Infomediation and Competitive Advantage: the Impact on Strategic Company Resources

In the previous section we focused on the role and contents of infomediation services in b2b digital marketplaces. We shall now focus on how service delivery affects a company's competitive advantage.
According to resource-based theory,9 the source of a company's competitive advantage lies in the bundle of resources (tangible, intangible and human) that the company can control.
In this sense, postulating the competitive impact of infomediation services means identifying the strategic resources involved and assessing their impact.
We present a model that illustrates how infomediation services affect a company's competitive advantage and its three resource networks (see Figure 4):


Figure 4 Infomediation Impact on Company Strategic Resources
Let us now analyse in greater detail the impact of these three services.
First, the activities of infomediaries have a great impact on logistic resources. Since in digital marketplaces companies basically exchange information flows, infomediaries usually have to develop a complex, multi-faceted partnership with different logistic operators in order to supply services that can lower procurement costs.
The explosive growth of b2b is mainly due to the cost saving derived from outsourcing most of the supply chain activities.
Goldman Sachs (1999) estimates that b2b solutions enable companies to decrease the unit cost of a single procurement process from 10 to 25 per cent.
Moreover, much more time is spent on order processing activities than on looking for new solutions.
B2b services allow companies to streamline the procurement process and employ human resources on more value-added activities. Improved stock management and procurement and transport efficiencies can also increase delivery speed, production flexibility and reduce lead times and timeto- market.
Logistic resources can be improved both in quantitative and qualitative dimensions (costs and service).
The central point is to properly integrate online and offline processes both outside and inside the company.
The impact of infomediation on logistic resources differs from one industry to the next according to the particular value chain.
Such impact depends on the cost structure, off-line intermediaries and inefficiencies in the supply chain.
Both buyers and sellers can benefit from the positive impact on logistic resources since sub-efficient transaction processes can be outsourced.
However, at the present time, the positive impact on procurement is greater than on potential supplier benefits.
In several markets, efficiency recovery in the value chain is needed more upstream than downstream.
This is why these solutions are now mainly buyer-driven. The second area involves transaction resources.
B2b digital marketplaces play an important role in increasing the transparency of price and product information, and can significantly affect competition.
Digital technologies lower the marginal cost of finding new counterparts and transactions can be made by means of a broader and more efficient comparison of potential partners.
Companies can access a wider range of business opportunities if they operate in a digital marketplace.
Interacting with a large number of potential counterparts reduces transaction costs and allows companies to enhance their businesses.
In particular, sellers benefit from improved exploitation of production capacity and lower stocks, especially in auctions.
In many markets, the demand is extremely fragmented and intermediated by several trade channels.
There are potential buyers that suppliers never reach, and transactions that would otherwise not be made outside these marketplaces.
On the other side, buyers may promote price competition among sellers and explore a broader supply base in order to improve the procurement process. In addition to expanding market opportunities, infomediation services strongly influence trust and other relational resources.
Price and product transparency reduces information asymmetry, opportunism and adverse selection phenomenon.
In digital marketplaces, the contractual power between buyers and sellers is altered. Services such as supplier information, customer rating and tracking past transactions reduce the asymmetry and the complexity of markets, and increase efficiencies in the transaction process.10
In a sample of large US companies, Goldman Sachs found that the average number of purchases made under adverse selection conditions is between 30 and 40 per cent.
This means that for those transactions there was at least one better exchange opportunity of finding another supplier.
By using software tools like price bot or search engines to compare offers, such problems of adverse selection could be considerably reduced.
The competitive effect on transaction costs is extremely widespread since direct and indirect purchase costs account for over 50 per cent of the company’s total costs.
This positive influence is closely connected to the trading platform mechanism. For instance, in an efficient auction system, the reduction of transaction costs transfers the surplus from participants to the auctioneer.
On the contrary, if the mechanism is inefficient, low competition on the demand side redistributes the surplus among the participants.
The influence on trust resources is not only related to exchange platforms, but new relations and partnerships may be enhanced through virtual communities, where firms may improve their mutual knowledge on projects and strategies.
The third area involves knowledge assets. In this case, the impact occurs on a more cognitive level and, although less evident, it is often strategic in heightening the competitive advantage, given the widespread role played by these resources.
Companies joining a digital marketplace may benefit from the knowledge-sharing circle,11 in which codified information circulating in b2b digital markets is integrated with firm-specific knowledge thus improving strategic assets.
For instance, a virtual forum permits firms to absorb experiences from other participants and add to their previous body of knowledge.
This is particularly important for SMEs that are usually excluded from these opportunities of knowledge absorption.
Joining b2b hubs does not merely mean absorbing the experience of other companies.
Firm-specific knowledge resources closely interact with a wide body of codified knowledge spread in the digital marketplace.
This continuous interaction is a typical mechanism that creates specific new knowledge able to support experimentation, simulations and innovations in a broad sense.
For example, a machine tools producer in the textile industry might meet a yarn producer who is developing a new product concept.
This might lead the machine tools producer to invent a new mechanical method to manufacture yarn, thus giving impetus to further innovations.
The impact of b2b services on knowledge resources is one aspect which, although less explored, is probably more important in understanding the competitive influence in b2b markets.
Repeating experiences and building new knowledge assets are powerful drivers in redesigning the competitive capabilities of companies.


Note 9: For an insightful synthesis of Resource-Based Theory, see contributions by Peteraf (1993) and, more recently, the Special Issue of Strategic Management Journal edited by Helfat (2000).
Note 10: Trust and loyalty on the virtual environment have been recently analysed by Reichheld and Schefter (2000) and by Sinha (2000).
Note 11: On knowledge-creation mechanisms, see Nonaka and Takeuchi (1995).


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