pp 16 e marketing

Global Marketing Management

Chapter 16 Global e.marketing

Warren J. Keegan

Keegan: Global Marketing Management Chapter 16 / 2

Overview

The Death of DistanceTargeting the individual customerRelationship marktingSpeed to marketChanging rules of competitionComponents of the electronic value chainSummary


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


IT-Environment: Important Facets

E-CommerceExtranet InternetPortalsWeb BrowserWorld Wide WebVirtual RealityEDI (electronic data exchange)


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


Uptake of Consumer Technologies

1930

1920

1940

1950

1970

1980

1990

1925

1935

1945

1955

1960

1965

1975

1985

1995

120

100

80

60

40

20

0

Millionsof Users

TV

Cable

Radio

Telephone

Internet

Source: Morgan Stanley, The Internet Advertising Report


Development of Internet Hosts

0

20.000.000

40.000.000

60.000.000

80.000.000

100.000.000

120.000.000

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


Geographical Distribution of Internet Users

Source: http://www.nua.ie/surveys/graphs_charts/1998graphs/location.html,

30. August 1999


The Evolution of E-Commerce

New Business

ModelNew

MarketingTool

NewDistribution

System

NewDrive for

Efficiency

yesterday

today

tomorrow

EvolutionRevolution

Source: Roland Berger & Partner (1999) Erfolgsfaktoren im Electronic Commerce: Auszug ausden Ergebnissen der Studie, Wien/Frankfurt am Main, p. 12


Evolution in Business Context and Strategies

Old Economy New Economy

Market share Strategic controlTechnology as an enabler Technology as a driverSeller-centric market Buyer-centric marketsPhysical assets Knowledge assetsVertical integration based on size Vertical integration based on speedDecreasing return to scale Increasing return to scaleFirm-centric marketing strategies Network-centric marketing strategies


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.


1. Importance of Dominant Market Positions

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“)


2. Importance of Strategic Alliances

Strategic alliances = cooperation of legally independent firms

ICT leads to a reduction of transaction costs3 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)


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)


Market Valuations:New Versus Old Economy

Digital Economy Valuations(1998)

Traditional Economy Valuations(1998)

Company AnnualRevenues ($m)

Market Cap($m)

Market Cap($m)

AnnualRevenues ($m)

Company

AOL 2,600.0 149,800 149,800 14,700 PfizerYahoo 203.3 34,500 34,700 15,100 Allied Signalebay 47.4 24,000 24,300 18,400 J.P. MorganAmazon 610.0 23,000 23,000 15,500 AlcoaPriceline 35.2 17,900 17,700 15,900 Fed Ex@Home 48.0 16,800 16,900 26,300 Lockheed

MartinE*Trade 285.0 12,900 13,500 19,200 AMRCMGI 91.5 11,200 11,400 8,300 Ingersoll RandRealNetworks 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.


4. Importance of Ongoing Innovations

Diffusion speed of new products has increased significantly

Innovation is necessary to keep a compny´s market share

ICT leads to greater efficiencies in all stages of the new product development process


Location of Value Chain Across Countries

Purchasing R&D Production Sale Customer Service

Supplier Customer

Country A

Country B

Country C

Country D

Country E

Support Level Support Level

Legend: In Country Presencelow medium high

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


Middlemen as Networks of Specialists

Context Supplier

SUPPLIERSUPPLIER

PaymentsSpecialist

LogisticSpecialist

Sales Agents

Market Makers

PurchaseAgent

Context Supplier CUSTOMERCUSTOMER

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


Summary

Rapid advances in IT are profoundly affecting the way global marketing is conducted: additional distribution & communication channels (e-

commerce) precise targeting (segment of one), customisation and

interaction fundamentally new business models (network

organisations) empowered customers

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