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The first of such findings is that industry representatives see that e-commerce is altering business models and, in particular, spheres of competition. Businesses are being forced to reassess who their competitors are in an online world as often they differ from their traditional competitors. There may be large new markets for some, but increasing competition is also a feature of the new environment. Secondly, e-commerce is forcing business to rethink customer relationships. Industry representatives have broadly identified that e-commerce is making it possible for businesses to approach customers directly, whether for direct sales or product information and feedback, rather than going through intermediaries (e.g. retailers, distributors, etc.). Customisation can occur much more readily. Order and delivery of products is being improved by e-commerce. Customers can be served from their home or business rather than having to go to a point of purchase. When products or services are digital or ‘virtual’, the entire process can be conducted electronically. While real goods still require eventual delivery, the process of gathering information, browsing, comparing and ordering can still be more convenient than by traditional means. A key theme that industry representatives reported was that e-commerce is being used to improve supply chain management. E-commerce continues the process of substituting information for inventories and reducing substantially the investment in warehouses. It continues to cut back the need for paper-based documentation and improves the speed of communication. (The modelling work to follow picks up on many aspects of this change). Some industry representatives have commented on the capacity for e-commerce to improve customer power by expanding their information base, particularly with respect to price differentials. As the Internet overcomes problems associated with buying products from a distance, alternative lower-cost suppliers can be found across a larger geographic range, widening the effective market and intensifying competitive pressures. This is another dimension of the increasing competition point made above. Finally, e-commerce is expected to allow competitors in other industries and other countries to enter markets as it bypasses the need for investment in local facilities. This has been seen in financial services, with the entrance of new dot.com players. Import competition is patchy with some sectors facing more competition than others. (Some aspects of this will be analysed in the modelling to follow). 16
Chapter Four Economy-wide assessment What are the economy wide implications of the changes foreshadowed in the previous Chapter? This Chapter reports on MONASH model simulations about the impact of greater use of e-commerce in the Australian economy. It compares outcomes for a range of economic indicators against a base case forecast which represents outcomes with less use of e-commerce. 4.1 The base case The simulation results that follow compare the expected outcomes with greater use of e-commerce against those that would have been obtained anyway, if use of e-commerce stayed largely static (the base case). The base case simulation is detailed in Appendix C to this report. The key inputs of the base case are: • The economy will grow and exhibit changes in prices and industry composition in line with standard economic forecasts (incorporating forecasts from Access Economics). • Trends in world commodity prices (largely drawing on Australian Bureau of Agricultural and Resource Economics forecasts). • Trends in technology particularly as reflected in changes in inputoutput ratios for differing industries. • Known policy changes of significance including issues such as the introduction of the GST and related reforms are included. 13 The Ralph reforms have not been included because they were announced after this analysis had been done. • Immigration and population growth forecasts from the ABS. • Pre-existing trends in the use of e-commerce as they applied up to the end of 1996–97 (the base year for the current MONASH model). This is projected to be supported by a reasonable level of access to the Internet infrastructure through adequate bandwidth at reasonable prices. • The economic impacts of greater use of some forms of e-commerce such as EDI and ATMs and EFTPOS are included in this study. It is viewed that these developments continue well established trends, further developments are likely to happen anyway and they have been factored in to the forecasts about expected economic outcomes. Against these settings, the results which are discussed below can therefore be viewed as the sensitivity of each economic indicator (i.e. output, employment, etc.) to greater use of e-commerce. 4.2 Change scenario To evaluate the economy-wide implications of e-commerce, the analysis draws on 14 sets of direct changes to the Australian economy. These changes are often referred to as ‘shocks’ because they change the balance 13 See Peter B. Dixon and Maureen T. Rimmer, ‘Changes in Indirect Taxes in Australia: A Dynamic General Equilibrium Analysis’, Australian Economic Review, December 1999 (forthcoming). 17
Page 2 and 3: © Commonwealth of Australia 2000 I
Page 5 and 6: Table of contents Foreword ........
Page 7 and 8: Part 2 - Case studies Section One I
Page 9 and 10: Executive summary E-commerce is sti
Page 11 and 12: Part 1— economic analysis
Page 13 and 14: Chapter One Study context, aims and
Page 15 and 16: Within the business-to-business cat
Page 17 and 18: Table 1.4 Projected growth in econo
Page 19 and 20: Chapter Two Economic issues What di
Page 21 and 22: Exhibit 2.1 Disintermediation effec
Page 23 and 24: Table 2.1 E-commerce impact on vari
Page 25 and 26: Chapter Three Changes ahead—indus
Page 27: Health Significant efficiencies sta
Page 31 and 32: Direct changes and flow on impacts
Page 33 and 34: consumption relative to economic ac
Page 35 and 36: External competitiveness Greater us
Page 37 and 38: Industry outcomes Greater use of e-
Page 39 and 40: Food products The food products sec
Page 41 and 42: people with differing occupational
Page 43 and 44: Tasmania and the Northern Territory
Page 45 and 46: Table 4.2 Regional growth and emplo
Page 47: The data for country regions (Exhib
Page 50 and 51: impacts are a reasonable representa
Page 53 and 54: Chapter Six Policy implications and
Page 55 and 56: Appendix A Study methodology, shock
Page 57 and 58: confidence. This is at the expense
Page 59 and 60: All of the GDP gain generated by ch
Page 61 and 62: (s11) Saving of particular inputs I
Page 63 and 64: Table A.1 continued Commodity Per c
Page 65 and 66: Table A.2 continued Engine & Boiler
Page 67 and 68: Table A.2 continued Safety Inspecto
Page 69 and 70: Table A.3 continued Industries 2007
Page 71 and 72: B.2 The structure of MONASH The cor
Page 73 and 74: simulations it is assumed that the
Page 75 and 76: Table B.1 (Continued) MONASH-RR Reg
Page 77 and 78: C.2 Forecasts for macroeconomic var
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other grains, iron and non-iron ore
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The numbers in column (II) of Table
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Productivity growth over the histor
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forecast of a 0.1 per cent decline
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Productivity growth in the construc
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Employment prospects in the sector
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Table D.1 continued Textiles, cloth
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Table D.1 continued Health, educati
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Table D.2 continued 45 Bags and Con
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Part 2 — case studies
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Industry sectors’ use of e-commer
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e-commerce were chosen. Key questio
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Banking For some time now most of t
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2.3 Cost savings Banks are keen to
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2.5 Changing business modes Branch
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Banks are also looking to take adva
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NAB, as a multinational, is already
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activities such as consumer electro
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Box 3.2 Building a business on e-co
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One of the issues for all industrie
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108
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Box 4.2 Australia Post and e-commer
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Opportunities are being created for
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Value can be transferred into Austr
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Continued use of email and the deve
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E-commerce allows some flexibility
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120
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are introduced to market at a start
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educe the duplication of assessment
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6.3 Cost savings as a result of ele
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The primary e-commerce tools for im
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New service modes and channels to t
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132
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This Section will review the implic
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of greater depth. (It should be not
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consumers watch five per cent less
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artist is the promotion which airpl
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New costs The fragmentation and reg
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gambled. The development of Interne
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146
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Making a purchase over the Internet
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Customers who access troubleshootin
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they does not actually sell those i
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Key points There are few other sect
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e-commerce allows quicker order pro
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9.3 New costs The demand for busine
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How a ticket is sold, through an ag
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Box 10.1 Case study: E-commerce and
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The education and training sector h
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166
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11.2 Production Manufacturing busin
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Opportunities for re-intermediation
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Value could transfer within the sec
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174
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years’ time. 30 This reflects an
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seeks to provide a point of referen
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To a small extent, direct selling t
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Box 13.1 Austmine—a window for th
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Box 13.2 Leaving mining sites for w
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