Case: FreeMarkets OnLine, Inc.
I. Statement of the Problem/Key Strategic Issue
Glen Meakem founded FreeMarkets OnLine in Pittsburgh, Pennsylvania in 1995. FreeMarkets OnLine, Inc. is an electronic market company which delivers interactive bidding among competing suppliers generated price savings. It created fair and open exchange software which is necessary for Competitive Bidding Event (CBE). The company was successful at developing reasonable expertise and market knowledge, to lead the art and science of making markets for custom products, where each buyer in the market has his own set of objectives and issues. FreeMarkets assists industrial buyers in posting requests for ...view middle of the document...
II. Statement of the Objectives
* To determine the most profitable and successful strategic direction for FreeMarkets Online, Inc.
* To analyze how FreeMarkets Online, Inc. can manage their growth carefully
* To determine how Freemarkets Online, Inc. can maintain its leadership position
III. Relevant Case Facts/Findings
Freemarkets Online, Inc.: Company Background
* Founded in Pittsburgh in 1995
* Has almost 1,000 employees worldwide and maintains offices in Asia, Europe and Latin America
* Core Service: To provide on-line industrial market-making services that culminated in real-time Competitive Bidding Events (CBEs)
* Market: Concentrated in the middle- components that were not commodities, but for which competitive supply markets exists
* Sales Model: Consisted of high bandwidth “client developers” networking into and establishing relationships with senior level purchasing, operations, and finance executives at large targeted corporations
* Market-Making Process:
* Phase 1: Identify savings opportunities - Analysis expenditure and savings for buyers
* Phase 2: Prepare total-cost RFQ (Request for Quoting) - Defining all elements of Request for Quotations,requirements of drawings, volume forecast, cost.
* Phase 3: Identify, screen, and support suppliers - Screening the potential suppliers with buyers and supporting RFQ to suppliers
* Phase 4: Conduct on-line competitive bidding events - Training sessions to suppliers, submitting real-time bids
* Phase 5: Provide post-bid analysis and award support - Collecting cost breakdown, final supplier analysis
FreeMarkets Online, Inc. strengths:
* First-mover advantage. By being the first to enter the market, the business gains an advantage over its actual and potential competitors since they are the leading B2B market maker.
* Good client service. They offer full-service or do-it-yourself options to their clients. Through this, they are able to earn the trust of their clients.
* Their service is complex and difficult to deliver, so their organizational skills are an advantage.
FreeMarkets Online, Inc. weaknesses:
* Loss of key clients. 35% of FreeMarkets revenues come from United Technologies and Visteon.
* Dependency on a particular outside vendor for the computer network over which online auctions are conducted. Breakdowns have transpired.
* Initial setup of new clients requires a lot of time and resources. No guarantee of profitability.
FreeMarkets Online, Inc. opportunities:
* Extend its customer base in its target market of Global 2000 corporations and other large enterprises including government agencies.
* Add domain knowledge of industrial product categories, called “supply verticals.”