Global Management

Marketing

Chapter 16 Global e.marketing Warren J. Keegan

Overview
The Death of Distance Targeting the individual customer Relationship markting Speed to market Changing rules of competition Components of the electronic value chain Summary

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Learning Objectives
Understand the main drivers of the information and communication technology (ICT) Appreciate the role of the Internet in providing a platform for e-commerce Learn how the new technological environment impacts on global marketing activities Know the components of the electronic value chain
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IT-Environment: Facets
E-Commerce Extranet Internet Portals Web Browser World Wide Web Virtual Reality EDI (electronic data exchange)

Important

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The Age of Technological Discontinuities

The speed of technological change has accelerated dramatically Our environment is characterised by
technological convergence and technological ubiquity

The internet is the most important driver of technological change

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Uptake of Technologies
120 Telephone 100 80

Consumer

Cabl e Radio

Millions of Users

60

Internet
40

20 TV

Source: Morgan Stanley, The Internet Advertising Report

19 19 60 65 19 19 70 75 19 19 80 85 19 19 90 95

19 19 19 20 25 30

19 19 19 19 19 35 40 45 50 55

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Development Hosts
120.000.000 100.000.000

of

Internet

80.000.000

60.000.000

40.000.000

20.000.000

Source: Adopted from: http://www.mids.org/mapsale/data/trends/trends-199907/sld004.htm, 30. Aug. 1999

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Geographical of Internet Users

Distribution

Source: http://www.nua.ie /surveys/graphs_c harts/1998graphs /location.html, 30. August 1999

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The Evolution Commerce

today

of
tomorr ow

E-

ye sterd ay

New Market ing Too l

Ne w Distribu tion Syste m

Evolution

New Drive for Effic ien cy

Ne w Bu si ne s s Model

Revolution

Source Roland Berger & Par tner (1999) Erfolgsfaktor en i m El ectroni c Commerce: Auszug aus : Ergebnissen der Studie, Wien/Frankfurt am Main, p. 12 den

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Evolution Business Context Strategies

in and

Old New Economy Economy 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

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New Economy Forces Companies to ...

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.

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1. Importance of Dominant Positions

Market

Cases where returns achieved through increased market share grow until market saturation has been reached i.e. in markets
with high fixed costs with high degree of intellectual factor input when the product becomes more valuable when used by more people (network effect)

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2. Importance Alliances

of

Strategic

Strategic alliances = cooperation of legally independent firms ICT leads to a reduction of transaction costs 3 types of alliances
vertical (eg manufacturer & retailer - marketing of an innovative product) horizontal (in the same industry, eg r&d) diagonal (different industries, eg r&d)

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3. Importance of Anticipating High Start-up Investments

In many e-based industries high start-up costs are necessary to achieve the desired market share Money is needed
either from well established financially strong partners or from the stock exchange (internet stocks)

Payback might only be achieved on a long-term basis (in comparison with traditional companies)

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Market Valuations: Old Economy New Versus

Digital Economy Valuations (1998) Company Annual Market Cap Revenues ($m) ($m) AOL 2,600.0 149,800 149,800 14,700 Pfizer Yahoo 203.3 34,500 34,700 15,100 Allied Signal ebay 47.4 24,000 24,300 18,400 J.P. Morgan Amazon 610.0 23,000 23,000 15,500 Alcoa Priceline 35.2 17,900 17,700 15,900 Fed Ex @H ome 48.0 16,800 16,900 26,300 Lockheed E*Trade 285.0 12,900 13,500 19,200 AMR CMGI 91.5 11,200 11,400 8,300 Ingersoll Rand RealNetworks 64.8 5,700 5,500 11,200 Toys R Us Sources: Fortune, April 26 and May 24, 1999; Hoover.com; Arvind Rangaswamy, Toward a Model of eBusiness Performance, Presentation at the American Marketing Association Summer Educators Conference, San Francisco, August 7-10, 1999. Traditional Economy Valuations (1998) Market Cap Annual Company ($m) Revenues ($m)

Martin

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4. Importance of Ongoing Innovations

Diffusion speed of new products has increased significantly Innovation is necessary to keep a compnys market share ICT leads to greater efficiencies in all stages of the new product development process

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Location Chain Across Countries

Supplier
Country A Country B Country C Country D Country E

of

Value

Purch asing R&D Pro duction Sale Cus to mer Service

Custome r

Support Level Sup port Level

low medium high

Source: Adapted from J. Griese, Auswirkungen globaler Informations- und Kommunikationssysteme auf die Organisation weltweit ttiger Unternehmen, in W.H. v. Staehle and P. Conrad (eds) Managementforschung 2, (Berlin / New York), de Gruyter, 1992, p. 423 In Country Presence

Legend:

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Middlemen Specialists

as

Networks

of

P aymen ts Specialis t SUPPLIER SUPPLIER Cont ext Supplier Sales Ag en ts Marke t Maker s Logisti c Specialis t Purchas e Agent Context Supplier CUSTOMER CUSTOMER

Source: Adapted from Paul F. Nunes and Brian S. Pappas, Der Vermittler auf der Suche nach Reichtum und Glck, Outlook, Andersen Consulting, Heft 1, 1998, p. 55

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Summar y
Rapid advances in IT are profoundly affecting the way global marketing is conducted:
additional distribution & communication channels (ecommerce) precise targeting (segment of one), customisation and interaction fundamentally new business models (network organisations) empowered customers

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