The Internet and International Marketing
Is the Internet just another marketing channel like direct mail or home shopping? Or will it revolutionize global marketing? Will large multinationals lose the advantages of size, while small start-ups leverage the technology and be-come big players internationally? The authors discuss the different opportunities and chal-lenges that the Internet offers to large and small companies worldwide. They examine the impact on global markets and new product development, the advantages of an intranet for large corporations, and the need for foreign government support and cooperation.
The Internet promises to revolutionize the dynamics of international commerce and, like the telephone and fax machine, may be a major force in the democratization of capitalism. Small companies will be able to compete more easily in the global marketplace, and consumers in emerging markets, in particular, will benefit from the expanded range of products, services, and information to which the Internet will give them access. As a recent Forrester industry report explains, the Internet removes many barriers to communication with customers and employees by eliminating the obstacles created by geography, time zones, and location, creating a “frictionless” business environment.1 Much of the current expansion in Internet use, accelerated by the emergence of the World Wide Web (WWW), is driven by marketing initiatives —providing products and product information to potential customers. However, in the future, many companies, especially those operating globally, will realize a much broader range of benefits from this medium’s potential as both a communication and a transaction vehicle.
Currently, the Internet is mainly a U.S. phenomenon, due to the later start and historically slower growth of Internet access in other countries. More than half the Internet’s nearly 7 million host computers are located in the United States, with the remainder spread across 100 other countries.2 In 1995, 22 countries came on-line.3 In 1994, there was wide variation in the number of Internet hosts per 1,000 people, ranging from more than 14 in Finland to fewer than 0.5 in South Korea (see Table 1).
With fewer non-U.S. businesses on line, fewer access nodes, higher telecommunications rates, and lower rates of personal computer ownership, consumer use of the Internet internationally is currently much lower than in the United States, where commercial on-line services like CompuServe and America Online (AOL) have also facilitated Internet use. But CompuServe and AOL have only recently begun to aggressively market their services in other countries. CompuServe first began global expansion in 1987 with entry into Japan through collaboration with Japanese partners.
1. G.F. Colony, H.W. Deutsch, and T.B. Rhinelander, “Network Strategy Service: CIO Meets the Internet,” The Forrester Report, volume 12 (Cambridge, Massachusetts: Forrester Consulting, May 1995).
2. As of July 1995, according to an Internet domain survey by Network Wizards, obtained from http://www.nw.com. Host computers are those connected directly to Internet gateways. A host computer can serve anywhere from one to hundreds of users, depending on the network set-up.
3. B. Bournellis, “Internet’s Phenomenal Growth Is Mirrored in Startling Statistics,” Internet World, volume 6, November 1995.
4. See http://www.comnex.com.
5. B. Giussani, “Why Europe Lags on the Web,” Inc., 15 November 1995, p. 23.
6. S. Gupta and J. Pitkow, “Consumer Survey of WWW Users: Preliminary Results from 4th Survey,” December 1995, obtained from http://www.umich.edu/~sgupta/hermes/.
7. These figures, for the World Wide Web alone, were calculated from “Trends in the WorldWide Marketplace,” Activmedia, at http://www.activmedia.com, 1996. Current estimates of transaction volume, especially predictions of future volume, vary widely based on the source of the data and the types of media included. For example, Forrester Research, in a May 1995 report, estimated 1996 transaction volume from all interactive retail (Internet, WWW, CD-ROMs, and commercial on-line services) at only $500 million.
8. Results reported from a Rochester Institute of Technology survey of 378 Internet shoppers conducted between February and May of 1995, obtained from http://www.rit.edu.
9. S. Butterbaugh, “More Than a Pretty Face: FedEx Gears up for a Brand-Intensive 1996,” Interactive Monitor, Media Central, obtained from http://mediacentral.com, December 1995.
10. S. Lohr, “When Pointing and Clicking Fails to Click: More and More Questions, and Employees, at Computer Help Services, New York Times, 1 January 1996, p. 45.
11. T. Seiderman, “Making Net Export Profits,” International Business, August 1995, pp. 47–50.
12. Giussani (1995).
13. A. Cortese, “Here Comes the Intranet,” Business Week, 26 February 1996, p. 76.
14. C. Anderson, “The Accidental Superhighway,” The Economist, 1 July 1995, pp. S1-S26.
15. Currently, there are some intricacies that may complicate this. Due to the international use of both domain (.edu, .com, .gov, .net) and country codes, it is sometimes difficult to identify the visitor’s country if he or she is using a domain code. However, more comprehensive databases of hosts, more sophisticated server matching schemes, and user registration procedures can overcome this.
16. Quoted from personal interview with MacPherson via e-mail, January 1996.
17. See M.B. Sarkar, B. Butler, and C. Steinfeld, “Intermediaries and Cybermediaries: A Continuing Role for Mediating Players in the Electronic Marketplace,” in R.R. Dholakia and D.R. Fortin, eds.,Proceedings from Conference on Telecommunications and Information Markets, October 1995, pp. 82–92.
18. See A. Warbelow, J. Kokuryo, and B. Konsynski, “AUCNET” (Boston: Harvard Business School, Case # 9-190-001, July 1989).
19. For examples of the range of Intranet applications in use, see: Cortese (1996), pp. 76–84.
20. P.D. Callahan, D. Goodtree, A.E. Trenkle, and D.F. Cho, “Network Strategy Service: The Intranet,” The Forrester Report, volume 10 (Cambridge, Massachusetts: Forrester Consulting, December 1995).
21. For a review and application of these models to the new media, see: D. Hoffman and T. Novak, “Marketing in Hypermedia Computer-Mediated Environments: Conceptual Foundations” (Nashville, Tennessee: Vanderbilt University, Owen Graduate School of Management, Working Paper No. 1, July 1995).
22. J.E. Frook, “‘Intranets’ Grab Mind Share,” Communications Week, 20 November 1995, p. 1.
23. J. Carl, “Digital’s Intranet Comes Together,” Web Week, volume 2, January 1996, p. 25.
24. K. Murphy, “Web Proves Useful as Training Platform,” Web Week, volume 2, January 1996.
25. N. Gross, “Here Comes the Intranet,” Business Week, 26 February 1996, p. 82.
26. E. Booker, “AT&T Using Internal Web to Test Digital Payments,” Web Week, volume 1, December 1995.
27. See http://www.obs-us.com/obs/.
28. M.W. Rennie, “Global Competitiveness: Born Global,” McKinsey Quarterly, 22 September 1993, pp. 45–52.
29. The policies of domain registration have created a frenzy to register brand names and trademarks since current trademark laws do not cover the registration of domain names. The company responsible for the allocation of the domain names, InterNIC, allocates names on a first-come, first-served basis with the agreement by domain holders that InterNIC will not be held liable for trademark infringements. For further information, see: “InterNIC Security,” Wired, 4.01, January 1996, p. 74.
30. Butterbaugh (1995).
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32. J. Bernoff and A. Ott, “People and Technology: What Web Sites Cost,” The Forrester Report, volume 2 (Cambridge, Massachusetts: Forrester Consulting, December 1995).
33. Butterbaugh (1995).
34. L. Marshall, “The Berlusconi of the Net,” Wired, 4.01, January 1996, pp. 78–85.
35. D. Rocks, N. Ingelbrecht, R. Castillo, and D. Peachey, “Developing World Seeks Highway On-Ramp,” Communications Week, 2 October 1995, p. 39.
36. J. Zander, “Russia Makes Net Progress,” TechWeb, obtained from http://techweb.cmp.com/ia/0108issue/0108issue.html.
37. See http://www.xpert.com/search/.
38. Rocks et al. (1995).
40. Guissani (1995).
41. J. Kahn, K. Chen, and M.W. Brauchli, “Chinese Firewall,” Wall Street Journal, 31 January 1996, p. A1.
42. C. Grycz, “The International Aspects of Internetting” (Boston: Fall Internet World 1995 on CD-ROM, 1995).
43. C. Mendler, “Stop! Or I’ll Yell Stop Again!,” Communications Week, 2 October 1995, p. 28.
44. Rocks et al. (1995).