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292 Part 2 Strategy and applications

An example of objective setting within a particular company, then at a relatively early
stage of adoption, is provided by Case Study 5.2 and for different industries in Activity 5.2.

Case Study 5.2 Setting the Internet revenue contribution at Sandvik Steel

Sandvik Steel, a company selling into many international Choosing the right cutting tools and using them
markets provides a good illustration of how Internet effectively can save around 10 per cent of the total cost
revenue contribution can be used to set objectives for of manufactured components. The e-business strategy
different geographical markets. had to take account of this.
When dotcom mania was at its height, so-called old It also had to avoid channel conflict, the bypassing of
economy companies, such as Sweden’s Sandvik, its traditional sales outlets. Most Coromant tools are
tended to be overshadowed as the brash new online sold directly to customers, but 40 per cent goes through
stars took the limelight. resellers. Moreover, there are big regional variations;
But now that the collapse of internet and other tech- more than 80 per cent of sales in the Nordic region are
nology stocks has injected a harsh dose of reality into direct, while most North American sales are indirect.
the stock market and business scene, many established The company’s approach was to work with the tra-
names are back in favour again. ditional sales channels. ‘So many companies try to bypass
As the experience of Sandvik, founded in 1862, traditional channels and lose sales and relationships’, Mr
shows, skilful use of the internet can lead to huge Fredriksson says.
improvements in links with customers and suppliers, It is the relationship with the customer – including
bringing considerable cost savings. greater personalisation and an extended reach into
Based north of Stockholm in Sandviken, the global markets – which will be the most important pillar
company’s activities seem remote from the virtual world of its e-business strategy in the long term, he says.
of the internet. It makes cutting tools, specialty steels This is what provides real competitive advantage.
and mining and construction equipment. Shifting existing customers to the internet, winning new
However, the group is a long-time advocate of IT. Its ones and saving costs are also important. But other
annual IT budget is some SKr1bn. companies will be doing the same.
‘We first formulated our IT strategy in 1969’, says Clas At present, only a small part of Coromant’s orders are
Ake Hedstrom, the chief executive. ‘We didn’t foresee transacted over the web. Nordic countries are leading
the internet.’ Only recently, he adds, has IT moved from the way. Around 20 per cent of all orders from Denmark
serving the company to benefiting customers. are online and 31 per cent of those from Sweden.
Transferring its 30-year-old IT experience to the age The proportion in the US, however, is only 3 per cent,
of the web requires more than a deep understanding of since most business goes through distributors and is
technology, says Arnfinn Fredriksson, director of conducted by EDI (electronic data interchange), the pre-

internet business development at the group’s Coromant internet means of e-commerce.
tooling business. Over the next six months, the company hopes to
‘The major challenges are not IT and systems, but raise the US figure to 40 per cent. Mr Fredriksson hopes
“soft” things such as attitudes, insights and getting that in two years, between 40 and 50 per cent of total
people to understand and accept that this is part of their orders will come via the web.
daily work.’ This means focusing hard on business To enhance its online service to customers, Coromant
needs and cutting through the internet hype. plans to offer each one a personalised web page. This
Sandvik Steel, the specialty steel operation, also will enable the company to offer new products, materials
goes beyond transactions to find solutions for its and advice on productivity improvements. Training will
customers. Its extranet enables users to obtain world- also be part of this expanded web offering, which
wide stock information, catalogues and training aids, as Coromant aims to have in place later this year.
well as take part in online discussions. For both Coromant and Sandvik Steel, the value of the
At both Coromant and Sandvik Steel, e-business activ- web lies in strengthening and expanding relationships
ities are mainly directed towards enhancing links with with customers. In the case of Coromant, with some
customers. ‘Customer value comes when our product is 25,000 standard products, there are numerous customers
used, not when it is purchased’, Mr Fredriksson says. buying low volumes. With Sandvik Steel, however, a small
Thus, Coromant allows customers not only to buy number of customers buys a high volume of products.
tools over the web but also to design their own products ‘Our aim is to have 200 key customers using the
– within parameters set by Coromant – and receive extranet at the end of June’, says Annika Roos,
advice on how best to use them. marketing manager at Sandvik Steel. ‘By the end of