Karlskirche, Vienna
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 disadvantage of Austria in IT
Factor Endowments
The computer literacy of Austria 's population is too low. In the workplace, the acceptance of
computers has increased and office automation picked up. More employees are now exposed to IT. In education, however,
there is still a lack of integration of computers and technology in the classroom. Teachers also have to be educated
in the field so they are able to pass it on to the students. Only recently has the Ministry of Education made an effort to
promote further education for teachers and to cooperate with the industry to gain further acceptance in the classroom.
There needs to be more focus on the usage of information and communications technologies in (not exclusively higher) education.
The PTT has been overwhelmed with the pace of evolution of IT products and demand growth rates.
The problem of the monopoly is reinforced by the fact that public funds are limited since the government has run a budget deficit
for years. Deregulation is of critical importance because other providers (railroad, utilities, and foreign companies) will increase
the infrastructure to meet the demand of the next century.
Private sector R&D is very limited because of the Austrian firm structure. The SMEs do not have the funds
to conduct necessary research to come up with innovative products. The whole country basically relies on the government's
research facilities and programs which are endangered if the Maastricht criteria to join the European Monetary System are to be
met. Considerable amounts provided for the R&D programs may be cut.
Demand Conditions
The PTT's tariffs for usage of public networks are too high. It will take until 1998
when the telecommunication infrastructure and the wired telephony market are deregulated that prices
will substantially fall. The biggest cost factor is phone costs, especially outside of Vienna. The lease of the
network is sometimes 10 times the fees prevailing in the US which inhibits demand growth.
The awareness of information and telecommunication technology opportunities is too low.
The public sector can stimulate usage by using electronic services for public information since there are difficulties
to mobilize the content industry (information providers) to switch to electronic media and telecommunications.
Access to public information should be transparent and free of charges to the people and the businesses.
The bottleneck in information technology development comprises the supply and
demand of information based on telecommunications rather than the infrastructure and service supply.
The content industry is weakly organized and, thus, cannot participate in the decision making
process through effective lobbying (no internationally relevant media group).
An important content provider on the Internet will be the tourism and cultural sectors.
There are still too many technical and legal restrictions (transfer of data and encryption) in the Internet.
Thus, business conducted through the World Wide Web is not growing at a maximum rate.
Other Internet-related problems are that high band width is expensive, tariffs are high (service and phone costs), copyright laws,
security, and little knowledge about the Internet. Missing Internet connections or telecommunication infrastructure may lead to
macroeconomic losses. In the EU, a large amount of information is provided by global communication links. Austrian
companies which do not participate in the growing trend will be at a competitive disadvantage resulting from
a lack of information.
Spending on hardware and software has been lagging in Austria compared to other OECD countries.
Computing power is relatively low but the demand is increasing. Spending on IT is a mere 1% of GDP (USA: 2.8%)
Related and Supporting Industries
The Austrian software developers are too small in size to be internationally competitive. The R&D spending is very limited
compared to the international software giants. SMEs have to look for niche markets or regional consulting
opportunities to be successful.
The lack of internationally relevant related or supporting industries, such as hardware manufacturers,
international media, or conglomerates is a weakness not only in demand but also in supply.
Firm Strategy, Structure, and Rivalry
The country is dominated by a multitude of small and medium-sized businesses. There is rivalry among
the small Austrian providers but it does not stimulate international development. In order to become successful, small software
companies cooperate with the large international software giants.
The PTT as a provider of the infrastructure has still a monopoly. Once competition forces companies to
develop the infrastructure to meet market demands, rivalry will stimulate IT usage through lower prices and better services.
Conclusion
In order to foster further IT development and to jump onto the train the leads the global information society into the next decade, Austria will have to improve in certain areas. The government has recognized that a main factor will be further education in information technology in order to overcome computer illiteracy. Austria has a good record in education but computer sciences and information management needs to be an integral part - not only in higher education. Lower tariffs is an urgent need to increase demand for IT services. Deregulation should help to a certain degree. It is, however, problematic that the service and infrastructure providers that want to compete in IT have monopolies in their particular fields (railroad, utilities). The mobilization of the content industry (information providers) to switch to electronic media and telecommunications is an important task. Libraries, print media, and other sources of information must increasingly switch their usage to IT. The government can help by providing access to public information free of charges to the people and the businesses. If these hurdles will be overcome, the Austrian society will find itself in the era of information revolution by the beginning of the next century.
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