Chapter 19Kotabe & Helsen's Global Marketing Management, Third Edition, Global Marketing Management Masaaki Kotabe & Kristiaan Helsen Third Edition John Wiley & Sons, Inc., 2004

Chapter 19Kotabe & Helsen's Global Marketing Management, Third Edition, Chapter 19 Global Marketing and the Internet

Chapter 19Kotabe & Helsen's Global Marketing Management, Third Edition, Chapter Overview 1. The Internet and the Global Marketplace 2. Structural Barriers to Global E-Commerce 3. Using the Internet for Understanding Global Buyers 4. Competitive Advantage and Cyberspace 5. Global Internet Consumers 6. Ramifications of the Internet for Global Marketing Strategies

Chapter 19Kotabe & Helsen's Global Marketing Management, Third Edition, Introduction The Internet has revolutionized the international business arena and global marketing in particular. The Internet has revolutionized the international business arena and global marketing in particular. Roughly speaking, the Internet is a network of computers interconnected throughout the world operating on a standard protocol that allows data to be transmitted. Roughly speaking, the Internet is a network of computers interconnected throughout the world operating on a standard protocol that allows data to be transmitted. Until the early 1990s, the Internet was primarily the preserve of the military and academic researchers. Until the early 1990s, the Internet was primarily the preserve of the military and academic researchers.

Chapter 19Kotabe & Helsen's Global Marketing Management, Third Edition, Introduction (contd.) The Web clearly provides a unique distribution and communication channel to marketers across the globe. The Web clearly provides a unique distribution and communication channel to marketers across the globe. The development of new software and other technologies during the early 1990s turned the Internet into a commercial medium that has transformed businesses worldwide. The development of new software and other technologies during the early 1990s turned the Internet into a commercial medium that has transformed businesses worldwide. This chapter looks at the impact of the World Wide Web (WWW) on global marketing activities. This chapter looks at the impact of the World Wide Web (WWW) on global marketing activities.

Chapter 19Kotabe & Helsen's Global Marketing Management, Third Edition, The Internet and the Global Marketplace Internet usage worldwide is growing rapidly (see Exhibit 19-1A & 19-1B). Internet usage worldwide is growing rapidly (see Exhibit 19-1A & 19-1B). The global e-commerce market is expected to grow to $3.2 trillion in The global e-commerce market is expected to grow to $3.2 trillion in Asia-Pacific Asia-Pacific –Asia-Pacific region is quickly catching up in the Internet. –Most of the action in the region is business-to- business.

Chapter 19Kotabe & Helsen's Global Marketing Management, Third Edition, The Internet and the Global Marketplace (contd.) –Online e-commerce revenues are expected to grow from $76 billion in 2001 to $338.5 billion by the end of –To boost e-commerce and Internet-related activities, Hong Kong has planned a Cyberport and Singapore a wired Island. –Several obstacles hinder the spread of e- commerce in Asia which include: face-to-face business instead of via anonymous channels,

Chapter 19Kotabe & Helsen's Global Marketing Management, Third Edition, The Internet and the Global Marketplace (contd.) relationships and networking, problems of secrecy and family-owned businesses, and knowledge barriers. relationships and networking, problems of secrecy and family-owned businesses, and knowledge barriers. Europe Europe –Consumer spending on e-commerce in Europe is growing at a very fast pace. –Small and medium-sized European companies are finding the Internet a cheap way to broaden their geographic scope.

Chapter 19Kotabe & Helsen's Global Marketing Management, Third Edition, The Internet and the Global Marketplace (contd.) –Several challenges to e-commerce in Europe persist, including: government red tape and regulations, knowledge barriers, and reluctance to reveal credit cards numbers. Latin America Latin America –Net fever is also spreading in Latin America. –Latin America’s B2B market is expected to be worth $9.3 billion by 2005.

Chapter 19Kotabe & Helsen's Global Marketing Management, Third Edition, The Internet and the Global Marketplace (contd.) –Like other regions, e-commerce faces a number of obstacles which include: high cost of Internet access, customs regulations and import duties, and consumers’ reluctance to release their credit card numbers.

Chapter 19Kotabe & Helsen's Global Marketing Management, Third Edition, Structural Barriers to Global E-Commerce Language Barriers: Language Barriers: –Much of the content on the Web is in the English language. –A recent study found that business users on the Web are three times more likely to purchase when the Web site “speaks” their language. –The demand for Web site localization services has boosted a new Web-oriented translation industry.

Chapter 19Kotabe & Helsen's Global Marketing Management, Third Edition, Structural Barriers to Global E-Commerce (contd.) Cultural Barriers: Cultural Barriers: –Cultural norms and traditions can hinder the spread of the Internet. –In Confucian-based cultures like most East Asian nations, business is conducted on a personal basis. –In many countries, credit card penetration is low. –To become familiar with local markets as well as local cultures is not possible through the Internet.

Chapter 19Kotabe & Helsen's Global Marketing Management, Third Edition, Structural Barriers to Global E-Commerce (contd.) Infrastructure: Infrastructure: –In many emerging markets, ownership of personal computers is still very low. –Slow Internet access remains a major problem in many countries. Knowledge Barriers: Knowledge Barriers: –Setting up an e-business requires certain knowledge and skills. –In emerging markets, scarcity of proper talent and skills will restrain the development of a digital economy.

Chapter 19Kotabe & Helsen's Global Marketing Management, Third Edition, Structural Barriers to Global E-Commerce (contd.) Access Charges: Access Charges: –In numerous countries, high Internet access charges may deter users. –Rates vary a great deal across countries. Legal Constraints and Government Regulations: Legal Constraints and Government Regulations: –Red tape and government regulations stall e- commerce in dozens of countries. –E-commerce is global but the laws are mostly local.

Chapter 19Kotabe & Helsen's Global Marketing Management, Third Edition, Structural Barriers to Global E-Commerce (contd.) –Fragmented government regulations and laws affect e-commerce. –Difference in value-added taxes, currencies, and culture may pose problems for the companies.

Chapter 19Kotabe & Helsen's Global Marketing Management, Third Edition, Using the Internet for Understanding Global Buyers In terms of primary research, the possibilities created by the Internet are stunning. There are many measurement tools available which include: In terms of primary research, the possibilities created by the Internet are stunning. There are many measurement tools available which include: –Online surveys –Bulletin boards and chat groups –Web visitor tracking –Virtual panels –Focus groups

Chapter 19Kotabe & Helsen's Global Marketing Management, Third Edition, Using the Internet for Understanding Global Buyers (contd.) Shortcomings of Online research: Shortcomings of Online research: –Sample representativeness –Low Internet access –Incorrect or out-dated addresses –Problems with the Web sites –Integrity of the respondents –Problems in identity validation when the same address is used by multiple people

Chapter 19Kotabe & Helsen's Global Marketing Management, Third Edition, Competitive Advantage and Cyberspace The Internet offers two major benefits to companies that use the tool as a gateway to global marketing: The Internet offers two major benefits to companies that use the tool as a gateway to global marketing: 1. Cost/efficiency savings 2. Accessibility (connectivity) The Internet also offers access to customers around the world. The Internet also offers access to customers around the world. The value of some of the pre-Internet sources of competitive advantage has been deflated. The value of some of the pre-Internet sources of competitive advantage has been deflated.

Chapter 19Kotabe & Helsen's Global Marketing Management, Third Edition, Competitive Advantage and Cyberspace (contd.) Some observers have argued that one of the major consequences of the Internet is that small and large firms are on an equal footings now as far as global competition is concerned. Some observers have argued that one of the major consequences of the Internet is that small and large firms are on an equal footings now as far as global competition is concerned. Although size-related advantages will probably lessen, claims that the Internet provides a level playing field to small and large global players alike are somewhat overblown. Although size-related advantages will probably lessen, claims that the Internet provides a level playing field to small and large global players alike are somewhat overblown.

Chapter 19Kotabe & Helsen's Global Marketing Management, Third Edition, Global Internet Consumers The following are some of the emerging issues and questions facing global marketers: The following are some of the emerging issues and questions facing global marketers: –To what extent do online customers differ from offline ones? –To what degree do Internet buyers differ across cultures?

Chapter 19Kotabe & Helsen's Global Marketing Management, Third Edition, Ramifications of the Internet for Global Marketing Strategies Globally Integrated Versus Locally Responsive Web Marketing Strategies (see Exhibit 19-3): Globally Integrated Versus Locally Responsive Web Marketing Strategies (see Exhibit 19-3): –At the core of any global Web marketing strategy is the basic conflict between local responsiveness and global integration. One-to-One Marketing One-to-One Marketing Product Policy Product Policy –Global branding »Internet-based new products

Chapter 19Kotabe & Helsen's Global Marketing Management, Third Edition, Ramifications of the Internet for Global Marketing Strategies (contd.) Marketing of Services Marketing of Services –Features of Services: »Intangibility »Simultaneity »Heterogeneity »Perishability Global Pricing Global Pricing –Cost transparency

Chapter 19Kotabe & Helsen's Global Marketing Management, Third Edition, Ramifications of the Internet for Global Marketing Strategies (contd.) Distribution Distribution –Role of Existing Channels »Replacement effect/complementary effect (see Exhibit 19-4) –E-Tailing Landscape »Click-and-retailing model E-Tailing model depends on three factors: Consumer behavior, cost structure, and government policies E-Tailing model depends on three factors: Consumer behavior, cost structure, and government policies

Chapter 19Kotabe & Helsen's Global Marketing Management, Third Edition, Ramifications of the Internet for Global Marketing Strategies (contd.) Global Communication and the Web: Global Communication and the Web: –According to Forrester Research, worldwide advertising on the Internet is expected to grow to $29 billion by –Online advertising techniques include the following (see Global Perspective 19-4): »Banners »Permanent buttons

Chapter 19Kotabe & Helsen's Global Marketing Management, Third Edition, Ramifications of the Internet for Global Marketing Strategies (contd.) »Affiliate programs »Sponsorships » ing lists »Rich-media expanding banners »Interstitials »Superstitials

Chapter 19Kotabe & Helsen's Global Marketing Management, Third Edition, Ramifications of the Internet for Global Marketing Strategies (contd.) –The ultimate success of an online campaign depends on the following four factors: »The nature of the product »The targeting »Choice of site »Execution of the ad –Direct E-Marketing: More and more global companies recognize the promise of the Web as a direct marketing tool to build ties with customers worldwide.

Chapter 19Kotabe & Helsen's Global Marketing Management, Third Edition, Copyright © John Wiley & Sons, Inc., 2004