The Alps
The Competitive Advantage of Nations
In 1990, Michael. E. Porter of Harvard Business School published the results of an extensive research effort that attempted to determine the competitive advantage of nations. The analysis is based on Porter's Diamond Framework which includes Factor Endowments (communications infrastructure, skilled labor, research facilities, technological know-how), Demand Conditions (nation's firms gain competitive advantage when domestic customers are sophisticated and demanding), Related and Supporting Industries, (the presence of suppliers or related industries that are internationally competitive), and Firm Strategy, Structure, and Rivalry (success depends on management ideology and domestic rivalry).
Competitive advantage of Austria in IT
Factor Endowments
The essential technologies for a variety of applications in the advanced telecommunications sector is available.
Most states focus on the Information highway infrastructure to make the location more attractive for FDI. Austria ranks 12th in
worldwide telecommunications development but it usually trails the United States, Japan, the Scandinavian countries, Switzerland
and Germany in the statistics. The main cities are connected with an ATM-network and latest technology is used.
Austria's workforce is skilled and disciplined. This has attracted many FDI despite high labor costs.
The educational level and productivity rates rank among the top 10 countries in the world. The number of programs
containing higher education in computer sciences is increasing.
The continuous effort by the government to improve the information technology infrastructure
and to increase usage has been a major driver of IT development. Both, the Austrian National Host and the
Austrian Telekom Initiative have brought the public and private sector together to brainstorm about the future.
These projects are important to keep Austria at the top level of developed nations.
Forschung Austria is an important R&D park that provides technological know-how in order
to make Austria's small and medium size enterprises internationally competitive. Austria's firm structure does not create
enough domestic rivalry and the SMEs do not have enough funds to conduct basic R&D.
The academic environment uses a very sophisticated network (ACOnet) and is connected to European institutions as well as Eastern European
countries (the number is growing). The sharing of resources in the EU and the initiatives by the EU Commission also comprise
an important variable in IT development.
Demand Conditions
The Austrian population is educated and affluent. It can be expected that once usage is stimulated,
demand will increase and create more opportunities and competition for the firms. The demand for cellular phones
and PCs as well as notebook computers has been high which is an indicator of increased acceptance of IT by the
Austrian consumer.
The point of no return for privatization has been reached. Many organization are eager to enter the
market and offer their services. Although the structure of the market is still unclear, a decrease in prices is anticipated.
Since high tariffs have been a major detriment to IT usage, deregulation will have a positive effect on demand. It will not happen
until 1998, but shock treatment has not proven to be the best solution anyway. While the PTT is trying to lose fat, the prospective
market entrants are gearing up their efforts to form powerful alliances.
Although 50% of the users are still in academics, Austrian commercial users increasingly provide information
on the Internet. The number of Internet users per 1000 people is higher than in Germany. It continues to grow but high
phone tariffs keep the growth rate down. Online services play a limited role in the business. The PTT took too long until it
provided Internet access. Most users subscribe to direct Internet providers.
The software piracy in Austria ins very low compared to other countries. Hence, the developers should
be able to get a fair return on their investment and will suffer less from illegal copies.
Related and Supporting Industries
There is a considerable number of association that help to promote the industry. They have influence in the
political arena and represent the small and medium-sized enterprises more effectively. The associations provide a network
for cooperation that increases awareness of the industry and stimulates development.
Firm Strategy, Structure, and Rivalry
Austriaís small and medium-sized companies will benefit from the telecommunication industry
which allows them to appear in the same way as large companies on the Internet. Typically, those companies have less than 10 employees and only recently started to use the Internet
for their business. The Internet allows small companies to reduce their marketing, PR and administrative costs.
Membership of the European Union will increase competition,
tear down monopolies, and offer domestic producers larger export opportunities.
Hence, a change in structure and rivalry is expected in the long term.
A few Austrian software companies have found a niche market to become internationally competitive.
Most entrepreneurs team up with the large international companies to use their global distribution channels. This is, however,
a very important signal to the Austrian competitors and an incentive to develop new products. It shows that small companies
or even individuals can become internationally successful despite the small firm structure.
Conclusion
Austria's high ranking in IT development is due to the infrastructure provided by the PTT as well as the scientific research funded by the government and the academia that provides the technical know-how. In Europe, only the Scandinavian countries and Germany show faster IT development. The government's increased effort to stimulate demand and usage have resulted in pilot projects based on the Austrian Telekom Initiative. The initiative looks at Finland and how it is integrating its IT infrastructure into the EU while maintaining a national profile. This is especially important for Austria because of its unique firm structure. Privatization will lead to a stimulus of IT usage, increased demand, and a faster development of broad-band networks and high speed lines. All these factors are necessary for Austria to sustain its position within the international community. Although it cannot be expected that Austria's firm structure will change, the companies will have a good competitive position for international trade, especially within the European Union.
Previous chapter: Legal Environment
Return to Main Menu
Next chapter: IT Weaknesses