B2B in China - Bright Future and Difficult Start Although the climax of the collapse of .com is surging, B2B e-commerce is still thriving in all walks of life because it can significantly reduce the supply chain between buyers and sellers. Operating costs, elimination of intermediaries, reduction of transaction costs, facilitating transactions to be achieved more easily, and encouraging price competition in the electronic trading market. The development of B2B should have more potential in China because in many industries in China, supply chain operations are less efficient than Western companies. Many companies still do not have reasonable business processes, and they have not experienced Western companies in the process. The business process reorganization and reengineering project that was popular in the early 1990s. The B2B development offers many opportunities for Chinese companies to improve efficiency and increase returns. However, at present, China's B2B is still in its infancy, and the transaction volume only accounts for 0.2% of the world total.
We can draw the following conclusions:
In the next five years, B2B e-commerce will achieve tremendous development in Asia and around the world.
Asia's growth rate will be slower than the rest of the world, especially the percentage of B2B transaction share in the Asia-Pacific region will decline. This is mainly because the growth of B2B in the area is subject to the following social structure and cultural factors.
China’s current share of Asia’s share is relatively small (currently 2.2%, 2004 will be 7.3%), but will maintain the highest annual growth rate of 129% for the next four years. In 2000, the transaction volume of China's B2B e-commerce has reached 800 million U.S. dollars.
The development potential of B2B is limitless. Although the development of B2C is earlier than B2B in both the West and China, the share of B2C may only account for 20-30% of China's total e-commerce transactions in the coming years. Profitable B2B will account for 70-80%.
However, after all, B2B is a new thing. It has only just emerged in the West. Does its mode of operation really adapt to China's social structure and culture? Next, we will discuss various factors that hinder or promote the development of China's B2B e-commerce.
B2B's Social Structural Differences in China's Development B2B was first developed in the United States and has only begun to take off in China. However, because of the differences in social structure, development methods will differ.
First, China's infrastructure for the development of e-commerce (information technology, online payment, communications, and information communication) lags behind the West, but it has improved rapidly. The infrastructure of information technology is lagging behind in China, but it is slowly improving. As of July 2001, China had 26.5 million registered Internet users, accounting for 1.6% of the population. There is only one computer per 100 inhabitants. Although the development is fast, the existing base is too small. Many factories do not even have computers, let alone implement ERP and supply chain management.
Second, the telecommunications channel is a bottleneck. At present, the non-high-speed Internet connection hinders the transmission of information during e-commerce transactions. However, to some extent, this is not necessarily a bad thing. China can use the latest technology to build telecommunications infrastructure without having to be trapped in the dilemma of whether to renovate existing facilities. In the 1990s, long distance optical fiber networks have been established between major cities in China.
Third, the online payment system is not perfect. China lacks a unified online payment system, and each bank launches its own online payment plan, making it difficult for the Internet to interoperate. At present, this situation will change. Under the coordination of the unified China Financial Certification Authority (CFCA), by the end of this year, the domestic 12 banks will implement inter-bank transactions in different locations. Merchants can use the financial CA certificate to successfully conduct B2B electronic transactions with the support of BOC and ICBC’s large-scale online payment services. This means that payment will no longer be a bottleneck that hinders the development of China's B2B e-commerce. China's domestic payment and settlement methods have made new breakthroughs and eased the urgent needs of many Chinese companies wishing to achieve online transactions. However, at present, many companies do not have sufficient awareness and are still accustomed to traditional payment methods. At the same time, China’s regulation of foreign exchange payments also restricts the integration of Chinese companies’ participation in international B2B e-commerce networks.
Fourth, in China, lack of information is a common problem. China lacks agencies that provide third-party credit information, like the West Nexis-Lexis or Dun & Bradstreet. This often hinders the parties from engaging in transactions in an anonymous manner in the B2B trading floor. Payments have also had to use payment instruments such as letters of credit, which are safe but time-consuming and complicated.
V. China's industry structure has a mixed effect on China's online transactions.
1. Most companies in China belong to the manufacturing industry, and their trading products are mostly direct goods (raw materials). These goods are not easily characterized. They are often the intermediate products of a business process. In this way, it is more difficult to transfer these products to the Internet for transactions. Therefore, China's best products for online transactions may be chemical products, rubber, textiles, shoes, leather, and other products that are easily identifiable in online trading catalogs.
2. China's tertiary industry is underdeveloped, which means that the development potential of the seller-led b2b e-commerce website established by companies in the tertiary industry, such as airlines and banks, is not great. It is difficult for them to benefit from e-commerce alone. Therefore, in these industries, it is very urgent for third parties to establish industry websites or to jointly conduct e-commerce to jointly increase industry productivity and increase revenue.
3. In many industries in China, there are issues such as low industry barriers and excessive competition. This will, to some extent, stimulate the development of e-commerce. For example, in the home appliance industry, competition is fierce. The price war of brand warfare of major companies is not a big deal. In order to further gain operational advantages, they will take all measures to improve efficiency, including e-commerce. At present, China's major home appliance manufacturers have already reached the net and the b2b transaction is a good example. With wto approaching, the domestic market competition of many industries in China is expected to be internationalized, and more companies will actively engage in b2b e-commerce.
4. In many industries in China, the level of intensification of the market is not high, the number of intermediate links is high, the supply chain is inefficient, and the consumption is too high. The biggest feature of e-commerce is that it can intensively process extensive processes. Because e-commerce uses "technical characteristics like the distance and cost of the Internet", the cost of intermediate processes in the economic process is consumed, and it does not increase with the increase in socialization (far and near). On the contrary, the scope of socialization is larger in area and the cost is relatively lower. . Goldman Sachs's analysis shows that B2B e-commerce can generate transaction savings of 5% to 30%.
The outstanding problem of China's current economic development is precisely that traditional industries are too extensive and the transaction costs in the industry are high. The implementation of B2B e-commerce can eliminate duplication of work through electronic orders, automated transactions, cooperative management of inventory, collaborative planning, etc., reduce ineffective middlemen, and improve the operational efficiency of the supply chain. However, the problem is that if B2B implementation is to achieve further success, it needs to optimize the traditional unreasonable business process, and this will inevitably encounter obstacles. For example, the reduction in staffing and eliminating unreasonable processes in the past may affect some people’s vested interests and thus slow the development of B2B. In short, there are many specific social structural factors that will hinder China’s development of B2B e-commerce. The company’s incomplete information technology architecture may be the main reason. However, the Chinese government has actively taken various measures to encourage the construction of the Internet infrastructure. In 1999, the Chinese government announced it was the year of the Internet. In 2000, we started the "Internet Project for Chinese Enterprises", and within the year, we will implement the Internet access for 1 million small businesses, 10,000 medium-sized companies, and 100 large enterprises. In addition, the government also actively develops related e-commerce supporting laws and regulatory mechanisms to create a good e-commerce operating environment. Recently, in order to encourage companies to conduct B2B online transactions, the government is also actively trying to purchase online. At the end of May 2001, the Hubei Jingmen Municipal Government Procurement Center opened a warehouse-based procurement e-commerce platform. Before that, cities such as Nanjing, Hefei, and Nanning had already implemented online purchasing. In the future, government e-procurement will become one of the most powerful promoters of the B2B market.
Cultural differences in B2B development in China 1. Interpersonal relationships are more important. Chinese people prefer face-to-face communication and are willing to rely on long-term business relationships based on trust, family affection, or history to conduct transactions. This is often because of the lack of credit understanding of strangers and the lack of legal protection mechanisms in the traditional Chinese business environment. Therefore, the relationship becomes a necessary condition for business development. In particular, to do some bigger business, not to meet, not to eat, not to give gifts, it is difficult to do things, and this set of business practices is difficult to transplant to the Internet. But does this mean that online B2B commerce is difficult to succeed in China? Not necessarily, Chinese companies are divided into two types:
One is companies in the export industry where the products have been highly standardized. They often need to deal with foreign customers. In these transactions, the relationship is not an important factor (many online sales are done through auctions, and the company also competes primarily based on the price and quality of products that can be clearly defined in advance).
The second category is those companies that face the Chinese local market. They may not be culturally suited to doing business with companies that have not met with them. This will hinder the development of B2B e-commerce and, in particular, it is not conducive to the establishment of a public electronic market.
We believe that face-to-face relationships can be combined with efficient e-commerce transactions. There is no reason to believe that as long as the buyers and sellers conduct online transactions, there is no need to spend a lot of effort to establish a close personal relationship: the pre-transaction understanding process of the two parties cannot be replaced. If they establish an e-commerce connection, they will be able to supplement their development more effectively. Relationship between. For example, in a seller or buyer-led electronics market, companies can establish network connections with their preferred business partners to strengthen their business contacts. However, in the public electronics market, products that are generally commoditized, such as pencils and popular industrial raw materials, appear to be of little importance. Under such circumstances, Chinese companies may not value the relationship between the two parties, but instead pay more attention to price and quality. For example, in the Global Chemical Industry Exchange, Chinese suppliers have already conducted online transactions with foreign buyers.
Second, China's decision-making system is more focused. The decision-making of Chinese enterprises tends to be centralized, and the e-commerce transformation of enterprises often requires the enterprise to decentralize its decision-making power to the grass-roots level. This is because market information changes rapidly in the e-commerce trading market. Employees often face a variety of fleeting information, such as price changes in large transactions, sudden changes in consumer demand. At this time, speed is the key. If employees ask for advice from the boss, they may miss the opportunity of the market. Therefore, leaders must realize that they cannot supervise employee decisions at all times. We should learn to delegate some of the decision-making powers to those responsible and focus on the strategic decisions of the company. At the same time, leaders must also make trade-offs. Decentralization of decision-making may cause chaos in the company's operations. Decentralization of decision-making is not conducive to the vigor of the company's operations.
Fortunately, a complete e-commerce technology infrastructure can help companies establish a clear and authoritative licensing system. Leaders can use it to adjust the scope and depth of decision-making authority at any time to achieve a smooth transition of decision-making. Therefore, to a certain extent, the extensive use of e-commerce technologies can gradually improve the company's original centralized decision-making system and obtain real benefits from it. This is evident in export-oriented SMEs. They most want to use e-commerce to increase their market coverage.
We can draw the following conclusions:
In the next five years, B2B e-commerce will achieve tremendous development in Asia and around the world.
Asia's growth rate will be slower than the rest of the world, especially the percentage of B2B transaction share in the Asia-Pacific region will decline. This is mainly because the growth of B2B in the area is subject to the following social structure and cultural factors.
China’s current share of Asia’s share is relatively small (currently 2.2%, 2004 will be 7.3%), but will maintain the highest annual growth rate of 129% for the next four years. In 2000, the transaction volume of China's B2B e-commerce has reached 800 million U.S. dollars.
The development potential of B2B is limitless. Although the development of B2C is earlier than B2B in both the West and China, the share of B2C may only account for 20-30% of China's total e-commerce transactions in the coming years. Profitable B2B will account for 70-80%.
However, after all, B2B is a new thing. It has only just emerged in the West. Does its mode of operation really adapt to China's social structure and culture? Next, we will discuss various factors that hinder or promote the development of China's B2B e-commerce.
B2B's Social Structural Differences in China's Development B2B was first developed in the United States and has only begun to take off in China. However, because of the differences in social structure, development methods will differ.
First, China's infrastructure for the development of e-commerce (information technology, online payment, communications, and information communication) lags behind the West, but it has improved rapidly. The infrastructure of information technology is lagging behind in China, but it is slowly improving. As of July 2001, China had 26.5 million registered Internet users, accounting for 1.6% of the population. There is only one computer per 100 inhabitants. Although the development is fast, the existing base is too small. Many factories do not even have computers, let alone implement ERP and supply chain management.
Second, the telecommunications channel is a bottleneck. At present, the non-high-speed Internet connection hinders the transmission of information during e-commerce transactions. However, to some extent, this is not necessarily a bad thing. China can use the latest technology to build telecommunications infrastructure without having to be trapped in the dilemma of whether to renovate existing facilities. In the 1990s, long distance optical fiber networks have been established between major cities in China.
Third, the online payment system is not perfect. China lacks a unified online payment system, and each bank launches its own online payment plan, making it difficult for the Internet to interoperate. At present, this situation will change. Under the coordination of the unified China Financial Certification Authority (CFCA), by the end of this year, the domestic 12 banks will implement inter-bank transactions in different locations. Merchants can use the financial CA certificate to successfully conduct B2B electronic transactions with the support of BOC and ICBC’s large-scale online payment services. This means that payment will no longer be a bottleneck that hinders the development of China's B2B e-commerce. China's domestic payment and settlement methods have made new breakthroughs and eased the urgent needs of many Chinese companies wishing to achieve online transactions. However, at present, many companies do not have sufficient awareness and are still accustomed to traditional payment methods. At the same time, China’s regulation of foreign exchange payments also restricts the integration of Chinese companies’ participation in international B2B e-commerce networks.
Fourth, in China, lack of information is a common problem. China lacks agencies that provide third-party credit information, like the West Nexis-Lexis or Dun & Bradstreet. This often hinders the parties from engaging in transactions in an anonymous manner in the B2B trading floor. Payments have also had to use payment instruments such as letters of credit, which are safe but time-consuming and complicated.
V. China's industry structure has a mixed effect on China's online transactions.
1. Most companies in China belong to the manufacturing industry, and their trading products are mostly direct goods (raw materials). These goods are not easily characterized. They are often the intermediate products of a business process. In this way, it is more difficult to transfer these products to the Internet for transactions. Therefore, China's best products for online transactions may be chemical products, rubber, textiles, shoes, leather, and other products that are easily identifiable in online trading catalogs.
2. China's tertiary industry is underdeveloped, which means that the development potential of the seller-led b2b e-commerce website established by companies in the tertiary industry, such as airlines and banks, is not great. It is difficult for them to benefit from e-commerce alone. Therefore, in these industries, it is very urgent for third parties to establish industry websites or to jointly conduct e-commerce to jointly increase industry productivity and increase revenue.
3. In many industries in China, there are issues such as low industry barriers and excessive competition. This will, to some extent, stimulate the development of e-commerce. For example, in the home appliance industry, competition is fierce. The price war of brand warfare of major companies is not a big deal. In order to further gain operational advantages, they will take all measures to improve efficiency, including e-commerce. At present, China's major home appliance manufacturers have already reached the net and the b2b transaction is a good example. With wto approaching, the domestic market competition of many industries in China is expected to be internationalized, and more companies will actively engage in b2b e-commerce.
4. In many industries in China, the level of intensification of the market is not high, the number of intermediate links is high, the supply chain is inefficient, and the consumption is too high. The biggest feature of e-commerce is that it can intensively process extensive processes. Because e-commerce uses "technical characteristics like the distance and cost of the Internet", the cost of intermediate processes in the economic process is consumed, and it does not increase with the increase in socialization (far and near). On the contrary, the scope of socialization is larger in area and the cost is relatively lower. . Goldman Sachs's analysis shows that B2B e-commerce can generate transaction savings of 5% to 30%.
The outstanding problem of China's current economic development is precisely that traditional industries are too extensive and the transaction costs in the industry are high. The implementation of B2B e-commerce can eliminate duplication of work through electronic orders, automated transactions, cooperative management of inventory, collaborative planning, etc., reduce ineffective middlemen, and improve the operational efficiency of the supply chain. However, the problem is that if B2B implementation is to achieve further success, it needs to optimize the traditional unreasonable business process, and this will inevitably encounter obstacles. For example, the reduction in staffing and eliminating unreasonable processes in the past may affect some people’s vested interests and thus slow the development of B2B. In short, there are many specific social structural factors that will hinder China’s development of B2B e-commerce. The company’s incomplete information technology architecture may be the main reason. However, the Chinese government has actively taken various measures to encourage the construction of the Internet infrastructure. In 1999, the Chinese government announced it was the year of the Internet. In 2000, we started the "Internet Project for Chinese Enterprises", and within the year, we will implement the Internet access for 1 million small businesses, 10,000 medium-sized companies, and 100 large enterprises. In addition, the government also actively develops related e-commerce supporting laws and regulatory mechanisms to create a good e-commerce operating environment. Recently, in order to encourage companies to conduct B2B online transactions, the government is also actively trying to purchase online. At the end of May 2001, the Hubei Jingmen Municipal Government Procurement Center opened a warehouse-based procurement e-commerce platform. Before that, cities such as Nanjing, Hefei, and Nanning had already implemented online purchasing. In the future, government e-procurement will become one of the most powerful promoters of the B2B market.
Cultural differences in B2B development in China 1. Interpersonal relationships are more important. Chinese people prefer face-to-face communication and are willing to rely on long-term business relationships based on trust, family affection, or history to conduct transactions. This is often because of the lack of credit understanding of strangers and the lack of legal protection mechanisms in the traditional Chinese business environment. Therefore, the relationship becomes a necessary condition for business development. In particular, to do some bigger business, not to meet, not to eat, not to give gifts, it is difficult to do things, and this set of business practices is difficult to transplant to the Internet. But does this mean that online B2B commerce is difficult to succeed in China? Not necessarily, Chinese companies are divided into two types:
One is companies in the export industry where the products have been highly standardized. They often need to deal with foreign customers. In these transactions, the relationship is not an important factor (many online sales are done through auctions, and the company also competes primarily based on the price and quality of products that can be clearly defined in advance).
The second category is those companies that face the Chinese local market. They may not be culturally suited to doing business with companies that have not met with them. This will hinder the development of B2B e-commerce and, in particular, it is not conducive to the establishment of a public electronic market.
We believe that face-to-face relationships can be combined with efficient e-commerce transactions. There is no reason to believe that as long as the buyers and sellers conduct online transactions, there is no need to spend a lot of effort to establish a close personal relationship: the pre-transaction understanding process of the two parties cannot be replaced. If they establish an e-commerce connection, they will be able to supplement their development more effectively. Relationship between. For example, in a seller or buyer-led electronics market, companies can establish network connections with their preferred business partners to strengthen their business contacts. However, in the public electronics market, products that are generally commoditized, such as pencils and popular industrial raw materials, appear to be of little importance. Under such circumstances, Chinese companies may not value the relationship between the two parties, but instead pay more attention to price and quality. For example, in the Global Chemical Industry Exchange, Chinese suppliers have already conducted online transactions with foreign buyers.
Second, China's decision-making system is more focused. The decision-making of Chinese enterprises tends to be centralized, and the e-commerce transformation of enterprises often requires the enterprise to decentralize its decision-making power to the grass-roots level. This is because market information changes rapidly in the e-commerce trading market. Employees often face a variety of fleeting information, such as price changes in large transactions, sudden changes in consumer demand. At this time, speed is the key. If employees ask for advice from the boss, they may miss the opportunity of the market. Therefore, leaders must realize that they cannot supervise employee decisions at all times. We should learn to delegate some of the decision-making powers to those responsible and focus on the strategic decisions of the company. At the same time, leaders must also make trade-offs. Decentralization of decision-making may cause chaos in the company's operations. Decentralization of decision-making is not conducive to the vigor of the company's operations.
Fortunately, a complete e-commerce technology infrastructure can help companies establish a clear and authoritative licensing system. Leaders can use it to adjust the scope and depth of decision-making authority at any time to achieve a smooth transition of decision-making. Therefore, to a certain extent, the extensive use of e-commerce technologies can gradually improve the company's original centralized decision-making system and obtain real benefits from it. This is evident in export-oriented SMEs. They most want to use e-commerce to increase their market coverage.