Special Report: The world according to b-to-b

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Overview: The European b-to-b market is among the most promising outside the U.S. Corporate involvement in exchanges, large amounts Opportunities: Cross-border trade and all the language and regulatory variations that go with it are second nature to European
executives at both large and small companies who have long conducted such business. (About 70% of European trade is cross-border.) And their companies’ legacy systems are well adapted for such transactions. All this puts them in good stead for easing into global Internet trade.
Disadvantages: Longtime European pitfalls such as high labor costs and onerous regulatory environments are now hurting b-to-b e-commerce’s progress. A lagging high-tech sector and the struggling Euro are other drawbacks.
Most aggressive countries: The U.K. and Germany are leading corporate Europe’s conversion to b-to-b e-commerce. Finland and Denmark are among the leaders in technology development.
Major existing e-marketplaces: More so than their Asian and Latin American counterparts, European executives view e-marketplaces as global plays. Regionalism is giving way to involvement in U.S.-led international exchanges. Switzerland-based Nestle Holdings Inc.’s backing of Transora is one example.


Overview: Large corporations are moving their budgets away from insular Internet strategies such working on only developing their own Web sites, and are now focusing on procurement in cooperative e-marketplaces. U.S. and U.K. banks’ technology and funding involvement, plus managerial help from Miami in particular, is spurring b-to-b growth.
Opportunities: Latin America paper, agriculture, oil and chemical industries are all highly fragmented, making them particularly good candidates for b-to-b exchanges. Pressure from U.S. financial backers to reduce inefficiencies is prompting Latin American executives to take e-procurement seriously. And IT spending is expanding markedly.
Disadvantages: Latin America’s notoriously poor roads and overall weak infrastructure will hurt fulfillment on the back end of b-to-b exchange deals.
This is particularly so in Brazil and Chile. Complex boat-truck-air shipping arrangements common to commerce in Latin America are also a problem, as are scant Web hosting options.
Most aggressive countries: Brazil and Mexico. Brazil, which leads Latin America in mobile phone and enterprise and consumer Internet usage, is expected to account for 51% of the region’s b-to-b volume by 2005. Mexico sat out Latin America’s business-to-consumer Internet boom, but its leading companies’ executives are keen on b-to-b e-procurement. The recent election of President Vicente Fox, an ex-Coca-Cola Co. executive and a Wall Street darling, is expected to help spur technology investment in Mexico.
Major existing e-marketplaces: A host of b-to-b exchanges are vying for Latin America’s limited client base. Among early, functioning leaders are, and LatiNexus.


Overview: Israel’s hot technology and VC industries are leading the region’s b-to-b growth. Corporate adoption of e-procurement in South Africa is expected to take off. But isolationism, inefficiencies and poverty will continue to hamper the region’s growth.
Opportunities: South Africa’s strength in the diamond and precious metals industries makes it a good candidate for b-to-b e-hub involvement. E-procurement in military and related industries, particularly in Israel and Turkey, is another potential strength.
Disadvantages: A major weakness is Africa’s lack
of economic integration with the rest of the world. Rampant isolationism throughout the Middle East, even in countries with developing Internet sectors such as Jordan, is another problem. An absence of a viable trading bloc, an equivalent to NAFTA or ASEAN, is a weakness.
Most aggressive countries: Israel and South Africa. The countries’ globally minded corporations, strong universities and viable legal systems are all contributing to b-to-b growth.
Major existing e-marketplaces: Regional, industry-specific exchanges, such as TimberAfrica SA Timber Exchange, are starting to make some headway. But participation in global b-to-b exchanges is minimal.


Overview: The tigers are back. Entrepreneurship in South Korea, Taiwan and Hong Kong is kick-starting Asia’s b-to-b technology growth. Big corporations in Japan are taking the lead in partnering with U.S. b-to-b leaders and are emerging as the region’s top investors. China is being viewed, as it always is, as a long-term play. Australia, meanwhile, is emerging from its consumer-centric Internet legacy and increasingly embracing a b-to-b model. Old-line Australian companies, for example, Foster's Brewing Group Ltd., are among those currently building exchanges. Globally minded U.S. investment banks and consultancies such as Goldman Sachs & Co. and McKinsey & Co., do a good deal of Internet business in Australia, something that could help cement its importance to the region.
Opportunities: The region’s strong manufacturing and technology industries place it in good stead for shifting toward b-to-b exchanges. Its longtime focus on foreign trade—-about 40% of Asia’s trade is cross-border—-will put it at the center of b-to-b globalization. Its collective just-in-time manufacturing ethos lends itself to e-procurement.
Disadvantages: High tariffs and red tape in India and China will probably be a drag on overall b-to-b growth in Asia, despite the high levels of U.S. VC dollars going into those countries. Asia’s lack of Internet technology innovation vis-à-vis the U.S.—Hong Kong, Malaysia and South Korea notwithstanding—could also hurt it.
Most aggressive countries: Japan and South Korea. The countries’ powerful corporations are quickly adapting to b-to-b e-commerce, which could spur a trickle-down effect to the region’s all-important midsize and small companies. Hong Kong’s combination of free enterprise and low tariffs will make it central to Asia’s b-to-b boom. Heavy-handedness and intrusion from Beijing, a real possibility, could change this.
Major existing e-marketplaces: As with Europe, Asia’s involvement in b-to-b exchanges is global rather than regional. Leading Asia-based e-hubs include, and local ones being spearheaded by Visa International and Ariba Inc.

Sources: Forrester Research Inc., Gartner Gruop Inc., Nua Ltd., The Yankee Group, The Ransford Group, AMR Research Inc. and published reports. Estimates vary widely based on methodologies used.

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