You are on page 1of 3

Minicase 1
FreeMarkets ( is a leader in creating B2B
online auctions for buyers of industrial parts, raw materials,
commodities, and services around the globe. The company
has created auctions for goods and services in hundreds of
industrial product categories. FreeMarkets auctions more
than $5 billion worth of purchase orders a year and saves
buyers an estimated 2 to 25 percent of total expenses
(administrative and items).
FreeMarkets operates two types of marketplaces. First,
the company helps customers purchase goods and services
through its B2B global marketplace where reverse auctions
usually take place. Second, FreeMarkets helps companies
improve their asset-recovery results by getting timely market prices for surplus assets through the FreeMarkets AssetExchange, employing a forward auction process, as well as
other selling models.
FreeMarkets Onsite Auctions include (1) asset disposal
recovery and (2) sourcing (e-procurement) functions.
These functions provide the following:
● Asset disposal analysis. Market makers work with

sellers to determine the best strategy to meet assetrecovery goals.
● Detailed sales offering. The company collects and consolidates asset information into a printed or online
sales offering for buyers.

● Targeted market outreach. FreeMarkets conducts tar-

geted advertising to a global database of 500,000 buyers and suppliers.
● Event coordination. The company prepares the site,
provides qualified personnel, and enforces auction
● Sales implementation. FreeMarkets summarizes auction results and assists in closing sales.

Asset-Recovery Success Stories
FreeMarkets helped the following companies make asset
New Line Cinema ( had unique memorabilia
that they had stored for years. In 2001 they decided to auction these via Freemarket’s auction marketplace (AssetExchange). The release of a movie sequel titled Austin Powers:
The Spy Who Shagged Me provided an opportunity for New
Line to experiment with the asset-recovery auction Items
from the original production were put off for auction; these
items included a 1965 Corvette driven by Felicity Shagwell
(sold in the auction for $121,000) and one of Austin’s suits
(sold for $7,500). In addition to freeing storage space and
generating income, the auction provided publicity for the
sequel through the newspaper and television coverage is
received. An additional benefit was that the auction was

Enter dell. Find out about local currency. Are there any disadvantages? To whom? 4. go to “desktops” and configure a system. Enter bizrate. Why is the site so successful? Could you start a competing one? Why or why not? 7. Prepare a list of services available on this site. How can such a site help a person who is making a purchasing ? 5. Compare this process to the one described in Figure 5. Look at the site’s private trading room. Comment on the relationships. e. . Enter campusfood. (You might try shopping. Register to “my cart” (no obligation). then go to view the payment diagram. What calculators are used there? What are the advantages of this process as compared to buying a computer in a physical store? What are the disadvantages? 8. Enter Enter nike. Access realtor.6. Identify the site capabilities. 11. Several sites help you do it. Enter alibaba. com and amazon. Enter checkfree. Try to find a unique gift on the Internet for a Prepare a Explore the and complete one of the questionnaires that entitles you to participate in their rewards and receive information. Compile travel tips.000 to that currency with an online currency and configure a pair of shoes. 10.d. 3. Prepare a and find echeck. and convert $1. for example. What data they collect? Why? and find their services. 6. Summarize your Then prepare a list of advantages derived by the users and advantages to realtors. and configure a car. Write a Describe your experience with such a site. and finally go to Lands’ End and configure some clothing for yourself.

tion created a dedicated community of users. to ensure maximized efficiency in the procure. a large in. see success stories (site accessed December 15.bished power-protection products.eling.ment process.fication and training). Then it designed an improved process that replicated the traditional negotiations with suppliers.tion site (using its standard technology. Finally. but only mer.tions.step tendering process that starts with the RFQ and ends with supplier management (which includes suppliers veri.linked to the company’s online store. FreeMarkets uses a five. 2002 and March 28. placing it for bid in the FreeMarkets Web site. it took a test item and prepared a RFQ. quality suppliers for reliability and support. had the following goals when it decided to use eprocurement (sourcing) with the help of FreeMarkets: to minimize the cost of products they need to buy. which were not very successful. Before using auc. These are typical goals of business purchasers. Fi. and since then New Line Cinema has conducted similar auctions on a regular basis. the auc. It also helped the company determine the auction strategies (such as starting-bid price and Questions for Minicase 1 1. Singapore Technologies Engineering (STE). the company used special liquidation sales. and toconsolidate existing suppliers. FreeMarkets started by training STE’s corporate buyers and other staff. 2003). . 2.tion running length). to identify a new global supply base for their multi-sourcing strategy. These were difficult to sell in the regular distribution channels. you instead could have purchased a new T-shirt or a poster of the new movie. What makes FreeMarket different from eBay? Why do you think FreeMarkets concentrates on asset recovery and on e-procurement? Why is the RFQ mechanism popular? In 2003 the company shifted attention to global supply What does the company mean by that? Sources: Compiled from freemarkets. such as board parts. FreeMarkets has also helped companies conduct reverse auctions either from their own sites (with necessary expertise provided by FreeMarkets) or from FreeMarkets’ site. to find new. which needed a channel for end-of-life (old models) and refur. which were facilitated by DSS mod. electronics. The site became an immediate success. The auction was a great success. land systems and marine. Freemarkets deployed the auc. 4. 3. E-Procurement (Sourcing) Success Story Besides providing companies with successful efforts in asset recovery. The company is considering selling regular products there. If you were unable to afford the 1965 Corvette. STE saved 35 percent on the cost of printed circuit board assemblies. but customizing the applications).tegrated global engineering group specializing in the fields of aerospace. Another success story for FreeMarkets’ auctions was American Power Conversion Corp.chandise for which there would be no conflict with the company regular distributors. (apcc.