Ryu & Hung (2009) have conducted a study, “E-Commerce Transaction Mechanisms and Buyer-Supplier Relationship,” published in the Journal of Business & Economics Research, to deepen managerial knowledge about e-business relationships between suppliers and purchasers. Their paper is intended for managers given various choices of transaction mechanisms, including electronic marketplaces and electronic data interchanges (EDI). Examining a number of studies on e-commerce relationships, the authors describe various advantages and disadvantages of e-marketplaces and EDI for managers in the process of selecting an efficient and economical transaction mechanism for electronic commerce (Ryu & Hung, 2009).
Results of this research include definitions of e-marketplaces and EDI as cost-cutting transaction mechanisms allowing for frequent and rapid exchanges of information. Since electronic business is dependent on the viability of information systems in place, the advantages of building EDI to suit environmental needs are also discussed (Ryu & Hung, 2009). Study findings further describe the need for these technologies to be adaptive in the face of both “environmental diversity” and “technological uncertainty” (Ryu & Hung, 2009, p. 84). If, for example, the economy is unstable in one place and strong in another, and EDI involves a buyer for an international business dealing with both places at the same time, the demand for perfect information requires electronic data interchange to be perfectly appropriate to face this form of “environmental diversity” (Ruy & Hung, 2009, p. 84). Likewise, both electronic data interchanges and e-marketplaces – despite the fact that they allow for quick relay of information between buyers and suppliers – need to be perfected in a time of “technological uncertainty,” when product features or technologies are rapidly evolving (Ruy & Hung, 2009, p. 84).
Ryu & Hung (2009, p. 84) note that present-day EDI and e-marketplaces are not equipped to handle “technological uncertainty.” When there are many suppliers, buyers are not likely to opt for electronic transaction mechanisms, seeing that the implementation procedures for EDI and e-marketplaces are both expensive and complicated. Use of electronic transaction mechanisms depends on suppliers’ and buyers’ beliefs about their respective abilities to successfully conduct e-business. Even if complex product features render EDI and e-marketplaces attractive as these transaction mechanisms make it cost-effective, speedy and efficient to exchange important facts about the product, participants in an e-business relationship must be sufficiently comfortable about their use of computer technology (Ryu & Hung, 2009).
Ryu & Hung (2009) further describe trust as an essential factor influencing the use of electronic transaction mechanisms. The authors’ approach in this context may be referred to as risk mitigation, as their article is focused on the pros of electronic business transactions. According to Ruy & Hung (2009, pp. 86-87), e-business relations reduce the risk of opportunism as perfect information is relayed between suppliers and buyers. In addition, the authors note that electronic data interchange allows for long-term relations to be developed between buyers and suppliers, even if electronic marketplaces do not promise this (Ruy & Hung, 2009, p.87).
Ruy & Hung’s (2009) conclusions are derived from various studies. The authors recommend a strategic approach to decision-making when it comes to choosing transaction mechanisms. Electronic transaction mechanisms involve uncertainties that information systems may or may not be equipped to handle at any given time. Given that the choice of transaction mechanism affects the firm’s performance as well as costs and revenues, the decision-making process must necessarily involve a consideration of the organization’s short-term goals versus its long-term strategic plan (Ruy & Hung, 2009, pp. 87-88).
Ryu, S., & Hung, K. (2009). E-Commerce Transaction Mechanisms and Buyer-Supplier
Relationship. Journal of Business & Economics Research, 7(2), 79-92. Retrieved January 8, 2013, from http://journals.cluteonline.com/index.php/JBER/article/view/2263/2311