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Problem

Discuss how Internet buying may lower the cost of procurement for a large company like Raytheon, the manufacturer of business aircraft.

Step-by-step solution

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Step 1/2

E-commerce is a modified version of a traditional business marketplace where seller and buyer interact virtually through a digital platform. It is a digital marketplace where the selling and buying of goods and services take place.

Step 2/2

In this context, firm R can lower the cost of procurement by the following means. First of all, the firm can reduce the procurement cost as the transaction cost will be the same for one or more units. In the case of offline procurement, the transaction cost will be high as the unit increases. Secondly, the firm can eliminate any processing errors since the platform is transparent. Solving invoice problems or returns is easier than offline purchases. Finally, the labor cost, procurement document reconciliation, supervision expense for the purchase can also be reduced. These are the ways in which the company R, manufacturer of aircraft can reduce the cost of procurement.