture manufacturer of steel office equipment. You have a single factory located in the Midwest with 2,000 employees. You sell about 40% of your office furniture to retail oriented catalog outlets such as Quill in response to specific customers’ orders, and the remainder of your output is sold to resellers under long-term contracts. You have a choice of purchasing raw steel inputs- mostly cold-rolled sheet steel – from an exchange and/or from an industry consortium. Which alternative would you choose and why?

I would choose to buy the raw material from a consortium. Although it is quite likely that you would find competing companies on the exchange which would result in a lower price than a consortium, it would require more work and it would be a less reliable system dealing in an exchange versus a consortium. The consortium might cost you more, but you would be able to plan and work more for the long-term than to exchange which would also be more reliable for you. This is essential in the manufacturing industry, and if you can plan your orders you could cut the extra cost that the raw material have by using inventory control, JIT methods, LEAN production principles etc. 

2.      Choose an industry and a B2B vertical market that interests you. Investigate the site and prepare a report that describes the size of the industry served, the type of Net marketplace provided, the benefits promised by the site for both suppliers and purchasers and the history of the company. You might also investigate the bias (buyer versus sellers), ownership (suppliers, buyers, and independents), pricing mechanism, scope and focus, and access (public versus private) of the net marketplace. I choose to investigate my former employer Akzo Nobel. Since they almost function as a conglomerate with their organizations being involved in many different industries, I will focus on one of their brands that they offer, which is Expancel. Expancel is a microsphere that expands 60x when exposed to heat and therefore possess unique qualities as an additive to products, it is used mostly for protective paint, wine corks, protective equipment, and chemical compounds. The size of the industry is rather big with about $80 billion in sales for 2015 where Akzo Nobel has a 75% market. The type of net marketplace provided basically consists of contact information on how to get in touch with sales representatives as it is a global company. There are no capabilities of making an order from their website without first talking to a sales representative to establish a sales contract. After this has been done, the buyer can put orders in to the system through Akzo Nobel’s ERP system. Since Akzo Nobel is such a huge company, they produce most of their raw materials themselves, and thus, they are not in need of external suppliers. The history of the company goes back all the way to the 1600s when Swedish scientist Alfred Nobel (Founder of the Nobel Prize) started his dynamite company Nobel Industries. In 1998 Nobel industries merged with Dutch company Akzo industries to grow and improve their market position.