THE STATE OF E-BUSINESS ON THE GERMAN ELECTRONIC

CONSUMER GOODS INDUSTRY

Eulalio G. Campelo F., Wolffried Stucky

Institute of Applied Informatics and Formal Description Methods,University of Karlsruhe, Englerstrasse 11, 78214,

Karlsruhe, Germany

Keywords: e-business, German electronic consumer goods industry.

Abstract: B2B electronic commerce is an increasing important component of company’s strategy as it provides key

support for the business processes and transactions. Therefore, e-business applications were expected to

have a high cumulative growth and be widely applied by companies in different sectors of the global

economy.

This paper outlines the state of e-business on one of the most dynamic sectors in the area of B2B electronic

commerce, the electronic consumer goods industry in the highly competitive German market. The intention

is to develop a better understanding of the level of information technology application to support business

relations as well as the reasons and the course of e-business initiatives in this sector

1 INTRODUCTION

Since the term e-business was introduced by IBM in

1998 numerous researches have been done about

different aspects of this concept that have influenced

radically the way that companies interact with each

other. E-business is characterized by rapid exchange

of information within a virtual network of customers

and suppliers working together to create value-added

processes (Ticoll, Lowry, and Kalakota, 1998,).

The adoption of information technology to

support business transactions applying the internet

was and is still being one of the main faces of the

internet revolution. After the euphoria of the internet

booming years, the market of e-business

technologies has achieved a new stage on its market

curve, where companies from different sizes are re-

starting to invest on their B2B e-commerce

strategies in order to gain competitive advantage and

cope with their dynamic business environment.

The reasons to adopt an e-business strategy are

still quite the same as before e.g. reduced maverick

buying, reduced procurement process and costs,

decrease of inventory levels, obtain lower price from

suppliers, improved customer service and support,

improved company communication and networking

through better access to relevant information.

This number of relevant benefits that e-business

provides to organisations has made research

institutes and consultants believe that a rapid

adoption of electronic processes and transactions

would occur. Unfortunately, the high growth rate

that was forecasted in the beginning of this decade

could not be achieved and current studies suggest

that the deployment of B2B e-commerce

applications is happening much slower than

expected.

This paper reports a survey that addresses the

current state of e-business technologies on the

German electronic consumer goods industry.

The intention is to provide a better picture of the

utilisation of the information technology to improve

the interaction processes between business partners

in this economic sector that is alluded as one of the

most dynamic sectors in the area of e-business

applications.

The survey analyses some key factors on the

field of e-business to develop a better understanding

of the German electronic consumer goods industry

in this area.

 The exchange of electronic product

information;

 The main applications deployed to manage

electronic information;

 The internal processes that are currently

covered electronically;

 The medium used to acquire and distribute

business information.

G. Campelo F. E. and Stucky W. (2006).

THE STATE OF E-BUSINESS ON THE GERMAN ELECTRONIC CONSUMER GOODS INDUSTRY.

In Proceedings of the Eighth International Conference on Enterprise Information Systems - SAIC, pages 69-74

DOI: 10.5220/0002456000690074

 SciTePress

2 METHODOLOGY

A questionnaire was chosen to investigate the

research questions. To design the questionnaire a

careful literature review was made with special

attention on the electronic management of product

information.

In order to test the questionnaire some experts in

the area of e-business were contacted to give their

input to the formulation of the questionnaire. The

new version was than applied to another group with

a limited knowledge of information technology to

avoid too technical questions that could make the

questionnaire not understandable to some

respondents.

The final version of the questionnaire was

applied between July and September of 2005 on a

group of 200 companies from the German electronic

consumer goods sector. These companies range from

large organisations with annual revenues of over 500

million euros to smaller organisations with an annual

turnover of less than 10 million euros, deriving from

different positions on the supply chain i.e.

manufacture, wholesale, retail.

The response rate was around 20%, a relative

good quote, if compared with other researches,

which apply the same research methodology. A

reason for this result may be the support of

telephone calls to localise the appropriate managers

and the availability of two mediums to answer the

questionnaire i.e. fax and on-line questionnaire.

3 WHY COMPANIES SHOULD

MOVE TOWARDS ELETRONIC

BUSINESS?

In the traditional world, the purchasing and sales

functions are a work intensive process, where a great

number of employees are involved and often realise

repetitive activities that take time and often do not

require specialized skills.

These intensive and repetitive tasks leave space

for errors, delays and high organisational costs, what

can lead to inefficiencies and managerial problems.

The utilisation of information technology can

improve these processes, while reducing their costs.

A study made by Aberdeen Group (2004) shows that

by the utilisation of e-procurement technology,

companies have on average:

• Reduced off-contract (“maverick”) spending by

64%.

• Reduced prices by 7.3% for spend brought back

onto contract.

• Reduced requisition-to-order cycles by 66%.

• Reduced requisition-to-order costs by 58%.

• Increased total spend under management of

procurement group by 20%. Each new dollar

brought under management can yield 5% to

20% cost reductions.

On the other side of the supply chain, company’s

customers have more and more different

requirements that organisations would have

difficulties to attend properly, in a reasonable time-

frame, when applying the so called traditional tools.

In this scenario, the goal of the information

technology is not restricted just to the improvement

and the cost reduction of the processes, instead it

seeks also to develop and maintain long-term

dependencies and relationships between firms and

their customers. Indeed, it seeks for creating loyalty

among profitable customers of a firm (Fayerman,

2002).

A number of other arguments could be listed to

justify the deployment of information technology to

support business transactions: from the improvement

of the time management that may be applied in other

strategic activities to the management of the

increasing number of channels that organisations use

to communicate with their customers and suppliers.

Nonetheless, because of the deception with the

early adopters results, companies have slowed their

speed of e-business systems deployment. Therefore,

the investment on e-business technologies are done

now only after a precise analysis of company’s

supply chain environment and the readiness of their

buyers and suppliers to engage in electronic

interactions, which (Barua, 2001) refers as one of

the main success factors to e-business initiatives.

The following survey results analyse the

implications of this phenomenon in the German

electronic consumer good industry as well as the

way that those enterprises are facing this relative

new business scenario, where although the deception

with the internet bubble, companies are more and

more required to apply information technology to

effectively and efficiently attend their business

partners.

4 SURVEY RESULTS

This section analyses the information collected at the

research on the state of e-business on the German

electronic consumer goods industry.

In order to get a better understanding of the

companies that participated in the survey, the first

part of the questionnaire has gathered information

ICEIS 2006 - SOFTWARE AGENTS AND INTERNET COMPUTING

about the profile of the participants, which consist in

terms of the number of employees mainly by big

organisations (75%) with more than 250 employees;

the number of SMEs respondents was around 25%

of the total (see figure 1).

20%

37%

33%

<150

150-250

250-500

500-1000

>1000

Regarding the annual revenue, which is another

main criterion to classify the size of an organisation,

the sample is formed as demonstrated at figure 2 by

enterprises with less then 10 million euros of annual

revenues (15%), firms with an annual turnover

between 10 and 50 million euros (25%), 44% of the

organisations with an annual turnover between 50

and 100 millions, 13% of companies between 100

and 500 million euros of annual revenues and 3% of

companies with an annual turnover greater than 500

million euros.

15%

25%

44%

13%

<10 Millions

10-50 Millions

50-100 Millions

100-500 Millions

>500 Millions

The distinction between the different hierarchies

of the companies on the supply chain is provided to

draw a better picture of the whole electronic

consumer goods sector, at the same time that allows

the analysis of the state of the organisations

localized at each position of the supply chain.

Figure 3 shows that most of the participating

companies come from the manufacturing sector

(57%), followed by retailers with 18%, wholesalers

with 17% of the participants and others representing

8% of the total participating organisations.

57%

17%

18%

manufacture

wholesaler

retail

others

The second part of the survey focuses on the

state of the German electronic consumer goods

industry regarding the adoption of e-business/e-

procurement applications and the reason to apply

those systems.

The analysis made on this research is done based

on the definition of e-procurement made by

(Möhrstädt, Bogner and Paxian, 2001), who say that

electronic procurement is denoted by a strong

customer orientation, based on an organised

electronic purchasing process with the goal to

provide and supply in the most efficient way

products and services to organisations.

However, prior to a closer examination of the

ways that companies realise their e-business

activities, information about the actual level of the

exchange of electronic product information is

required.

The survey found that around 90% of the

participants deploy already some kind of IT-system

to manage their business information, and between

the companies that still not doing so, most of them

are planning to apply information systems to support

their interaction processes within the next three

years (see figure 4).

This result is in accordance with other similar

studies made in other European countries e.g. UK,

Italy and Spain, where the electronic consumer

goods sector also places on the top position between

the sectors that apply B2B e-commerce technology

to communicate with their customers and suppliers

(Mainetti and Perego, 2004, Telefonica, 2004 ).

89%

Yes

Planned within the next year

Eventually within the next

three years

In order to realise business-to-business electronic

commerce companies are required to link different

information management systems e.g. CRM,

eCatalog, ERP, SCM with other systems from

independent organisations, what allows the

exchange of product and service information and its

respective transaction data between the parties.

Concerning the systems, which the participating

enterprises apply to support the exchange of product

information, figure 5 demonstrates that eCatalog

systems are the most applied systems to acquire and

distribute product information with 25% of the

responses.

Figure 1: Number of employees.

Figure 2: Annual turnover.

Figure 3: Supply Chain hierarchy.

Figure 4: Exchange of electronic product information.

THE STATE OF E-BUSINESS ON THE GERMAN ELECTRONIC CONSUMER GOODS INDUSTRY

A reason for this result may be the focus of

eCatalog systems on competences that provide to

their end users the functions, scalability and

flexibility that they require to act in the e-commerce

environment.

ERP systems was mentioned as the second most

applied system to manage product information with

20% of the participants, followed by CRM, which is

mainly applied to sell products electronically, and

SRM, which is mainly to purchase products

electronically, both with 5% of the total responses .

20%

25%

CRM

ERP

eCatalog system

SRM

Own solution

A not expected quote was given to the option

own solution, but this quote can be partially

explained by the understanding from some

participants that consider e-mail as an own solution

system.

In addition, companies are required to acquire

and distribute business information in both sides of

the supply chain: either sell-side, while interacting

with their customers; or buy-side, while dealing with

their suppliers, what characterise the so called

extended enterprise.

The medium that the participating companies

apply to communicate with their business partners in

both sides of the supply chain are basically the same

i.e. CD-ROM, eCatalog, e-mail, e-procurement,

paper catalog.

However, there is a slide difference in the

application level of this medium, while comparing

the communication between companies and their

suppliers and these enterprises and their customers.

Figures 6 and 7 compare these two scenarios,

showing that the utilisation of electronic format to

distribute and receive product information has

almost become so widely spread as the traditional

format i.e. paper catalog.

It can be said that the level of the medium

application follows a historic path, being the most

applied medium paper catalog, followed by CD-

ROM, which was introduced in the mid-eighties and

eCatalog, which has its origins in the nineties with

the utilisation of the internet to do business.

Nonetheless, it should be noted that companies

apply normally more than one medium to support

their product data distribution and acquisition, thus

suggesting that the total volume of electronic data

applied could be actually greater than the paper-

based content used to communicate with business

partners.

80,00%

65,00%

45,00%

27,50%

22,50%

7,50%

Paper Catalog

-ROM

e-mail

-M

tplace

-Ca

g/e

-S

-P

rocurement S

stem

80,00%

65,00%

62,50%

25,00%

23,00%

7,50%

Paper Catalog

CD-ROM/DVD

Mail

Mark

ttpla

catalog/e-Shop

Procurement-s

After having analysed the results of the survey, it is

clear that the participants exchange different type of

product information through the above mentioned

mediums with their customers and suppliers.

In figure 8 is shown that the two most applied sort of

product information in the German electronic

consumer goods sector are basic information e.g.

price, quantity, product number and technical

information with more than 82% of the participants

applying them, followed by logistic information with

around 47%, marketing with 35% and multimedia

data with around 22%.

Figure 5: Systems applied.

Figure 6: Medium applied with suppliers.

Figure 7: Medium applied with customers.

ICEIS 2006 - SOFTWARE AGENTS AND INTERNET COMPUTING

82,50% 82,50%

47,50%

35,00%

22,50%

Basic Prod.

Information

Technical

information

Logistic

Information

Marketing

Information

Multimedia

Data

A possible explanation to this result is that the

sales process, which is the most electronically

supported process between the participating

companies as can be seen in figure 9, is highly

dependent on basic and technical information. In

addition, the vast utilisation of e-mail to distribute

and acquire business information has contributed to

this result.

Furthermore, as already mentioned, the

responses on the processes that are currently

supported electronically show that the marketing and

sales processes are the most electronically based of

all processes done by the participating companies

(52,5%), followed by the internal product control

and development coming up both to 45% of the total

responses (see figure 9).

The purchasing process is the less electronically

based process with around 32,5% of the

participating companies applying it. This might be a

result of the average size of the participants, which

in average have an annual revenue of fewer than 100

million euros per year, thus not allowing an optimal

scenario to take the best advantage of electronic

purchasing and all benefits that these systems bring.

52,50%

45,00% 45,00%

32,50%

5,00%

Marketing/Sales

process

Dev elopment

process

Intern product

control

Pur chasing

process

None

Regarding the reasons to apply electronic

processes the opinion of the participating

organisations are in line with the vast literature on

this topic, which refer the cost reduction as the main

single factor to introduce electronic processes with

around 75%, followed by higher quality and control

of product data with 63%, improvement of

performance with 55% and support of sales activities

with around 38%, other reasons were mentioned in

23% of the cases, however without further

specifications (see figure 10).

The customer satisfaction is listed as the less

relevant reason to apply electronic processes, with

less than 13% of the responses. This result

demonstrates that the main reasons to apply

information systems are still basically cost related

issues and/or internal driving reasons, leaving the

customer satisfaction to a second plan, what have

been proved by early adopters experiences a wrong

path to follow.

75,00%

63,00%

55, 00%

37, 50%

22, 50%

12, 50%

Co st

reduction

Higher quality

and control of

the prod. Data

Improvement

of the

p urch asi ng

performance

Support of

the Sales

Activities

Other Customer

Sati sfacti o n

5 CONCLUSION

The application of e-business on the German

electronic consumer goods industry, although the

deception of the first experiences is widely spread,

leading to a situation where around 90% of the

organisations in this sector apply some kind of IT-

solution to communicate with their business

partners.

The survey shows that in this sector the question

is no longer: Why should companies move toward

electronic Business? But, how and by which means

should companies realise their electronic business

activities, in order to best profit from the relationship

with their customers and suppliers.

Nonetheless, organisations should constantly re-

assess their reasons, strategies and tactics to achieve

the best results from their virtual activities and be

placed in a competitive position in this dynamic

sector of the German economy.

Figure 8: Sort of information acquired/distributed.

Figure 9: Processes electronically supported.

Figure 10: Reason to apply e-business.

THE STATE OF E-BUSINESS ON THE GERMAN ELECTRONIC CONSUMER GOODS INDUSTRY

The result of this survey suggests that although

some improvements on the state of e-business have

been done, there are still some issues that should be

further addressed.

An interesting field for further researches on this

area would be to research the specific success

factors of e-business in this sector and how their

influence the overall company’s performance.

REFERENCES

Aberdeen Group., 2004. The e-procurement benchmark

report – Less Hype, More Results, Aberdeen Group,

Boston, 1

edition.

Barua, A., Konana, P., Whinston, A. B. and Yin, F., 2001.

Driving e-business excellence. Sloan Management

Review, Fall, 36-44.

Fayerman, M., 2002. Customer Relationship Management,

New Directions For Institional Research, Wiley

Periodicals. Inc, no. 113.

Mainetti, S., and Perego, A., 2004. Il B2B in Italia:

Finalmente parlano i dati, Associazione Impresa

Politecnico, Milano, 1

edition.

Möhrstädt, D.G., Bogner, P., Paxian, S., 2001. Electronic

Procurement planen - einführen – nutzen, Schäffer-

Poeschel Verlag Stuttgart.

Telefonica., 2004. La sociedad de la informacion en

espana 2004, Madrid, 1

edition.

Ticoll, D., Lowry, A. and Kalakota, R., 1998. Joined at

the bit, in Blueprint to the Digital Economy creating

wealth in the era of e-business, McGraw-Hill

ICEIS 2006 - SOFTWARE AGENTS AND INTERNET COMPUTING