Electronics Firms In The Box Seat For E-business: Survey
Sydney Morning Herald
Friday October 27, 2000
The financial services industry may be best suited to the Internet, but it is the electronics sector that is in prime position to boom on the back of the new economy in the near term.
According to a KPMG global survey of more than 370 executives representing the financial services, communications, electronics, consumer markets, automotive/manufacturing, chemical and pharmaceuticals industries, electronics companies such as Hitachi and Nortel Networks should reap the benefits of e-business within the next 18 months.
This conclusion is based on an assessment of senior management commitment to the Internet, stage of Web development, and proportion of earnings generated from the Internet. Currently earning 9 per cent of their revenue from the Internet, electronics companies estimate online sales will leap to 33 per cent of revenue by 2002, the greatest increase of all seven industries and well ahead of the 22 per cent average forecast.
More than half (57 per cent) anticipated higher profit growth as a result of the adoption of e-business strategies, which will see many electronics companies switch from manufacturing technology products to providing IT services.
``E-business will reshape the very core of electronics companies," said KPMG Australia partner Mr Kieran Lane. Having been in the business of buying, selling and storing money electronically for years, the information-based financial services industry is best suited to the Internet.
According to KPMG, it is the most advanced sector in terms of Web development, with 11 per cent of those surveyed vaunting a fully-integrated transactional site. The sector currently generates 13 per cent of its revenue online.
However, KPMG believes the toughest e-business challenges still lie ahead for the financial services industry in the form of disintermediation and increased competition from both Net-based operators and consumers portals which compare different financial products and services.
In addition, firms are struggling with systems integration, maintaining a high level of security and bundling products and services online.
Just as the financial services sector has the potential to provide the fiscal infrastructure for the new economy, the communications industry is in a position to provide much of the technological infrastructure for Internet, data, mobile and cable services.
Drawing the highest proportion of its earnings (20 per cent) from the Internet of all sectors at present, the industry is pushing for the majority of customer interactions to be managed online.
Consumer businesses are poised to exploit the best of the offline and online, supporting their retail Web presence with physical warehouses.
However, 83 per cent of survey respondents are yet to recognise the competitive advantage they hold over dot coms in the form of their bricks and mortar operations, and 69 per cent said they needed to improve their fulfilment processes if their e-business strategies were to succeed. KPMG identified the automotive/manufacturing, chemical and pharmaceuticals industries as the laggards of the new economy.
THE RATINGS
Electronics: Most ready for e-business growth.
Financial services: Best suited, but face most competition.
Communications: Earning the highest proportion of revenue online.
Consumer markets: Combining Web sites with physical presence to take on dot coms.
Automotive/manufacturing: Big gains expected from B2B exchanges.
Chemicals: Lack of customer demand for online transactions.
Pharmaceuticals: The laggard of the new economy.
© 2000 Sydney Morning Herald