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

The European E-Business Report 2005
Bargaining power of customers
ICT represents an opportunity to improve relations with distribution chains, but it is also a threat. The
negotiation power of modern distribution has been growing for years, particularly as regards SMEs.
Amongst the factors that have contributed to this process are:
• the current increase in concentration in the distribution sector,
• the rising levels of volumes purchased,
• the rising service levels demanded of the producers and
• a trend towards an increased average size of sales outlets.
The introduction of ICT may represent an opportunity for the industry to gain ground in its relations
with the distribution chains. The problem that characterises the F&B industry in particular is the
polarisation between large and small firms and between the different levels of use of technology.
As a consequence, the impact of ICT has again been mixed. On the one hand, the large firms, or at
least the more evolved amongst them from an ICT perspective, have seen a partial balancing of power
relationships through improved collaboration with trade. On the other hand, SMEs (and less evolved
enterprises in general) have witnessed a further fall in their negotiation power in relation to the
distribution chains.
Rivalry in the market
ICT has had a mixed impact on the intensity of competition between firms in recent years. Although
the introduction of ICT into the industry has increased competition, it has also strengthened market
share and the competitive positioning of some companies, bringing about a reduction in competitive
intensity.
On the one hand, ICT has increased competition in the F&B sector:
• ICT is an enabling factor in the establishment and development of large groups as it allows
interconnection, communication and integration, thus favouring the concentration process.
Broadening the gap even more between large and small firms, the introduction of new
technology has changed the very foundations on which industry competition was based.
• Price competition has been accelerated by the introduction of ICT. This has led to an erosion
of margins, causing some firms to be forced out of business (particularly SMEs).
• The increased level of customer service, made possible by the optimisation of logistics and
use of customer management applications, also contributed to increasing competition between
firms.
On the other hand, ICT may support firms in facing competitive challenges, as:
• ICT reduces learning and reaction times, in relation to competitor moves, particularly following
the launch of new products.
• New, e-business enabled forms of distribution, particularly selling online, are supporting the
development of new niche markets. These new forms allow some enterprises to create
barriers and defence structures by differentiating from their direct competitors which continue
distributing their products via traditional channels.
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