Elemica Case Study
- Why is Elemica described as an example of an industry consortia net marketplace? How does it differ from other types of net marketplaces like ChemConnect?
Elemica is referred to as an industry consortia net marketplace due to the nature of its ownership composition. The company is unique in the fact that it draws its membership from different players and sectors in the industry. As thus, the company is owned by people that have a deeper understanding of the industry and that are involved in the industry directly. The goal of the company is to provide a market place where inputs can be supplied directly to the consumers. Another distinction is the fact that the company consolidates all the processes of purchasing and supplying the chemical inputs. All correspondences in the supply chain are managed by one company thereby easing communication.
Other types of net marketplaces such as ChemConnect are usually individually and privately owned and do not necessarily have members from the industry. These companies procure the services of an outsider company to offer a bidding platform for the farm inputs. In addition, the outsourced firm further provides the necessary technology and software to coordinate all forms of communications amongst the different stakeholders.
- If you were the owner of a small chemical company, what concerns would you have about joining Elemica?
The biggest challenge with small companies is the issue of competition and barriers of entry in an industry dominated by large companies (Budde, Felcht & Frankemlle, 2005). The first concern is the provision of a fair platform on which all companies are appreciated. I’d be concerned about how Elemica can support small companies to gain the reputation of large companies so that buyers can also get to order from our company. In addition, the prioritization of the different companies supplying inputs and how they are allocated space would be a concern. The ability of the company to meet the bids of large supplies would also be a source of concern. A small company’s scale of production would mean that it cannot meet the needs of large suppliers who might place high bids (Schaefer, 2014). The modalities of using the Elemica system and the terms and conditions of use present another concern in choosing to join it.
- Elemica claims to provide a community for participants in which they can transact, coordinate and cooperate to produce products for less. Yet these firms also compete with one another when they sell chemicals to end-user firms in the automobile, airline and manufacturing industries. How is this possible?
By sharing knowledge on production of the inputs, Elemica provides an equal and fair platform for the different players to compete with each other. The role of Elemica is not to completely eradicate competition but to rather limit the areas of competition between the different players. In addition, all the participating traders benefit through reduced costs of serving customers. In so doing, a company’s overhead costs are reduced and this may drive the company to profitability. Moreover, the platform assures the companies of smoother operations and the improvement of the customer experience. This, Elemica does, through the standardization of the buying process thereby improving customer service. The competition between the different traders is maintained through the confidentiality of bids and quotations. For instance, new customers cannot access previous bids or quotations pertaining to previous transactions. This means that companies cannot use the issue of pricing as a competing factor since they are kept confidential. In addition, competition is further ensured through the maintenance of a large community pool (Golwalkar, 2016) and therefore one or even a few companies cannot meet all the industry needs.
Golwalkar, K. R. (2016). Production management of chemical industries.
Budde, F., Felcht, U.-H., & Frankemlle, H. (2005). Value Creation: Strategies for the Chemical Industry. Weinheim: Wiley-VCH.
Schaefer, B., & Springer Science+Business Media. (2014). Natural products in the chemical industry. Berlin: Springer.
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