Cross cultural management 3e by cullen ch09

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 th

Chapter 9

Multinational E-Commerce:

Strategies and Structures

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

• Understand the attractions of and deterrents to building

a multinational e-commerce business

• Know the basic multinational e-commerce business

• Understand the attractions of and deterrents to building

a multinational e-commerce business

• Know the basic multinational e-commerce business

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

• C2C: consumer-to consumer transactions

• Anyone selling online

• C2C: consumer-to consumer transactions

• Anyone selling online

• C2B: consumer-to-business transactions

Exhibit 9.1: E-Commerce

Value Chain

The Internet Economy

• 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 9.2: Secure Servers

and Internet Hosts in Selected

OECD Countries

The Internet Economy

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

• Between 2001 and 2002, U.S consumers spent over

$1.3 billion on e-commerce, increase of over 90%

• Recent estimates suggest growth around the world

• Offers tremendous opportunities for multinationals

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

• Between 2001 and 2002, U.S consumers spent over

$1.3 billion on e-commerce, increase of over 90%

• Recent estimates suggest growth around the world

• Offers tremendous opportunities for multinationals

Exhibit 9.3: Internet Users

around the World

The Internet Economy

• Internet economy has four layers

• The infrastructure

• The applications infrastructure

• The Internet intermediaries

• The Internet commerce layer

• Internet economy has four layers

• The infrastructure

• The applications infrastructure

• The Internet intermediaries

• The Internet commerce layer

Layer 1

• The Internet infrastructure is the backbone of the

Internet, including the Internet service providers, 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, 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 (SB1)

• 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 (SB1)

• 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)

Exhibit 9.4: Internet Businesses

Ranked on Business Week’s

Information Technology 100

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 9.5: Summary of

Threats and Opportunities

Five Steps for Successful E-Commerce Strategy

1 Build on current business models and experiment with new e-commerce models

1.Use e-commerce to search for ways to reduce costs

or enhance the business

2 Meet the challenge of developing an e-commerce

organization

1.Entire firm (not only top management) must be

prepared to embrace the e-commerce model

1 Build on current business models and experiment with new e-commerce models

1.Use e-commerce to search for ways to reduce costs

or enhance the business

2 Meet the challenge of developing an e-commerce

organization

1.Entire firm (not only top management) must be

prepared to embrace the e-commerce model

Steps for Successful E-Commerce Strategy (cont.)

3 Allocate resources to the e-commerce business

3.Commit financial, human, and technological

resources to develop e-commerce capabilities

4 Build a superior e-commerce infrastructure as a basis

of a differentiation strategy

3.Provide superior online experiences

3 Allocate resources to the e-commerce business

3.Commit financial, human, and technological

resources to develop e-commerce capabilities

4 Build a superior e-commerce infrastructure as a basis

of a differentiation strategy

3.Provide superior online experiences

Steps for Successful E-Commerce Strategy (cont.)

• Make sure the entire management team aligns with the e-commerce agenda

• Make sure the entire management team aligns with the e-commerce agenda

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

• Right mixture of bricks and clicks

• How much to integrate Internet into traditional

businesses

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

operation

Integrated or Autonomous

• 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)

E-Commerce Structure:

Integrated or Autonomous

• 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 9.6: Key Decisions in

the Integration vs Separation

Decision

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 9.7: Organizational Changes in

Major Multinational Co Building

E-Commerce

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

• Payment infrastructure to move money

• Physical infrastructure to deliver products

• Depends on

• Nature of the business

• Types of products or services offered through

• Payment infrastructure to move money

• Physical infrastructure to deliver products

Attractions of E-commerce (cont.)

• Speed of access

• Company’s products or services can be accessed

immediately from anywhere in the world

• 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

• Cultural differences

• Web sites must be appropriate culturally

• Traditional cross-border complexities remain

• Exchange rates, different taxes, and government

regulations

Picking a Market

• Two factors to target countries

• Those with 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

• Two factors to target countries

• Those with 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 9.8: 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

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