chapter copyright© 2007 thomson learning all rights reserved 10 multinational e-commerce:...

Chapter

Copyright© 2007 Thomson Learning All rights reserved

10Multinational E-Commerce:

Strategies and Structures

Copyright© 2007 South-Western/Thomson Learning All rights reserved

Learning Objectives

• Define the forms of e-commerce• Appreciate the growing presence of e-commerce in the

global economy• Understand the structure of the Internet economy• Identify the basic components of successful

e-commerce strategy

• Define the forms of e-commerce• Appreciate the growing presence of e-commerce in the

global economy• Understand the structure of the Internet economy• Identify the basic components of successful

e-commerce strategy


Learning Objectives

• Know the basic multinational e-commerce business models

• Identify the practicalities of running a multinational e-commerce business

• Understand the function of enablers in multinational e-commerce operations

• Know the basic multinational e-commerce business models

• Identify the practicalities of running a multinational e-commerce business

• Understand the function of enablers in multinational e-commerce operations


The Internet Economy

• Internet Economy• Growing faster than any other business trend in

history• Companies face issues similar to those faced by

traditional multinational companies

• Internet Economy• Growing faster than any other business trend in

history• Companies face issues similar to those faced by

traditional multinational companies


What Is E-Commerce?

• Refers to the selling of goods or services over the Internet

• Includes goods or services delivered offline- E.g., Amazon.com shipping book via UPS

• Also includes goods and services delivered online- E.g., downloaded computer software

• Refers to the selling of goods or services over the Internet

• Includes goods or services delivered offline- E.g., Amazon.com shipping book via UPS

• Also includes goods and services delivered online- E.g., downloaded computer software


Types of E-Commerce Transactions

• B2C: business-to-consumer transactions- Buying toys from eToys

• B2B: business-to-business transactions- Makes up 70 to 85% of current e-commerce

business• C2C: consumer-to consumer transactions

- Anyone selling online• C2B: consumer-to-business transactions

• B2C: business-to-consumer transactions- Buying toys from eToys

• B2B: business-to-business transactions- Makes up 70 to 85% of current e-commerce

business• C2C: consumer-to consumer transactions

- Anyone selling online• C2B: consumer-to-business transactions


Exhibit 10.1: E-Commerce Value Chain



• Two indicators of the global presence of e-commerce- Secure server: an Internet host that allows users to

send and receive encrypted data- Internet hosts: computers connected to the Internet

with their own IP addresses• OECD dominate the Internet with over 90% of Internet

hosts

• Two indicators of the global presence of e-commerce- Secure server: an Internet host that allows users to

send and receive encrypted data- Internet hosts: computers connected to the Internet

with their own IP addresses• OECD dominate the Internet with over 90% of Internet

hosts


Exhibit 10.2: Secure Servers and Internet Hosts in Selected OECD Countries



• In 1991, 3 million people used the Internet and almost none used it for e-commerce.

• The growth in the use of the Internet or the World Wide Web for e-commerce is so dramatic that its impact is difficult to estimate

• Some say that the Internet will have more impact on the world than the industrial revolution

• Offers tremendous opportunities for multinationals

• In 1991, 3 million people used the Internet and almost none used it for e-commerce.

• The growth in the use of the Internet or the World Wide Web for e-commerce is so dramatic that its impact is difficult to estimate

• Some say that the Internet will have more impact on the world than the industrial revolution

• Offers tremendous opportunities for multinationals


Exhibit 10.3: Percentage of Households with Internet Access


Exhibit 10.4: The Number of Broadband Subscribers over Time for a Number of Selected Countries



• Internet economy has four layers1. The infrastructure2. The applications infrastructure3. The Internet intermediaries4. The Internet commerce layer

• Internet economy has four layers1. The infrastructure2. The applications infrastructure3. The Internet intermediaries4. The Internet commerce layer


Layer 1

• The Internet infrastructure is the backbone of the Internet, including the Internet service providers (ISPs), e.g.,- Communications (Qwest, MCI, WorldCom)- Internet service providers (Mindspring, AOL,

Earthlink)- Networking (Cisco, Lucent, 3Com)- Hardware (Dell, Compaq, HP)

• The Internet infrastructure is the backbone of the Internet, including the Internet service providers (ISPs), e.g.,- Communications (Qwest, MCI, WorldCom)- Internet service providers (Mindspring, AOL,

Earthlink)- Networking (Cisco, Lucent, 3Com)- Hardware (Dell, Compaq, HP)


Layer 2

• The applications infrastructure- Companies and consultants that build web systems

and supporting software• Consultants (Scient)• Commerce applications (Netscape, Sun, IBM)• Web development software (Adobe, NetObjects)• Search engine software (Verity)• Web-enable databases (Oracle)

• The applications infrastructure- Companies and consultants that build web systems

and supporting software• Consultants (Scient)• Commerce applications (Netscape, Sun, IBM)• Web development software (Adobe, NetObjects)• Search engine software (Verity)• Web-enable databases (Oracle)


Layer 3

• The internet intermediaries- Companies that provides linking services on the

Internet and derive revenues from commissions, advertising, and membership fees• Online travel agencies (Travelweb,

Travelocity.com)• Online brokerages (E*TRADE)• Content aggregators (CNET, ZDNet)• Online advertising (Yahoo!)

• The internet intermediaries- Companies that provides linking services on the

Internet and derive revenues from commissions, advertising, and membership fees• Online travel agencies (Travelweb,

Travelocity.com)• Online brokerages (E*TRADE)• Content aggregators (CNET, ZDNet)• Online advertising (Yahoo!)


Layer 4

• The Internet commerce layer- Companies that conduct commercial transactions on

the Web• E-retailers (wine.com, diamond.com)• Manufacturers selling directly (hpshopping.com,

Dell)• Subscription-based companies (VRBO.com)• Transportation services (most airlines)• Shipping services (FedEx, UPS)

• The Internet commerce layer- Companies that conduct commercial transactions on

the Web• E-retailers (wine.com, diamond.com)• Manufacturers selling directly (hpshopping.com,

Dell)• Subscription-based companies (VRBO.com)• Transportation services (most airlines)• Shipping services (FedEx, UPS)


Fundamentals of E-Commerce

• E-commerce is evolving quickly.• Failures of many start-ups show it’s not without risks.• E-commerce presents significant opportunities and

threats.

• E-commerce is evolving quickly.• Failures of many start-ups show it’s not without risks.• E-commerce presents significant opportunities and

threats.


Exhibit 10.5: E-Commerce Business Models


Steps for Successful E-Commerce Strategy

• Leadership- Successful e-commerce is only possible through

dynamic and strong leadership.• Build on current business models and experiment with

new e-commerce models- Use e-commerce to search for ways to reduce costs

or enhance the business.

• Leadership- Successful e-commerce is only possible through

dynamic and strong leadership.• Build on current business models and experiment with

new e-commerce models- Use e-commerce to search for ways to reduce costs

or enhance the business.


Steps for Successful E-Commerce Strategy (cont.)

• Meet the challenge of developing an e-commerce organization- Entire firm (not only top management) must be

prepared to embrace the e-commerce model.• Allocate resources to the e-commerce business

- Commit financial, human, and technological resources to develop e-commerce capabilities

• Meet the challenge of developing an e-commerce organization- Entire firm (not only top management) must be

prepared to embrace the e-commerce model.• Allocate resources to the e-commerce business

- Commit financial, human, and technological resources to develop e-commerce capabilities



• Build a superior e-commerce infrastructure as a basis of a differentiation strategy- Provide superior online experiences

• Have an e-commerce strategy- Use strategic management to implement a strong

and adequate strategic e-commerce plan

• Build a superior e-commerce infrastructure as a basis of a differentiation strategy- Provide superior online experiences

• Have an e-commerce strategy- Use strategic management to implement a strong

and adequate strategic e-commerce plan



• Develop appropriate e-commerce systems- Work hard to remove traditional barriers to ensure

that there are increased coordination and information flows among the various functional areas

• Measure success- Have metrics in place to measure e-commerce

success

• Develop appropriate e-commerce systems- Work hard to remove traditional barriers to ensure

that there are increased coordination and information flows among the various functional areas

• Measure success- Have metrics in place to measure e-commerce

success


Exhibit 10.6: Summary of E-Commerce “don’ts” based on Best Practices


E-Commerce Structure: Integrated or Autonomous

• Company needs to decide how e-commerce fits into existing design

• Right mixture of bricks and clicks- How much to integrate Internet into traditional

businesses• Brick-and-mortar: traditional or non-virtual business

operation

• Company needs to decide how e-commerce fits into existing design

• Right mixture of bricks and clicks- How much to integrate Internet into traditional

businesses• Brick-and-mortar: traditional or non-virtual business

operation



• Degree of interaction between brick-and-mortar operations can occur anywhere in the value chain

• Can range from near seamless operations (e.g., Office Depot) to the mostly independent operations (e.g., Barnes & Noble and Barnesandnoble.com)

• Degree of interaction between brick-and-mortar operations can occur anywhere in the value chain

• Can range from near seamless operations (e.g., Office Depot) to the mostly independent operations (e.g., Barnes & Noble and Barnesandnoble.com)



• The independent benefits- Faster and more entrepreneurial- Freed from corporate bureaucracy

• The integrated benefits- Cross-promotion, shared information, increased

quantity purchases, use of same distribution channels

• The independent benefits- Faster and more entrepreneurial- Freed from corporate bureaucracy

• The integrated benefits- Cross-promotion, shared information, increased

quantity purchases, use of same distribution channels


Exhibit 10.7: Key Decisions in the Integration vs. Separation Decision



• Ways companies can integrate their online and offline operations- Keep customers informed- Integrate business operations- Share customer data across channels

• Ways companies can integrate their online and offline operations- Keep customers informed- Integrate business operations- Share customer data across channels


Additional Operational Challenges for an E-Commerce Business

• Finding partnerships and alliances with customers or third parties

• Attracting, retaining, and developing employees in the e-commerce unit

• Inadequate e-commerce training• E-commerce employee retention• Deciding what e-commerce functions to outsource

• Finding partnerships and alliances with customers or third parties

• Attracting, retaining, and developing employees in the e-commerce unit

• Inadequate e-commerce training• E-commerce employee retention• Deciding what e-commerce functions to outsource


Pure E-business Company Tasks to Face Challenges

• Develop information and management systems to respond to growth

• Maintain rapid decision making, creativity, innovation, and flexibility

• Build relationships with e-commerce support companies and customers

• Attract and retain e-commerce–capable talent• Develop an effective management team

• Develop information and management systems to respond to growth

• Maintain rapid decision making, creativity, innovation, and flexibility

• Build relationships with e-commerce support companies and customers

• Attract and retain e-commerce–capable talent• Develop an effective management team


Tasks for Traditional Companies with E-Commerce

• Build a common vision and commitment to e-commerce

• Change the organization structure for quick reconfiguration of assets and capabilities

• Change the organization culture to support e-commerce

• Attract and retain e-commerce-skilled employees• Alter HR programs to suit skill requirements of

e-commerce employees

• Build a common vision and commitment to e-commerce

• Change the organization structure for quick reconfiguration of assets and capabilities

• Change the organization culture to support e-commerce

• Attract and retain e-commerce-skilled employees• Alter HR programs to suit skill requirements of

e-commerce employees


Exhibit 10.8: Organizational Changes in Major Multinational Co. Building E-Commerce


E-Commerce Security

• E-Commerce security: refers to the degree to which customers feel that their private, personal information can be safeguarded in the hands of online companies collecting such information

• E-Commerce security: refers to the degree to which customers feel that their private, personal information can be safeguarded in the hands of online companies collecting such information


E-Commerce Security

• Companies need to be concerned about a number of information security issues such as- Confidentiality: making sure that private information is

protected- Availability: ensuring that information is accessible to

authorized users- Integrity: ensuring that the information collected is accurate

and reliable- Authentication: having systems in place to ensure that

persons using the systems are legitimate

• Companies need to be concerned about a number of information security issues such as- Confidentiality: making sure that private information is

protected- Availability: ensuring that information is accessible to

authorized users- Integrity: ensuring that the information collected is accurate

and reliable- Authentication: having systems in place to ensure that

persons using the systems are legitimate


E-Commerce Security

• To ensure that these Internet security issues are addressed, experts suggest the following- Use firewalls, intrusion detection software, and

antivirus shields- Encrypt data- Require two-phased authentication- Use web site monitoring tools- Abide by privacy rules

• To ensure that these Internet security issues are addressed, experts suggest the following- Use firewalls, intrusion detection software, and

antivirus shields- Encrypt data- Require two-phased authentication- Use web site monitoring tools- Abide by privacy rules


Globalizing Through the Internet

• Internet is enabling the emergence of a new form of multinational, the born-global firms

• Born-global firms are able to obtain a significant portion of their revenues from sales in international markets

• Born-global firms tend to adopt a global view of markets and develop competitive advantages to succeed in the various markets

• Internet is enabling the emergence of a new form of multinational, the born-global firms

• Born-global firms are able to obtain a significant portion of their revenues from sales in international markets

• Born-global firms tend to adopt a global view of markets and develop competitive advantages to succeed in the various markets


Globalizing Through the Internet

• A Web site gives the company immediate global access- The challenges of globalization faced by traditional

brick-and-mortar companies remain• Managers must still decide whether they want to sell

global or local product• Business issues related to national contexts (e.g.,

currencies, local laws, etc.) have to be handled

• A Web site gives the company immediate global access- The challenges of globalization faced by traditional

brick-and-mortar companies remain• Managers must still decide whether they want to sell

global or local product• Business issues related to national contexts (e.g.,

currencies, local laws, etc.) have to be handled


Multinational E-Commerce Strategy Formulation

• Depends on- Nature of the business- Types of products or services offered through

e-commerce• Hierarchy of difficulty depending on infrastructure

requirements- Telecommunications infrastructure to move

information- Payment infrastructure to move money- Physical infrastructure to deliver products

• Depends on- Nature of the business- Types of products or services offered through

e-commerce• Hierarchy of difficulty depending on infrastructure

requirements- Telecommunications infrastructure to move

information- Payment infrastructure to move money- Physical infrastructure to deliver products


Attractions of E-Commerce

• Cost reduction- Less expensive to reach international customers

• Technology- Already available

• Efficiencies- More efficient

• Cost reduction- Less expensive to reach international customers

• Technology- Already available

• Efficiencies- More efficient


Attractions of E-commerce(cont.)

• Convenience- Web is operating all the time regardless of location

• Speed of access- Company’s products or services can be accessed

immediately from anywhere in the world

• Convenience- Web is operating all the time regardless of location

• Speed of access- Company’s products or services can be accessed

immediately from anywhere in the world


E-Commerce Deterrents/Challenges

• Return/receipt burden and cost of delivery- Expect 30-40% return rate

• Costs of site construction, maintenance, upgrades• Channel conflicts• Easily copied models

- Competitors can easily see and copy business model

• Return/receipt burden and cost of delivery- Expect 30-40% return rate

• Costs of site construction, maintenance, upgrades• Channel conflicts• Easily copied models

- Competitors can easily see and copy business model


E-Commerce Deterrents

• Cultural differences- Web sites must be appropriate culturally

• Traditional cross-border complexities remain- Exchange rates, different taxes, and government

regulations• Standard or local web sites• Customer trust and satisfaction

• Cultural differences- Web sites must be appropriate culturally

• Traditional cross-border complexities remain- Exchange rates, different taxes, and government

regulations• Standard or local web sites• Customer trust and satisfaction


Picking a Market

• Two factors to target countries- Market inefficiencies

• E.g., formerly state-controlled economies- Attractive demographic characteristics

• Internet population of at least 5%• High literacy rate• Participation in at least on free trade agreements• Government with viable legal system

• Two factors to target countries- Market inefficiencies

• E.g., formerly state-controlled economies- Attractive demographic characteristics

• Internet population of at least 5%• High literacy rate• Participation in at least on free trade agreements• Government with viable legal system


Picking a Market (cont.)

• E-commerce potential is substantial in Latin America because of MERCOSUR

• Potential exists for Asian countries with membership in ASEAN

• Open borders and common currency of European Union is also fertile ground

• E-commerce potential is substantial in Latin America because of MERCOSUR

• Potential exists for Asian countries with membership in ASEAN

• Open borders and common currency of European Union is also fertile ground


Exhibit 10.9: E-Readiness of Selected Countries


Multinational E-Commerce Strategy Implementation

• Requires building an appropriate organization and developing the necessary technical capabilities to conduct electronic transactions

• Requires building an appropriate organization and developing the necessary technical capabilities to conduct electronic transactions


The Multinational E-Commerce Organization

• Three-tiered mixing of global and local functions• Headquarters

- Vision, strategy, leadership for worldwide electronic marketing

- Also provide shared services such as network infrastructure

• Three-tiered mixing of global and local functions• Headquarters

- Vision, strategy, leadership for worldwide electronic marketing

- Also provide shared services such as network infrastructure


The Multinational E-Commerce Organization (cont.)

• Shared functional services- Provide HRM, marketing, partner management to

regions• Local subsidiaries

- Deliver goods, manage functions better done locally such as the supply chain

• Shared functional services- Provide HRM, marketing, partner management to

regions• Local subsidiaries

- Deliver goods, manage functions better done locally such as the supply chain


Exhibit 10.10: Organizational Structures of the Multinational E-Corporation


Technical Capabilities for Multinational E-commerce

• Ability to process multiple currencies• Ability to calculate/show purchase information on

international shipping, duties, and local taxes such as VAT

• Systems that check compliance with local and international laws

• Ability to process multiple currencies• Ability to calculate/show purchase information on

international shipping, duties, and local taxes such as VAT

• Systems that check compliance with local and international laws


Technical Capabilities for Multinational E-commerce

• Ability to provide support in multilingual service centers• Fraud protection• Electronic payment models in addition to credit cards

• Ability to provide support in multilingual service centers• Fraud protection• Electronic payment models in addition to credit cards


Web Sites: To Localize or Standardize

• Standardized web site: companies’ web sites are fairly similar in layout and design around the world

• Localized web site: values, appeals, symbols, and even themes in the communication content is adapted to the local culture

• Standardized web site: companies’ web sites are fairly similar in layout and design around the world

• Localized web site: values, appeals, symbols, and even themes in the communication content is adapted to the local culture


Exhibit 10.11: High-Context and Low-Context Cultures and Two of Hoftsede’s Cultural Dimensions and Potential Influence on Web Design and Layout


“Mission-Critical” Factors to Communicate to Global Audience

1. Link all Web sites to corporate Web site2. Web site should contain all nonelectronic local contact

information for feedback or comment3. Provide a prominent list of languages used by the

company’s Web site4. Use different languages for downloads

1. Link all Web sites to corporate Web site2. Web site should contain all nonelectronic local contact

information for feedback or comment3. Provide a prominent list of languages used by the

company’s Web site4. Use different languages for downloads


“Mission-Critical” Factors to Communicate to Global Audience (cont.)

5. Localize by language the parts of the parent company Web site that receive the most access

6. Provide a site map7. Provide the firm’s privacy statement in all local

languages

5. Localize by language the parts of the parent company Web site that receive the most access

6. Provide a site map7. Provide the firm’s privacy statement in all local

languages


“Mission-Critical” Factors to Communicate to Global Audience (cont.)

8. Guard against local piracy by putting your policies in local languages

9. Localize your graphics and written material10.Localize content management

8. Guard against local piracy by putting your policies in local languages

9. Localize your graphics and written material10.Localize content management


Exhibit 10.12: Major Problems Identified in Web Site Globalization


To Build or Outsource Technical Capabilities?

• Two options- Run all e-commerce functions internally or outsource

to e-commerce enablers• E-commerce enablers: fulfillment specialists that

provide services such as Web site translation- Provide services and software that translate Web

sites, calculate shipping, value-added taxes, duties, and other charges unique to each country

• Two options- Run all e-commerce functions internally or outsource

to e-commerce enablers• E-commerce enablers: fulfillment specialists that

provide services such as Web site translation- Provide services and software that translate Web

sites, calculate shipping, value-added taxes, duties, and other charges unique to each country


Conclusion

• Internet and e-commerce becoming an increasingly important component of any multinational’s strategy

• Chapter introduced the basic concepts of e-commerce• Comparison of traditional vs. e-commerce companies

discussed• Many of the same challenges are faced• Chapter provides solid background on key

international e-commerce issues

• Internet and e-commerce becoming an increasingly important component of any multinational’s strategy

• Chapter introduced the basic concepts of e-commerce• Comparison of traditional vs. e-commerce companies

discussed• Many of the same challenges are faced• Chapter provides solid background on key

international e-commerce issues

chapter copyright© 2007 thomson learning all rights reserved 10 multinational e-commerce:...

Documents

business transactions

forms of ecommerce

business trend

business transactions

growing presence of

consumer transactions

ecommerce value chain

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