Pace on the world economics by the new model of e-business

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1 Pace on the world economics by the new model of e-business Vincent Lin Executive Director of At Commerce Limited Abstract The new economics age brings up by e-business provides new opportunities for China. In this information age, China can shorten the distance with west nations last from the industry age. The most significant e-business model in the west is CommerceOne and Ariba from The core idea of this model is to reduce the cost. Nevertheless, this model can not copy to China for the business environment is much different between the west and China. Chinese enterprises demands a business model which can solve their problems, such as distance between enterprise and market, too high cost in channel, outstanding payment and etc. Thus, we must set up a Chinese e-business model based on the technology of the west. The core idea of this model is setting up a large virtual market with various services. This model can standardize the behavior of enterprise, provide convenience service, and help enterprise improve market share as well as reduce the cost. Consequently, this model can make a revolution on Chinese economics environment. 1 Chinese Enterprises BtoB Requirements Need Fulfilled E-business is rapidly transforming business as enterprises of all sizes join the Internet economy. Companies are using the Internet to enter new markets, increase supply chain efficiency, create new value chains, and meet the challenges of increased competition and global markets. The wind of BtoB e-business has been going up by the success of Ariba and

2 CommerceOne. More and more companies in China are dreaming of bringing the USA BtoB model to Chinese market, especially CommerceOne model. The core model of CommerceOne model is to let all kinds of business entities become buyer or seller. Buyer and seller can work separately, and can communicate with each other via Internet. CommerceOne also set up a market side, so as to improve the search ability of buyers. The advantage of CommerceOne in USA are listed below, 10 A five to 15 percent drop in product costs and a 70 percent decrease in process costs 10 An average cost of $30 to process an order through an electronic procurement system as compared to $107 per requisition for orders processed manually 10 A reduction of purchase requisition cycle times by between 50 and 70 percent when processing orders from initialization through fulfillment using electronic solution Though the BtoB market of China is a large market only smaller than USA, the market status is quite different. The key differences are, 10 Most of large USA manufactories have complete ERP software such as SAP, PeopleSoft and etc. Few Chinese manufactories have such software, or they only have some simple ERP system developed by 2 programmer in one month. Without a complete ERP system, automatic purchase order processing can not be achieved, and we can not benefit directly from Internet-based communication between enterprises. 10 The labor cost of USA is very high, and any elimination of employee number will make significant reduction of budget. In China, the labor cost is low, and automatic purchase order processing can make few effect in cost saving. Nevertheless, The communication fee will cost the enterprise a lot. 10 Some other problems are much more important than reduce the cost in China, such as pseudo products. Because of these differences, a simple move of CommerceOne model to China will face many obstacles. We must modify CommerceOne model so as to match the requirement of Chinese enterprises.

3 2 The Key Problem of Chinese Enterprises According to the research and understanding on Chinese enterprises, the key problems of them are listed below, 10 Distance between enterprises and market Most Chinese enterprises have few methods to get the market trends immediately. It will be a long time for a new product to move to the final customers, and it will be an extremely high risk for a Chinese enterprise to research on new products. 10 Too high cost spent on channels All large Chinese enterprises using channels to selling their products. It is a hard work to maintain a large amount of channels for a single enterprise. Thus, it may take many channels for a product from manufactory to final customers. Too many levels of channels means too high cost spent on it. 10 Outstanding payment Credit is very important in modern economics. There is no public credit system in China, and many Chinese enterprises pay little attention on maintaining its credit. Consequently, outstanding payment is very popular in Chinese transactions. Some corporation in China who had good product and was selling well finally went to bankrupt because of this problem. 10 Pseudo products It is true that Chinese market is almost full of pseudo products. Each product that has some market share will bring up lot of pseudo product factory corresponding to it. It is hard to find the difference between true products and pseudo products in Chinese market. The larger the manufactory is, the more hurt by pseudo products. It is important for Chinese style BtoB system to solve the problems above for enterprises. And this idea leads the At Commerce Model. 3 The Chinese BtoB model The Chinese BtoB model must solve the problems in China using the newest e-business technology. The core idea of solve the problems listed above is provide suitable service in the market, which will be useful for enterprises.

4 The services required are listed below. 10 Finance The finance services of Chinese BtoB Commerce model can connect to independent finance service providers will provide many bank services not just limited to payment. It is important that the finance services include LC issuing. With this service, domestic transaction can use LC as well as international trading. 10 Logistics The logistics system of Chinese BtoB Commerce model should be a third party logistics. A third party logistics will have a planning center to optimize all the logistics. The planning center to connect to many shipping service provides and inventories. 10 Information Chinese BtoB Commerce model also provides an information center. The most important function on it is cache and tunnel. The cache mechanism will gather catalog, purchase order and tracking information, which can help buyers and sellers find the information they required. The tunnel mechanism will make it possible for buyers and sellers to communicate with each other. 10 Credit The credit supporting of the Chinese BtoB Commerce Model is extremely important for Chinese enterprises. Credit system of this model can connect to independent credit system, for both enterprise credit and personal credit. All credit information will be provided to transaction participant. 10 Others We also requires other services for enterprises, such as CRM system which can minimize the cost spend on such kind of work, data analysis which can provide data warehouse for enterprises, survey, consultant insurance and etc. New services will add to market continuously to improve the function of market. Taking advantage of the services above, the problems facing by Chinese enterprises can be resolved.

5 4 Chinese BtoB Model solve Chinese Problems Chinese enterprises can solve the problems they are facing by the help of the services above. 10 Distance between enterprises and market Any enterprise can gather information about its products throw market, and he will know where they are, how many of them come to final users, and how many of them are still in channels. Consequently, enterprises can get the exact market information immediately. This cyber market will narrow the gap between enterprises and market. 10 Too high cost spent on channels With the help of independent services of the market, an enterprise can control more channels than ever before. It will not be required for large enterprises to maintain a multi-level channel system. One level may be enough for most of them. Decreasing of channel levels indicates cost reduction on channels. 10 Outstanding payment LC can solve the problem of outstanding payment. Nevertheless, LC is not popular in domestic transaction in China, for it is too complicate to do so for a small business. At Commerce model provides LC services to all the transaction participants, and it is as simple as press a key on computer. With the help of LC or any similar way else, enterprises will not be worry about outstanding payment. 10 Pseudo products All the products provided by each enterprise can be tracked in the market, and there will be no way for pseudo products to enter this market. At the day that all the people use this market to do purchasing, pseudo products can not find their survive space. 5 Conclusion We can make the conclusion that a large and virtual market with suitable services can standardize the behavior of enterprise, provide convenience service, and help enterprise improve market share as well as reduce the cost. Consequently, this model can make a revolution on Chinese economics environment.

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