Multinational E-Commerce

Chapter 10
Multinational E-Commerce:
Strategies and Structures
Copyright 2007 Thomson Learning All rights reserved
Learning Objectives
Define
Define the
the forms
forms ofof e-commerce
e-commerce
Appreciate
Appreciate the
the growing
growing presence
presence ofof e-commerce
e-commerce inin the
the
global
global economy
economy
Understand
Understand the
the structure
structure ofof the
the Internet
Internet economy
economy
Identify
Identify the
the basic
basic components
components ofof successful
successful
e-commerce
e-commerce strategy
strategy
Copyright 2007 South-Western/Thomson Learning All rights reserved
Learning Objectives
Know
Know the
the basic
basic multinational
multinational e-commerce
e-commerce business
business
models
models
Identify
Identify the
the practicalities
practicalities ofof running
running aa multinational
multinational
e-commerce
e-commerce business
business
Understand
Understand the
the function
function ofof enablers
enablers inin multinational
multinational
e-commerce
e-commerce operations
operations
The Internet Economy

Internet
Internet Economy
Economy
Growing
Growing faster
faster than
than any
any other
other business
business trend
trend inin
history
history
Companies
Companies face
face issues
issues similar
similar toto those
those faced
faced by
by
traditional
traditional multinational
multinational companies
companies
What Is E-Commerce?
Refers
Refers toto the
the selling
selling ofof goods
goods or
or services
services over
over the
the
Internet
Internet
Includes
Includes goods
goods or
or services
services delivered
delivered offline
offline
-- E.g.,
E.g.,Amazon.com
Amazon.com shipping
shipping book
book via
via UPS
UPS
Also
Also includes
includes goods
goods and
and services
services delivered
delivered online
online
-- E.g.,
E.g., downloaded
downloaded computer
computer software
software
Types of E-Commerce
Transactions
B2C:
B2C: business-to-consumer
business-to-consumer transactions
transactions
-- Buying
Buying toys
toys from
from eToys
eToys
B2B:
B2B: business-to-business
business-to-business transactions
transactions
-- Makes
Makes up
up 70
70 toto 85%
85% ofof current
current e-commerce
e-commerce
business
business
C2C:
C2C: consumer-to
consumer-to consumer
consumer transactions
transactions
--Anyone
Anyone selling
selling online
online
C2B:
C2B: consumer-to-business
consumer-to-business transactions
transactions
Exhibit 10.1: E-Commerce

Value Chain

Two
Two indicators
indicators ofof the
the global
global presence
presence ofof e-commerce
e-commerce
-- Secure
Secure server:
server: an
an Internet
Internet host
host that
that allows
allows users
users toto
send
send and
and receive
receive encrypted
encrypted data
data
-- Internet
Internet hosts:
hosts: computers
computers connected
connected toto the
the Internet
Internet
with
with their
their own
own IP
IPaddresses
addresses
OECD
OECD dominate
dominate the
the Internet
Internet with
with over
over 90%
90% ofof Internet
Internet
hosts
hosts
Exhibit 10.2: Secure Servers

and Internet Hosts in Selected
OECD Countries

InIn 1991,
1991, 33 million
million people
people used
used the
the Internet
Internet and
and almost
almost
none
none used
used itit for
for e-commerce.
e-commerce.
The
The growth
growth inin the
the use
use ofof the
the Internet
Internet or
or the
the World
World Wide
Wide
Web
Web for
for e-commerce
e-commerce isis so
so dramatic
dramatic that
that its
its impact
impact isis
difficult
difficult toto estimate
estimate
Some
Some say
say that
that the
the Internet
Internet will
will have
have more
more impact
impact on
on
the
the world
world than
than the
the industrial
industrial revolution
revolution
Offers
Offers tremendous
tremendous opportunities
opportunities for
for multinationals
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
Internet economy
economy has
has four
four layers
layers
1.1. The
The infrastructure
infrastructure
2.2. The
The applications
applications infrastructure
infrastructure
3.3. The
The Internet
Internet intermediaries
intermediaries
4.4. The
The Internet
Internet commerce
commerce layer
layer
Layer 1
The
The Internet
Internet infrastructure
infrastructure isis the
the backbone
backbone ofof the
the
Internet,
Internet, including
including the
the Internet
Internet service
service providers
providers (ISPs),
(ISPs),
e.g.,
e.g.,
-- Communications
Communications (Qwest,
(Qwest, MCI,
MCI, WorldCom)
WorldCom)
-- Internet
Internet service
service providers
providers (Mindspring,
(Mindspring,AOL,
AOL,
Earthlink)
Earthlink)
-- Networking
Networking (Cisco,
(Cisco, Lucent,
Lucent, 3Com)
3Com)
-- Hardware
Hardware (Dell,
(Dell, Compaq,
Compaq, HP)
HP)
Layer 2
The
The applications
applications infrastructure
infrastructure
-- Companies
Companies and
and consultants
consultants that
that build
build web
web systems
systems
and
and supporting
supporting software
software
Consultants
Consultants (Scient)
(Scient)
Commerce
Commerce applications
applications (Netscape,
(Netscape, Sun,
Sun, IBM)
IBM)
Web
Web development
development software
software (Adobe,
(Adobe, NetObjects)
NetObjects)
Search
Search engine
engine software
software (Verity)
(Verity)
Web-enable
Web-enable databases
databases (Oracle)
(Oracle)
Layer 3
The
The internet
internet intermediaries
intermediaries
-- Companies
Companies that
that provides
provides linking
linking services
services on
on the
the
Internet
Internet and
and derive
derive revenues
revenues from
from commissions,
commissions,
advertising,
advertising, and
and membership
membership fees
fees
Online
Online travel
travel agencies
agencies (Travelweb,
(Travelweb,
Travelocity.com)
Travelocity.com)
Online
Online brokerages
brokerages (E*TRADE)
(E*TRADE)
Content
Content aggregators
aggregators (CNET,
(CNET, ZDNet)
ZDNet)
Online
Online advertising
advertising (Yahoo!)
(Yahoo!)
Layer 4
The
The Internet
Internet commerce
commerce layer
layer
-- Companies
Companies that
that conduct
conduct commercial
commercial transactions
transactions on
on
the
the Web
Web
E-retailers
E-retailers (wine.com,
(wine.com, diamond.com)
diamond.com)
Manufacturers
Manufacturers selling
selling directly
directly (hpshopping.com,
(hpshopping.com,
Dell)
Dell)
Subscription-based
Subscription-based companies
companies (VRBO.com)
(VRBO.com)
Transportation
Transportation services
services (most
(most airlines)
airlines)
Shipping
Shipping services
services (FedEx,
(FedEx, UPS)
UPS)
Fundamentals of E-Commerce
E-commerce
E-commerce isis evolving
evolving quickly.
quickly.
Failures
Failures ofof many
many start-ups
start-ups show
show its
its not
not without
without risks.
risks.
E-commerce
E-commerce presents
presents significant
significant opportunities
opportunities and
and
threats.
threats.
Exhibit 10.5: E-Commerce

Business Models
Steps for Successful

E-Commerce Strategy
Leadership
Leadership
-- Successful
Successful e-commerce
e-commerce isis only
only possible
possible through
through
dynamic
dynamic and
and strong
strong leadership.
leadership.
Build
Build on
on current
current business
business models
models and
and experiment
experiment with
with
new
new e-commerce
e-commerce models
models
-- Use
Use e-commerce
e-commerce toto search
search for
for ways
ways toto reduce
reduce costs
costs
or
or enhance
enhance the
the business.
business.

E-Commerce Strategy (cont.)
Meet
Meet the
the challenge
challenge ofof developing
developing an
an e-commerce
e-commerce
organization
organization
-- Entire
Entire firm
firm (not
(not only
only top
top management)
management) must
must be
be
prepared
prepared toto embrace
embrace the
the e-commerce
e-commerce model.
model.
Allocate
Allocate resources
resources toto the
the e-commerce
e-commerce business
business
-- Commit
Commit financial,
financial, human,
human, and
and technological
technological
resources
resources toto develop
develop e-commerce
e-commerce capabilities
capabilities

E-Commerce Strategy (cont.)
Build
Build aa superior
superior e-commerce
e-commerce infrastructure
infrastructure as
as aa basis
basis
ofof aa differentiation
differentiation strategy
strategy
-- Provide
Provide superior
superior online
online experiences
experiences
Have
Have an
an e-commerce
e-commerce strategy
strategy
-- Use
Use strategic
strategic management
management toto implement
implement aa strong
strong
and
and adequate
adequate strategic
strategic e-commerce
e-commerce plan
plan
Steps for Successful ECommerce Strategy (cont.)

Develop
Develop appropriate
appropriate e-commerce
e-commerce systems
systems
-- Work
Work hard
hard toto remove
remove traditional
traditional barriers
barriers toto ensure
ensure
that
that there
there are
are increased
increased coordination
coordination and
and
information
information flows
flows among
among the
the various
various functional
functional
areas
areas
Measure
Measure success
success
-- Have
Have metrics
metrics inin place
place toto measure
measure e-commerce
e-commerce
success
success
Exhibit 10.6: Summary of ECommerce donts based on

Best Practices
E-Commerce Structure:
Integrated or Autonomous
Company
Company needs
needs toto decide
decide how
how e-commerce
e-commerce fits
fits into
into
existing
existing design
design
Right
Right mixture
mixture ofof bricks
bricks and
and clicks
clicks
-- How
How much
much toto integrate
integrate Internet
Internet into
into traditional
traditional
businesses
businesses
Brick-and-mortar:
Brick-and-mortar: traditional
traditional or
or non-virtual
non-virtual business
business
operation
operation
Degree
Degree ofof interaction
interaction between
between brick-and-mortar
brick-and-mortar
operations
operations can
can occur
occur anywhere
anywhere inin the
the value
value chain
chain
Can
Can range
range from
from near
near seamless
seamless operations
operations (e.g.,
(e.g., Office
Office
Depot)
Depot) toto the
the mostly
mostly independent
independent operations
operations (e.g.,
(e.g.,
Barnes
Barnes && Noble
Noble and
and Barnesandnoble.com)
Barnesandnoble.com)
The
The independent
independent benefits
benefits
-- Faster
Faster and
and more
more entrepreneurial
entrepreneurial
-- Freed
Freed from
from corporate
corporate bureaucracy
bureaucracy
The
The integrated
integrated benefits
benefits
-- Cross-promotion,
Cross-promotion, shared
shared information,
information, increased
increased
quantity
quantity purchases,
purchases, use
use ofof same
same distribution
distribution
channels
channels
Exhibit 10.7: Key Decisions in

the Integration vs. Separation
Decision
Ways
Ways companies
companies can
can integrate
integrate their
their online
online and
and offline
offline
operations
operations
-- Keep
Keep customers
customers informed
informed
-- Integrate
Integrate business
business operations
operations
-- Share
Share customer
customer data
data across
across channels
channels
Additional Operational
Challenges for an E-Commerce
Business
Finding
Finding partnerships
partnerships and
and alliances
alliances with
with customers
customers or
or
third
third parties
parties
Attracting,
Attracting, retaining,
retaining, and
and developing
developing employees
employees inin the
the
e-commerce
e-commerce unit
unit
Inadequate
Inadequate e-commerce
e-commerce training
training
E-commerce
E-commerce employee
employee retention
retention
Deciding
Deciding what
what e-commerce
e-commerce functions
functions toto outsource
outsource
Pure E-business Company

Tasks to Face Challenges
Develop
Develop information
information and
and management
management systems
systems toto
respond
respond toto growth
growth
Maintain
Maintain rapid
rapid decision
decision making,
making, creativity,
creativity, innovation,
innovation,
and
and flexibility
flexibility
Build
Build relationships
relationships with
with e-commerce
e-commerce support
support
companies
companies and
and customers
customers
Attract
Attract and
and retain
retain e-commercecapable
e-commercecapable talent
talent
Develop
Develop an
an effective
effective management
management team
team
Tasks for Traditional

Companies with E-Commerce
Build
Build aa common
common vision
vision and
and commitment
commitment toto
e-commerce
e-commerce
Change
Change the
the organization
organization structure
structure for
for quick
quick
reconfiguration
reconfiguration ofof assets
assets and
and capabilities
capabilities
Change
Change the
the organization
organization culture
culture toto support
support
e-commerce
e-commerce
Attract
Attract and
and retain
retain e-commerce-skilled
e-commerce-skilled employees
employees
Alter
Alter HR
HR programs
programs toto suit
suit skill
skill requirements
requirements ofof
e-commerce
e-commerce employees
employees
Exhibit 10.8: Organizational Changes in

Major Multinational Co. Building
E-Commerce
E-Commerce Security
E-Commerce
E-Commerce security:
security: refers
refers toto the
the degree
degree toto which
which
customers
customers feel
feel that
that their
their private,
private, personal
personal information
information
can
can be
be safeguarded
safeguarded inin the
the hands
hands ofof online
online companies
companies
collecting
collecting such
such information
information
E-Commerce Security
Companies
Companiesneed
needtotobe
beconcerned
concernedabout
aboutaanumber
numberofof
information
informationsecurity
securityissues
issuessuch
suchas
as
--Confidentiality:
Confidentiality:making
makingsure
surethat
thatprivate
privateinformation
informationisis
protected
protected
--Availability:
Availability:ensuring
ensuringthat
thatinformation
informationisisaccessible
accessibletoto
authorized
authorizedusers
users
--Integrity:
Integrity:ensuring
ensuringthat
thatthe
theinformation
informationcollected
collectedisisaccurate
accurate
and
andreliable
reliable
--Authentication:
Authentication:having
havingsystems
systemsininplace
placetotoensure
ensurethat
that
persons
personsusing
usingthe
thesystems
systemsare
arelegitimate
legitimate
E-Commerce Security
To
To ensure
ensure that
that these
these Internet
Internet security
security issues
issues are
are
addressed,
addressed, experts
experts suggest
suggest the
the following
following
-- Use
Use firewalls,
firewalls, intrusion
intrusion detection
detection software,
software, and
and
antivirus
antivirus shields
shields
-- Encrypt
Encrypt data
data
-- Require
Require two-phased
two-phased authentication
authentication
-- Use
Use web
web site
site monitoring
monitoring tools
tools
--Abide
Abide by
by privacy
privacy rules
rules
Globalizing Through the

Internet
Internet
Internet isis enabling
enabling the
the emergence
emergence ofof aa new
new form
form ofof
multinational,
multinational, the
the born-global
born-global firms
firms
Born-global
Born-global firms
firms are
are able
able toto obtain
obtain aa significant
significant
portion
portion ofof their
their revenues
revenues from
from sales
sales inin international
international
markets
markets
Born-global
Born-global firms
firms tend
tend toto adopt
adopt aa global
global view
view ofof
markets
markets and
and develop
develop competitive
competitive advantages
advantages toto
succeed
succeed inin the
the various
various markets
markets
Globalizing Through the

Internet
AAWeb
Web site
site gives
gives the
the company
company immediate
immediate global
global
access
access
--The
The challenges
challenges ofof globalization
globalization faced
faced by
by traditional
traditional
brick-and-mortar
brick-and-mortar companies
companies remain
remain
Managers
Managers must
must still
still decide
decide whether
whether they
they want
want toto sell
sell
global
global or
or local
local product
product
Business
Business issues
issues related
related toto national
national contexts
contexts (e.g.,
(e.g.,
currencies,
currencies, local
local laws,
laws, etc.)
etc.) have
have toto be
be handled
handled
Multinational E-Commerce
Strategy Formulation
Depends
Depends on
on
-- Nature
Nature ofof the
the business
business
--Types
Types ofof products
products or
or services
services offered
offered through
through
e-commerce
e-commerce
Hierarchy
Hierarchy ofof difficulty
difficulty depending
depending on
on infrastructure
infrastructure
requirements
requirements
--Telecommunications
Telecommunications infrastructure
infrastructure toto move
move
information
information
-- Payment
Payment infrastructure
infrastructure toto move
move money
money
-- Physical
Physical infrastructure
infrastructure toto deliver
deliver products
products
Attractions of E-Commerce
Cost
Cost reduction
reduction
-- Less
Less expensive
expensive toto reach
reach international
international customers
customers
Technology
Technology
--Already
Already available
available
Efficiencies
Efficiencies
-- More
More efficient
efficient
Attractions of E-commerce
(cont.)
Convenience
Convenience
-- Web
Web isis operating
operating all
all the
the time
time regardless
regardless ofof location
location
Speed
Speed ofof access
access
-- Companys
Companys products
products or
or services
services can
can be
be accessed
accessed
immediately
immediately from
from anywhere
anywhere inin the
the world
world
E-Commerce
Deterrents/Challenges
Return/receipt
Return/receipt burden
burden and
and cost
cost ofof delivery
delivery
-- Expect
Expect 30-40%
30-40% return
return rate
rate
Costs
Costs ofof site
site construction,
construction, maintenance,
maintenance, upgrades
upgrades
Channel
Channel conflicts
conflicts
Easily
Easily copied
copied models
models
-- Competitors
Competitors can
can easily
easily see
see and
and copy
copy business
business
model
model
E-Commerce Deterrents
Cultural
Cultural differences
differences
-- Web
Web sites
sites must
must be
be appropriate
appropriate culturally
culturally
Traditional
Traditional cross-border
cross-border complexities
complexities remain
remain
-- Exchange
Exchange rates,
rates, different
different taxes,
taxes, and
and government
government
regulations
regulations
Standard
Standard or
or local
local web
web sites
sites
Customer
Customer trust
trust and
and satisfaction
satisfaction
Picking a Market
Two
Two factors
factors toto target
target countries
countries
-- Market
Market inefficiencies
inefficiencies
E.g.,
E.g., formerly
formerly state-controlled
state-controlled economies
economies
--Attractive
Attractive demographic
demographic characteristics
characteristics
Internet
Internet population
population ofof atat least
least 5%
5%
High
High literacy
literacy rate
rate
Participation
Participation inin atat least
least on
on free
free trade
trade agreements
agreements
Government
Government with
with viable
viable legal
legal system
system
Picking a Market (cont.)

E-commerce
E-commerce potential
potential isis substantial
substantial inin Latin
LatinAmerica
America
because
because ofof MERCOSUR
MERCOSUR
Potential
Potential exists
exists for
forAsian
Asian countries
countries with
with membership
membership inin
ASEAN
ASEAN
Open
Open borders
borders and
and common
common currency
currency ofof European
European
Union
Union isis also
also fertile
fertile ground
ground
Exhibit 10.9: E-Readiness of

Selected Countries
Multinational E-Commerce
Strategy Implementation
Requires
Requires building
building an
an appropriate
appropriate organization
organization and
and
developing
developing the
the necessary
necessary technical
technical capabilities
capabilities toto
conduct
conduct electronic
electronic transactions
transactions
The Multinational E-Commerce

Organization
Three-tiered
Three-tiered mixing
mixing ofof global
global and
and local
local functions
functions
Headquarters
Headquarters
-- Vision,
Vision, strategy,
strategy, leadership
leadership for
for worldwide
worldwide
electronic
electronic marketing
marketing
--Also
Also provide
provide shared
shared services
services such
such as
as network
network
infrastructure
infrastructure
The Multinational E-Commerce

Organization (cont.)
Shared
Shared functional
functional services
services
-- Provide
Provide HRM,
HRM, marketing,
marketing, partner
partner management
management toto
regions
regions
Local
Local subsidiaries
subsidiaries
-- Deliver
Deliver goods,
goods, manage
manage functions
functions better
better done
done locally
locally
such
such as
as the
the supply
supply chain
chain
Exhibit 10.10: Organizational

Structures of the Multinational
E-Corporation
Technical Capabilities for

Multinational E-commerce
Ability
Ability toto process
process multiple
multiple currencies
currencies
Ability
Ability toto calculate/show
calculate/show purchase
purchase information
information on
on
international
international shipping,
shipping, duties,
duties, and
and local
local taxes
taxes such
such as
as
VAT
VAT
Systems
Systems that
that check
check compliance
compliance with
with local
local and
and
international
international laws
laws
Technical Capabilities for

Multinational E-commerce
Ability
Ability toto provide
provide support
support inin multilingual
multilingual service
service centers
centers
Fraud
Fraud protection
protection
Electronic
Electronic payment
payment models
models inin addition
addition toto credit
credit cards
cards
Web Sites: To Localize or

Standardize
Standardized
Standardized web
web site:
site: companies
companiesweb
web sites
sites are
are fairly
fairly
similar
similar inin layout
layout and
and design
design around
around the
the world
world
Localized
Localized web
web site:
site: values,
values, appeals,
appeals, symbols,
symbols, and
and
even
even themes
themes inin the
the communication
communication content
content isis adapted
adapted
toto the
the local
local culture
culture
Exhibit 10.11: High-Context and Low-Context

Cultures and Two of Hoftsedes Cultural
Dimensions and Potential Influence on Web
Design and Layout
Mission-Critical Factors to
Communicate to Global
Audience
1.1.Link
Link all
all Web
Web sites
sites toto corporate
corporate Web
Web site
site
2.2.Web
Web site
site should
should contain
contain all
all nonelectronic
nonelectronic local
local contact
contact
information
information for
for feedback
feedback or
or comment
comment
3.3.Provide
Provide aa prominent
prominent list
list ofof languages
languages used
used by
by the
the
companys
companys Web
Web site
site
4.4.Use
Use different
different languages
languages for
for downloads
downloads
Audience (cont.)
5.5.Localize
Localize by
by language
language the
the parts
parts ofof the
the parent
parent company
company
Web
Web site
site that
that receive
receive the
the most
most access
access
6.6.Provide
Provide aa site
site map
map
7.7.Provide
Provide the
the firms
firms privacy
privacy statement
statement inin all
all local
local
languages
languages
Audience (cont.)
8.8.Guard
Guard against
against local
local piracy
piracy by
by putting
putting your
your policies
policies inin
local
local languages
languages
9.9.Localize
Localize your
your graphics
graphics and
and written
written material
material
10.Localize
10.Localize content
content management
management
Exhibit 10.12: Major Problems

Identified in Web Site
Globalization
To Build or Outsource
Technical Capabilities?
Two
Two options
options
-- Run
Run all
all e-commerce
e-commerce functions
functions internally
internally or
or outsource
outsource
toto e-commerce
e-commerce enablers
enablers
E-commerce
E-commerce enablers:
enablers: fulfillment
fulfillment specialists
specialists that
that
provide
provide services
services such
such as
as Web
Web site
site translation
translation
-- Provide
Provide services
services and
and software
software that
that translate
translate Web
Web
sites,
sites, calculate
calculate shipping,
shipping, value-added
value-added taxes,
taxes, duties,
duties,
and
and other
other charges
charges unique
unique toto each
each country
country
Conclusion
Internet
Internet and
and e-commerce
e-commerce becoming
becoming an
an increasingly
increasingly
important
important component
component ofof any
any multinationals
multinationals strategy
strategy
Chapter
Chapter introduced
introduced the
the basic
basic concepts
concepts ofof e-commerce
e-commerce
Comparison
Comparison ofof traditional
traditional vs.
vs. e-commerce
e-commerce companies
companies
discussed
discussed
Many
Many ofof the
the same
same challenges
challenges are
are faced
faced
Chapter
Chapter provides
provides solid
solid background
background on
on key
key international
international
e-commerce
e-commerce issues
issues

Multinational E-Commerce

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Chapter 10

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The Internet Economy

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Exhibit 10.1: E-Commerce

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The Internet Economy

Exhibit 10.2: Secure Servers

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The Internet Economy

Exhibit 10.3: Percentage of

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Exhibit 10.4: The Number of Broadband

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The Internet Economy

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Exhibit 10.5: E-Commerce

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Steps for Successful

Steps for Successful

Steps for Successful

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Steps for Successful ECommerce Strategy (cont.)

Exhibit 10.6: Summary of ECommerce donts based on

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Exhibit 10.7: Key Decisions in

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Pure E-business Company

Tasks for Traditional

Exhibit 10.8: Organizational Changes in

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Globalizing Through the

Globalizing Through the

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Picking a Market (cont.)

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Exhibit 10.9: E-Readiness of

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The Multinational E-Commerce

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The Multinational E-Commerce

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Exhibit 10.10: Organizational

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Technical Capabilities for

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Technical Capabilities for

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Web Sites: To Localize or

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Exhibit 10.11: High-Context and Low-Context

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