The European e-Business Report The European e ... - empirica

The European E-Business Report 2005
Large enterprises have indisputably a decisive role in determining the direction of e-business
development in the automotive industry and, as confirmed by the e-Business W@tch evidence, the
diffusion of all e-business technologies follows a clear top-down pattern.
Exhibit 2.6-5: E-business related opportunities and challenges in the automotive industry
General opportunities
• ICT still a source of competitive advantage:
Internet-based innovations remain important
enablers of product and process innovation.
• Success does not solely depend on ICT: E-
business laggards can be successful, provided
they are innovative.
• Improved collaboration: Firms outsourcing their
activities benefit from new systems facilitating
inter-firm collaboration.
• Large enterprises drive e-business diffusion:
Becoming key partners to the manufacturers,
suppliers have to adopt applications used by their
customers. Integration increases the bargaining
power of OEMs and large suppliers.
Opportunities for SMEs
• Innovativeness decisive for performance.
Companies lagging behind in ICT usage can be
successful, provided they remain innovative.
• Closing ICT gap: ICT investment trends suggest
that SMEs are catching up with larger firms.
• Industry-wide platform: The development of
online marketplaces accelerates the adoption of
e-business applications.
• Lower transaction costs – more outsourcing:
ICT makes outsourcing more attractive. Thus,
despite the stagnant car market, automotive
suppliers are growing.
General risks
• Exclusion of ICT-laggards: A technological
disadvantage compared to direct competitors
could lead to inferior performance.
• Close integration with few customers: Entering
into relationship-specific investments increases
firm’s vulnerability and raises the ‘hold-up issue’.
• Implementation: Thr way from an IT system
implementation to real benefits is long.
• Opportunity costs: Resources dedicated to ICT
projects cannot be used in other areas.
• Risk of eroding profit margins: Increased
transparency and unlimited access to information
leads to lower margins.
Risks for SMEs
• The lack of standards: The absence of ICT
standards hinders the diffusion of e-business and
increases implementation costs.
• Numerous e-business initiatives: OEMs and
large suppliers force SMEs to join their e-
business platforms.
• "Take IT or leave it": Suppliers receive contracts
only when they have implemented specific e-
business standards and practices.
• The risk of opportunistic behaviour: The unequal
distribution of power affects the benefits
and rent allocation among integrated firms.
Opportunities and risks for SMEs stemming from e-business
An important implication for SMEs is that the relationship between innovative activities and firm
performance is independent of company size. Consequently, ICT-based innovations are attractive for
both large and small enterprises. Companies lagging behind in ICT usage can be successful, provided
that they remain innovative and responsive to changing market conditions. Therefore, further growth
and development of SMEs in the automotive industry does not depend entirely on endowment with
ICT infrastructure and e-business intensity.
Possible risks include the lack of IT standards and unequal distribution of power in the sector. Despite
the importance of e-business in the automotive industry, exchange of standardised data within and
between sectors has not yet become a common practice. Standards are mainly used by large
enterprises in the industry. However, when considering ICT investments, SMEs pay considerable
attention to standards and systems interoperability. Their absence could hinder the diffusion of e-
business and increase the costs for SMEs.
Although the automotive industry is already characterised by an unequal distribution of power, further
inter-firm integration combined with highly relationship-specific ICT investments might have an
additional effect on the benefits and rent allocation in vertical cooperation. Having built up capacities
and established intra-firm communication channels, small suppliers have to ensure that they receive
the successive contract for the next period.
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