Freemarkets Case Analysis

20 Pages 5027 Words

Individual Case Analysis

FREEMARKETS, Inc.

Electronic Commerce


Contents

I. Introduction

II. Description of the Company

III. Description of the Industry

IV. Description of FreeMarkets Auctions

V. Analysis of Porter’s Five Forces

VI. STEEP and SWOT Analysis

VII. Business Model

VIII. Target Markets

IX. Company Core Competencies

X. Company and Industry Financial Information

XI. Key Company Challenges

XII. Problem Statement

XIII. Strategies and Recommended Actions

XIV. Summary

XV. References

INTRODUCTION

Electronic commerce (e-commerce) has traditionally been separated into two main categories: Business to Business (B2B) and Business to Consumer (B2C). B2B e-commerce is broadly defined as sales of goods and services between firms, transacted over the Internet. B2B e-commerce is by far the largest segment of the Internet economy, accounting for 92% of all electronic commerce worldwide and $450 billion of economic activity in the U.S. last year. B2B
E-commerce is expected to grow at a compound annual rate of 61% and by 2004 will account for 25% of national GDP.

The success of e-commerce generally – and B2B e-commerce in particular – stems from its ability to make markets more efficient in an economic sense. B2B has been successful in creating more efficient markets by reducing market risks caused by informational asymmetries and by adding more liquidity to markets.

Added liquidity is a result of an electronic market’s ability to aggregate buyers and sellers at a very low cost, especially when they are spread out across a large geographic area. A more liquid market tends to drive prices closer to cost, which in turn forces sellers and producers to become more efficient. For example, a firm’s procurement department can use B2B exchanges to instantaneously receive and compare price quotes from hundreds or even thousands of potential suppliers.
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