GLOBAL MARKETING AND INTERNET

1. GLOBAL MARKETING AND INTERNET CHAPTER OVERVIEW The Internet and the Global Marketplace Structural Barriers to Global E-Commerce Using the Internet for Understanding Global Buyers Competitive Advantage and Cyberspace Ramifications of the Internet for Global Marketing Strategies

2. Introduction • 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. • Until the early 1990s, the Internet was primarily the preserve of the military and academic researchers.

3. Introduction • 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. • This chapter looks at the impact of the World Wide Web (WWW) on global marketing activities.

4. 1. The Internet and the Global Marketplace • Internet usage worldwide is growing rapidly (see Exhibit 19-1). The internet population in China ranks second now. By 2010, analysts estimate it will equal the entire US population. • The worldwide internet population surpassed 1 billion in 2005- up from only 45 million 10 years ago and 420 million in 2000.

5. 1. The Internet and the Global Marketplace

6. 1. The Internet and the Global Marketplace • Asia-Pacific • Asia-Pacific region is quickly catching up. Most of the action in the region is business-to-business. • Internet penetration in Japan and South Korea is higher now than in the US. With high broadband penetration, online shopping is more attractive in South Korea than in the rest of the region. • In China, web surfers apparently have a positive attitude toward online shopping (see Global Perspective 19-1 for further information on China’s internet sector).

7. 1. The Internet and the Global Marketplace • Asia-Pacific (cont.) • Several obstacles hinder the spread of e-commerce in Asia which include: • prefer to do business face-to-face instead of via anonymous channels, relationships and networking, problems of secrecy and family-owned businesses, and knowledge barriers.

8. 1. The Internet and the Global Marketplace • 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. • Several challenges to e-commerce in Europe persist , including: government red tape and regulations, knowledge barriers, and reluctance to reveal credit cards numbers.

9. 1. The Internet and the Global Marketplace • Latin America • Net fever is also spreading in Latin America. • Brazil has been one of the strongest e-commerce markets in the region, although internet penetration is still fairly low. • Brazil also has the largest number of online retailers in the region. • E-commerce in Latin America is spurred by opportunities for transparency, cost-cutting, and supply chain productivity increases. • 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.

10. 2. Structural Barriers to GlobalE-Commerce • 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.

11. 2. Structural Barriers to GlobalE-Commerce • 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.

12. 2. Structural Barriers to GlobalE-Commerce • Infrastructure: • In many emerging market countries, e-readiness rank very low. E-readiness measures the extent of internet connectivity and infrastructure in the country (see Exhibit 19-2 and 19-2B). • 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.

13. 2. Structural Barriers to GlobalE-Commerce

14. 2. Structural Barriers to GlobalE-Commerce

15. 2. Structural Barriers to GlobalE-Commerce • Access Charges: • In numerous countries, high Internet access charges may deter users. • Rates vary a great deal across countries. • 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. • Fragmented government regulations and laws affect e-commerce. • Difference in value-added taxes, currencies, and culture may pose problems for the companies.

16. 3. Use of 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: • Online surveys • Bulletin boards and chat groups • Web visitor tracking • Virtual panels • Focus groups

17. 3. Use of the Internet for Understanding Global Buyers • Shortcomings of Online research: • Sample representativeness • Low Internet access • Incorrect or out-dated e-mail addresses • Problems with the Web sites • Integrity of the respondents • Problems in identity validation when the same e-mail address is used by multiple people

18. 4. Competitive Advantage and Cyberspace • 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 value of some of the pre-Internet sources of competitive advantage has been deflated.

19. 4. Competitive Advantage and Cyberspace • 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.

20. 4. Competitive Advantage and Cyberspace

21. 5. Global Internet Consumers • 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 or countries?

22. 6. Internet Ramifications for Global Marketing Strategies • Companies can use the web to contact internal users (staff, salespeople) or external users (customers, suppliers, distributors) around the globe. • Regardless of the target, the medium can be effectively used as a business model to generate revenues and/or cut costs (see Global Perspective 19-3).

23. 6. Internet Ramifications for Global Marketing Strategies • Globally Integrated Versus Locally Responsive Web Marketing Strategies (see Exhibit 19-4): • At the core of any global Web marketing strategy is the basic conflict between local responsiveness and global integration. • One-to-One Marketing • Product Policy • Global branding • Internet-based new product development (see Global Perspective 19-4)

24. 6. Internet Ramifications for Global Marketing Strategies

25. 6. Internet Ramifications for Global Marketing Strategies • Marketing of Services • Features of Services: • Intangibility • Simultaneity • Heterogeneity • Perishability • Global Pricing • Cost transparency

26. 6. Internet Ramifications for Global Marketing Strategies • Distribution • Role of Existing Channels • Replacement effect/complementary effect (see Exhibit 19-5) • E-Tailing Landscape • Click-and-retailing model • E-Tailing model depends on three factors: Consumer behavior, cost structure, and government policies

27. 6. Internet Ramifications for Global Marketing Strategies • Global Communication and the Web: • By 2009, JupiterResearch forecasts online advertising spending is expected to grow to $16.1 billion in the US and $3.9 billion in Europe. • Overall, in almost all countries internet advertising still is a tiny slice of the global advertising pie, even in the developed world (see Exhibit 19-6)

28. 6. Internet Ramifications for Global Marketing Strategies • Advantages of internet advertising: • Global reach • Lower cost • Allows precision • Interactivity • Ability to customize • Ability to instantly monitor

29. 6. Internet Ramifications for Global Marketing Strategies • Online advertising: Wide spectrum of techniques • Banner ads • Search engine advertising-keyword search or website context • Microsites • Audience measurement is still a major issue- metrics to monitor the effectiveness of an on-line campaign- number of views? click-through rates? cost per acquisition? cost per sale?

30. 6. Internet Ramifications for Global Marketing Strategies • 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.