Many Expect E-Business To Alter Their Core Business;
         Need For Greater Senior Management Involvement Going Forward

    NEW YORK, Sept. 20 /PRNewswire/ -- The majority of companies in a KPMG
International global study see the Internet having a profound effect on the
role they play in their industries -- with nearly one-third expecting to see
e-business changing their core businesses, according to the professional
services organization.
   
    Some 30 percent of 331 senior corporate executives interviewed say that
e-business will change the definition of their core business, with a greater
percentage of executives in electronics (43 percent), financial services
(42 percent) and communications (39 percent) industries saying so.  These
findings are reported in the KPMG study "The e-business value chain: Winning
strategies in seven global industries," which was conducted by the Economist
Intelligence Unit in cooperation with KPMG in June and July 2000.  The study
focuses on the automotive/manufacturing, chemicals, communications, consumer
markets, electronics, financial services, and pharmaceuticals industries.
    "The revolution triggered by the rise in the Internet and e-business is
clearly gaining momentum and influence, despite the recent fallout suffered by
the dot-coms," said Alistair Johnston, KPMG International Managing Partner,
Global Markets.  "On the positive side, the changes will deliver new
opportunities, from strengthened customer relationships to new sources of
revenue.  However, the dramatic changes occurring across these industries are
posing a real threat of diminishing market share for those companies who may
be unable to adapt quickly."
    Most companies were found to have an e-business strategy and active
involvement by senior management in formulating e-business strategies.
However, the KPMG analysis also disclosed that senior management involvement
is probably inadequate at more than 40 percent of the companies
surveyed -- suggesting that it may take longer for those companies to
implement their e-business plans.
    When asked 'what changes to your organizational structure are needed for
your e-business strategy to succeed,' more than half of the executives overall
responded that their firms need to dedicate a senior-level manager with sole
responsibility for e-business initiatives.  E-business strategy is being
driven by executive committees at 42 percent of the firms, and by chief
executives at 28 percent.
    Among the seven industries included in the study, the automotive industry
ranked lowest (35 percent) in senior management involvement.  Not
surprisingly, electronics (80 percent) and financial services (62 percent),
two industries at the leading edge of e-business change, enjoy the highest
degree of senior management participation.
    The survey found the financial services and communications industries
undergoing fairly significant e-business change, with the chemical and
automotive industries lagging in terms of readiness for e-business growth.
The analysis is based on a number of measures, including senior management
commitment, web site capabilities, and on-line revenue projections.

    Key Findings:
    -- 50 percent of the survey respondents expect e-business to change their
       company's relationship to other industries, in effect, crossing
       industry lines to offer bundled products and services.
    -- 57 percent expect e-business to transform the role they play within
       their industries.
    -- All of the industries surveyed are placing more emphasis on B2B than
       B2C, and expect to shift the balance of their investments toward B2B
       initiatives. In addition, 48 percent believe that on-line exchanges
       will be very important for their own supply chains in the next 18
       months, up from 19 percent today.
    -- 45 percent said their companies are investing in dotcoms.  The reasons
       for doing so are to gain access to e-business expertise and to reach
       new customers and markets.

    High Expectations
    In the next year and a half, the executives surveyed expect dramatic
improvement in the web or internet-based features that they offer suppliers
and partners.  Today, only 11 percent of those interviewed report that their
suppliers can access their inventory systems.  In 18 months, 46 percent say
their firms will grant access.  Electronic bill payment capabilities to
suppliers are expected to increase to 44 percent in the next 18 months, up
from 12 percent.
    Projections for on-line sales growth, the study found, are significant.
Respondents expect their e-business revenue contribution to increase from an
average of seven percent today to 22 percent in 18 months.  While
communications and financial services firms today enjoy the greatest
percentage of online sales, the largest growth will come from the electronics
industry, which is projected to increase from 9 percent today to 33 percent in
18 months.

    Other KPMG/EIU findings:
    -- E-business strategies are being adopted because of the need to keep
       future strategy options open (75 percent), need for growth
       opportunities (73 percent), for internal efficiencies (55 percent) and
       because of competitive pressures (53 percent).  By contrast, little
       direct pressure is coming from either their boards (19 percent) or
       shareholders (17 percent).
    -- When asked about the potential barriers to e-business implementation,
       executives interviewed in the study cited the necessity to re-engineer
       business processes, the lack of e-business skills, and the lack of back
       and front-end systems integration.
    -- In pursuing e-business goals, the executives said their firms would be
       less willing to risk alienating customers (13 percent) or a lower
       short-term share price (16 percent), but would be more willing to risk
       lower short-term revenues (23 percent), disruptions with established
       supplier relationships (22 percent) or cannibalizing existing sources
       of revenue (22 percent).

    For the "The e-business value chain: Winning strategies in seven global
industries" study, 331 industry executives were surveyed in June and July in
North America, Europe and Asia.  In addition, 42 senior executives
participated in in-depth interviews during the same timeframe.  The hypotheses
for the study were developed jointly by the Economist Intelligence Unit and
KPMG.

    KPMG's global industry strategy focuses on a number of priority sectors,
including financial services; industrial markets; consumer markets;
information, communications & entertainment; and infrastructure, government
and healthcare.
    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.

    About the Economist Intelligence Unit
    The Economist Intelligence Unit (EIU), the business-to-business arm of The
Economist Group, is the world's leading provider of country intelligence, with
over 500,000 customers in corporations, banks, universities and government
institutions. Our mission is to help companies do better business by providing
timely, reliable and impartial analysis on worldwide market trends and
business strategies. Through our global network of over 500 analysts, the EIU
continuously assesses and forecasts political, economic and business
conditions in 195 countries, and provides insight into how companies are
responding.