The Boston Consulting Group (BCG) warns Asian companies not to put e-commerce on the back burner just because the dot-com craze has subsided. BCG says e-commerce is changing the basis of business competition around the world, and that if Asian companies continue to lag their Western counterparts in adopting it, they put their fundamental competitive advantage at risk.
At greatest risk, according to BCG, are Asian companies serving global markets. E-commerce is shifting comparative economics globally, and although Western companies that have embraced business-to-business e-commerce are already driving down their costs with average productivity gains of six per cent estimated by 2010 -- Asian companies lag in implementation. At risk is Asia's fundamental basis of competitive advantage-cost.
Given Asia/Pacific's heavy reliance on exports as a percentage of GDP, which exceeds that of any other region in the world the risk is not insignificant. The greatest risk is in industries with narrow cost advantages, such as hot-coiled steel. Asia/Pacific producers currently have an average seven per cent cost advantage (including shipping), over their North American counterparts. This could fall to just 0.3 per cent by 2010 if local producers do not fully integrate e-commerce with their supply chains.
Noting that the estimated value of business-to-business transactions in Asia by 2003 is expected to a much as $US430 billion, BCG's report says companies now face an additional level of risk as e-commerce in Asia-Pacific will evolve with big winners and big losers. "While we see a handful of Asian companies starting to think about e-commerce more strategically, the majority of those doing anything at all are simply implementing "made in the USA" strategies. This won't work in Asia/Pacific, because the competitive landscape is emerging quite differently than in the USA, explained BCG analysts.
Although the risks are significant, the ultimate payoff for smart Asia companies can be even higher than in the West. Their businesses will undoubtedly benefit from breaking Asia's huge existing tradeoff between the "richness" or quality of information and the "reach" of that information. But perhaps even more importantly, they will benefit from the increased efficiencies and transparency that result from the back-end changes they'll have to make in areas such as inventory processes, forecasting and the like.