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E-Commerce to Bring Huge Profit for Oil Industry
As the oil and natural gas industry is a traditional vertical industry, 90 percent or above of the e-commerce is done between business and business, said director of the Research Institute of Oil Economic and Information Fu Zhida in the recently held 2000 China International Oil and Natural Gas Conference.
The coming of B2B mode will impose great impact on the oil industry by boosting a revolutionary change in the operation mode of oil companies, he said. B2B will become the main means of oil enterprises in selling their products, which brings great profit to the industry.
First of all, Fu said, B2B will save great amount of transaction cost through which huge profit will be brought to the oil companies. Statistics show the total purchase expenditure of global oil companies in 1998 amounted to US$170 billion. If e-commerce lowers five percent of the purchase expenditure for oil industry, it will bring a profit of US$8.5 billion for the industry.
Secondly, through e-commerce, companies acquire large amount of commercial information. The lowering of information cost and enhancing of business opportunities boost the sales of the products.
Third, the purchase price can be cut by 5-10 percent through e-commerce. Purchase cycle will be shortened by 50-70 percent while a 25-50 percent stock cost can be saved. The global purchase is then accessible to get the best supplier and price.
Fourth, e-commerce decreases the restriction of time and space to draw near the distance of oil companies and the market.
Fifth, e-commerce will enforce the internal coordination of oil companies to increase the speed of decision-making in the company as well as sharpen the competitive edge of the company.
Sixth, through e-commerce, oil companies can strengthen cooperation and communication in a bid to learn from each other and achieve a win-win pattern, thus the overall competitiveness of the oil industry will be increased accordingly.
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