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Chapter 4: Global Markets

Learning Objectives
Overvie w of Global E-Marketing Issues
Global e-marketers must understand that a countrys e -readiness profile significantly influences marketing strategy and tactics. E-marketing strategies and Internet usage in industrialized nations are generally similar to those in the U.S., while those in emerging markets are not. Emerging Economies Countries that have high levels of economic development (United States, Canada, Japan, etc) are classified as developed countries. These countries are highly industrialized and use technology proficiently. Those countries that are still struggling with standards of living for their citizens are called emerging economies and are poised for rapid technological growth. Importance of Information Technology Technology can boost a nations overall production capacity and efficiency. However, it is through the application of information technology that countries with emerging economies can really open up new, exciting, global markets. Country and Market Opportunity Analysis Global e-marketers bust balance two different analytical approaches. Market differences are ways in which two markets exhibit dissimilar characteristics. Market similarity refers to ways in which two markets exhibit similar characteristics. Therefore, if a firm is based in an emerging economy and wants to market to its home target, the marketer must identify market differences within the population. Market Similarity Marketers often choose foreign markets that have characteristics similar `to their home market for initial market entry. Credit Card Conundrum Many countries around the world do not use or issue credit cards, or do so in a very limited fashion. This problem limits the ability for potential customers to make a purchase via the Internet. International e-marketers understand these differences and must find alternative means for conducting business over the Internet. E-Commerce Payment in the Czech Republic The Czech Republic has similar skepticism of online purchasing, but e-marketers have found innovative payment solutions. Czech customers pay for the online purchases with bank transfers, cash on delivery, and postal money orders.

(PPT 4-2, 4-3)

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However the most creative payment method came from eBanka which issues credit cards specifically designed for online purchases. This credit card acts very similar to our debit cards.

Technological Readiness Influences Marketing


Solving credit card payment issues is only one of several problems. E-marketers must also deal with basic technology, limited access to computers and telephones, high Internet costs, slow Internet connection speeds, and unpredictable power supplies Computers and Telephones Connection to the Internet in industrialized countries has historically been handled by desktop computers and an ISP (Internet Service Provider). In emerging economies, computer access is a big problem. Many personal computers are not privately owned so consumers must use public forums to access the Internet. Telephones are also both scarce and expensive causing additional hurdles for e-marketers. Internet Connection Costs Countries with emerging economies have higher Internet-related costs and are comparatively quite expensive. E-marketers must deal with the discrepancy between low labor costs and high technology and other business costs. Connection Speeds and Web Design: Broadbands Influence Connection speed and Web site design is another concern for e-marketers. Emerging economies typically have slower connection speeds and higher per minute costs, so e-marketers must consider how their connection speed and the Web site design influences download rates. Electricity Problems Sporadic electricity in emerging economies also pose a challenge for e-marketers. Several countries experience blackouts which can be challenging for e-businesses to overcome.

Wireless Internet Access


E-marketers must determine how to modify existing Web site content for the smaller screens on cell phone display. They must also determine how to resolve potentially cumbersome text entry using tiny keypads and how to develop new content that consumers will want. Additionally, they must consider how to price their services, and how to develop easy, secure payment methods.

The Digital Divide


An LDC has two economies that are centuries apart in terms of economic and technological development. This disparity is called the digital divide, which has been described as that between countries and between different groups of people within countries, there is a wide division between those who have real access to information and communications technology and are using it effectively, and those who dont.

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Industrialized countries, with only 15% of the worlds population, are home to 88% of all Internet users. China Profile China is the worlds most populous country, with 1.3 billion inhabitants, and is thus the worlds largest emerging market. Chinas vast population offers a huge market potential. E-marketers are developing and anticipating significant growth and opportunity in the emerging Chinese e-market.

Chapter Summary
Within a worldwide B2C market of 945 million consumers, some countries have higher penetration of Internet access, usage, and shopping. Among the many factors affecting Internet penetration are income, infrastructure, computer ownership, telecommunication availability and pricing, social and cultural traditions, business attitudes, and wireless Web access. E-marketers must carefully research each countrys current market conditions and environmental factors before selecting specific targets for entry. Internet usage is growing so rapidly outside the United States that users from other countries will increasingly dominate the Internet. This is creating opportunities and challenges for e-marketers to target or operate in countries that are less developed than the most highly industrialized nations. Emerging economies are those with low levels of gross domestic product (GDP) per capita that are experiencing rapid growth. Not only can technology generally boost a nations overall production capacity and efficiency, but also information technology can help countries with emerging economies open up promising global markets. In the course of analyzing country and market opportunities, e-marketers in emerging economies that target markets in developed countries must understand market similarity. E-marketers in emerging economies that market within their own countries or those in developed economies that want to target groups in an emerging economy must understand market differences. In general, e-marketers that target emerging economies must deal with a variety of challenges, including limited credit card use, lack of secure online payment methods, consumer attitudes toward online purchasing and payment, limited computer and telephone access, slow connection speeds that affect Web page download rates, and unexpected power failures. Enterprising e-marketers have reacted to these challenges with innovative solution. Man countries, including those with emerging economies, have more mobile telephone subscribers than fixed-line telephone subscribers. As a result, e-marketers must consider how to modify Web site content for small cell phone displays; how to handle text entry using tiny keypads; how to develop appropriate content for wireless Web users; how to price services; and how to develop appropriate payment methods. Emarketers also must understand how consumers behave with the mobile Internet. Nations with emerging economies may be in different stages of economic development, which affects their social climate. Least developed countries (LDCs) have the poorest economies an, in many cases, a dual economy because the population has both higher-income citizens and poorer citizens. Capital cities in LDCs may have both middle and an upper class, while the areas outside these cities are underdeveloped economically and technologically. This disparity, especially as it concerns the ability of

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technology to raise both a persons and an entire nations standard of living, is called the digital divide. Many organizations and e-marketers are working to close this digital divide by bringing Internet technology and e-commerce capabilities to LDCs. China is the largest emerging economy in the world. Chinas rapid economic growth has made China an attractive market. China will soon have more Internet users, mobile phone subscribers and more broadband customers than any nation on earth. Chinese-language Web sites are developing rapidly to reach this expanding domestic market. Adaptation is a necessary feature for domestic e-marketing, since China still lags behind industrialized nations in terms of its infrastructure. Some Chinese companies are also using the web to create a global brand presence.

Chapter Outline
Opening Vignette: The FIFA Story (PPT 4-4)
Have the class read the opening vignette on the FIFA. How did the strategic partnership with Yahoo! Benefit the popularity of the website? Were the additional partnerships with McDonalds, MasterCard, JVC, etc the reason that this Web site was more successful than any other sport site with worldwide appeal? Yahoo! Charged subscriptions to access the information, video, etc that ranged from $4.95 to $19.95. Would these types of subscription services work with a U.S. based sporting event with worldwide appeal like the Super Bowl? Why or why not? www.fifaworldcup.com

I. Overvie w of Global E-Marketing Issues

(PPT 4-5, 4-6)

A. Capitalizing on changes 1. Users from other countries speaking languages other than English will increasingly dominate the Internet 2. The Webs content and language will become more diversified 3. A countrys e -readiness profile influences marketing strategy and tactics 4. E-marketers must differentiate between industrialized nations and emerging economies B. Global Markets 1. Worldwide Internet usage more than doubled between 2000-2004 2. Middle East saw Internet use grow over 200% in four years 3. Asia has the most Internet users at over 243 million 4. American has the highest Internet penetration rate at almost 70% C. Emerging Economies 1. High levels of economic development (developed) a. United States b. Canada c. Japan d. Australia 2. Emerging economies 42

(PPT 4-8)

(PPT 4-9)

a. b. c. d. e. f.

Mexico Poland Hungary Romania Russia Ukraine

D. Importance of Information Technology (PPT 4-10) 1. In economic development a. Information technology opens up new, exciting, global markets b. The Internet can jump-start many national economies c. Allows for instant access to a global marketplace 2. Unique challenges a. Slow connection speeds b. High costs of domestic phone calls c. ISP costs d. Privacy concerns e. Censorship f. Navigation difficulties g. Taxes h. Lack of content in ones own language i. Lack of local content j. Limited credit card use k. Lack of secure online payment methods l. Unexpected power failures

II. Country and Market Opportunity Analysis


An e-marketing plan guides the marketer through the process of identifying and analyzing potential markets. Market differences and market similarities must be measured and compared to determine strengths and weaknesses. A. Market similarity 1. Marketers will choose foreign markets that have characteristics a. Literacy rates b. High Internet usage rates c. Clearly defined market segments willing to shop d. Credit card usage rate 2. Parallel target market decision a. Citizens living abroad b. Using alternative methods of payment.

similar

B. Credit Card Conundrum (PPT 4-11) 1. Convenience and ease of transactions on the Internet a. Credit cards and secure online payments are seamless and easy b. Some countries are cash based 2. Considerations and alternatives

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a. Limited credit card use can severely restrict a target markets purchasing ability b. Marketers need to know how many credit cards are in circulation c. Marketers need to understand consumer attitudes toward credit card purchases C. E-Commerce Payment in the Czech Republic 1. E-marketers faced the challenges of limited credit card use and consumer skepticism. 2. Customers did not think shopping online was fun 3. Customers did not trust online brands 4. Firms reassured customers concerning online security 5. Alternative payments were accepted a. Bank transfers b. Cash on delivery c. Postal orders d. eBanka debit cards specifically created for online buying

III. Technological Readiness Influences Marketing

(PPT 4-12)

Solving credit card payment issues was only one of several marketing challenges in emerging economies. The following are several other issues that must be addressed. A. Computes and Telephones (PPT 4-13) 1. Computers a. Historically and predominately, Internet connection is with a desktop PC and dial up ISP b. Emerging economy countries do not have many privately owned computers c. Ukraine only 1.8% own personal computers d. United States 62 computers for every 100 people e. Creates opportunities for local, small business entrepreneurs 2. Telephone Internet connection a. Telephone land lines are not as prevalent in emerging economies b. Telephone services can be very expensive in emerging economies c. Many emerging economy countries have more televisions, radios, motorcycles, etc than have telephones B. Internet Connection Costs (PPT 4-14) 1. If an emerging economy customer has a telephone, chances are the Internet connections costs are extremely high. 2. In Morocco, 30 hours of Internet service is $70 per month 3. Many customers in emerging economies have cell phones, but not land lines

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C. Connection Speeds and Web Design: Broadbands Influence (PPT 4-16) 1. E-marketers must analyze the relationship between Web site design and customers connection speeds. a. Many feel the dial-up era is quickly coming to an end b. Online companies with a diverse customer base must keep their Web sites simple 2. E-marketers must understand how connection speeds influence download rates 3. E-marketers and graphic designers must differentiate between what can be done and what should be done. D. Electricity Problems sporadic electricity poses a specific challenge for emarketers. Internet based business cannot complete transaction if customers have no electricity. (PPT 4-18)

IV. Wireless Internet Access


A. Countries with emerging economies are often market leaders in cellular technology 1. The rapid growth of cell phone is shown in Exhibit 4.14 2. Explain why, by reviewing the story about Cambodias civil war B. Cell phone technology is relatively inexpensive and effective C. Challenges e-marketers face 1. How to modify existing Web site content for smaller screens 2. How to resolve potentially cumbersome text entry with tiny keypads 3. How to develop new content that consumers will want 4. How to price services 5. How to develop easy, secure payment methods

V. The Digital D ivide

(PPT 4-19)

In addition to the technical challenges they must overcome, e-marketers have to consider the social environment in which their e-business operate. A. Least Developed Countries (LDC) 1. Those countries with the worlds poorest economies 2. Economically underdeveloped 3. Exhibit 4.15 shows the percentage of a countrys population earning less than $2 per day. B. Dual Economy haves and have-nots 1. All emerging economies have upper and middle income citizens 2. Two completely different economies exist side by side in an LDC

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C. Digital divide 1. This phenomenon is called the digital divide 2. That between countries and between different groups of people within countries, there is a wide division between those who have real access to information and communications technology and are using it effectively, and those who dont www.bridges.org 3. 15% of the worlds population make us 88% of all Internet users 4. The World Wide Web is not really worldwide

VI. China: Back to the Future


Many entrepreneurs look at Chinas vast population and see huge market potential. Some experts predict that China will soon dominate the Internet. By 2008 China will have more than half a billion mobile phone user and will have the greatest number of Internet users in the world A. The Chinese market is big 1. Currently 87 million Internet users 2. Had an increase in broadband users of 78.7% in 6 months 3. Over 200 million current cell phone users 4. Total broadband subscribers totaled 31.1 million B. It will only get bigger 1. Expected to have 500 million cell phone users by 2008 2. Expected to have more Internet users than any other country within the next 5 years

Exercise Answers
(Exercise answers prepared by David Lan, University of Nevada, Reno, with assistance from the authors)

Note Discussion questions may require outside research whereas review questions do not require research beyond the text.
Review Questions 1. What is an emerging economy? Most countries are struggling withand working towardsimproved standards of living for their citizens. This broad, diversified group of countries is what we refer to as emerging economiesthose with low levels of gross domestic product (GDP) per capita and are experiencing rapid growth.

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2. What use can countries with emerging economies make of information technology? Every country can improve its level of economic development through increased efficiencies in the production, distribution, and sale of goods and services. While technology can, in general, boost a nations overall production capacity and efficiency, it is through the application of information technology that countries with emerging economies can really open up new, exciting, global markets. In the past, decades passed before many developing countries could benefit from railroads, electricity, and telephones. Today, the Internet, along with its supporting information technologies, can jump-start many national economies. 3. What is the concept of market similarity and how does it apply to companies that target foreign markets? If companies are operating from a country with an emerging economy and want to target markets in developed countries, they must understand market similarity. If, on the other hand, they are based in an emerging economy and want to market to their home (domestic) target market or if they are from a developed economy and want to target groups in an emerging economy, they must understand market differencesways in which the two markets exhibit dissimilar characteristics, such as different languages, cultural behaviors, buying behaviors, and so forth. 4. Why is credit card payment a conundrum in emerging economies? Convenience and ease of transactions are two of the Internets greatest benefits. Credit cards and secure online payment systems make for seamless and easy Webbased transactions in developed countries. But in countries with emerging economies, things arent so easy. Credit cards are scarce and of limited use, and only issued to individuals with very high incomes. In addition to knowing how many credit cards are in circulation, e-marketers working in emerging economies should understand consumer attitudes towards credit card purchases. 5. How do computer and telephone ownership affect e-marketing in emerging economies? E-marketers should never underestimate the profound influence of limited computer access on Internet marketing. It directly limits market size. Owning a computer is only the beginning. Individuals and businesses need to be connected to the Internet in some way. Generally, connections are made though telephone lines, although Internet connection patterns, as discussed in earlier chapters, are rapidly changing. In emerging economies, telephone access has a very different pattern than in developed countr ies. Online firms cant market to someone who has no computer or no means of connecting to the Internet.

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6. Why must Web site designers consider connection speeds in emerging economies? Another key issue for e-marketers in emerging economies is the relationship between connection speed and Web site design. Although most Internet connections around the world are through dial-up connections, a telephone line limits the speed at which data can be sent and received. The current maximum speed for a modem connection is 56 kbps (56,000 bits per second). Download speeds in emerging economies may be much lower than 56 kbpsoften 28.8 kbps or lower. This has significant implications for Web site design, especially the extent to which graphics are used. The Web is quintessentially a visual medium, and users expect to see pictures, particularly complicated graphics and pictures that move, swirl, and morph into usual shapes. Web sites may also have sound. Yet each of these elements slows the download rate. This is especially true for home pages, which often attempt to wow the user. In countries with emerging economies, where connections speeds are slow and a user may be paying by the minute, download speed is a major consideration. 7. What are some of the electricity problems faced by e -marketers in emerging economies? Countries with emerging economies pose another challenge for e-marketers: sporadic electricity. Electrical outages and rolling blackouts due to poor infrastructure and other issues make it difficult to do business online. A lack of electricity forces an ebusiness off line, making the business effectively closed. 8. How is wireless Internet access likely to influence e-marketing around the world? Mobile phones and the supporting technology have the potential to dramatically change the face of e-marketing around the world. Many countries have reached the point where they have more mobile telephone subscribers than fixed-line telephone subscribers. Because mobile phone technology is an effective and relative ly inexpensive path to telecommunications, countries with emerging economies can leap frog industrialized countries in terms of usage.

9. What is the digital divide and what does it mean for e -marketers?

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Nations with emerging economies may be in different stages of economic development, which affects their social climate. Least developed countries (LDCs) have the poorest economies and, in many cases, a dual economy because the population has both higher-income citizens and poorer citizens. Capital cities in LDCs may have both a middle and an upper class, while the areas outside these cities are underdeveloped economically and technologically. This disparity, especially as it concerns the ability of technology to raise both a persons and an entire nation's standard of living, is called the digital divide. Many E-marketers and organizations are trying to close the digital divide, but in the meantime E-marketers must adapt to their target audience. This may involve offering fewer product choices, decreasing delivery areas, and disclosing limitations; Emarketers know that it is better to under-promise and over-deliver than to overpromise and under-deliver. Discussion Questions 10. Do you agree with the observation that the global Internet will drive styles, tastes, and products to converge and create a more homogenous, global marketplace? Why or why not? Yes, even before the advent of the Internet, cultural macro-regions had large influences on one another. For example, the United States is world renown for its cultural and commercial influences. Stylistic trends in music and pop culture would often spill over into other nations and regions. This in turn, creates a more homogenous environment as different cultures converge in the global market place. Language will be an interesting challenge as these marketplaces converge. The heavy English orientation of the Internet is a cause for concern for some countries like France. They have tried to enact laws limiting this type of influence as well as promoting more nationalistic websites in their native languages. Other nations like China and Japan use pictogram-based languages instead of romanized characters and thus will be limited in convergence as well. The sheer market size of Chinas 1.3 billion people have forced E-marketers to re-examine their web presentation styles and thus create multiple language sites as well. In any case, the homogenization of cultures will continue as interaction and convergence through enabling technologies such as the Internet become more and more adopted. 11. Knowing that many consumers in emerging economies are wary of buying online, what would you do, as an e -marketer, to encourage them to change their attitudes and behavior? E-marketers must look at each individual culture for unique problems and concerns specific to their country. Some issues like a lack of infrastructure is out of the hands of E-marketers to address. Overcoming a lack of adoption may require businesses to promote and offer incentives to utilize technology. Programs designed to ease the process of adoption will help consumers of emerging economies become more comfortable one technology at a time. Special discounts, promotions, etc. available only online can also encourage users to try electronic purchases as well. In addition, affiliation and collaboration with trusted entities such as the government or

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established brand names can help users become more comfortable. As the world becomes more and more globalized, consumers may inadvertently be forced to adopt technologies as the infrastructure and cultural influences of entering a global marketplace are put in place. This of course takes time and is usually out of the hands of individual E-marketers to influence.

12. What are the advantages of disadvantages of e -marketers creating fast-loading low-graphics versions of their Web sites to accommodate slower connection speeds in emerging economies? E-marketers must recognize the relationship between connection speed and Web site design in emerging economies. Most Internet connections around the world are through dial-up connections. A telephone line limits the speed at which data can be sent and received. The current maximum speed for a modem connection is 56 kbps (56,000 bits per second). Download speeds in emerging economies may be much lower than 56 kbpsoften 28.8 kbps or lower. This has significant implications for Web site design, especially the extent to which graphics are used. In countries with emerging economies, where connections speeds are slow and a user may be paying by the minute, download speed is a major consideration. By providing fast-loading graphic versions of pages, firms can address the needs of emerging economies. This could be coupled with mobile technology since many emerging economies are adopting wireless options more than land line ones. Disadvantages could include a perceived lack of sophistication as well the absence of CRM and interactivity tools available with more sophisticated Websites. The best case would be to offer both. 13. What responsibility do you think e-marketers should assume for helping to close the digital divide? Do you think consumers and governments should assume some responsibility, as well? Explain your answers. Bridging the digital divide is a responsibility of all those who wish to provide equal opportunity and access in the information age. Similar to the concept of public libraries giving access to information in the form of books, the Internet and its plethora of information resources should be available to the public as well. Emarketers can do their part by creating Websites, promotions, etc. that are cognizant of the special needs of emerging economies. Promotion of advancing technologies by E-marketers can help adoption rates of consumers as well. Thus consumers must take responsibility of their own acceptance and adoption of emerging technologies to be competitive in an increasingly technological world. This in turn should help and provide the impetus for governments to establish the needed infrastructure to bridge the digital divide. By providing more and more public services online, governmental agencies can help normalize the usage of online resources as well. Ultimately it is the combination of all of the above that will help bridge the digital divide.

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14. How serious is the online threat from Chinese companies? Are some product or service categories more likely for Chinese companies to succeed in globally than others? Explain your answer. As Internet adoption rates increase quickly in China, national firms have emerged to capture market share. Two examples are: 1) Dangdang is a vigorous online retailer and aspires to be the Amazon.com of China. Like Amazon.com, Dangdang sells books, CDs, DVDs, and computer games online. But unlike Amazon.com, Dangdang has a ready fleet of couriers on bicycles who zip around Chinas major cities, delivering packages and collecting cash, and 2) Haier is a Chinese company with one overriding ambition: It wants to be the first Chinese company to have a true, worldclass global brand that is acknowledged as equal to (and Haiers CEO would say better than) the best global brands from Japan, the United States, Germany, and South Korea. In addition to capturing local market, firms such as Haier are challenging Whirlpool and other global brands. It appears, then, that U.S. and other firms must scramble to compete in the Chinese market this is especially true because of distribution challenges (e.g., Dandang example). It remains to be seen whether or not these and other Chinese firms can challenge well-established global brands. Probably the best success will be in online services/intangibles that do not require the complex global distribution systems already established by strong multinationals. As well, there may be threats from Chinese manufacturers that already export abroad and who decide to become direct marketers, cutting out the retailers in other countries. Mobile commerce via cell phone is another area of possible growth. Because Asia is far ahead of the U.S. with m-commerce, competition from China may come via this channel.

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