European companies face some unique challenges-and opportunities-in setting up Internet-enabled trading exchanges. In certain industries, European companies barely lag their North American counterparts in establishing online trading exchanges. Financial services companies, for example, are aggressively creating and supporting online exchanges on several continents. Similarly, European retailers also have moved ahead quickly, as have select automotive, aerospace, and high-tech organizations. In broad terms, however, exchange activity in Europe remains a few years behind that of North America. The key reason, not surprisingly, is that Europe is composed of more than 30 countries, with widely diverse characteristics and needs. As a result, the total number of exchanges in Europe may be larger than North America, even though their scope, efficacy, buy-in, and technological sophistication generally are lower. Precisely because of Europe's bifurcation, a significant opportunity now exists to develop pan-European exchanges that cater to a super-set of the continent's countries. The greatest challenge, of course, will be overcoming country-specific issues such as language, legislation and customs. However, another long-term barrier-currency-is beginning to crumble: By helping to establish "common denominator pricing," the Euro is aiding the development of online exchanges. Common denominator pricing is a huge issue in the UK, where people pay premium prices for automobiles, PCs, electronic equipment, capital goods and food. Pan-European exchanges should lead to more equitable, fair-value pricing throughout the European marketplace via common denominator pricing. Cultural concerns aside, pan-European exchanges will have to demonstrate many of the same characteristics that define success in other parts of the world. For example, they must demonstrate the ability to drive down the cost of goods and services. That means acquiring the buying expertise that really delivers lower cost. To get buyers and sellers in place, exchanges also will have to do a great job of selling themselves. It's not easy to get a company to hand over its expenditures. Suppliers want direct relationships with their customers and, to some degree, customers want those relationships as well. In addition, European executives will need to determine if it is buyers or sellers that will lead the exchange... if profits will be derived principally by aggregating spending power and driving volume reductions... if value-added services are part of the business proposition... how services will be charged for... how buyer and seller systems will integrate with the exchange's underlying technology... and how links will be established with other exchanges. Perhaps most important, they will need to know where the value is. Will companies join to get access to better deals, to take advantage of better customer service, to get better compliance for existing deals, or to reduce the internal cost of service? Only one of these goals can be primary. About the author: Tom Barry is a partner in the Accenture Supply Chain Management group. Talk to someone about this topic  To Top
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