The European e-Business Report 2004 - Berlecon Research GmbH

The European E-Business Report 2004The share of craft value added tends to be lower in the new Member States compared with the formerEU-15 Member States.Productivity, measured as value added at factor cost per person employed, is much lower in craftsthan in medium-sized and large enterprises (MLEs). In EU average, crafts only reach 71% of MLEproductivity in the construction sector, 68% in the textiles sector, 63% in wood and furniture manufacturing,61% in transport equipment manufacturing and 58% in electrical machinery and electronics.Data availability for the new Member States is very limited, except for the Czech Republic where craftproductivity is relatively large in the textiles sector (61% of MLE productivity) and lowest in wood andfurniture manufacturing (40%).Trends and challengesSingle market: The enlargement of the European Union opens up new trade opportunities for craftenterprises in the former 15 and current 25 Member States – but also challenges their competitiveness.The same applies to the free trade zone between European Union and Mediterraneancountries that is planned to be established by 2010, to open the European market to further suppliersfrom low-wage countries. Adapting to the new environment of the single market for enterprises will beimportant for craft firms to tap into the opportunities of free trade in Europe.Limited resources / administrative burdens: Craft and small businesses suffer from having limitedhuman and financial resources, as well as from being more locally bound than their largercounterparts. Several issues are related to this disadvantage, the most important among them beingadministrative burdens, as well as technical and administrative standards. For example, the ISO 9000system is firmly established today in the European economy. Many crafts, in particular those operatingas subcontractors for big companies, were obliged to become certified. Certification costs for themturned out to be relatively higher than for large companies.Otherwise, trends and challenges differ by sub-sector:• Important trends in the textile sub-sector include: globalisation, business acceleration, concentration(for example chemicals on the supply side and big textile retail on the demand side),the quality imperative as well as customisation and personalisation.• The business climate in electronics and electrical machinery remains volatile, maintainingpressure to innovate and increase efficiency. The electronics sector (NACE 30 and 32) was thefastest growing business sector in many European countries during the 1990s, but the past twoyears confronted the industry with a recessive demand scenario.• The current business environment in the transport equipment sector is difficult for manyproducers in the whole value chain, including crafts. The global economic environment continuesto be uncertain, and general economic growth is slow in most EU countries.• The cost of raw materials is one of the most important issues in the wood manufacturing industry.In international comparison, stumpage costs in the EU are relatively high because of fragmentedand private ownership of forests.• The construction industry is currently facing stagnation. According to the European ConstructionIndustry Federation (FIEC), construction activity in the EU grew by a moderate 0.6% in 2002 andhardly grew (figures not yet consolidated) by more than 0.5% in 2003.123