e commerce & international business

8/12/2019 E Commerce & International Business

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14 June 2014

E-commerce and international business

Abstract

E-commerce means electronic commerce and pertains to trading in goods and

services through the electronic medium. E-commerce has transformed business, changing

the form of competition with internet, the computer communication network creating an

e-commerce market place for consumers and business (Hanifzade , 1385). With

expansion in the Internet and Web-based technologies, dissimilarity between traditional

markets and the global electronic marketplace-such as business capital size, among

others-are gradually being lessened. Electronic commerce has a great effect on the way

people live and the people should get familiar with the issues and problems related to it.

Electronic business for international trade created a kind of new market environment; the

customs business process and therefore had a great change. Electronic commerce today

plays a major role in the worlds economy.Nowadays Corporations pass through lots of

stages in order to become an international corporation or company and profit from its

advantages. Companies can defeat long-lasting limitations facing international commerce

by making use of the Internet .Companies must, first of all, equip themselves to this

powerful tool in the stages of globalization. By the manifestation of the Internet many

companies have attempted to reach themselves to international markets and gain the

advantages in this field.


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Introduction

International electronic commerce makes major changes in the way international

business management. The electronic commerce provides interactive network operation

mechanism, and creates more complete information of market environment for

international business. However, for many companies international e-commerce is still a

challenge (Huang R., 2012). One of the very crucial international business decisions

surrounding the global e-commerce is whether to use a standardized approach to

marketing and communications or a localized approach. On one hand, the debate on the

appropriateness of standardization versus localization in international marketing

continues to receive considerable attention among scholars and practitioners in the

international marketing realm.

Standardization & Localization

Standardization can also lead to the development of a single and unified brand

and corporate identity worldwide. This can lead to better global recognition and can

provide global competitive advantage (Ohmae, 1989). Standardization can lead to having

a rationalized product line which comprises only a few core global brands instead of

multiple localized brands and brand extensions in numerous countries. Hence, in the

context of ecommerce, the cost and effort of maintaining a single global web site can be

significantly less than maintaining several different multilingual sites due to lower

resource allocation and marketing requirements.

However, emerging research studies are showing that standardization strategies

do not really impact financial performance positively (ODonnell and Jeong 2000).

Furthermore, the complex nature of the international marketing environment promotes


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diversity in terms of the physical environment, the political and legal systems, cultures,

product usage environment and economic development. However, even when dealing

with industries or product categories which require no localization, there is a chance that

a certain element of the firms marketing mix may need adaptation.

On the other hand, Localization or Adaptation Strategy takes into account the

inhering diversity that exists in the international market arena and treats individuals as

cultural beings, whose values and behaviours are shaped by the unique culture in

which they live and grow (Hofstede, 1991). Localization strategy is geared toward

understanding local consumer preferences and institutional requirements and then

adapting the marketing mix to best satisfy consumer needs and wants. To tap into

international online markets, companies need to create localized global websites.

Appropriate localization can be a cost saving strategy for the multinational firm since the

cost of offending a group of consumer by insensitive standardization of the marketing

mix can be very expensive.

Hence, to better target their global audiences, many companies have proactively

adapted & localized their products and marketing mix. The Internet can dramatically

lower entry barriers for new competitors (McCarthy, 2004). Companies can enter into e-

commerce easily because they do not need sales forces and huge capital investments as

they do in traditional markets. The Internet also brings many more companies into

competition with one another by expanding geographic markets.

Strategy Building

From the angle of the industry management, international Ecommerce growth

needs more government coordination. First of all, the state legislature needs to revise the


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related laws according to the electronicsignature law as soon as possible. Worlds"the

electronic signature law "has been carried out for three years, but promotion was

extremely difficult. The electronic signature's come through is in business applications.

To suggest legislation departments assure the electronic signature and handwritten

signature having equal legal effect regulation according to Worlds the electronic

signature law,alter the associated law, make the specific clear recognition the about the

problem of electronic signature. Second, through the national ministry of industry and

information and national standardization committee doing injustice, One is tackling the

problem of department, enterprise's information sharing, the other is to resolve the

international e-commerce longitudinal and transverse integration of information

(Gleason, K. C. and J. Wiggenhorn, 2007). Ministry of industry & IT industry should

choose some pilot project, promote international trade and industry supply chain

information cohesion, and solve the integration of longitudinal information: choose

several areas as a pilot coordinate customs, commodity inspection, taxes, and other

departments, solve straight combination of information question.

Competitive Advantage

The Internet changes the basis of competition by radically altering product/service

offerings and the cost structure of firms. The Internet also changes the balance of power

in relationships with buyers and suppliers by increasing or decreasing the switching costs

of these buyers and suppliers. It also makes easy partnerships or strategic alliances by

networking partners or allies. On the Internet, consumers can easily collect information

about products or services without travelling to stores to inspect products and compare

prices. In the traditional market researching product offerings can be extremely expensive


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and time intense. As a result, consumers rely on product suppliers and retailers to aid

them in the search, and the suppliers and retailers take advantage of this situation by

charging higher prices. Since customers can easily compare prices and find close

substitutes, companies are affected to lower prices. Companies cannot attain competitive

advantage simply by exploiting consumers' search costs, as they did in the material

market (Bakos, 1998).

In industries or markets where the threat of new entrants, rivalry among existing

firms, and fear of substitutes are significant, only certain combinations of suitable

product, price, promotion, and place strategies can succeed in achieving a competitive

advantage. For example, Internet companies in commodity markets cannot rely on price

discrimination strategies because products are basically identical, and customers are able

to seek the lowest price for each product by comparing many opponents. In this situation,

companies must reduce costs in order to maintain market share and profits. On the other

hand, in industries or markets that are concentrated and have differentiated products,

threats of new entrants and/or product substitutions are relatively weak. An expansion

into related product lines can also be a good strategy. The expansion into related product

lines can exploit transfer of skills or sharing of activities such as promotion and

allocation, which will lead to competitive advantage.

To overcome threats, companies have to employ appropriate pricing strategies for

selling products over the Internet. Sellers can use a price discrimination strategy that

makes it difficult for buyers to compare the prices of alternative product offerings

(Bakos, 1998). By collecting information about buyers, companies can perform more

efficient price discrimination. Smart pricing refers to the practice of charging various


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prices from market to market, depending on market situation and differences in how

customers value the product. Bundling can also be thought of as a type of price

discrimination since it reduces the heterogeneity of choices facing consumers and thus

their willingness to pay for individual items. In bundling, a single price is applied to a

bundle. Companies can also protect profits by achieving cost leadership in a particular

market or industry. As competition intensifies, companies may have to lower their

production costs to protect profits. Or companies may have to improve their product or

service offerings with added values. Even in rigorous price competition, improved

products or services will raise customers' switching costs and still command higher

margins.

A revenue-sharing marketing strategy is an affiliated marketing program with

partners based on commissions. However, traditional marketing mechanisms such as

television commercials are still important in that they can attract off-line customers. For

most companies, place refers to the supply chain. The place aspects of the marketing mix

are closely related to the distribution and delivery of products or services. The Internet

and its associated application software have significantly changed the way companies

products or services are delivered by reducing transaction and distribution costs

(Hoffman and Novak, 2000). The Internet allows companies to jump over parts of the

traditional supply channel. Instead they contract with third-party providers such as FedEx

and UPS, which provide fast, efficient delivery because they have superior logistical

expertise and economies of scale in distribution.


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Cultural Issues

All social behaviour has taken shape around a particular issue and is deeply

related to the values and beliefs. This means that wasteful management of cultural

differences might cause high risks. Ignore and misconduct of these differences may mean

inability in preserving and interesting employees, incorrect interpretation of the capability

to unite international borders, inevitable mistakes in marketing, and failure in creating

everlasting sources of competitive advantage (Hooklin , 1998). One of the major

problems which appear in the cultural aspect of electronic commerce is the

advertisements on different websites which are against human esteem and human values.

Such advertisements affect the human spirit gradually and subconsciously. This issue

makes the person become indifferent to the human values little by little. One of the other

cultural problems in the websites is cultural perspectives regarding time. Individuals need

to work cooperatively with a group of their colleagues. Working with a team through a

telephone line and an electronic network will not be as effective as face to face

conversations.

Understanding cultures, cultural values and cultural differences of the people with

whom we interact brings about different negotiations in a particular situation and

management of cultural differences paves the way towards having a successful

international trade (pahlavan ,1382). The establishment of electronic commerce needs

creating a cultural basis in order to familiarize people with this kind of trade. The world

is changing faster than we are able to calculate and in order to face global competitions,

we should have a comprehensive understanding of the way cultural variables influence

trade. Electronic commerce, especially doing business on the Internet has brought about


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significant changes in competitive conditions. It has also been able to create new job

opportunities to replace the old ones in different fields. Moreover, electronic commerce is

a new method to carry out business affairs through which businesspeople offer their

products completely too all the buyers in the world. Anyway, the future belongs to the

one who thinks about it. In this many buyers and sellers can come together in one trading

community and gets idea of whether to bur y or sell.Many-to-many e-markets will be

supported by complementary business functions.

The information network transaction platform becomes the largest middlemen;

challenges the traditional way which international trade import and export business are as

a national commodity business between the media. We have tried to highlight the recent

advances in global-ecommerce in both research and practice. It is apparent that

globalization has now percolated through every industry and the global business

environment is shaped by global factors. But as technology is evolving there are means of

tracking web site traffic, web usage behaviour and other web metrics to measure the

impact of localizing websites for international markets. Web localization and cultural

customization of websites is not only desired but should be an important part of

companies global strategy, as global online consumers prefer local content that is adapted

to their unique language and cultural preferences. It is extremely difficult to value

Internet companies because most of them have few assets and make little profit.

Conclusion

Internet companies do not have business strategies that provide a clear path to

increased profit. The possible questions to be raised are: When traditional companies

enter into e-commerce, what strategies should they implement? How much integration


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should take place when traditional and online businesses merge? For traditional firms,

one of the most serious challenges to going online is deciding how much to integrate their

traditional operations with online business. Other challenges to integration include price

competition and avoiding the problem of online and offline businesses cannibalizing each

others customers. Facedwith these challenges, traditional companies need to develop

unique business strategies in order to compete against Internet companies. In any case,

corporate managers who best understand the impact of the Internet and e-commerce on

marketing mix and competitive forces will be best prepared to meet the challenges of the

e-business marketplace.


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