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![]() E-commerce Overview Series: Plastics Industry and Plastics Processing Sector in CanadaPublication Date: February 2004 View and print this document in PDF format.
Description of the SectorThe plastics industry is comprised of four main sectors: 1) resin producers; 2) mould manufacturers; 3) machinery and equipment manufacturers; and, 4) plastic products manufacturers or plastics processors. This last sector is called the plastics processing sector. The plastics industry includes 4,056 firms of which 2% are machinery and equipment manufacturers, 14% are mould manufacturers, 6% are resin producers and 78% are plastic products manufacturers (Statistics Canada, 2000 and Industry Canada, 2000) (refer to Diagram 1). Firms in the plastics industry are located mainly in Ontario (50%) and Quebec (26%). Nearly 75% of this industry's firms are small- or medium-sized enterprises (SMEs) with 250 or fewer employees. Diagram 1
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Sector | Percentage of Firms with a Web Site | |||||
---|---|---|---|---|---|---|
Quebec | Ontario | Canada | ||||
2001 | 2002 | 2001 | 2002 | 2001 | 2002 | |
Machinery and Equipment Manufacturers | 83% | 100% | 74% | 76% | 78% | 78% |
Synthetic and Composite Resin Producers | 46% | 56% | 57% | 62% | 57% | 67% |
Plastic Products Manufacturers | 33% | 43% | 40% | 48% | 38% | 46% |
Mould Manufacturers | 21% | 24% | 30% | 37% | 28% | 34% |
Generally, Canadian SMEs in the plastics industry choose unsophisticated technological solutions. In most cases, they maintain informational Web sites and make use of e-mail. SMEs, especially those in the plastics processing sector, are less inclined to initiate significant changes to accommodate electronic business (e-business) in their operations. There are, however, a few firms in the plastics processing sector that do rely on more advanced technological solutions. Some of the more interesting technological solutions emerging as a result of initiatives led by private firms include procurement marketplaces for resins, export sales of plastic products in international markets, and product design and development activities using collaboration platforms. These are primarily American or European firms. Diagram 2 shows a few examples of firms or Web sites that stand out in the plastics industry. In Canada, plastics processing SMEs are found, for the most part, in quadrant one.
To fully understand Diagram 2, the reader should consult the document entitled "Electronic Business Models: A Conceptual Framework for Small- and Medium-sized Canadian Enterprises" at the following address: www.cefrio.qc.ca/english/pdf/Strategis%20_Eng.pdf. This document describes in detail the four main models illustrated in the above diagram.
SMEs looking to develop an e-business strategy should take into account the structural challenges facing the plastics processing sector, including: (1) reduction in procurement costs; (2) innovative products; (3) cost control through reduced cycle times and transaction costs; and, (4) the development of new markets.
SMEs estimate that conversion to e-business offers few advantages in the short term and presents significant investment risks. Moreover, data confidentiality and intellectual property concerns create a level of apprehension among certain firms. Considering that profit margins among SMEs are the lowest since 1980, these firms may not have the capital needed to convert to e-business.
ICT offer companies in the plastics processing sector opportunities to increase their bargaining power in their negotiations with resin producers and to join large networks of buyers as subcontractors. Portals might offer SMEs attractive opportunities to promote export cooperation among firms with a view to filling large orders or, again, to encourage bulk purchases of resin supplies and machinery.
SMEs have a poor understanding of the advantages e-business might bring them. E-business seems to enhance the power of suppliers, resin producers, as well as those customers that place large orders in the automotive and other industries. The latter are then in a position to exert significant pressure on prices and margins.
Canadian firms in the plastics processing sector making products with little value added find themselves increasingly threatened by manufacturers in countries such as China that are able to offer better prices. It therefore becomes imperative for Canadian firms to develop products with greater value added to counter the arrival of these new entrants. That said, the ability of a firm to offer such products depends on the speed with which it obtains information from its customers and suppliers and on its feedback from them. E-business might serve as a tool that offers this speed.
Scott's Business Directories – Quebec Manufacturers Directory, 2002
Scott's Business Directories – Quebec Industrial Directory, 2003
Statistics Canada, 2000, Canadian Business Patterns (Beyond 20/20)
www.cefrio.qc.ca/english/indexAccueil.cfm
http://strategis.gc.ca/plastics
http://strategis.gc.ca/ebizenable
http://sourcecan.com
This document has been prepared by CEFRIO, as part of the project "New E-business Models and SME Development", a project undertaken in cooperation with Industry Canada, the National Bank of Canada, TELUS, CANARIE and Canadian Heritage.
The research team included Mrs. Louise Côté and Mr. Michel Vézina from HEC Montréal, and Mr. Vincent Sabourin from the Université du Québec à Montréal.
For more information, please go to the CEFRIO Web site – the authority on information technology appropriation – at: www.cefrio.qc.ca/english/indexAccueil.cfm.
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Created: 2004-02-26 Updated: 2004-05-06 ![]() |
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