European Lethargy Helps U.S. Web Firms

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LONDON - The current rush of American Internet companies into the European market is taking advantage of a growing "e-gap" as Europeans are slow to start new firms and even slower to put established companies on the Web.

In analyzing "e-business Europe," the influential Financial Times noted that "in almost every industry, US companies are proving quicker to use the Internet to cut costs, streamline business processes and find new markets - sometimes by stealing old ones."

The FT quotes a British management consultant to the effect that "if we Europeans don't get our act together there will be steady flow - perhaps a rush - of US entrepreneurs to do it for us."

The consultant's concern, however, may already be outdated, judging from the number of US Internet companies opening up European offices and moving around the continent as if national barriers don't exist.

More than the Europeans, Internet analysts in the US noted, Americans find Europe to be one market as far as the Web is concerned, and so far have not been disappointed.

Their colleagues in the print catalog and other DM disciplines found their initial hopes dashed in the early nineties when they took the 1992 Maastricht treaty at face value and assumed one market already existed when it did not.

It took many companies years to adjust to the fact that 15 single markets co-existed with the framework of one market and that they had to operate in both. Internet companies don't have that problem.

Both Europe and the US started from ground zero but European hesitation, red tape, and general unease with the new media have given the US a 30-month lead in implementing enabling technology, according to a Forrester Research study.

"This," the FT said, "may leave the US dot-coms better placed to soak up rising European online sales." And they are rising. A Boston Consulting Group study said the US handled $770 billion worth of electronic transactions last year compared to $330 billion in the rest of the world.

But in just three years the consulting group estimates the US share will rise to $2.8 trillion while the rest of the world will be "only" 1 trillion behind at $1.8 trillion.

Most of the growth won't come from sales to consumers where e-tail will remain a fraction of retail sales, but from the BTB sector, the FT predicted, specifically in terms of operating margins, lower inventory risk and better customer service.

Forrester predicts that Europe is in a take-off position on the Internet right now and could become the driving force. It said sales might increase by as much as 150 percent a year through 2004.

The problem, the FT said, was "transforming the internal culture of European businesses. Instead of startups most European Web companies are offshoots of existing companies.

"If US companies regard e-business as a land-grab operation, European companies see it more as an opportunity to extend an existing franchise."

The increasingly aggressive American behavior in tackling new markets and the legal thickets surrounding them bear out that assessment, analysts here said.

"You're going to need greater flexibility and more openness in corporate structures in the 21st century," said Paul O'Donnell, executive vice president at OgilvyOne Europe. "Things are not as neat in terms of ownership, alliances and partnerships anymore."

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