InternationalEntrepreneurship.com

1
InternationalEntrepreneurship.com

• Lecture 11
• International E-Commerce

• According to Michael Porter, the internet is not
  a business model, but a tool that businesses
  should use to increase productivity.

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E-Commerce
Total Numbers Online World Total 605.60
m Africa 6.31 m Asia/Pacific
187.24 m Europe 190.91 m Middle East
5.12 m Can. USA 182.67 m Latin America 33.35
m

• Using the internet to transact business
• Very new less than 10 years old
• Highest growth in activity couple years
• Tip of the iceberg in potential
• Huge successes high valuations
• Will effect every home and business
• US Amounts for 2/3s of World E-Commerce Sales
  
• World E-commerce sales for 2001 600 B

Source www.nua.com, 2002
Source Economist 2000
Source Jupiter 2/2002
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Types of E-Commerce

• Business to Consumer (B2C)
• Most Known eBay, Amazon, AOL, etc.
• But Smaller Piece, Maybe 180 B by 2003
• Maybe 50 B by 2003 in UK
• Business to Business (B2B)
• 80 of E-commerce, 150 B in 1999, Maybe 4
  trillion by 2004
• Electronic Data Interchange (EDI) or Extranet
• Manufacturers Communications w/ Suppliers, etc.

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Worldwide B2B E-Commerce
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Key Issues in International E-Business

• Culture Language Issues Do the French want to
  see an English site?
• Taxation US moratorium
• Consumer Protection Credit Card Fraud
• Buyer Behavior Japans 8,000 7-11s
• Censorship 45 countries restrict Internet
• Li Han of Shanghai sentenced to 2 years in jail
  for giving a list of email addresses to US
  Democracy group
• Syrians go to Lebanon for the weekend to check
  email

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Most Common Languages
Source Global Reach 2000
Online Language Population English 36 Chinese 1
1 Japanese 10 Spanish 7 German 7
But 96 of E-Business done in English
Source Jupiter Research, 2002
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Problems with E-Commerce

• New internet business formed every 3 seconds in
  USA
• Very poor reputation in retail sites - 1.44 B
  Lost in 99
• A good site is not necessarily a good business or
  a money maker
• Tens of thousands of failures Customers
  Unforgiving
• Very poor supporting technology Demise of some
  DSL providers Only 15 of Orders On Time
• In South America, customers wont use credit cards
  for fear of kidnapping
• Only 15 of Germans have a credit card and even
  fewer Japanese
• By 2006, 66 of European consumers will be online
  but only 10 will have Broadband access
  Source Jupiter 2/2002

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Success Characteristics

• First Mover Advantages
• First web site in sector
• Rapid growth through extensive promotion
• Very high capitalization
• Rapid extension worldwide
• Brandname advantage (Yahoo, Ebay, AOL)
• Needs real business (AOL Time Warner, Amazon)
• Unique Access
• Large Company with information and product
  control
• Only supplier
• Internet is an extension of existing business
• Protected from invasion and competition
• Examples Disney, CNN

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Success Characteristics - Part 2

• Niche Markets (spice racks)
• Differentiation of product or service
• Deep search ability to find product or service
• Narrow scope but high quality
• Targeted marketing or associated with a group
  (Doctors, Galleries, Hotels)
• Often high margins
• Limited growth potential
• Stickiness
• High return usage
• Was the most important characteristic for
  valuations Now PROFIT
• Often assigned with work activity
• High Compelling need to use
• Can be turned into a portal

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Success Characteristics - Part 3

• Quick Click Thru to Sales Closing
• Amazon in America
• 7-11 in Japan
• Brits Want Someplace to Return Goods and Ask
  Questions
• Good Web Marketing Effort
• Must Establish Trust
• Design Sites from Customers Point of View
• Offer Choice b/t Streamlined or Normal Pages
• Offer Shorter Registration Systems, Fast DLs
• Be Honest about Product Availability
• Use Customers Language (except Russia)
• Display Real Contact Numbers and Addresses

Online, Trust is more important than low prices.
Source E Y, 2002
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Web Site Income

• Banners (advertising) HA
• Click Points (links) HA
• Commission on sales (transactions)
• High Postage and Packing margins HA
• Pay to use (enter with credit card)
• Referral fees
• Set-up and monthly page charges
• Alternatives to credit cards
• Cash on delivery
• Payment through service provider
• Installment plans
• Pay through Utility Bills
• 7-11 in Japan

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Internet Retail Price Breakdown
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Overview of InternationalE-Business

• Cannot assume American models will work Overseas
• Hosting service can be anywhere
• Band widths are better in USA, Western Europe
• High usage in USA, growing in Europe
• Low penetration in Eastern Europe, South America,
  Asia
• Rapid growth in emerging countries
• Rapid international expansion of largest firms
  (AOL, Yahoo)
• Europeans prefer brick and mortar presence
• Low cost of entry Ideal for Entrepreneurs and
  Intl Bus
• Accounting, tax, trade, currency issues
  outstanding

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Worldwide PC Distribution
.de Germany .uk UK .ar Argentina .kr S.
Korea .nl Netherlands .au Australia .ch
Switzerland .dk Denmark .it Italy .at
Austria .jp Japan .br Brazil .za
South Africa .fr France
Source World Bank 1999
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Worldwide Telephone Distribution
Source World Bank 1999
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Internet Usage by Region
Source Computer Industry Almanac 1999
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Home Internet Penetration
Millions of Users USA
166 China 57 Japan
51 Germany 32 UK
29 S. Korea 27 Taiwan
11 Australia 10
Source Jupiter Research, March 6, 2002
66 of US Homes have Internet Access.
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Worldwide of Users with DSL
By 2006, 1/3 of homes in the Netherlands are
expected to have Broadband, mostly via cable.
Source Jupiter Research, May 10, 2002
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Top Retail Sites in Britain and Europe
Source Jupiter Research, March 14, 2002
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Internet Futures

• Serious problem of access time
• Problems with delivery and returns
• Quality issue of products and services unseen
• Limited growth in retail markets
• Huge potential in Business to Business
• Huge growth in niche markets
• Valuations will fall
• Internet compliments not replaces

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Internet Success

• Same success criteria as other business
• Product or service
• Customers
• Cash
• People
• Marketing is key (hit rates and conversion)
• New technology needs education