Year: 2020

Management Notes

Mergers and Acquisition Objectives, Types, Pros and Cons

indiafreenotesby indiafreenotes1

Mergers and Acquisitions (M&A) are strategic financial transactions that involve the consolidation of companies or assets, typically to enhance competitiveness, expand market reach, or acquire specific assets. A merger occurs when two or more companies combine to form a new entity, often aiming for synergies that result in greater efficiency, increased market share, or enhanced product offerings. In a merger, companies often have relatively equal standing and decide to join forces to better position themselves in the market or industry. The resulting entity may adopt a new name and brand identity, symbolizing the unification of the companies.

An acquisition, on the other hand, involves one company (the acquirer) purchasing another company (the target). This transaction does not result in the formation of a new company; instead, the acquired company becomes a part of the acquirer, either as a subsidiary or by being fully integrated. The acquirer gains control over the target company, including its operations, assets, and resources. Acquisitions can be friendly, with both parties agreeing to the terms, or hostile, where the acquirer pursues the target company despite resistance. The primary aim of acquisitions is to achieve strategic objectives such as entering new markets, acquiring technologies, or eliminating competition.

Objectives of Mergers and Acquisition

  • Growth and Expansion

One of the primary objectives of mergers and acquisitions is to achieve rapid growth and expansion. Instead of growing organically, which is time-consuming and risky, companies merge with or acquire existing firms to instantly increase their market size, assets, and customer base. Mergers enable firms to enter new geographical markets and business segments without starting from scratch. This objective helps companies strengthen their competitive position, increase revenue, and achieve long-term sustainability in a dynamic business environment.

  • Economies of Scale

Mergers and acquisitions help firms achieve economies of scale, which result in cost reduction per unit of output. By combining operations, companies can reduce duplication in administration, marketing, production, and distribution. Bulk purchasing, shared infrastructure, and better utilisation of resources lead to lower operating costs. This objective enhances efficiency and profitability. Economies of scale also allow companies to offer competitive prices and improve their market share, strengthening their overall financial performance.

  • Synergy Benefits

Synergy is a key objective of mergers and acquisitions, where the combined value of firms is greater than the sum of their individual values. Synergy may arise in the form of cost savings, increased revenues, technological advantages, or managerial efficiency. Financial synergy includes better access to capital and improved creditworthiness, while operating synergy results from improved production and distribution. Achieving synergy helps firms maximise shareholder value and improve long-term performance.

  • Diversification of Risk

Another important objective of mergers and acquisitions is risk diversification. Companies may merge with firms operating in different industries or markets to reduce dependence on a single product or market. Diversification stabilises earnings and protects the firm from fluctuations in demand, competition, or economic downturns. This objective is particularly useful for companies facing declining markets or high business risk. Through diversification, firms achieve more stable cash flows and financial security.

  • Increase in Market Power

Mergers and acquisitions are often undertaken to increase market power and reduce competition. By merging with competitors, firms can increase market share, control pricing, and strengthen bargaining power with suppliers and customers. This objective enables companies to dominate the market and improve profitability. However, such mergers are regulated by competition laws to prevent monopolistic practices. Increased market power helps firms maintain leadership and strategic advantage.

  • Access to New Technology and Expertise

Companies pursue mergers and acquisitions to gain access to advanced technology, patents, skilled manpower, and managerial expertise. Instead of investing heavily in research and development, firms acquire companies that already possess technological capabilities. This objective helps improve innovation, product quality, and operational efficiency. Acquiring technical know-how strengthens the company’s competitive edge and enables faster adaptation to changing business environments.

  • Financial Benefits and Tax Advantages

Financial considerations form a major objective of mergers and acquisitions. Merged entities often enjoy tax benefits, such as set-off of accumulated losses and unabsorbed depreciation. Improved cash flows, better utilisation of financial resources, and enhanced borrowing capacity also motivate mergers. A financially stronger firm can acquire a weaker firm to improve overall financial stability. This objective ultimately aims at maximising shareholder wealth and financial efficiency.

  • Survival and Revival of Sick Units

Mergers and acquisitions are frequently undertaken for the revival of sick or weak companies. A financially strong firm may acquire a struggling firm to utilise idle capacity, skilled labour, or brand value. This objective helps prevent business failure, protects employment, and ensures optimal use of resources. For the acquiring firm, it provides an opportunity to expand operations at a lower cost. Revival mergers promote industrial stability and economic development.

Types of Mergers

Merger is a form of corporate restructuring in which two or more companies combine to form a single entity. Mergers are classified into different types based on the nature of business activities, objective of combination, and relationship between the merging firms. Understanding the types of mergers is essential in Advanced Corporate Accounting, as each type has different strategic motives and accounting implications.

1. Horizontal Merger

Horizontal merger takes place between companies operating in the same line of business and at the same stage of production. These firms are usually competitors in the same industry.

The main objectives of a horizontal merger are to:

  • Increase market share

  • Reduce competition

  • Achieve economies of scale

For example, when two automobile manufacturers merge, it is a horizontal merger. Such mergers help firms strengthen market power, reduce duplication of operations, and improve profitability. However, they are closely regulated to prevent monopoly practices.

2. Vertical Merger

Vertical merger occurs between companies operating at different stages of the same production process. It may be either:

  • Backward integration (merger with suppliers), or

  • Forward integration (merger with distributors or retailers).

The objective of a vertical merger is to:

  • Ensure regular supply of raw materials

  • Reduce production and distribution costs

  • Improve operational efficiency

For example, a manufacturing company merging with a raw material supplier is a vertical merger. It helps in better coordination and control over the supply chain.

3. Congeneric (Related) Merger

Congeneric merger takes place between companies that operate in related industries or have similar technologies, markets, or distribution channels, but are not direct competitors.

The objectives include:

  • Expansion of product lines

  • Utilisation of common technology

  • Marketing and operational synergies

For example, a camera manufacturer merging with a lens manufacturer represents a congeneric merger. Such mergers allow firms to leverage existing strengths and diversify moderately without entering completely unrelated businesses.

4. Conglomerate Merger

Conglomerate merger involves companies operating in entirely unrelated businesses. There is no commonality in products, markets, or technologies.

The main objectives are:

  • Diversification of business risk

  • Stability of earnings

  • Optimal utilisation of surplus funds

For example, a cement company merging with a software firm is a conglomerate merger. These mergers help reduce dependence on a single industry but may pose challenges in management and coordination due to lack of business similarity.

5. Market Extension Merger

Market extension merger occurs when companies selling similar products merge but operate in different geographical markets.

Objectives include:

  • Expansion into new regions

  • Increase in customer base

  • Strengthening market presence

For example, two telecom companies operating in different countries merging together. This type of merger enables firms to enter new markets quickly without setting up new operations from scratch.

6. Product Extension Merger

Product extension merger takes place between companies dealing in related products but not identical ones.

The objectives are:

  • Product diversification

  • Better utilisation of distribution channels

  • Cross-selling opportunities

For example, a laptop manufacturer merging with a tablet manufacturing company. Such mergers allow companies to broaden their product portfolio and meet varied customer needs using existing marketing infrastructure.

7. Reverse Merger

Reverse merger occurs when a private company merges into a public company, allowing the private company to become publicly listed without undergoing an IPO.

Objectives include:

  • Quick access to capital markets

  • Cost and time savings

  • Regulatory convenience

This type of merger is commonly used by small or growing firms seeking public status efficiently.

Types of Acquisitions

Acquisition refers to the process by which one company (the acquiring company) purchases a controlling interest in another company (the target company). Unlike mergers, the acquired company may continue to exist as a separate legal entity. Acquisitions are classified into various types based on the nature of control, relationship between companies, and mode of acquisition. Understanding these types is important for analysing corporate restructuring and accounting treatment.

1. Friendly Acquisition

Friendly acquisition takes place with the consent and cooperation of the target company’s management and board of directors. The acquiring company negotiates terms, price, and conditions mutually.

Objectives include:

  • Smooth transfer of control

  • Better integration of operations

  • Minimal resistance from stakeholders

Friendly acquisitions are less disruptive and usually beneficial to both companies, leading to strategic synergy and value creation.

2. Hostile Acquisition

Hostile acquisition occurs when the acquiring company takes control against the wishes of the target company’s management. It is usually done by directly purchasing shares from shareholders.

Characteristics:

  • Management opposition

  • Use of aggressive takeover strategies

  • Possible legal and regulatory challenges

Although controversial, hostile acquisitions can improve efficiency by replacing ineffective management.

3. Horizontal Acquisition

Horizontal acquisition involves the acquisition of a company operating in the same industry and at the same stage of production.

Objectives include:

  • Reduction of competition

  • Increase in market share

  • Economies of scale

For example, one telecom company acquiring another telecom company. Such acquisitions are regulated to prevent monopolistic practices.

4. Vertical Acquisitio

Vertical acquisition occurs when a company acquires another company operating at a different stage of the production or distribution process.

Types:

  • Backward acquisition (supplier)

  • Forward acquisition (distributor)

This type improves supply chain efficiency, reduces dependency, and lowers operational costs.

5. Congeneric (Related) Acquisition

In a congeneric acquisition, the acquiring and target companies operate in related industries or share similar technologies, customers, or distribution channels.

Objectives:

  • Product line expansion

  • Technological synergy

  • Market development

This allows moderate diversification with manageable risk.

6. Conglomerate Acquisition

Conglomerate acquisition involves companies from entirely unrelated businesses.

Objectives include:

  • Diversification of business risk

  • Stable earnings

  • Efficient use of surplus funds

For example, a manufacturing firm acquiring a financial services company. Such acquisitions reduce industry-specific risk.

7. Asset Acquisition

An asset acquisition involves purchasing specific assets of another company rather than its shares.

Features:

  • Selective acquisition

  • Avoidance of unwanted liabilities

  • Flexible structure

This type is preferred when the acquirer wants only certain assets without assuming full control.

8. Share Acquisition

In a share acquisition, the acquiring company purchases a majority of shares of the target company.

Features:

  • Control through ownership

  • Target company retains legal identity

  • Common form of acquisition

This is the most common method of acquiring control.

Special Forms

  • Leveraged Buyout (LBO)

Involves the acquisition of another company using a significant amount of borrowed money (bonds or loans) to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loans.

  • Management Buyout (MBO)

An acquisition type where a company’s existing managers acquire a large part or all of the company.

Pros of Mergers and Acquisition

  • Growth Acceleration

M&A can provide immediate access to new markets and customer bases, accelerating growth more rapidly than organic expansion methods.

  • Synergies

Combining operations can lead to cost reductions, increased revenue, and improved efficiency through the integration of best practices, technologies, and resources.

  • Economies of Scale

Mergers often result in economies of scale, reducing the cost per unit of production or operation due to larger volumes, which can enhance competitiveness and profitability.

  • Diversification

Acquiring companies in different industries or sectors can spread risk across a broader portfolio, reducing vulnerability to industry-specific downturns.

  • Market Power

M&A can increase market share and bargaining power with suppliers and customers, potentially leading to better terms and improved margins.

  • Access to Technology and Talent:

Acquisitions can provide quick access to new technologies, patents, and skilled employees, facilitating innovation and improving competitive positioning.

  • Tax Benefits

Certain mergers and acquisitions can yield tax advantages, such as the utilization of tax losses and more efficient corporate structures.

  • Overcoming Entry Barriers

Entering a new market through M&A can overcome barriers to entry such as stringent regulations, high startup costs, and competition.

  • Restructuring Opportunities

M&A allows companies to restructure their operations and portfolios more efficiently, focusing on core competencies and divesting non-core assets.

  • Financial Leveraging

Acquisitions can be used to leverage the financial strength of the combined entities, improving access to capital and potentially leading to better investment and growth opportunities.

  • Strategic Realignment

Companies can use M&A to strategically realign their business focus, shedding less profitable or non-core operations and reinforcing areas with higher growth potential.

  • Elimination of Competition

By acquiring or merging with competitors, companies can reduce competition in the market, which can lead to increased market share and pricing power.

Cons of Mergers and Acquisition

  • High Costs

The process of merging with or acquiring another company can be extremely costly. Expenses include advisory fees, legal fees, and other transaction costs. Additionally, the premium paid to acquire a company can be substantial.

  • Integration Challenges

Combining two companies often involves significant integration challenges, including merging different corporate cultures, systems, and processes. These challenges can lead to disruptions in operations and employee dissatisfaction.

  • Overvaluation Risk

There’s a risk of overpaying for the company being acquired due to overestimation of synergies or underestimation of integration costs, potentially leading to a significant loss of value.

  • Regulatory Hurdles

Mergers and acquisitions can face intense scrutiny from regulatory bodies concerned about antitrust laws and the impact on competition. Obtaining approval can be a lengthy and uncertain process.

  • Loss of Key Employees

The uncertainty and changes brought about by M&A activities can lead to the loss of key employees who may feel insecure about their future roles or disagree with the direction of the newly formed entity.

  • Cultural Clashes

Differences in corporate culture between the merging companies can lead to conflict, reduced morale, and a decline in productivity, undermining the benefits of the merger or acquisition.

  • Debt Burden

Acquisitions often involve taking on significant debt to finance the deal. This increased leverage can put a strain on cash flow and limit future investment opportunities.

  • Customer and Supplier Reactions

Customers and suppliers may react negatively to the news of a merger or acquisition, fearing changes in their relationship with the company or in the quality of products and services.

  • Dilution of Shareholder Value

In cases where the acquisition is financed through the issuance of new shares, existing shareholders may experience dilution of their ownership percentage and, potentially, a reduction in earnings per share.

  • Failure to Achieve Synergies

The anticipated synergies from a merger or acquisition may fail to materialize to the extent projected, whether due to operational challenges, higher-than-expected integration costs, or cultural issues.

  • Reputation Risks

If the merger or acquisition is perceived negatively by the public or fails to achieve its goals, it can lead to reputational damage for the companies involved.

  • Distraction from Core Business

The significant effort required to complete and integrate an M&A transaction can distract management from focusing on the core business, potentially leading to missed opportunities or operational shortcomings.

Difference between Mergers and Acquisition

Basis of Comparison Mergers Acquisitions
Definition Two companies become one One company buys another
Power Balance Generally equal Buyer is dominant
Decision Making Jointly By acquiring company
Legal Status Dissolves into one Remains separate
Objective Synergies, growth Control, expansion
Financial Size Similar companies Can be unequal
Autonomy Reduced for both Acquired loses autonomy
Brand Identity Often new identity Usually retains names
Negotiation Atmosphere Collaborative Can be hostile
Public Perception Positive, growth-oriented Can be negative
Complexity High integration complexity Relatively simpler
Example Outcome New entity formed Subsidiary or absorbed

Management Notes

Joint Ventures Objectives, Types, Pros and Cons

indiafreenotesby indiafreenotes3

Joint Venture is a strategic alliance where two or more parties, often businesses, agree to collaborate by pooling their resources to achieve a specific task, project, or business activity. This partnership involves sharing the risks, costs, profits, and losses associated with the venture. Joint ventures are typically formed for a finite time and aim to leverage the unique strengths and capabilities of each partner to achieve goals that would be difficult or impossible for them to reach independently. These ventures can vary widely in scope and scale, ranging from small collaborative projects to significant international business operations. The collaboration allows each party to access new markets, technologies, and resources, fostering innovation and growth while mitigating the risks involved in new endeavors.

Objectives of Joint Ventures:

  • Access to New Markets:

Joint ventures often enable companies to enter geographical markets that are otherwise difficult to penetrate due to regulatory barriers, cultural differences, or high entry costs. Partnering with a local entity can facilitate market entry and acceptance.

  • Resource Sharing:

Companies engage in joint ventures to pool resources such as technology, industry expertise, and financial capital. This collaboration can lead to more efficient use of resources and cost-sharing, reducing the burden on individual entities.

  • Risk Mitigation:

By sharing the investment and operational risks, companies can mitigate the potential losses they might incur if they pursued the venture alone. This is particularly appealing for high-risk projects or markets.

  • Access to New Technologies and Expertise:

Joint ventures can provide companies with access to new technologies, skills, and expertise that they may not possess in-house. This can accelerate innovation and improve competitive positioning.

  • Speed to Market:

Collaborating with a partner can expedite product development and launch processes, allowing companies to bring products and services to market more quickly than they could on their own.

  • Economies of Scale:

Joint ventures can lead to economies of scale in production and distribution, reducing costs per unit and enhancing competitiveness.

  • Regulatory Compliance:

In some markets, local laws and regulations may favor or require local ownership. A joint venture with a local partner can provide a compliant pathway to market entry.

  • Strategic Realignment and Expansion:

Companies may enter into joint ventures to strategically realign their business focus or explore new business lines without diverting significant resources from their core operations.

  • Competitive Advantage:

By combining strengths, companies can create a competitive advantage that is difficult for competitors to replicate, such as combining proprietary technologies or strong brand recognition.

  • Learning and Innovation:

Joint ventures can be a platform for mutual learning, allowing companies to gain insights into new business practices, management styles, and cultural approaches that can drive innovation and efficiency.

Types of Joint Ventures:

  • Project-Based Joint Ventures:

This type focuses on a single project or a series of projects. Partners collaborate to complete a specific task, such as a construction project or research and development initiative, and the joint venture is often dissolved once the project is completed.

  • Functional Joint Ventures:

In this model, partners come together to share specific functions or operations, such as marketing, distribution, or manufacturing, leveraging each other’s strengths to enhance efficiency and reach.

  • Vertical Joint Ventures:

These involve companies at different stages of the production process or supply chain, such as a manufacturer partnering with a supplier or distributor. The goal is often to secure supply chains or access new markets.

  • Horizontal Joint Ventures:

Companies at the same stage of production in the same or similar industries collaborate to expand their market reach, share resources, or undertake projects that are too large or complex for one entity to handle alone.

  • Cross–Border Joint Ventures:

These joint ventures involve companies from different countries coming together to enter new markets, access local resources, or leverage international expertise. They are particularly common in industries where local knowledge is crucial for success.

  • Equity Joint Ventures:

In this arrangement, the parties create a separate legal entity and contribute equity to it. They share profits, losses, and control according to their respective equity investments. This type is common in long-term partnerships with significant investments.

  • Non–Equity Joint Ventures:

This type involves collaboration without forming a new legal entity. Partners may agree to cooperate in specific areas or projects, sharing resources and benefits based on contractual agreements rather than equity contributions.

  • Consortiums:

Consortium is a form of a joint venture where multiple parties collaborate for a specific purpose, often in large-scale projects or bidding processes. Unlike other joint ventures, a consortium usually does not involve forming a separate legal entity.

Pros of Joint Ventures:

  • Access to New Markets and Distribution Networks:

Joint ventures can provide companies with an easier and more efficient entry into foreign or previously inaccessible markets. Partnering with local firms offers immediate access to their distribution channels, customer base, and market expertise.

  • Resource Sharing:

Joint ventures allow partners to share the burden of costs and risks associated with new projects or business expansions. This includes sharing technology, expertise, capital, and human resources, making ventures more feasible and less risky than solo endeavors.

  • Synergy and Increased Capacity:

By combining strengths, joint ventures can achieve greater results than the sum of what partners could achieve individually. This synergy can enhance productivity, innovation, and the ability to undertake larger projects or orders.

  • Access to New Knowledge and Expertise:

Partners can learn from each other, gaining insights into new technologies, management practices, or market strategies. This knowledge transfer can be a significant advantage in competitive and rapidly changing industries.

  • Speed to Market:

Joint ventures can accelerate the process of bringing new products or services to market. By leveraging the existing capabilities and resources of both partners, products can be developed, manufactured, and distributed more quickly.

  • Flexibility:

Compared to mergers and acquisitions, joint ventures offer a flexible approach to business collaboration and expansion, with the ability to easily dissolve the partnership or adjust its terms as the market or objectives change.

  • Risk Mitigation:

The shared investment and responsibility inherent in joint ventures spread the financial and operational risks between the partners, making high-stake projects more manageable and less daunting.

  • Overcoming Legal and Regulatory Barriers:

In many countries, local laws and regulations may restrict foreign companies’ operations. Forming a joint venture with a local partner can provide a way to comply with these regulations, facilitating market entry and operation.

  • Strengthening Business Relationships:

Engaging in a joint venture can strengthen relationships between companies, fostering long-term collaboration and mutual benefits beyond the scope of the initial project.

  • Cost Savings:

By pooling resources and optimizing the use of each partner’s assets, joint ventures can achieve cost efficiencies in production, research and development, and marketing, among other areas.

Cons of Joint Ventures:

  • Cultural and Operational Differences:

Partners in a joint venture may have different business cultures, management styles, and operational practices, leading to conflicts and inefficiencies. Aligning these aspects can be challenging and time-consuming.

  • Shared Control and Decision-Making:

Joint ventures involve sharing control, which can lead to disagreements and delays in decision-making, especially if the partners have different visions, strategies, or priorities for the venture.

  • Resource Allocation issues:

Determining how much each party should contribute in terms of capital, expertise, and other resources can be complex. Disputes may arise over perceived imbalances in contributions versus benefits received.

  • Integration Challenges:

Effectively integrating processes, technology, and personnel from different organizations can be difficult, potentially leading to disruptions in operations and conflicts among staff.

  • Limited Flexibility:

The terms of the joint venture agreement may limit each partner’s ability to pursue independent initiatives or respond quickly to market changes, potentially leading to missed opportunities.

  • Profit Sharing:

While sharing risks is a benefit, sharing profits can be a downside, especially if one partner feels they are contributing more to the venture but not receiving commensurate rewards.

  • Exit Difficulties:

Dissolving a joint venture or exiting the partnership can be complicated, especially if the venture is successful. Issues may arise regarding the division of assets, intellectual property rights, and ongoing commitments.

  • Legal and Regulatory Compliance:

Joint ventures, especially international ones, must navigate complex legal and regulatory environments. Ensuring compliance can be resource-intensive and may pose risks if not managed properly.

  • Reputational Risks:

If the joint venture faces public relations issues or fails, each partner may suffer reputational damage, which can affect their broader business operations and relationships.

  • Dependency:

Relying on a joint venture partner for critical aspects of operations or market access can lead to dependency, which might be risky if the partnership deteriorates or if the partner’s business faces difficulties.

Management Notes

Nature, Characteristics and Features of International Business

indiafreenotesby indiafreenotes0

Business which is conducted internationally in more than one country is termed as an International business. It involves transactions of goods & services between the two countries. These transactions are conducted at the global level & across national borders. International businesses are very large in size as they are performed at a global level.

Their scales of operation are vast in size. International businesses provide employment to a large number of peoples. It is served as an important source for earning foreign exchange for the country. All payments in these businesses are done in foreign currencies of different countries.

These businesses help in improving the standard of living of people in different countries by supplying high-quality goods. International business is of different types like imports & exports, franchising, licensing, foreign direct investment, etc.

International businesses provide employment to a large number of peoples. It is served as an important source for earning foreign exchange for the country. All payments in these businesses are done in foreign currencies of different countries.

Nature of International Business

  1. International Restrictions

In international business, there is a fear of the restrictions which are imposed by the government of the different countries. Many country’s governments don’t allow international businesses in their country. They have trade blocks, tariff barriers, foreign exchange restrictions, etc. These things are harmful to international business.

  1. Benefits to Participating Countries

It gives benefits to the countries which are participating in the international business. The richer or developed countries grow their business to the global level and they get maximum benefits. The developing countries get the latest technology, foreign capital, employment opportunities, rapid industrial development, etc. This helps developing countries in developing their economy. Therefore, developing countries open up their economy for foreign investments.

  1. Large Scale Operations

International business contains a large number of operations at a time because it is conducted on a large scale globally. Production of the goods at a large scale, they have to fulfill the demand at a global level. Marketing of the product is also conducted at a large scale to make them aware of the product. First, they fulfill the domestic demand and then they export the surplus in the foreign markets.

  1. Integration of Economies

International Business combines the economies of many countries. The companies use the finance, labor, resources, and infrastructure of the other countries in which they are working. They produce the parts in different countries, assembles the product in other countries and sell their product in other countries.

  1. Dominated by Developed Countries

International business is dominated by developed countries and their MNC’s. Countries like U.S.A, Europe, and Japan all are the countries that are producing high-quality products, they have people working for them on high salaries. They have large financial and other resources like the best technology and Research and Development centers. Therefore, they produce good quality products and services at low prices. They help them to capture the world market.

  1. Market Segmentation

International business is based on market segmentation on the basis of the geographic segmentation of the consumers. The market is divided into different groups according to the demand of the consumers in different countries. It produces goods according to the demand of the consumers of the different market segmentations.

  1. Sensitive Nature

International Business is highly affected by economic policies, political environment, technology, etc. It can play a positive role to improve the business and can also be negative for the business. It totally depends on the policies made by the government, it can help in expanding the business and maximizing the profits and vice-versa.

Characteristics of International business

  1. Large Scale Operations

International businesses are conducted on a very large scale. They perform their operations in different countries globally. Their business activities are very large in size ranging from production, marketing & selling of their products. These businesses serve the demands of local markets also where they are present & also demands of different countries globally. That’s why they produce a large amount of goods & services to cater to the large demands.

  1. Earns Foreign Exchange

International businesses are served as an important source for earning foreign exchange. Foreign Currencies of different countries are involved in transactions in these businesses. This helps in getting enough foreign exchange reserves for the country.

  1. Integrates Economies

Another important feature of international business is that it integrates the economies of different countries worldwide. It takes advantage of different economies & aims at providing its services economically. It takes labor from one country, technology from one country & finance from another country. Also, it designs, produces, assembles its products not only in one country but in different-different countries. This helps in taking advantage of different economies & becoming economical.

  1. Large Number of Middlemen

International businesses are very large in size. Their scale of operations is not limited to one country but performs in different countries globally. There is a large number of middlemen involved in international businesses. These all person renders their services properly for the efficiency of the business. Their services help the business in easy expansion & growth.

  1. High Risk

The degree of risk associated with international business is very high. These businesses require a large amount of resources both in terms of money & manpower for carrying out its operations. These need to carry out trade in different countries at large distances. It requires a huge cost & time to carry these goods & services. Also, sometimes different economies face unfavorable conditions which affect the business conditions.

  1. Intense Competition

International business faces a large number of risks internationally. These businesses invest large amounts in advertising their products. There are a large number of competitors in the international market. There is tough competition in terms of price, quality, design, packing, etc. Business needs to focus on these things to face the tough competition going on.

  1. International Restrictions

International businesses face large restrictions while carrying out there operations in different countries. Sometimes they are not allowed to inflow & outflow goods, technology & different resources. There are restricted by the government of different countries to not enter into their countries. They face several foreign exchange barriers, trade barriers & trade blocks which are harmful for international business.

  1. Highly Sensitive Nature

International businesses are highly sensitive in nature. Proper market research is very essential for carrying out these businesses effectively. Any unfavorable economic conditions in one country will adversely affect the business. If there is any economic, political or technological change will directly influence the functioning of the business. Therefore, these businesses should change their activities from time to time to survive the change.

Features of International Business

  1. Separates Producers from Buyers

In international business, producers and buyers are at distant places. This business involves the production of products in one country and is sold in another country. Buyers and producers are not in close contact with each other like in case of Domestic business. They belong to different nations which make it difficult to contact with each other.

  1. Immobility of Factors

There is a large degree of immobility of factors in international business. Factors like labour and capital cannot move freely like in case of inland trade. There are certain laws and regulations like immigration laws, qualification, citizenship etc. which impose several restrictions on the movement of these factors. Government of different countries have different fiscal policies and therefore they accordingly prohibit the flow of capital in their countries.

  1. Heterogeneous Markets

International markets are homogeneous in nature and differ from each other. These markets lack homogeneity due to difference in culture, tradition, climate, habits, preferences, weigh and measures etc. These markets are different from those which are in a single country. Behaviour of buyers in international business differs from country to country due to difference in the socio-economic environment of different nations.

  1. Large Operations

International businesses are conducted at a very large scale. They perform their operations in different countries globally. Their business activities are very large in size ranging from production, marketing and selling of their products. These businesses along with the demands of local markets where they are present also serve the demands of different countries globally. That’s why they produce a large amount of goods and services to cater to the large demands.

  1. Foreign Currency Payments

International Business involves different currencies of different countries as all payments are done in foreign currency. These businesses serve as an important source of earning foreign exchange for the country. Foreign currencies of many countries are involved for transactions in these businesses. This helps in maintaining adequate foreign exchange reserve for country.

  1. International Rules and Regulations

International businesses are bound to follow several international rules and regulations of different countries where they operate. They face large restrictions while carrying out there activities and are not allowed to inflow and outflow goods, technology and several resources in different countries. International businesses are also restricted by government of many countries to not enter into their countries. They face several foreign exchange barriers, trade barriers and trade blocks which are harmful for international business.

  1. Large Middlemen

There are large numbers of persons involved in International business for their proper functioning in different countries. These businesses are very large in size and their scale of operations is not limited to one country but performs in several countries globally. This requires a large no. of middlemen’s for performing different activities. These all person renders their services properly for the efficiency of business. Their services help the business in easy expansion & growth.

  1. Multiplicity of Documents

International business requires large no. of documents from importing and exporting goods among different countries. These documents are like commercial invoice, shipping bill, Certificate of origin, inspection and insurance certificate, mate receipt etc. There is a series of documentation followed right from the point when an order for goods is received by exporter till the time when they are finally delivered at their destination.

Management Notes

Meaning and Definition of International Business

indiafreenotesby indiafreenotes1

Today business is growing globally and the need for profit is pushing a large number of business firms into world markets beyond their historical and traditional boundaries. A global corporation is gaining an increasing acceptance in the business community compared to corporations operating within the geographical limits of a country. These companies are termed as Multi National Corporations (MNC) or Trans National

International business involves transactions across the national boundaries. It  includes  the transfer of goods, services, technology, managerial knowledge and capital to other countries. Although business has been conducted on an international scale for many years, international business has gained more significance only in recent years because of the emergence of multinational corporations in some of the developing countries.

Meaning of International Business

International business denotes all those business activities which take place beyond the geographical  limits  of  the  country.   It involves not only the international movements of goods and services,  but  also  of  capital  personnel,  technology  and intellectual property like patents, trademarks, know-how and copy rights.

Definition of International Business

Roger Bennet defines, International business involves commercial activities that cross national frontiers

According to John D. Daniels and  Lee H. Radebaugh, International business is all business transactions-private and governmental- that involve two or more countries. Private companies undertake such transactions for profits, governments may or may not do the same in their transactions.

Features of International Business

The nature and characteristics or features of international business are:-

  1. Large scale operations

In international business, all the operations are conducted on a very huge scale. Production and marketing activities are conducted on a large scale. It first sells its goods in the local market. Then the surplus goods are exported.

  1. Intergration of economies

International business integrates (combines) the economies of many countries. This is because it uses finance from one country, labour from another country, and infrastructure from another country. It designs the product in one country, produces its parts in many different countries and assembles the product in another country. It sells the product in many countries, i.e. in the international market.

  1. Dominated by developed countries and MNCs

International business is dominated by developed countries and their multinational corporations (MNCs). At present, MNCs from USA, Europe and Japan dominate (fully control) foreign trade. This is because they have large financial and other resources. They also have the best technology and research and development (R & D). They have highly skilled employees and managers because they give very high salaries and other benefits. Therefore, they produce good quality goods and services at low prices. This helps them to capture and dominate the world market.

  1. Benefits to participating countries

International business gives benefits to all participating countries. However, the developed (rich) countries get the maximum benefits. The developing (poor) countries also get benefits. They get foreign capital and technology. They get rapid industrial development. They get more employment opportunities. All this results in economic development of the developing countries. Therefore, developing countries open up their economies through liberal economic policies.

  1. Keen competition

International business has to face keen (too much) competition in the world market. The competition is between unequal partners i.e. developed and developing countries. In this keen competition, developed countries and their MNCs are in a favourable position because they produce superior quality goods and services at very low prices. Developed countries also have many contacts in the world market. So, developing countries find it very difficult to face competition from developed countries.

  1. Special role of science and technology

International business gives a lot of importance to science and technology. Science and Technology (S & T) help the business to have large-scale production. Developed countries use high technologies. Therefore, they dominate global business. International business helps them to transfer such top high-end technologies to the developing countries.

  1. International restrictions

International business faces many restrictions on the inflow and outflow of capital, technology and goods. Many governments do not allow international businesses to enter their countries. They have many trade blocks, tariff barriers, foreign exchange restrictions, etc. All this is harmful to international business.

  1. Sensitive nature

The international business is very sensitive in nature. Any changes in the economic policies, technology, political environment, etc. has a huge impact on it. Therefore, international business must conduct marketing research to find out and study these changes. They must adjust their business activities and adapt accordingly to survive changes.

Management Notes

Emerging Trends in E-Commerce

indiafreenotesby indiafreenotes0

In today’s time, all thanks to advancement in technology nothing or no business is restricted to one place, one city or even one country anymore. Everything is global. In the past few years e-commerce industry has taken a ride and has come to become the need of the hour. E-Commerce industry as a whole is evolving at a great pace and as for 2016 and 2017, it has already risen tremendously.

There are new trends emerging in this space, such as:

(1)  Moving to Mobile Commerce

As per a recent report, it is predicted that by the end of 2016 almost a third of the world’s population will have access to Smartphone. Having this feature has become more of a necessity. E-Commerce stores must fit in all screens in order to enhance customer experience or they may be losing on some serious business. As per recent Forbes study, 87 % of the gen-X people spend most of their time on digital devices every day than ever.

(2) Choose how you want to pay

Convenient and more payment options new businesses are emerging to facilitate new payment models to enhance online shopping experience. They aim not only to make wider options available but also to increase payment security for both buyers and sellers. In the past few years, many new models and gateways have emerged like e-wallets, Chip card readers, magnetic cards , EMV and cashback services.

(3) Multi Channel Model

Inspite of booming eCommerce market, retailers have come to an understanding that Omni Channel /Multiple channel is must for any business model. Though there has been a lot of buzz on online shopping comfort, in reality it has been recorded that many customers may surf net all day but at the end do need a brick and mortar store to make the final purchase. However, new technologies such as instore digital services are emerging to make the physical store experience better.

(4) Seamless Shopping experience

Many new features are being added by all companies to facilitate seamless shopping for example stores are now offering easy on the spot or online payments , easy wallets with discounts and coupons or unique store debit cards .

(5) Social Ecommerce

Retailers are adopting social media as their lead sales medium . Social network has come to play the most important role in the retail world lately , almost 40 % purchases are made because of social media handles . Thus , social network is sure expected to rise in the coming time.

(6) Quality rather than quantity

Retailers have come to an understanding that now having more variety will not win them customers, thus the focus has shifted to enhancing customized shopping experience by introducing new features. The emphasis is now being laid on unique online features like virtual trial rooms, zoom in pictures, 360 degree image view.

(7) Customer Relationship

With the increasing variety available the customer loyalty is now completely out of picture. It requires well integrated technology supporting easy payments and high tech shopping experience. The focus is now being shifted from discounts to better integrated technology services.

(8) Customer service

With the increasing online shopping, people are becoming more and more comfortable with the concept of choosing amongst great variety at the comfort of their own space anywhere, anytime 24/7 . Thus , there will be a rise in customer support service feature in the coming time .

(9) Smarter Customers

With more shopping and payment options than ever , customers are more informed and empowered now the stakes are much highe. It is utmost important to win their trust now than ever, but maintaining quality and logistics.

(10) Merging online and offline

It has become important to merge online /offline systems to facilitate easy working. A well integrated technology is crucial.

“Change is the essence of life” in order to survive and make a mark in today’s time retailers must be extremely flexible and mouldable towards the smart customers changing needs. It requires tools like social media monitoring , customer feedback & so on . It is the need today to stay upbeat with the changing trends and technology to stay long.

Management Notes

Peer-to–Peer (P2P) business Model

indiafreenotesby indiafreenotes0

A peer-to-peer (P2P) economy is a decentralized model whereby two individuals interact to buy sell goods and services directly with each other or produce goods and service together, without an intermediary third-party or the use of an incorporated entity or business firm. In a peer-to-peer transaction, the buyer and the seller transact directly with each other in terms of the delivery of the good or service and the exchange of payment. In a peer-to-peer economy, the producer is usually a private individual or independent contractor who owns both their tools (and means of production) and their finished product.

A peer-to-peer economy is viewed as an alternative to traditional capitalism, whereby organized business firms own the means of production and also the finished product. Firms act as centralized intermediaries, selling finished goods and services to customers and hiring labor as necessary to carry out the production process.

A P2P economy can exist within a capitalist economy. Open-source software (which is P2P) co-exists with retail and commercial software. Services like Uber or Airbnb serve as alternatives to taxi and livery services or hotels and inns, respectively. These companies act as hybrids between traditional capitalist firms and true P2P activity by providing intermediary services, including a network to connect buyers and sellers and process payments, but using private contractors to deliver services directly to customers.

In P2P, with no third party involved in a transaction, there is a greater risk that the provider may fail to deliver, that the product will not be of the quality expected, or that the buyer may not pay. Reduced overhead costs and resulting lower prices might defray this extra risk.

Because providers of P2P goods or services own their finished product and means of production, the peer-to-peer economy is similar to the economic production of the pre-industrial age when everybody was a self-producer, a system that was supplanted by more efficient economic systems that provided greater productivity and wealth. The Internet and the IT revolution have made the P2P economy a much more viable system in the modern age, and have also spurred investment in service providers who, while not directly involved in the production of P2P goods or services, act to make P2P transactions more visible, safer, and efficient.

The modern state of emerging P2P economies is just the latest example of the Internet’s value to consumers. The emerging Internet-empowered, self-producer model of capitalism is now significant and disruptive enough for regulators and companies to have woken up to it. That is a sign of its immense potential for such innovative business models in years to come.

  • A peer-to-peer (P2P) economy is one where individuals directly transact business or cooperate in production with each other with little to no intermediation by third parties.
  • Modern technology has helped to increase the ability of people to engage in P2P economic activity.
  • Factors affecting whether P2P or intermediated economic activity are more likely and efficient include economies of scale, transaction costs, managerial and entrepreneurial specialization, and risk and uncertainty.
Management Notes

Consumer to Business (C2B) business Model

indiafreenotesby indiafreenotes3

In this model, a consumer approaches a website showing multiple business organizations for a particular service. The consumer places an estimate of amount he/she wants to spend for a particular service. For example, the comparison of interest rates of personal loan/car loan provided by various banks via websites. A business organization who fulfills the consumer’s requirement within the specified budget, approaches the customer and provides its services.

Consumer-to-business (C2B) is a business model in which consumers (individuals) create value and businesses consume that value. For example, when a consumer writes reviews or when a consumer gives a useful idea for new product development then that consumer is creating value for the business if the business adopts the input. In the C2B model, a reverse auction or demand collection model, enables buyers to name or demand their own price, which is often binding, for a specific good or service. Inside of a consumer to business market the roles involved in the transaction must be established and the consumer must offer something of value to the business.

Another form of C2B is the electronic commerce business model in which consumers can offer products and services to companies, and the companies pay the consumers. This business model is a complete reversal of the traditional business model in which companies offer goods and services to consumers (business-to-consumer = B2C). We can see the C2B model at work in blogs or internet forums in which the author offers a link back to an online business thereby facilitating the purchase of a product (like a book on Amazon.com), for which the author might receive affiliate revenues from a successful sale. Elance was the first C2B model e-commerce site.

C2B is a kind of economic relationship that is qualified as an inverted business type. The advent of the C2B scheme is due to:

  • The internet connecting large groups of people to a bidirectional network; the large traditional media outlets are one-directional relationships whereas the internet is bidirectional.
  • Decreasing costs of technology; individuals now have access to technologies that were once only available to large companies (digital printing and acquisition technology, high-performance computers, and powerful software).

Positives and Negatives

Nowadays people have smartphones or connect to the internet through personal tablets/computers daily allowing consumers to engage with brands online. According to Katherine Arline, in traditional consumer-to-business models companies would promote goods and services to consumers, but a shift has occurred to allow consumers to be the driving force behind a transaction. To the consumers benefit, reverse auctions occur in consumer to business markets allowing the consumer to name their price for a product or service.

A consumer can also provide value to a business by offering to promote a business products on a consumers blog or social media platforms. Businesses are provided value through their consumers and vice versa.

Businesses gain in C2B from the consumers willingness to negotiate price, contribute data, or market to the company. Consumers profit from direct payment of the reduced-price goods and services and the flexibility of the transaction the C2B market created. Consumer to business markets have their downfall as well. C2B is still a relatively new business practice and has not been fully studied.

Data Aggregation

Aggregation of data is a common C2B practice done with many internet corporations. In this instance, the consumer is creating the value of personal information and data to better target them to the correct advertisers. Businesses such as Facebook, Twitter, and others utilize this information in an effort to facilitate their B2B transactions with advertisers. Most of these systems cannot be fully utilized without B2C or B2B transactions, as C2B is usually the facilitator of these.

Management Notes

Customer-to-Customer (C2C) e-commerce, Characteristics, Types, Benefits, Challenges

indiafreenotesby indiafreenotes3

Customer-to-Customer (C2C) e-commerce refers to online transactions where individual consumers buy and sell goods or services directly to and from each other through digital platforms. These platforms act as intermediaries, facilitating the exchange of products or services between individuals, without the involvement of businesses as sellers. Examples of C2C e-commerce platforms include online marketplaces like eBay, Craigslist, and Facebook Marketplace, where individuals can list items for sale, negotiate prices, and complete transactions. C2C e-commerce enables individuals to monetize unused or unwanted items, find unique goods, and engage in peer-to-peer commerce, fostering a dynamic and decentralized marketplace driven by consumer-to-consumer interactions.

Characteristics of Customer-to-Customer (C2C) e-commerce:

  1. Peer-to-Peer Transactions:

C2C e-commerce involves direct transactions between individual consumers, bypassing traditional business intermediaries.

  1. Individual Sellers:

In C2C e-commerce, individuals act as both sellers and buyers, listing items for sale or auction and purchasing goods from other individuals.

  1. Online Marketplaces:

C2C e-commerce platforms provide digital marketplaces where individuals can list items for sale, browse listings, and communicate with other users.

  1. Variety of Products:

C2C platforms offer a wide range of products and services, including used goods, handmade items, collectibles, and unique or niche products.

  1. User-Generated Content:

C2C e-commerce relies on user-generated content, including product listings, descriptions, images, and reviews, to facilitate transactions and build trust among users.

  1. Informal Transactions:

Transactions in C2C e-commerce platforms often involve informal negotiations, haggling over prices, and flexible payment and delivery arrangements.

  1. Community Engagement:

C2C platforms foster community engagement and interaction among users through features such as forums, messaging, and social sharing, enhancing the overall user experience.

  1. Trust and Reputation:

Trust and reputation play a crucial role in C2C e-commerce, as buyers rely on seller ratings, reviews, and feedback to assess reliability and credibility before making purchases.

Types of Customer-to-Customer (C2C) e-commerce:

  1. Online Classifieds:

Platforms like Craigslist and Gumtree allow individuals to list items for sale or trade in local or regional markets, facilitating C2C transactions.

  1. Online Auctions:

Websites such as eBay enable individuals to auction off goods to the highest bidder, creating dynamic marketplaces for buying and selling a wide range of products.

  1. Peer-to-Peer Rental:

C2C rental platforms like Airbnb and Turo enable individuals to rent out their properties, vehicles, or other assets to other consumers for short-term use.

  1. Freelance Services:

Online platforms such as Upwork and Fiverr connect individuals seeking freelance work with those offering services such as graphic design, writing, programming, and digital marketing.

  1. Peer-to-Peer Lending:

Peer-to-peer lending platforms like Prosper and Lending Club allow individuals to lend money directly to other individuals or businesses in exchange for interest payments.

  1. Ticket Resale:

C2C ticket resale platforms like StubHub and Ticketmaster Resale enable individuals to buy and sell tickets for events such as concerts, sports games, and theater performances.

  1. Swapping and Bartering:

Online communities and platforms facilitate C2C exchanges through swapping and bartering of goods and services without the use of money.

  1. Social Commerce:

Social media platforms like Facebook Marketplace and Instagram enable individuals to buy and sell goods directly within their social networks, leveraging peer-to-peer connections for transactions.

Benefits of Customer-to-Customer (C2C) e-commerce:

  1. Wide Product Selection:

C2C platforms offer a diverse range of products and services, including unique and niche items that may not be readily available through traditional retail channels.

  1. Lower Prices:

Direct transactions between individuals often result in lower prices compared to buying from businesses, as sellers may offer used or second-hand items at discounted rates.

  1. Opportunity for Income:

C2C e-commerce provides individuals with an opportunity to monetize unused or unwanted items by selling them to other consumers, generating additional income.

  1. Flexibility:

C2C platforms offer flexibility in terms of listing items for sale, setting prices, and negotiating with buyers, allowing individuals to control their selling process.

  1. Community Engagement:

C2C e-commerce fosters community engagement and interaction among users, creating a sense of belonging and facilitating communication and collaboration.

  1. Market Research:

Buyers can access valuable market insights and trends by browsing listings and observing buying behaviors on C2C platforms, helping them make informed purchasing decisions.

  1. Environmental Benefits:

C2C e-commerce promotes sustainability by extending the lifespan of products through reuse and recycling, reducing waste and environmental impact.

  1. Empowerment:

C2C e-commerce empowers individuals to become entrepreneurs and build their own businesses, regardless of geographical location or traditional barriers to entry, fostering economic empowerment and entrepreneurship.

Challenges of Customer-to-Customer (C2C) e-commerce:

  1. Trust and Security:

Establishing trust between buyers and sellers can be challenging in C2C transactions, as individuals may be concerned about fraud, scams, or receiving misrepresented goods.

  1. Quality Control:

Maintaining product quality and consistency can be difficult in C2C e-commerce, as sellers may offer used or second-hand items with varying levels of condition and reliability.

  1. Payment Risks:

C2C transactions may involve risks related to payment processing, including fraudulent transactions, payment disputes, and chargebacks, posing challenges for both buyers and sellers.

  1. Logistics and Shipping:

Managing shipping and delivery logistics can be complex in C2C e-commerce, especially for individual sellers who may lack access to affordable shipping services or struggle with packaging and fulfillment.

  1. Marketplace Competition:

C2C platforms often face intense competition from other online marketplaces and traditional retail channels, making it challenging for sellers to attract buyers and stand out in the crowded marketplace.

  1. Regulatory Compliance:

C2C e-commerce platforms must comply with various regulations and legal requirements related to consumer protection, taxation, and online transactions, which can be complex and costly to navigate.

  1. Customer Service:

Providing satisfactory customer service and support can be challenging in C2C transactions, as sellers may lack the resources or expertise to address buyer inquiries, complaints, or issues effectively.

  1. Seller Reputation:

Building and maintaining a positive seller reputation is crucial in C2C e-commerce, as buyers rely on seller ratings, reviews, and feedback to assess credibility and trustworthiness, posing challenges for new or inexperienced sellers.

Management Notes

Business to Consumer (B2C) business Model

indiafreenotesby indiafreenotes2

In B2C model, a business website is a place where all the transactions take place directly between a business organization and a consumer.

In the B2C model, a consumer goes to the website, selects a catalog, orders the catalog, and an email is sent to the business organization. After receiving the order, goods are dispatched to the customer. Following are the key features of the B2C model:

  • Heavy advertising required to attract customers.
  • High investments in terms of hardware/software.
  • Support or good customer care service.

Consumer Shopping Procedure

Following are the steps used in B2C e-commerce:

A consumer:

  • Determines the requirement.
  • Searches available items on the website meeting the requirement.
  • Compares similar items for price, delivery date or any other terms.
  • Places the order.
  • Pays the bill.
  • Receives the delivered item and review/inspect them.
  • Consults the vendor to get after service support or returns the product if not satisfied with the delivered product.

Disintermediation and Re-intermediation

In traditional commerce, there are intermediating agents like wholesalers, distributors, and retailers between the manufacturer and the consumer. In B2C websites, a manufacturer can sell its products directly to potential consumers. This process of removal of business layers responsible for intermediary functions is called disintermediation.

Nowadays, new electronic intermediary breeds such as e-mall and product selection agents are emerging. This process of shifting of business layers responsible for intermediary functions from traditional to electronic mediums is called re-intermediation.

Management Notes

Business to Business (B2B) business Model

indiafreenotesby indiafreenotes4

A website following the B2B business model sells its products to an intermediate buyer who then sells the products to the final customer. As an example, a wholesaler places an order from a company’s website and after receiving the consignment, it sells the end product to the final customer who comes to buy the product at the wholesaler’s retail outlet.

B2B identifies both the seller as well as the buyer as business entities. B2B covers a large number of applications, which enables business to form relationships with their distributors, re-sellers, suppliers, etc. Following are the leading items in B2B eCommerce.

  • Electronics
  • Shipping and Warehousing
  • Motor Vehicles
  • Petrochemicals
  • Paper
  • Office products
  • Food
  • Agriculture

Key Technologies

Following are the key technologies used in B2B e-commerce:

  • Electronic Data Interchange (EDI): EDI is an inter-organizational exchange of business documents in a structured and machine processable format.
  • Internet: Internet represents the World Wide Web or the network of networks connecting computers across the world.
  • Intranet: Intranet represents a dedicated network of computers within a single organization.
  • Extranet: Extranet represents a network where the outside business partners, suppliers, or customers can have a limited access to a portion of enterprise intranet/network.
  • Back-End Information System Integration: Back-end information systems are database management systems used to manage the business data.

Architectural Models

Following are the architectural models in B2B e-commerce:

  • Supplier oriented marketplace: In this type of model, a common marketplace provided by supplier is used by both individual customers as well as business users. A supplier offers an e-stores for sales promotion.
  • Buyer oriented marketplace: In this type of model, buyer has his/her own market place or e-market. He invites suppliers to bid on product’s catalog. A Buyer company opens a bidding site.
  • Intermediary Oriented marketplace: In this type of model, an intermediary company runs a market place where business buyers and sellers can transact with each other.
error: Content is protected !!