E-commerce and Project Consulting

Transcription

1 E-commerce and Project Consulting ----Feasibility Analysis and Implementation Framework for Consulting of Engineering Project Based on Internet in China Anquan WANG Hongyuan XIE Xinwei MO Liangde LI Weiqing MAO College of Management Zhejiang University Hangzhou, Yuquan, P.R.China Abstract: In recent years, E-commerce has gained great development in China, and its integration with traditional industry has become essential for it to maintain fast development. Through full market analysis and competitiveness analysis, we propose a framework of FACS (Full Application Consulting System) for engineering projects based on Internet in this paper. Key Words: FACS; core competitiveness; B2B 1 Introduction Nowadays, Internet-economy has become the focus of world s economic life, and e-commerce s popularity is unprecedented. Compared with the developed countries in North America, Europe and Japan, China started later in developing e-commerce, but at high speed. Since the propagation of e-commerce by media and IT industry in 1998, Chinese e-commerce has developed from initiation stage to implementation and developing stages. The development of e-commerce can t be detached from the integration with traditional industries. The merge of WEA by AOL, and the following wave of merging case between IT industry and traditional industry demonstrate the interdependent relation between e-commerce and traditional industry. At present, project consulting service has become a business with annual sales volume of US$ 422 billion in the world. Total output of this business account for 6.4% of total amount of global fixed assets investment. As monetary industry and other traditional industries develop their e-commerce, Chinese consulting industry has not recognized the importance of Internet yet. Chinese project consulting has only a tiny share of global market, and its technology and service quality are far below international standard. With globalization of economy and China s entry WTO soon, a lot of famous global consulting firms enters Chinese market. Some world biggest consulting 1

2 firms, like Mackinsey, First Boston started business in China several years ago,. They set standards of traditional consulting, offer their prices. So the competition of consulting business is very fierce in China now. Developing business through Internet will be a effective counter-measure for Chinese project consulting industry to meet impending challenges actively. This paper will study the feasibility and theoretical framework of carrying out FACS in China. 2 Full Application Consulting System(FACS) 2.1 Definition Full Application Consulting System here means a service system comprised of a international B2B site, its mirror subsites, consulting unit and ASP. It provides related investment information for foreign investors, helps foreign investors to establish relation with related enterprises in China, and provides complete application consulting service at home and abroad so as to accomplish the investment project smoothly. In the meantime, it forms relation with Chinese general contractor and subcontractors, providing information to them, processing on-line or off-line tendering and bidding, and providing Internet and software service for Chinese related enterprises by ASP. 2.2 Targeted clients and service contents The potential clients of FACS are: foreign investors who want to invest in China, domestic investors, consulting service firms, domestic general contractor, certificated subcontractors specializing in construction, installation, decoration, equipment, and certificated professionals. By founding B2B site, consulting unit and ASP, it will provide following services to clients: 10 Information consulting service 10 Investment consulting service 10 Establishing relations among clients 10 Consulting service for general contractors of project implementation 10 Kinds of direct application consulting service, like budgeting 10 On-line or off-line tendering and bidding 10 Providing B2B implementation plans for clients and corresponding B2B software selling and system integration 2.3 Core advantages Based on B2B site, this system that provides on-line and off-line consulting service for investment projects and ASP for vertical markets is advanced in today s market. It integrates advantages of several industries. For consulting industry, it can provide more comprehensive information and Trans-regional service on Internet, and is the first consulting system in China that proposes to include full-range services 2

3 such as supplying project information, investment project contacting, project implementing, project designing, and contracting. So it is different from traditional consulting. For website and ASP, it is aimed to vertical market of certain industry. Because Internet and software are only means aimed to serving certain industry, the advantage is obvious. 3 Source of market opportunity 3.1 fast increase of foreign capital and investment market As the pace of integration of world economy speeds up, more and more global companies put their eye to China. It is estimated by foreign economy and foreign trade ministry that at least 400 out of top 500 companies in the world have invested in China, and the biggest 20 US companies have been engaged in more than 200 investment projects in China. Until 1998, investors from more than 170 countries or regions have invested in China. After China enters into WTO, there surely will be a new heat wave of investment in China by foreign investors. According to statistics and forecasting by National Economy And Trade Commission, the situation of foreign investment in China from 1997 to 2001 is shown in following figure Total amount of foreign investmetn ( RMB billion) Increasing Rate of Foreign Investment (%) s 3.2 The increasing of domestic investment market According to statistics of 1998, the capital of state-owned and state-controlled industry enterprises accounted for of total capital of all industry enterprises. The increased value created by stated-owned enterprises accounted for 57.03% of that created by all enterprises. Moreover, state-owned enterprises are now meeting a opportunity of reform. Under the push and impact of WTO, state-owned enterprises are making great infrastructure investments, therefore, domestic investment will develop into a huge market. According to statistics and forecasting by National Economy and Trade Commission, the situation of domestic investment in China from 1997 to 2001 is shown in following figure. 3

4 Total Amount of Domestic Investment( RMB Billion) The increasing of demand of contractors Increasing Rate of Targeted Market of Domestic Investment(%) According to statistics, there are about 126 thousand enterprises in China engaged in general contracting or subcontracting of design, construction, etc, accounting for 5% of total Chinese enterprises. China has employees at present, 10.3% of whom are involved in construction, installation, decoration, etc. Faced with so many related industries (such as manufacturing, construction, installation), how to provide project information, tendering and bidding management, budget, final account,market opportunities, and corresponding Internet and software services will become source of FACS s market opportunity. The market competition becomes more and more fierce, so every contractor should think how to use compute and Internet technology to explore market to survive and develop in the ruthless market. Therefore, these enterprises have increasingly high demand for services such as providing project information, tendering and bidding management, budget, final accounts,market opportunities, and corresponding Internet and software services. According to statistics and forecasting by National Economy and Trade Commission, the increasing of contractors in China from 1997 to 2001 is shown in following figure total amount of contractors(hundred)) Increasing Rate of Amount of Contractors (%) To sum up, how to provide fast and adequate information and related full-range application consulting service for foreign investors will become a potentially great market. This includes how to attract foreign investment, how to provide related consulting service, choice of partners, analysis of government policy and environment, analysis of investment strategy, project budget, final accounts, feasibility analysis, service of accompanying on-the-spot investigation, general contracting service, and tendering and bidding service for foreign investors. It is aimed to help foreign 4

5 investors and domestic contractors to complete investment projects in China smoothly. 4 The gradual maturation of Internet market The survey of Chinese e-commerce development done by China e-commerce Net shows that Chinese e-commerce has entered into fast developing stage. Until Dec 31, 1999, Chinese mainland has 571 e-commerce sites, about 5 times that in the end of At present, another 500 e-commerce sites are still being prepared and constructed. In the meantime,,the first phase of China Monetary Authentication Center, the crucial link in development of Chinese e-commerce has been completed, which remove a big obstacle constraining e-commerce development in China. IDC forecasts that there will be more than 15 million Internet users in China in , and that the amount of Internet users of China will rank first in Asia-Pacific region in According to data from Information Industry Ministry, Chinese mainland has about 200 e-commerce sites in Jan, 2000, with 50 more added up on average every month. These datum domestic and international Internet market has matured and has great prospect. Internet site has developed from former e-commerce information, platform establishing, software supplying, information consulting to Internet mall, on-line auction, security transaction, Internet education, e-postal service, health and medical service, real estate transaction, construction materials, chemicals, tourism, etc. However, the system proposed in this paper which is based on B2B site, and provides on-line and off-line consulting service for investment projects and ASP for vertical markets is unprecedented. 5 Government support After entering WTO, Chinese government will take more active measures to introduce foreign capital and push e-commerce development in China. After entering WTO, China will keep perfecting laws and regulations on introducing foreign capital and loosen industry restriction on foreign investment. China will revise the content in present laws which is incompatible with clauses of WTO and provide favorable conditions for foreign investors who invest in western regions. Meanwhile, China will reform approval system of foreign investment and enhance transparency of approval system. Besides notifying change of foreign capital policy to WTO at certain intervals, China will open service market, introduce capital, apply advanced technology management and normative market operation. B2B is characteristic of relatively low cost and simple investment process., so it receive attention from Internet service providers, business units and governments. The developing trend of e-commerce demonstrates that it will take a dominant status in future economic life. The governments of all countries actively institute related regulations, and take action to perfect related laws and regulations to make them more effective. In 2000 NPC and NPCC,the NO 1 overture is about e-commerce. Chinese 5

6 government attaches great importance to e-commerce. It organizes related departments to institute e-commerce regulation, perfects overall legitimate environment, constitutes general framework of Chinese e-commerce. Local government also gives unprecedented attention and support to e-commerce, making it an important direction of future development. 6 Service content and advantage FACS means to establish B2B-based system which is oriented to global application investment and project construction. It will include information about major economic and technological development zones in mainland and major construction contractors, and provide face-to-face channel between investors and ultimate contractors, and between investors and invested site. Thus, it can spare a lot of intermediary links and time and provide more choices for investors. It is a investment-project-oriented B2B application system. 6.1 For foreign investors At present, if a foreign investor who don t know much about China wants to invest in China, he can get to know situation of investment site through three channels: 1. The government of investment site organizes foreign investment introduction group. It discusses with potential investors, introduces the condition, advantage of the investment site, and expatiates and promises favorable policies toward foreign investors. 2. Seek one or several consulting firms which meet investors requirements. The consulting firm investigates situation of different potential investment sites of China, then collects and analyzes conditions such as infrastructure, resources, favorable policy, etc for investors to choose. 3. Investors come to China directly to investigate the conditions of potential investment site, such as infrastructure, resources, and favorable policy. The above three methods have both advantages and shortcomings. Using the first method, investors can know detailed conditions of investment site. If they decide to invest there, they can win much government support in the course of project execution. But it has shortcomings too. The investors are relatively passive. They can t master appropriate investment opportunity and timing. And they only know conditions of visited sites, which can t be compared with that of other potential sites in China. Investors can master investment timing by investigating conditions of potential investment sites through consulting firm or by themselves. But there are some difficulties: 1. Can t gain adequate information to make the decision to invest in China. The information includes policy, investment environment, language and cultural difference, etc. 2. Need to spend much time in contacting and investigating a lot of companies to 6

7 find a suitable partner. 3. Owing to unfamiliarity with Chinese culture and environment, investors have difficulties in acquire true information from potential investment site or enterprise. FACS can provide following services to foreign investors: 1. Cooperate with different potential investment sites in China (economic and technological development zones) to provide timely and abundant regional information and government policy information on Internet to make foreign investors choose more conveniently. Foreign investors can acquire plenty of market survey information on Internet. 2. Provide direct relation through Internet for foreign investor about investment information in China. Present procedures: 1. Investor handles procedures such as land purchasing after reaching investment agreement so that the investment project can be carried out. 2. Investor chooses general contractor or project construction consulting firm through tendering. 3. Investor and general contractor or project construction consulting firm choose domestic design company. 4. Investor and general contractor or project construction consulting firm complete procedures such as gaining approval of project construction and submitting project starting report. 5. Investor and general contractor or project construction consulting firm choose construction, architecture and construction units through tendering. Drawbacks: 1. Because foreign investors aren t acquainted with price of construction, installation, etc, they can t fix appropriate project construction and installation price, which results in rise of investment capital. 2. Foreign investors can t contact many Chinese construction and installation companies in short period of time and with as little resources as possible, so they lack enough information to select high-quality construction units. FACS can provide following services for investors: 1. Serve Chinese construction units. FACS provides information about Chinese construction units so that foreign investors can acquire abundant and actual information on Internet to make choices. 2. Establish direct contact between foreign investors and Chinese construction units 3. Carry out on-line tendering and bidding to choose general contractors and construction units. 4. Make analysis of bidding offers, and carry out on-line tendering and bidding of sub-project. Using these services, foreign investors can cooperate with partners directly and establish direct contact with ultimate contractors so that they can complete the whole investment project trans-regionally depending on Internet B2B consulting system. 7

8 6.2 Domestic investors and general contractors Some problems of using the common method: 1. They can t know enough information dynamically, and can only depend on former business relation statically. It will cost a lot of time, human and financial resources. They can do nothing but wait once business relation is unstable. 2. For investment project in other places, they have to spend a deal of time and energy in trans-region contact and tendering, therefore, they can t make reasonable distribution of workforce in coordination with society. 1. Owing to lack of subcontractor information, general contractors have to maintain a large pool of reserved personnel. It will become a huge burden once they have no projects. On the other hand, they will be short of personnel once they get a lot of projects. 2. They can t contact directly with investors. A lot of profits are lost due to many intermediary links, which results in vicious competition. FACS can provide following services for contractors: 1. Provide plenty of project information so that contractors can make choices to contact and bid. 2. Establish more comprehensive business relation in B2B model,not confined by time and location. So it expands business opportunity. 3. Make reasonable distribution of human and material resources dynamically to avoid negative impact of seasonal fluctuation. 1. Cut off intermediary links to enhance profit margin. 2. Receive ASP service on Internet. Contractors can not only enjoy the convenience of e-commerce, but also decrease expenditure on Internet software and hardware. 7 Operation model FACS comprise of four departments, including investment information department, investment analysis department, investment service department, investment calculation department and project managing department. Internet site provides information such as investment environment, policy, investment orientation, capital introduction information and development zone information. Information center analyzes needed information, the make sifting to provide relatively concentrative and appropriate investment direction. On the basis of integration of analysis result of information center with client s requirements, investment calculation department does initial calculation and carries out feasibility analysis. Help clients with clear investment direction to finish procedures such as project application, registration, land approval, planning, environment protection and sanitation approval, etc, and provide APS service for client who needs it. Investment calculation department calculates expenditures for implementation of the project, including land fee, taxes, construction cost, regulation fee, equipment cost, 8

9 etc. Or it uses ASP to provide approximate calculation directly. On the basis of result of calculation department, project managing center carry out contracting, purchasing, and supervising of projects or equipments. It can tender on Internet. The operation model is shown in the figure below: Client Consulting Company Information analysis Investment analysis Investment service Website ASP Investment calculation Project managing Other consulting partners 8 Conclusion According to the analysis in this paper, Internet-based and project-oriented FACS has great market prospect and relatively feasibility. Nevertheless, Chinese e-commerce and consulting business are still situated in a irregular phase, so it need a great deal of market cultivation. Venture capitalists must make comprehensive risk analysis and take corresponding risk-avoiding measures. Reference 1 Bei Changhong, Wang Xiaojuan: The Trend of Foreign Investment in China and Investment Opportunities in China, Investment and Security, Vol Editors of Chinese and Foreign Management: The Consulting and Planning of Chinese Enterprises, Chinese and Foreign Management, Vol