GLOBAL E-MARKETING E-marketing is a term that can be used to label the potential of information technology (IT) and the Internet, and the impact on marketing, e-marketing is perhaps the single most important new development in technology in the entire history of marketing, particularly in its ability to leap over distance. It is clear that marketing is undergoing a revolution as a result of the explosion of information technology and the World Wide Web. THE DEATH OF DISTANCE Distance was, in the pre-modern world, a variable of the greatest marketing significance.
As the real estate maxim has it, the three rules of real estate valuation are location, location, location. In global marketing, strategies and practice reflected the importance of distance. The most important variable impacting trade behavior, for example, is distance. The primary trading partners of every county are the proximate neighbors: for the United States they are Canada and Mexico, for Canada and Mexico it is the United States. For France it is Germany, and for Germany it is France, and so on around the world.
There has always been a positive correlation between trade and proximity. However, the internet is totally independent of distance. Electrons traveling at the speed of light get to anywhere in the world in the same time and at the same cost. If a person sends e-mail, it does not make a difference in time or cost whether the mail is addressed to my next door neighbor or to someone halfway around the world. The same thing is true of a Web site: The location of the site does not affect the cost or speed of access. For the first time in history, the world has become a level playing field.
Anyone, anywhere in the world can communicate with anyone else in the world in real time with no premium charged for distance. These long-standing historical patterns of trade are a reflection of the importance of physical distance in global marketing. The improvement of transportation and communications technologies has been a major driver pushing the world toward greater globalization. Costs have come down and service has improved steadily and dramatically since the end of World War II. The Internet and IT have been major new drivers of globalization since the beginning of the 1990s.
A Web presence is instantly global. The global reach of credit card issuers, package delivery services, and the Internet has created a whole new level of possibilities for global retail and business-to-business marketing by even the smallest firms. For example, until the Internet, the aftermarket for motorcycle accessories was fragmented by country. The only way an accessory would cross national boundaries was if the manufacturer set up marketing and distribution operations in overseas or foreign markets. Today, this is no longer necessary.
Motorcycle Consumer News, a reader-sponsored magazine, which does not accept paid advertising, reviews new accessories and products for motorcyclists. For the past year, the magazine has included reviews of products that are marketed in other countries with the telephone number, and Web and e-mail addresses of the manufacturer. Readers of the magazine anywhere in the world can communicate directly with the supplier, who can receive payment via credit card with card authorization and ship anywhere in the world via express delivery.
The dramatic decline in communications and shipping costs and the decline of both tariff and nontariff barriers to trade have opened up world markets to companies that were formerly too small to participate in world markets. COMMUNICATIONS E-mail is a major new communications tool that supplements the fax and telephone to eliminate the barrier of distance. It is instant, cheap (free to most users), and insensitive to time zone. We can read e-mail when we wish regardless of time zone considerations. E-mail is a marketing communications fool that offers unprecedented power for one-on-one messages for both B2B and B2C communications.
Remarkably, it has emerged as a universal communications tool. TARGETING THE INDIVIDUAL CUSTOMER: BEYOND SEGMENTATION The aim of marketing segmentation has always been to create a unique value offer for as many customers as possible. Before the Internet, this meant, in practice, creating an offer for a segment of the market that was an aggregation of customers. Almost over night, the World Wide Web has emerged as a powerful new tool for accomplishing what in the past was only a theoretical possibility in marketing: creating marketing programs that target a segment of one. With the Internet, that theoretical possibility has become a reality.
Indeed, the whole notion of segmentation has to be reconsidered. Segmentation was a goal in marketing because it was too expensive to address the individual customer. With the available tools of the Internet and IT, it is now possible to respond to the individual customer regardless of where the customer is located. RELATIONSHIP MARKETING Another major thrust of marketing in recent years has been relationship marketing The Internet has opened up immense new possibilities for creating a relationship with global customers, potential customers, suppliers, and channel members.
The end of segmentation means that marketers can now focus on delivering value to the individual customer. The best way to do this is to create a win-win relationship with the customer. The company should offer the customer a unique value, and serving the customer should be profitable for the company. The relationship should be mutually beneficial. Whenever the benefit is one sided, the relationship is threatened. INTERACTIVITY Before the emergence of the Internet and IT, communications between companies and their customers were generally limited to one-way communications.
Companies made offers, and customers voted in the marketplace. The possibility of an interactive relationship between customers and prospects has now emerged. This is particularly true for online retailers who can use customer purchase behavior information to uniquely tailor communications to their customers. A customer who purchases sun screen skin protection from an on-line retailer can be advised of other products that also provide sun protection. SPEED TO MARKET Globalization has unfolded in stages. The first stage was the move of companies to make sure that their products were sold in global markets.
Before the Internet and IT created a new world of instant global communications, the pace of information and company communications traveled slowly. Products were introduced in one country at a time or at best one region at a time. Today, that has changed. The Web is causing the Hollywood movie industry to rethink its America-first policy. Take Mel Gibson’s epic Brave heart, for example. It was released in the United States on May 24, 1995, and it crept around the world. Some countries, such as Portugal, waited seven months to see the movie.
When Mel Gibson returned to the screen with a new movie, The Patriot, on June 28,2000, the studio rolled it out around the world in two months. When the DVD version of a film goes on sale in the United States, it can be played anywhere in the world on a modified player. The solution to this problem is to move to a global release of new films. This offers a number of advantages. It helps movies that “bomb” in the United States because, when this happens, it has no effect on the international market, which makes an independent judgment on a new release.
It also has opened up new costs savings since there is no time to develop expensive, customized marketing programs for each country. Studios are simply recycling art and photos from the U. S. campaign to create a global campaign with the same look around the world. LIVING IN AN AGE OF TECHNOLOGICAL DISCONTINUITIES • PRICE PLUNGES INDICATE SPEED OF TECHNOLOGICAL PROGRESS The drivers of the technology revolution we are witnessing are the changes with the most dramatic impact on globalization occurred in two fields: transportation and communication.
Dicken refers to these two areas as “enabling technologies. In transportation, key advances have been made in air travel and the speedier loading and unloading of container shipments. On the communication side, the reduced cost of long-distance telecommunication is most remarkable. Today, a three-minute telephone call between New York and London costs about $0. 30; in 1930 it would have cost about $250 when expressed in today’s prices. That is an 83,333 percent decrease in prices in 70 years. (This is a reminder that when it comes to technology, prices decline instead of increase. Market liberalization is expected to bring down international rates by at much as 80 percent over five years. Cambridge Strategic Management predicts that by 2005, a transatlantic videophone call will cost only a “a few cents an hour. “5 Already, about two thirds of the world’s new telephone subscriptions are for mobile phones and, in some developed countries, this share is as high as 75 percent. A second important cost reduction is the dizzying decline in the cost of computer-processing power: It now costs only 1 percent of what it did in the early 1970s.
Expressed differently, “If cars had developed at the same pace as microprocessors, a typical car would now cost less than $5 and do more than 250,000 miles to the gallon. “. These price reductions reflect the breathtaking speed of technological change, indeed, never before have such dramatic price falls been observed. • TECHNOLOGICAL CONVERGENCE AND THE UBIQUITY OF TECHNOLOGY In information and communication technology, it is not only the improved speed and reliability of devices that have brought about the rapid technological change but also the convergence between the transmission of information and the processing of information.
Moreover, it is expected that the next few years will witness a convergence of different types of information and communication technologies into one common Internet standard. A second development has been labeled technological ubiquity. Andersen Consulting describes it as “a world in which information technology is an integral part of everything we see and do in the workplace and at home. Thus, every kitchen device, car, or exercise machine will be packed with easy-to-use electronics that will add value to the product, for example, by tailoring it to personal preferences, enabling remote communication, and so on. EXPLOSIVE GROWTH OF THE INTERNET The Internet represents one of the most important drivers of the technological revolution because it has led to the development of an entirely new form of doing business called e-commerce or e-business. The history of the Internet can be traced back to 1969, when the U. S. Department of Defense introduced ARPANET. Apart from enabling access to remote computers, the network also permitted the transfer of electronic messages . At this stage; the users were restricted to a few military researchers.
Although subsequent years witnessed an extension of users and the development of similar networks springing up from a cooperative effort among NASA, IBM, and MCI, the true breakthrough occurred as recently as 1992. In this year,Tim Berners-Lee at the Conseil Europeen pour la Recherche Nucleaire (CERN), a European research institute in Switzerland, introduced the World Wide Web (WWW). For the first time, this protocol permitted the graphic representation of information in the Internet.
In connection with Web browsers used to navigate the network of hyperlinks that make up the World Wide Web, this development is widely seen as the origin of the explosive growth of the Internet. Today, the World Wide Web is often used synonymously for the entire Internet, although the latter also hosts traditional Internet services such as Telnet, Gopher, and FTP. Web access is still very much skewed toward developed countries. Moreover, a number of countries connected to the Internet offer only e-mail and are; consequently, cut off from the wealth of information available on the Web.
Despite the fact that current developments and growth rates, particularly in China and South America, will help ease the problem of geographically unequal access, there is still concern. Richard Jolly, author of the latest development report of the United Nations, notes that technology is a double-edged sword, opening new ways for many but also cutting off access for others. In Bangladesh, for example, a computer costs eight times the average annual income. Technological change as such, of course, is nothing new. What is remarkable today is the speed of change.
For example, although it took some 38 and 25 years, respectively, for the radio and telephone to reach 50 million U. S. consumers, television only needed 13 years and cable television 10 years to reach the same threshold. The Internet with the World Wide Web achieved the same penetration level in less than 5 years. On a worldwide basis, the Internet has expanded by about 2,000 percent in the last decade and is doubling in size every 6 to 10 months. • THE DEVELOPMENT OF E-COMMERCE Technology, particularly information and communication technology (ICT), is more than merely an enabler.
It has become the basis for an entirely new business model. Starting with electronic data exchange (EDI, i. e. , the transfer of standardized data between corporations), the Internet has undergone a metamorphosis from a medium primarily used to advertise a product or service to an e-commerce platform combining information, transactions, dialogue, and exchange. In short, the Internet has given birth to an entirely new business model and opened completely novel opportunities for global marketing. The scope for new developments arising from the new technologies is considerable.
Consider the example of the well-known electronic bookseller Amazon. com. Using a virtual network that seamlessly connects suppliers and customers, the firm has changed the way in which books are traded. Over 30,000 associated Web sites are recommending the company for a commission and provide links to the Amazon site. Of course, Amazon not only offers books but also informs customers about new publications and encourages readers to post reviews of books they have read. Virtual chat rooms and meeting with authors also foster the formation of an Amazon community.
More than half the business Amazon conducts is with loyal customers. Examples of companies that developed their business around the possibilities offered through e-commerce are Dell Computers, which shows growth rates that exceed those of conventional computer manufacturers by a factor of four, E-Trade, an online brokerage with annual growth rates of 200 percent, and eBay, which offers online auctions and has an annual transaction volume of more than $300 million. At eBay, customers provide the entire content, starting from the goods on offer up to the chat rooms in which they exchange background information on these goods.
Although most media attention has focused on consumer marketing on the Internet, more of Internet transactions are generated in the business-to-business field. Rapid technological change does not only affect high-tech companies that like to include an “e” in their name. For a global marketer, rapid technological advances in general and the unprecedented speed of change in ICT in particular have resulted in numerous new challenges; virtual organizations, symbiotic relationships, electronic markets, new forms of co-option, blurring corporate boundaries, and flatter organizational hierarchies are among the most important.
Although these challenges open entirely new business opportunities, they also represent fundamental threats to established organizations. Companies have to learn how to live with a high degree of volatility. Consider Yahoo! , which provides the largest search engine onthe Internet. Only a few years ago, Yahoo! ‘s cofounder, David Filo, was a relatively poor ex-student. Today, his on-line service leads the field in both traffic and advertising revenues. But while Internet search companies such as Yahoo! Infoseek, Lycos, and Excite raised $170 million by going public in 1996, Internet search facilities have become a commodity. There are now hundreds of ways to find and retrieve information on the Web. The Internet search business, in which a number of engines compete for a pool of willing advertisers, may soon take some casualties. Another example is Netscape, which was founded in 1994 as Mosaic Communications. It offered the first version of its Internet navigator one year later and, at its peak in the first quarter of 1997, generated revenues in excess of $150 million per year.
Hoever, since October 1997, the company’s stock has lost value on fears that it will be the big loser in its browser war with Microsoft’s Internet Explorer. Given these dramatic business histories, it is not surprising that Microsoft’s CEO Bill Gates supposedly said, “We are always two years away from failure,” and Intel’s CEO Andy Grove coined the motto, “Only the paranoid survive. ” NEW TECHNOLOGIES CHANGING RULES OF COMPETITION In addition to increasing volatility, the move from an industrial to a postindustrial e-economy also presents the global marketer with a new set of business rules.
Long established principles, such as the emphasis of retailers on “location, location, location,” are passe. Question exists is why should a busy executive spend her valuable time and fight traffic to buy some books or videos for her children in town,She can do the same in much greater comfort from home via the Web. Looking at the changing business principles forced by the new e-economy, Arvind Rangaswamy of Penn State University summarized the situation in Table 1 In a similar vein, Andersen Consulting stated that the new economy will force companies to adopt some new game plans.
Among the most important follow. 1. Secure a dominant market position as quickly as possible. 2. Form alliances based on their potential for market access and synergies. 3. Anticipate very high start-up investments. 4. Defend positions through an ongoing process of innovations. Table 1: Evolution in Business context and strategies |FROM |TO | |Market share Strategic control | |Technology as an enabler |Technology as a driver | |Seller-centric market |Buyer-centric markets | |Physical assets |Knowledge assets | |Vertical integration based on size |Vertical integration based on speed | |Decreasing return to scale |Increasing return to scale | |Firm-centric marketing strategies |Network-centric marketing strategies | • IMPORTANCE OF DOMINANT MARKET POSITIONS In the industrial environment, scale advantages have their limits. This is referred to as decreasing returns to scale. Although a large factory might be more cost efficient than a small one, there is a point at which adding capacity at the same location will be uneconomical.
The cost of adding labor and material will exceed the added returns. This effect permits smaller competitors to compete against those with larger market shares, providing they can achieve production sizes that yield optimal efficiency. Under the new technological regime, the rule of decreasing returns to scale no longer holds universally. In many cases, the optimal output is not determined by the factory size but is based on the point of market saturation. This can be observed in markets in which fixed costs are much higher than variable costs. Examples are computer software or pharmaceutical products, which demand a high degree of intellectual factor input.
The same holds for products or services that become more valuable when used by more people, that is, products that develop into a de facto standard and profit from the frequently mentioned network effect. Microsoft Office is an example that shows how useful it is to use the same product used by many other people. In all these cases, the returns achieved through increasing market shares do not diminish over time but grow in a reversal of the “law” of decreasing returns. Being placed in such a technological environment, it is important for companies to gain market share quickly and conversely, the global marketer can no longer afford to tolerate even small attacks from competitors and must be prepared for a vigorous defense of its market position. • IMPORTANCE OF STRATEGIC ALLIANCES
The postindustrial e-economy is more and more characterized by a dilution of traditional corporate structures and boundaries in favor of a move toward symbiotic alliances with external partners. Companies involve legally and economically independent firms to fulfill various tasks. Technology is important in this context, since the use of ICT leads to a reduction of transaction costs and, thus, promotes the market and alliances orientation of companies. Videoconferencing, electronic data exchange, extranets, and other technologies offer companies involved in symbiotic alliances cost efficient means of communication. Three types of alliances can be distinguished.
Vertical cooperation describes partner-ships between companies active in different stages of the value chain, such as collaboration between a manufacturer and a retailer in the marketing of an innovative product Horizontal cooperation involves companies in the same industry, such as research and development cooperation of two or more microelectronic companies. Diagonal cooperation, finally, refers to situations in which companies from different industries collaborate. While cooperation and alliances as such are not a new phenomenon, the changes in the technological environment have not only made cross-country alliances easier to manage but have also influenced the motivation behind the alliances.
Besides the desire to increase efficiency, it is now primarily the desire to gain market access and market share that drives cooperation. The desire to utilize network effects and to achieve synergies in products and services, for example, was behind the cooperation between the American Broadcasting Company (ABC), the New York Times, and America Online (AOL). Indeed, the benefit of gaining access to its customers allowed AOL to bill the other two companies $1 billion. 24 Airlines can serve as another example of strategic alliances. E-commerce permits airlines to utilize their brand names in on-line reservations through so called “code-sharing. ” This, in turn, eventually results in higher market shares for the globally networked partner airlines. IMPORTANCE OF ANTICIPATING HIGH START-UP INVESTMENTS Increasing returns to scale in many e-based industries necessitate high start-up costs in order to achieve the desired market share. A substantial part of the investment must be committed for years before the revenues eventually exceed the costs. AOL, for example, had to invest $500 million per year into marketing and sales before it reached its current position as market leader. 25 Toys “R” Us recently announced that it planned to update its Web site organized as a separate company in order to fight increasing Web competition in the toy industry. The anticipated costs for this Web site update are $80 million. 6 Many e-based companies need the backing of well-established, financially strong corporations or are forced to turn to the stock exchange to raise the required capital. The high stock market valuation of the so called Internet stocks in comparison to the stocks of traditional companies shows that the market, contrary to its reputation as being too short term oriented, is willing to take a long term view. • IMPORTANCE OF ONGOING INNOVATIONS In the traditional technical environment, innovations were primarily a means to gain a few points of market share. It was a rare event that consumers changed allegiances in droves. Information about goods and services diffused relatively slowly and there were significant gaps between lead and lag countries in the adoption of technology.
In today’s technological environment, the situation is drastically different. Not only has the diffusion speed increased significantly (70 percent of the computer industry’s revenue, for example, comes from products that did not exist two years ago), but the penalties for falling behind the latest world-class technological standard are quick and sharp, Consider WordPerfect, which for a long time was the world’s leading word-processing package. When Microsoft Word offered a more up-to-date technological standard, WordPerfect suffered a drastic fall. Increasing use of ICT is leading to greater efficiencies in all stages of the new-product development process.
Many companies are encouraging their employees, customers, and suppliers to submit ideas for new products or improvements through interactive Websites or e-mail. Toyota, for example, generated over 2 million suggestions for improvements from its employee’s alone. After new ideas are generated, expert systems can be used in the evaluation of these ideas. At the design stage, computer-aided design (CAD) and Business and marketing analyses, running concurrently with the technical development of new-product ideas, may use ICT in the form of data mining to identify whether there is a likely demand for the new product from existing customers. Finally, simulated test markets again speed up the new product development process.
Such approaches use mathematical modeling of marketing mix data to gauge the likelihood of the new product’s success and may render real-life test marketing superfluous. COMPONENTS OF THE ELECTRONIC VALUE CHAIN For global marketers, one of the most dramatic and relevant effects of technological changes has been the “death of distance. ” As Frances Cairncross of the Economist put it “The death of distance as a determinant of the cost of communications will probably be the single most important economic force shaping society in the first half of the 21st century. It will alter, in ways that are only dimly imaginable, decisions about where people live and work, concepts of national borders, patterns of international trade.
Its effects will be as pervasive as those of the discovery of electricity. Some effects are already emerging in the shape of a reconfiguration of the value chain. A major part of the attractiveness and dynamics of the new technological environment stems from the ability to “modularize,” “segment,” or “fragment” the value chain into small and distinct customer-oriented processes. ICT facilitates the coordination between these modules in largely non hierarchical systems and increases the scope for outsourcing specific modules. Closely related to the modularization within companies is the transformation of linear value chains into multidimensional networks.
For the customer, it is often not transparent which part of a transaction is carried out by which particular member of the network. For example, the customer usually does not know which reservation system a travel agency uses to book a flight. Indeed, most often the customer does not care as long as the required goods or services are delivered as requested. What appears to emerge under the new technological regime is a network of specialists, which permits participants to focus on their respective core values. Figure 1 illustrates this point FIGURE 1: The Intermediaries as Networks of Specialists • CONTEXT SUPPLIERS Context suppliers, also called portals, support the use of the electronic channel both for customers and suppliers.
Their key functions are to offer access to the channel and reduce the complexity of the electronic environment. Among the most important context providers are Internet on-line services such as America Online, Web browsers such as Netscape Communicator and Microsoft Explorer, or search engines such as Yahoo! and Lycos. In 1998, the top nine portals generated approximately 15 percent of all Internet traffic. However, their growth appears to be slowing down, and it has been estimated that by 2003, the Internet traffic flowing through the top nine portals will plateau at 20 percent. • SALES AGENTS Sales agents support suppliers primarily through offering high-quality address banks of potential customers. Metromail provides an example.
It offers suppliers carefully sifted address banks of potential customers that typically contain a wealth of information about customer preferences, demographics, and other data. One of the latest services is referred to as the “firefly technique. ” It helps companies to target consumer groups and provide special product offerings based on profiles of musical and reading preferences. • PURCHASE AGENTS On the customers’ side, electronic purchase agents help the Internet shopper to find the desired goods or services. Auto-By-Tel, for example, is a service that helps customers finds the right car for the right price. Similarly, search robots such as Price SCAN permit consumers to find the best price on thousands of computer hardware and software products.
Such programs automatically travel the Web and gather data from magazine ads and vendor catalogs. Web robots are also sometimes referred to as Web crawlers or spiders, Companies such as BizBots are developing a “real time 24 by 7 (24 hours a day, 7 days a week) automated market of markets” that link multiple sites in various business sectors (such as chemicals) to provide complete transparency for buyers and sellers. • MARKET MAKERS Market makers are mediators that bring together buyers and sellers and increase market efficiency. Typical examples are the numerous auction sites that have sprung up on the Web. According to its Web site, Onsale, for example, had more than 160,000 visitors per day and in excess of 1 million registered users. nd the need to innovate can also be felt in this part of the supply chain. eBay, with some 5. 6 million registered users as the world’s leading person-to-person on-line trading community, recently announced the availability of pagers featuring “eBay a-go-go,” a new service that allows users to receive updates on their eBay auctions via pagers. PlasticNet. com for plastics, Metals. com for steel, and various other sites bring together buyers and sellers in business-to-business markets. • PAYMENT AND LOGISTIC SPECIALISTS Currently, one of the main stumbling blocks for the use of electronic markets continues to be the means of payment via the Internet.
However, the development of efficient electronic payment systems is advancing rapidly. It is expected that by the year 2011, some 55 percent of all consumer payments will be based on digital payment systems. In the meantime, traditional credit card companies such as VISA are managing the transfer of payments and the associated risks. The box “PenOP: Signing Up for E-Commerce” provides some insights on how a British company helps to overcome one of the last hurdles facing a paperless business culture, namely the need for a signature on documents. Physical distribution via the Internet is only possible for software products or information services (e. g. investor, stock market, and database information). All other products have to be shipped via traditional channels. Nevertheless, the Internet and the Web offer a completely new view of the traditional distribution function. Although physical distribution was one of the core functions for the traditional retail/commerce systems, this aspect can be unbundled and outsourced using international distribution experts (e. g. , UPS). Moreover, the logistic functions of warehouses get outsourced to logistic experts and software companies. BIBLIOGRAPHY Book • Warren J Keegan,2008,”Global Marketing Management”, Prentice Hall of India, New Delhi, page no 440-457 Svend Hollensen,2007,” Global Marketing: A Decision-Oriented Approach”, 4/E, Financial Times Press, page no 234-258 Websites http://wps. pearsoned. co. uk/ema_uk_he_hollensen_globalmark_4/64/16424/4204554. cw/index. html http://www. marketingteacher. com/Lessons/lesson_emarketing_place. htm http://www. templatezone. com/pdfs/ems_whitepaper. pdf http://www. mmv. vic. gov. au/Assets/220/1/eMarketing. pdf http://www. pedroguitton. com/adrianajordan/pdf/emarketing. pdf http://www. themanager. org/pdf/eMarketing_New%20Millennia. pdf ———————– Payment specialist Market Makers Context Supplier Purchase Agent Customer Supplier Context Supplier Logistical specialist Sales Agent