Market Process Reengineering through Electronic Market Systems: Opportunities and Challenges

Abstract:Over the past few years, various electronic market systems have been introduced by market-making firms to improve transaction effectiveness and efficiency within their markets. Although successful implementation of electronic marketplaces may be found in several industries, some systems have failed or their penetration pace is slower than was projected, indicating that significant barriers remain. This paper analyzes the economic forces and barriers behind the electronic market adoptions from the perspective of market process reengineering. Four cases of electronic market adoptions—two successful and two failed—are used for this analysis. Economic benefits are examined by investigating how the market process innovation enabled by information technology (IT) reduces transaction costs and increases market efficiency. Adoption barriers are identified by analyzing transaction risks and resistance resulting from the reengineering. Successful deployment of electronic market systems requires taking into account these barriers along with the economic benefits of adoption. The paper presents suggestions based on these case studies, which are relevant to the analysis, design, and implementation of electronic market systems by market-making firms.Key Words and Phrases: adoption barrierselectronic commerceelectronic marketsmarket makersreengineeringtransaction costs Additional informationNotes on contributorsHo Geun LeeHo Geun Lee is an Assistant Professor in the Department of Information and Systems Management at Hong Kong University of Science and Technology. He was previously a visiting scholar at Erasmus University in the Netherlands, where he worked on electronic market systems for Dutch flower auctions. His research interests include interorganizational systems, electronic market structures, and electronic commerce applications. He is currently analyzing how market organizations can redesign their market processes to benefit from advances in information technologies. He is also interested in understanding social and organizational barriers to market process reengineering. Dr. Lee received his B.S. in industrial engineering from Seoul National University, his M.S. in management science from the Korea Advanced Institute of Science and Technology, and his Ph.D. in management information systems from the University of Texas at Austin.Theodore H. ClarkTheodore H. Clark is currently an Assistant Professor at Hong Kong University of Science and Technology in the Department of Information and Systems Management of the School of Business and Management. His research focuses on issues related to interorganizational systems (IOS) and electronic commerce; he is particularly interested in the role of IOS in restructuring channel relationships, processes, and markets. He is currently conducting research on the impact of information technology on alternative consumer supply-chain structures, and has published several Harvard case studies on this theme. Dr. Clark received his B.S. in electrical engineering and his D.B.A. and M.B.A. degrees from Harvard Business School, where he was named the Baker Scholar.