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III.c. Linking into B2B Supply Chains: E-COMMERCE AND SMALL ENTREPRENEURS

Guest post by: OECD Development Centre

Article Overview: For countries undergoing rapid structural transformation, the expansion of industrial employment still holds vast potential for raising living standards of the poor. To what extent can the Internet and e-commerce serve to raise productivity and competitiveness in the industrial sectors of developing countries?

III.c. Linking into B2B Supply Chains: E-COMMERCE AND SMALL ENTREPRENEURS

For countries undergoing rapid structural transformation, the expansion of industrial
employment still holds vast potential for raising living standards of the poor. To what extent
can the Internet and e-commerce serve to raise productivity and competitiveness in the
industrial sectors of developing countries? If entry barriers have been reduced in the B2C
market, does the same hold for B2B marketplaces? There is reason to suppose it does,
though perhaps not to the same degree. Companies primarily in the business of making
products for sale to other companies generally do not require the same sort of advertising
presence as those selling to consumers. In that sense, small producers of intermediate
products in developing countries may not derive the same benefits as traditional artisans
from being able to advertise their wares on the Web. On the other hand, such enterprises
clearly need to make contact with potential business customers and to convince them of
their capacity to supply products to specification, on time, to an acceptable standard of
quality and at a competitive price. The Internet does almost certainly make this process
easier. Indeed, in principle access to the large B2B portals being established by OECD-based companies in sectors as diverse as auto parts, steel, and chemicals is open to any
potential supplier on an equal basis, regardless of location. Naturally, though, online market
access cannot on its own open opportunities to developing country suppliers lacking access
to adequate transport and logistics infrastructure to ensure reliable delivery.
Not only is the SME with a Web presence more likely to be discovered than one
without, but Internet savvy may itself be a signal to potential customers of a certain level of
technical and commercial sophistication. A typical global supply chain involves multiple
transactions: if at any point an electronic interface is not present, then the time and cost
advantage of e-commerce is dissipated. Thus, international companies are unlikely to go
to the expense of dealing with the non-Internet-capable supplier unless there are significant
other cost advantages of doing so. In short, if some SMEs in developing countries cannot
afford the costs of entry into the electronic marketplace, neither can they afford not to
enter if they aspire to membership in international supply chains.

OECD DEVELOPMENT CENTRE
Working Paper No. 164
E-COMMERCE FOR DEVELOPMENT: PROSPECTS AND POLICY ISSUES
by
Andrea Goldstein and David O’Connor

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Article Tags: b2b marketplaces, b2b portals, business customers, cost advantage, developing countries, developing country, electronic interface, global supply chain, industrial employment, industrial sectors, intermediate products, logistics infrastructure, market access, oecd, open opportunities, productivity and competitiveness, sophistication, traditional artisans, wares, web presence



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