Elements of a Reference Model for Electronic Markets

A marketplace as a historically-evolved institution allows customers and suppliers to meet at a certain place and a certain time in order to announce buying or selling intentions which eventually match and may be settled. Due to the evolution of communication technologies time and space restrictions have been weakened. Electronic markets (EM) representing the next step in the evolution of the former marketplace. They are emerging in different fields, supporting the exchange of goods and services of different types, with different types of actors and are following different architectural principles. Some of the existing new systems are solutions for just parts of the transaction process which do not interoperate with other systems. Further, the Internet with its tremendous evolution fosters the development of EM in retail business. A lot of different EM will arise which have to co-operate and network with each other. This rather hinders a structured development of EM and demands for common architectural principles. The necessity for a reference model towards real EM is given. 1. Coordination mechanisms The business world is to a large extent determined by the activities of interacting organizations. A task within the domain of these processes lies in the coordination of activities as well as output of the participants. Fundamental forms of business coordination are: hierarchies, networks and markets [23], [24], [30]. If information and communication technology for coordination is applied within the framework of these basic models, then reference to an electronic hierarchy, electronic business network and electronic market can be made [21], [36], [13]. The market is the location where the supplier and customer meet [9] whose activities are governed by price and competition [22]. Significant problem in this respect is the information deficiency or asymmetry between the market participants [8]. The concept "electronic markets" [21], [26] is subject to wider consideration of this paper and will be analyzed in detail in the following chapters. EM result 1060-3425/98 $10 if the information phase is realized or supported with means of a new information carrier. This is among other things due to the large transparency and low search costs resulting in more competition and globalization. The secondary effect of automatic price fixing is indeed still a seldom occurrence, however the effects of price fixing are immediately felt (compare the global reservation systems in the airline market). 2. Theory of electronic markets Since 1989 the research area "electronic markets" is a relevant topic for the CCEM Competence Centre Electronic Markets at the Institute for Information Management, University of St. Gallen. An overview of the previous work and a detailed analysis of the theoretical framework can be found in [26], [10], [15], [16]. Although a number of EM were constructed in the past, suitable reference models in contrast to data modeling or business process re-engineering are missing to answer the question: "How can an EM be built and operate?". In the following section a reference model for electronic markets will be discussed, which attempts as a meta-model to present relevant elements. This meta-model is necessary for the development of application-relevant models of specific EM. Important for the understanding of the proposed reference model are the phases of a market transaction which form the basis upon which the concept "electronic markets" is developed. It has to stated out, that the following proposal is from the viewpoint of an information manager, and not of an economist. 2.1. Phase model of market transactions A market transaction corresponds to a finite number of interaction processes between market participants in various roles. The goal is to initiate, arrange and complete a contractual agreement for exchange of goods and services in the most efficient manner. The involved interaction processes are grouped into classes and form the phases of a market transaction [16, pp.18-22].