THE ECONOMIC IMPACTS OF ELECTRONIC MARKETPLACES IN GLOBALIZATION AGE: EXAMPLES FROM AGRICULTURAL WEB PORTALS

Rouzbeh Meymandpour* M.Sc. Student in Information Technology Engineering and Electronic Commerce, Shiraz University, Shiraz, Iran dr.rouzbeh@yahoo.com Mohammad Amin Mousavinezhad B.Sc. in Agricultural Machines Engineering and M.Sc. Student in Information Technology Engineering and Electronic Commerce, Shiraz University, Iran a_mousavi_nezhad@yahoo.com

Dr. Mohammad Hadi Sadreddini Assistant Professor, Department of Computer science and Engineering, School of Engineering, Shiraz University, Shiraz, Iran sadredin@shirazu.ac.ir Abstract Electronic Marketplaces (e-marketplaces, EMs) is one of the most important components of Electronic Commerce (EC). They allow the exchange of goods or services between buyers and sellers for money or other products and services. EMs also play a central role in the economy, facilitating the exchange of information, goods, services, and payments. E-marketplaces create economic value for buyers, sellers, market intermediaries, and for society at large. In this paper, after the introducing the e-marketplaces we present the globalization issue and its opportunities for businesses. Then, the challenges and influences of electronic marketplaces in this new economy will be expressed. Finally, as an instance, we present the applications of EM to improve agriculture industry in a selected region. Keywords Electronic Marketplace, Globalization, Business-to-Business (B B), Economy, Electronic Commerce.

INTRODUCTION
An Electronic Marketplace (e-marketplace, EM) is a marketplace in which buyers and sellers electronically exchange goods or services for money or other goods or services, through the Internet or other electronic facilities, like VPN (Virtual Private Networks) (Turban, ). Electronic marketplaces are one of the most important components of Electronic Commerce (EC). They also play a central role in the economy, facilitating the exchange of information, goods, services, and payments (Bakos, ). EMs create economic value for buyers, sellers, market intermediaries, and for society at large. In this paper, we first introduce e-marketplaces and their different types. Next, we present the issue of globalization and its opportunities for businesses. Then, the roles, impacts, challenges, and influences of electronic marketplaces in this new global economy will be expressed. Finally, as an exemplary case study, we present the applications and benefits of EM to improve agriculture industry in a selected region.

ELECTRONIC MARKETPLACES
Electronic marketplaces (EMs) are online communities, which sellers and buyers exchange products, goods, or services for money or other products and services (Turban, ). The main components of EMs are:

Matching buyers and sellers Facilitating the exchange of information, services, goods, and payments Providing an infrastructure for regulatory and legal issues to facilitate and support business transactions

They may also include some front-end interfaces, to interact directly with customers, such as a shopping cart, a search engine, electronic catalogs, and a payment gateway. They can support back-end business activities including order fulfillment, inventory management, payment processing, delivery, and logistics (see Beynon-Davies, and Turban, ). Electronic marketplaces not only facilitate business activities and supply chain collaboration, but they also increase the efficiency of business transactions and provide value-added benefits for all of participants, such as: Provide advantages both for suppliers (or sellers) and consumers (buyers) Decrease transactions cost Increase the speed of transactions Decrease the cost of raw materials procurement and related processes

Finally, e-marketplaces offer effective services to benefit all participants involved and provide them with quality functions.

TYPES OF E-MARKETPLACES
), states that

Electronic marketplaces can be categorized based on different factors. Reference (IBM, following items must be clarified before implementing any EM: Audience: who are the main actors in the EM? Offering: what does the e-marketplace offer these players? Access: what access restrictions are in place? Control: who has full control over the rules and regulations of the e-marketplace? Revenue model: how does the e-marketplace owner receive value? Pricing mechanism: how are prices determined for items being bought or sold?

According to (Turban, different groups (Table characteristics.

; Benatallah, ; Lee, ), we can classify electronic marketplaces in ). Note that an e-marketplace can belong to multiple groups, base on its

GLOBALIZATION
Thinking and working globally is unavoidable in todays business. Nowadays, almost all businesses are dealing with competitors around the world. Therefore, companies should seek a sufficient strategy to protect its business against threats and take the advantages of opportunities. Globalization compels business companies to change their traditional leading strategies and revise their control and management activities to best fit todays challenges and compete in this new competitive world. Globalization is conducting the structure, missions, departments, and employees of a business organization beyond geographical and political borders (Lan and Unkelkar, ). It is a process of increased freedom and capacity of individuals and firms to conduct economic activities with residents of other countries (Carayannis and Ziemnowicz, ). Based on these definitions, in the globalization
The globalization term sometimes, used in negative meaning; i.e. the conquest of developed and reached countries over developing and poor nations.

TABLE : TYPES OF ELECTRONIC MARKETPLACES

B C Buyers and Sellers B B Member Registration Type Close Open Private Ownership Public Consortium Geographical Location Limited Region Global Industry Specific MultiIndustry

Storefront: a single companys Web site where products and services are sold. Internet Mall (E-Mall): In these markets, buyers can search for products or services in different stores and compare prices. In B B e-marketplaces, usually known as e-marketplace (Turban, ), both buyers and sellers are businesses. Members are business partners and registration is not available for others. Membership and registration is available for all businesses. An online market, Usually B B, owned by a single company; may be either SellSide or Buy-Side EM. An online market, Usually B B, owned or managed by a third party and includes many sellers and buyers, also known as exchanges. These markets controlled and managed by a group of large businesses and companies and usually operate in specific industry. It works in a limited area, nation, country, or region. There is no borderline for their activities. They are active in a single or a few industries. They work in different industries and are divided into two subcategories: Horizontal and Vertical. In horizontal EMs, industries are not related together but in verticals offered products or services are belong to a single supply chain.

Operation Industry

process, the structure, departments, and employees of the company must be changed to give the business administrators the opportunity of making global decisions. For example, employees must be taught to be familiar with other traditions and cultures. Therefore, the company must be adapted to these new situations to remain in global business.

ECONOMIC IMPACTS OF E-MARKETPLACES IN GLOBALIZED BUSINESS COLLABORATIONS

The essential in the new economy is a structural shift from the industrial economy toward an economy characterized by information, intangibles and services and a parallel change toward new work organizations and institutional forms. A digital economy is a convergence of communications, computing, and information. The new economy is about coordination, innovation, selection and learning (Grdin, ). A large number of enterprises have developed their business to global collaborations for increased efficiencies, lower costs and the ability to operate in real time across different platforms. E-commerce is changing business economics and as a result, many firms are re-engineering their core business processes. There are many reasons for international business communications, some of them are: Organization growth and advancement Potential opportunities in foreign markets Increasing request of special products in some regions To decrease the risk level Outsourcing To take the advantages of political, legal, and taxation benefits of special regions Inexpensive workers or skilled specialists

Accordingly, businesses try to deploy their trade to benefits from special opportunities in all around the world to increase productivity, decrease costs, and increase revenue. In addition, in business-to-business collaborations, companies always search for sufficient suppliers, profitable customers, and reliable business partners, to increase the companys profitability, in some ways. In this approach, which is facilitated by information technology, electronic marketplaces can benefit businesses by connecting buyers and sellers and help them to reduce costs, decrease the wasted time, and finally increase the profitability. The increased productivity will result from lower production costs, lower inventory holding costs and lower overall input costs to a business. Moreover, e-marketplaces bring substantial net benefits to the economy. The real impact of EM, as one of the main components of e-commerce, is its ability to

reduce costs and prices and make doing business more efficient. These savings permeate through the entire value chain and impact significantly in business interactions with other businesses (Sharma and Gupta, a). The EM is providing considerable opportunities for firms to expand their business operations and collaborations as well as offering greater choices and lower prices to customers. Electronic marketplace is widely expected to improve efficiency due to reduced transaction and search costs, increased competition, and more streamlined business processes. Lower search costs may also lead to Internet consumers being more sensitive to price changes. By reducing search costs and increasing the flow of information, e-commerce might effectively shift power from producers to consumers (Bakos, ) and move to consumer-driven competition (Mowatt, ). The adoption of e-marketplace technologies is also beneficial for SMEs. EM can remove many of the competitive advantages of larger companies and provide opportunities for smaller enterprises. It can also include a cost-effective way for SMEs to market their business, launch new products, improve communications, and identify potential partners (Sharma et al., ).

CHALLENGES IN GLOBAL E-MARKETPLACES

When businesses pass the political and geographical boundaries, special issues occurred: Legal issues: banned special products in some countries, difference in regulations in different countries, intellectual property law, etc. Security and trust Cultural issues: companies must consider difference in cultures and traditions of their business partners or customers Integration: when the company and its business growth, important information related to it will grow accordingly. It may buy or originate additional software systems to do these new tasks. The integration between new information systems and old ones became critical in developing businesses. The integration has two dimensions: o Integral integration, between information systems inside the company o Integration with software systems outside the company, between business partners and supply chain participants. Standardization: from product catalogs and product information to the way the company communicate with its business partners and its customers (some solutions are EDI and ebXML )

E-MARKETPLACE FUNCTIONS IN GLOBAL BUSINESSES

In addition to previously mentioned capabilities, a global electronic marketplace can have positive influences on the companys businesses: Electronic procurement: o Automation of purchasing process o Decreasing the supply costs by means of group purchasing and auctions Electronic supply chain management (E-SCM) o Manufacturing forecasting o Inventory management o Planning o Scheduling

Electronic Data Interchange (EDI) E-Business Extensible Markup Language (eb-XML)

o Information sharing across participants Customer care o Storing the customers information o After-sales services o Technical guidance about the products Online product design collaborations o Rapid development of the products, through information sharing o Reducing the price of the product using collaborative design o Reducing the final price of product manufacturing with help of successful experiences Internal transaction processing Customization facilities for special customers; custom order products based on individual needs and preferences

Hence, an EM can include ERP , CRM , and SCM activities and significantly improve all processes related to the business.

EXAMPLE: APPLICATIONS OF ELECTRONIC MARKETPLACES IN AGRICULTURE

To study the potential applications of e-marketplaces in agriculture, we choose Fars province in southern Iran because of following reasons: They dont use any kind of e-marketplaces (not regional nor global) Most of farmers in this region are interested in new technologies (this province is the most important manufacturer of agricultural machinery in Iran) Most of farmers are in good economical conditions Many different types of crops produce in this region Information technology infrastructure is in sufficient condition (at least of farmers have cell phone and almost of them using fixed line Internet access) They produce some of the most popular fruits, like pomegranate, apple, orange, and some strategic crops like wheat, barely and corn

E-marketplaces have many advantages that some one them can solve many critical problems in this area.

METHODOLOGY

We investigate in two different cities to find their problems, requirements, and the potential applications of e-marketplaces. They are Marvdasht (most important city of Iran in producing wheat) and Farough (producer of one of the qualitative pomegranates). We also spoke with almost farmers and almost agricultural engineers, and we conducted a survey to find out their current problems.

FINDINGS

. . PROBLEMS IN MARVDASHT This city is the largest wheat producer in Iran, but it has following problems:
Most of farmers are using underground water, but by over consuming, now they have not enough water to irrigate their farms. Therefore, water supply is one of the critical problems in this city.

Enterprise Resource Planning (ERP) Customer Relationship Management (CRM) Supply Chain Management (SCM)

Most of farmers cultivate only wheat and corn, but because of using insufficient cultivation alternations and chemical fertilizers, their farms are being too weak and the soils became very hard. They do not like to cultivate other crops; because they cannot sell it as easy as how they sell wheat and corn. Some of their important agricultural productions are tomato, potato, cucumber, and onion. Often the amount of their productions and the market requirements are not match, therefore they loss profits.

. .

PROBLEMS IN F AROUGH
Price of pomegranate is not as much as what it exactly has to be, then producing small amount of it is not economical. Some amounts of fruits will destroyed until the producers find customers. Because of the lack of specific factories, they could not produce other productions from pomegranate, such as grained pomegranate.

This small city produces one of the best pomegranates in Iran, its problems are:

HOW E-MARKETPLACES CAN SOLVE THE PROBLEMS

Connecting buyers and can sellers Facilitating exchange of information, goods and services Providing business infrastructures Reducing transaction time and cost Helping in finding raw materials

As we said, some of the e-marketplace characteristics are:

If we put compare the problems and e-marketplace characteristics, we can find these solutions for the problems: In Marvdasht by using e-marketplaces: Any time the productions was more than regional needs, it can be sold to another region or even another country. Thus, price of agricultural productions will be stayed stable. Farmers can cultivate others crops and sell them in the e-marketplace. By cultivating different crops in farms, they can use sufficient cultivation alternations and they will need less chemical fertilizers, then soil conditions will be better. Moreover, because they can sell everything they produce, by cultivating or planting other crops or plants with less need to irrigation, underground water supply condition will become better.

In Farough by using e-marketplaces: Farmers can find better customers for their crops, then they can produce fruits with better quality and having small gardens will be economical. Because they can find their customers very fast, they will not lose any amount of their productions. They can build factories to produce other productions from pomegranates, and sell them through the marketplace.

By benefiting e-marketplaces, governments and businesses can easily find their requirements faster and cheaper, sell their products in new markets. In agricultural perspective, e-marketplaces help farmers instead of producing some crops that their production is not effective, they produce better crops and sell

it at higher price. In addition, they can choose better crops that are suitable to the regions conditions and global prices. For instance, olive and olive oil is a sufficient choice in Farough conditions. The olives tree requires small amount of water, it is profitable enough in world markets, and the olive oils price is almost $ per liter (Price List, ). As an another example, while one liter pomegranates juice has a price between $ - (Pomegranate Juice, ) but in a pomegranate producer city like Farough no juice making factory exist, because they cannot sell it to the world markets. To summarize, e-marketplaces can make new jobs with good incomes and considerably increase the productivity, profitability, and effectiveness. However, in the agriculture industry we should consider about some limitations or problems in using electronic marketplaces, such as the transportation cost, which may decrease net profits.

CONCLUSION
Electronic marketplaces not only facilitate all business transactions inside and outside the company but also it can benefit all partners and supply chain participants. Consequently, these markets result to increasing the companys profit and its production, decrease the product development cost, and finally improve customers and suppliers satisfaction. In other hands, the advancement of globalization process is unavoidable and all businesses should adapt themselves to this new competitive world. In this environment, electronic marketplaces, with providing prominent infrastructures and helpful facilities, can play a pivotal role in the expansion process of the business and the company itself.

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