Cross cultural management 5e by cullen CH10

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 10

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

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 10.1: 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 10.2: 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

• The growth in the use of the Internet or the World Wide Web for e-commerce is so dramatic that its impact is

difficult to estimate

• Some say that the Internet will have more impact on

the world than the industrial revolution

• Offers tremendous opportunities for multinationals

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

• The growth in the use of the Internet or the World Wide Web for e-commerce is so dramatic that its impact is

difficult to estimate

• Some say that the Internet will have more impact on

the world than the industrial revolution

• Offers tremendous opportunities for 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

The Internet Economy

• Internet economy has four layers

1 The infrastructure

2 The applications infrastructure

3 The Internet intermediaries

4 The Internet commerce layer

• Internet economy has four layers

1 The infrastructure

2 The applications infrastructure

3 The Internet intermediaries

4 The Internet commerce layer

Layer 1

• The Internet infrastructure is the backbone of the

Internet, including the Internet service providers (ISPs), 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 (ISPs), 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 (Scient)

• 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 (Scient)

• 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)

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 10.5: E-Commerce

Business Models

Steps for Successful E-Commerce Strategy

• Leadership

- Successful e-commerce is only possible through

dynamic and strong leadership

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

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

or enhance the business

• Leadership

- Successful e-commerce is only possible through

dynamic and strong leadership

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

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

or enhance the business

Steps for Successful E-Commerce Strategy (cont.)

• Meet the challenge of developing an e-commerce

organization

- Entire firm (not only top management) must be

prepared to embrace the e-commerce model

• Allocate resources to the e-commerce business

- Commit financial, human, and technological

resources to develop e-commerce capabilities

• Meet the challenge of developing an e-commerce

organization

- Entire firm (not only top management) must be

prepared to embrace the e-commerce model

• Allocate resources to the e-commerce business

- Commit financial, human, and technological

resources to develop e-commerce capabilities

Steps for Successful E-Commerce Strategy (cont.)

• Build a superior e-commerce infrastructure as a basis

of a differentiation strategy

- Provide superior online experiences

• Have an e-commerce strategy

- Use strategic management to implement a strong

and adequate strategic e-commerce plan

• Build a superior e-commerce infrastructure as a basis

of a differentiation strategy

- Provide superior online experiences

• Have an e-commerce strategy

- Use strategic management to implement a strong

and adequate strategic e-commerce plan

Steps for Successful Commerce Strategy (cont.)

E-• Develop appropriate e-commerce systems

- Work hard to remove traditional barriers to ensure

that there are increased coordination and

information flows among the various functional

areas

• Measure success

- Have metrics in place to measure e-commerce

success

• Develop appropriate e-commerce systems

- Work hard to remove traditional barriers to ensure

that there are increased coordination and

information flows among the various functional

areas

• Measure success

- Have metrics in place to measure e-commerce

success

Exhibit 10.6: Summary of

E-Commerce “don’ts” based on

Best Practices

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

E-Commerce Structure:

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 10.7: Key Decisions in

the Integration vs Separation

Decision

E-Commerce Structure:

Integrated or Autonomous

• Ways companies can integrate their online and offline operations

- Keep customers informed

- Integrate business operations

- Share customer data across channels

• Ways companies can integrate their online and offline operations

- Keep customers informed

- Integrate business operations

- Share customer data across channels

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 10.8: Organizational Changes in

Major Multinational Co Building

E-Commerce

E-Commerce Security

• E-Commerce security: refers to the degree to which

customers feel that their private, personal information can be safeguarded in the hands of online companies collecting such information

• E-Commerce security: refers to the degree to which

customers feel that their private, personal information

can be safeguarded in the hands of online companies collecting such information

E-Commerce Security

• Companies need to be concerned about a number of

information security issues such as

- Confidentiality: making sure that private information is

- Authentication: having systems in place to ensure that

persons using the systems are legitimate

• Companies need to be concerned about a number of

information security issues such as

- Confidentiality: making sure that private information is

- Authentication: having systems in place to ensure that

persons using the systems are legitimate

E-Commerce Security

• To ensure that these Internet security issues are

addressed, experts suggest the following

- Use firewalls, intrusion detection software, and

antivirus shields

- Encrypt data

- Require two-phased authentication

- Use web site monitoring tools

- Abide by privacy rules

• To ensure that these Internet security issues are

addressed, experts suggest the following

- Use firewalls, intrusion detection software, and

antivirus shields

- Encrypt data

- Require two-phased authentication

- Use web site monitoring tools

- Abide by privacy rules

Globalizing Through the Internet

• Internet is enabling the emergence of a new form of

multinational, the born-global firms

• Born-global firms are able to obtain a significant portion

of their revenues from sales in international markets

• Born-global firms tend to adopt a global view of

markets and develop competitive advantages to

succeed in the various markets

• Internet is enabling the emergence of a new form of

multinational, the born-global firms

• Born-global firms are able to obtain a significant portion

of their revenues from sales in international markets

• Born-global firms tend to adopt a global view of

markets and develop competitive advantages to

succeed in the various markets

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