According to a global business study from KPMG International, the professional services organization, consumer markets executives expect e-business strategies to dramatically alter the organizational structure of their companies.

Almost half (46 percent) of the consumer markets executives surveyed say their companies need to reorganize according to customer needs rather than internal functions or divisions in order for their e-business strategy to succeed. The all industry average is 39 percent. Only 23 percent believe they need to organize along product/service lines. The all industry average is 31 percent. In addition to these organizational changes, 63 percent of consumer markets executives interviewed expect that e-business will change their role within their industry. This compared to the all industry average of 57 percent.

The findings are reported in the KPMG Study, "The E-Business Value Chain: Winning Strategies in Seven Global Industries," conducted in June 2000 by the Economist Intelligence Unit, in cooperation with KPMG. The study focuses on the consumer markets, communications, electronics, financial services, chemical, pharmaceutical and automotive industries.

"The Internet is having a profound and for some, alarming effect on consumer markets companies," says Michael Hughes, global chairman, KPMG consumer markets, "and we expect to see the industry reorganizing along customer lines-a critical initiative for a successful e-business strategy. "These changes should lead to more effective and efficient customer service and fulfillment, certainly high priorities for consumer markets companies." In fact, 77 percent of those surveyed say their customer service responses need to be faster and 69 percent want to see more effective fulfillment processes. The all industry averages are 65 percent and 59 percent, respectively.

In addition 40 percent of consumer markets executives expect e-business to change their company's relationship to other industries, indicative of growing alliances across industries and the bundling of products and services to better meet marketplace needs. The all industry average is 50 percent.

E-Business Barriers
When asked about the potential organizational barriers to e-business implementation, 57 percent of consumer markets executives interviewed in the KPMG study cited lack of e-business skills. This compared to the all industry average of 50 percent. In addition, 60 percent of consumer markets executives say that to succeed a company needs a dedicated senior level manager with sole responsibility for e-business initiatives. The all industry average is 54 percent. Currently e-business planning is driven by executive committees at 43 percent of companies.

Online Exchanges
E-marketplaces promise a fundamental change in the way companies manage their value chains from the sourcing of raw materials to the delivery of finished products and approximately one-third of consumer markets companies are already using vertical industry e-marketplaces.

Almost 70 percent of consumer markets companies look for an online marketplace that allows them to secure lower prices. This compared to the all industry average of 51 percent. Fifty-seven percent of executives also rate the ability to work more closely with suppliers on product development as a very important criteria for online exchanges. The all industry average is 49 percent.

"These criteria reflect the frustration faced by consumer markets companies," says Hughes. "This is an industry that is under constant pressure to churn out new products while at the same time works with extremely tight profit margins. Right now we are seeing tremendous growth among digital marketplaces and the ones that meet the needs of the industry will have a major influence on moving e-business initiatives into fast forward."

Brick and Mortar Advantage
Consumer markets companies scored significantly higher than other industries in regarding their offline brands as a top advantage over dotcoms --60 percent of executives versus the all industry average of 38 percent. Yet only 17 percent of consumer markets companies surveyed see their "bricks and mortar" assets, such as retail stores and warehouses, as an important competitive advantage over dotcoms.

"It's clear from these findings that consumer markets companies need to better integrate their infrastructure with their e-business initiatives to gain full value from multichannel sales strategies," says Hughes.

E-Business Goals and Growth
Concerning e-business customer goals, the top goal is to provide value-added products and services (77 percent) followed by reaching a broader range of customers (69 percent). This is consistent with the all industry average.

Regarding risks, consumer markets executives are generally more willing to take risks than their counterparts in other industries. They are the most willing to take risks concerning relationships with their existing suppliers -31 percent versus the all industry average of 23 percent. Twenty-nine percent say they can tolerate greater cash flow volatility. The all industry average is 19 percent.

As for projections for on-line sales growth, the KPMG study found that consumer markets executives expect that revenue will climb from five percent to 20 percent in 18 months. The all industry average is expected to jump from seven percent today to 22 percent in 18 months. In addition, in the next year and a half, consumer markets executives expect dramatic improvement in the Internet-based features that they offer suppliers and partners.

Other KPMG findings:
  • In the next 18 months, consumer markets executives expect to dedicate 42 percent of their total e-business investment to B2C initiatives with the rest going to B2B initiatives. However, like other industries, investments are shifting towards B2B, since today, 49 percent of consumer markets e-business investments go to B2C.

  • Only 26 percent of consumer markets companies are investing in dotcoms. This is the lowest of all industries. When they do make the investment, 89 percent of executives say it is to access e-business expertise.

  • Almost half of executives stated that security/privacy of transactions was a barrier to e-business strategy implementation. The all industry average is 40 percent.
KPMG is the global network of professional service firms whose aim is to turn understanding of information, industries and business trends into value. With more than 100,000 people worldwide, KPMG member firms provide assurance, tax and legal, financial advisory and consulting services from more than 830 cities in 159 countries.