Author: Moodley, Sagren Source: Journal of Small Business Management
41, no. 3 (Jul 2003): p. 317 ISSN: 0047-2778 Number: 356306801 Copyright:
Copyright International Council for Small Business Jul 2003
Introduction
Excluding government transactions,
approximately 90 percent of global e-commerce is conducted among businesses (Mansell 2001). Increasingly, international wood furniture
buyers are using the internet to transform the way they do business and by
which they collaborate with trading partners. In particular, many of them are
using the internet to trade online and to develop close knowledge-based links
with suppliers. E-commerce technologies are, in turn, becoming increasingly
important for South African small wood furniture producers (SWFPs)
as they are integrated into global value chains and are exposed to more
sophisticated markets.
SWFPs are likely to benefit from low cost access to the
global marketplace, which previously was only open to major companies with a
global marketing and distribution infrastructure. The development of effective
e-commerce strategies thus is of critical importance for increasing SWFPs' competitiveness in global markets. This is in keeping
with Keesing and Lall's
(1992) argument that third-world producers often are expected to meet
requirements that frequently do not apply as yet to their domestic markets.
Opportunities exist for SWFPs to participate in the
reorganization of supply chains to capture efficiency gains and to participate
in more geographically diverse supply systems. Failure to adopt e-commerce
technologies could lead to SWFPs increasingly
becoming marginalized from international markets. By not making the transition
to e-commerce, SWFPs run the risk of becoming less
competitive, affecting both their present market positions and their long-term
viability. As larger companies in the wood furniture value chain integrate
e-commerce into their business, small firms without e-commerce capabilities run
the risk of being "frozen out" of the value chain.
Unlike large enterprises, many of which
already operate in global markets through well-established networks of
affiliates, the export potential of SWFPs has been
constrained because of their small size, lack of resources, and limited ability
to identify and work with new international customers and suppliers. The
internet eliminates these disadvantages by opening up global markets to SWFPs with an effective strategy for conducting business
online. Reduced transaction costs, lower barriers to market entry, and improved
access to information likely are to reduce the economically optimal size of
firms, thereby encouraging smaller firms to work together to develop global
markets. Despite these opportunities, South African SWFPs
are lagging behind their counterparts in the European Union,
For SWFPs the
e-commerce shift is likely to be profound, but for large firms they are
primarily extensions of the proprietary networks that many big firms already
are using. Smaller producers would, thus, be able to leap-frog the expensive
and relatively inflexible electronic data-interchange (EDI) stage of networking
and would be able to go straight to building networks based on an open internet architecture. From a development
perspective, small furniture firms are important because of their potential for
economic growth, job creation, and black economic empowerment.
The objective of this paper is to provide a
preliminary analytical foundation to help focus the policy debate. The
discussion that follows is based on insights gleaned from an exploratory,
qualitative survey, undertaken between January and March 2001, of SWFPs that currently are exporting. One hundred five
exporting SWFPs listed in the South African Wooden
Furniture Trade Directory (2000) were identified and a short questionnaire and
cover letter were sent to each firm. Completed questionnaires were received
from 64 firms (a response rate of 61 percent). In addition, face-to-face
interviews were conducted with 19 furniture industry experts drawn from
academia; government; trade unions; employers' associations; the South African
Furniture Export Council; and business, marketing, and information technology
(IT) consultancies.
Conceptual Framework: Internet Connectivity
and Access to Global Markets
The issue of engaging more openly in global
production and trade networks has become central to debates on how formerly
inwardly oriented industrial sectors restructure themselves to maintain
competitiveness in a more open, trade-liberalized environment (Schmitz 2000;
Sturgeon 2000; Nadvi 1999). Increasingly, trade in
wood furniture is "organized by global buyers, who may work for, or act on
behalf of, major retailers or brand-name companies" (Humphrey and Schmitz
2001, p. 1). Detailed empirical research on trade in labor-intensive products
has shown that access to developed country markets increasingly has become
dependent on linking into the global production networks of lead firms situated
in highly industrialized countries (Dolan and Humphrey 2000; Schmitz and Knorringa 2000; Gereffi 1999).
In order to participate in export
manufacturing to the
Therefore, SWFPs
need to position themselves strategically within global trade networks and to
develop information and communication technology (ICT) strategies for
connecting to the lead firms. In theory, upgrading opportunities are likely to
stem from leveraging the information flows and learning potential that is
transmitted through internet-organized trade networks. When foreign buyers wish
to develop new sources of supply, they are likely to look for producers that have
the potential to engage in e-commerce. Thus internet-based e-commerce
capabilities become a key source of competitive advantage in the value chain.
South African Small Wood Furniture Producers
The South African wood furniture production
sector (WFPS) is dominated by small firms (Table 1). Since 1994, the WFPS
landscape has been altered substantially by the twin pressures of globalization
and trade liberalization. This is attributable partly to
Table 1
South African Wood Furniture Producers by
Size of Firm*
There are several reasons for shifting the
focus to export markets. First, the local market is small, making it difficult
to sustain economies of scale. Second, furniture is a
consumption good, and in a developing country like
The main export destinations for South
African wood furniture products are the
According to Table 2, furniture accounted
for 3.5 percent of total manufacturing employment and 2.7 percent of total
manufacturing exports for
In 1998, the world furniture industry was
the 19th-largest traded goods sector, with a total value of world trade of
US$44.9 billion, surpassing the value of trade in the apparel industry (US$40.6
billion) and the footwear industry (US$33.8 billion). Between 1994 and 1998,
all world trade grew by 16 percent, whereas world trade in the wood furniture
industry grew by 26 percent (International Trade Center 2001).
To put this growth in context, the other two
low-technology sectors (that is, apparel and footwear) grew by 18 percent and
two percent, respectively, during the same period. Competition in the global
furniture industry has intensified in recent times with the increasing
penetration of industrialized country markets by developing countries (mainly
from
Theoretically, the internet provides South
African furniture manufacturers with the requisite connectivity to become a
global player through world-wide marketing and sourcing. E-commerce represents
a major opportunity for SWFPs to compensate for their
traditional lack of access to national and international markets. The improved
transaction efficiency and reduced communication and information costs of the
internet offer opportunities to small producers for extending their global
reach. Small firm competitiveness also can be enhanced through the attainment
of internet-mediated "collective efficiency" gains (Schmitz 1999).
Internet penetration among furniture firms
with 200 or more employees has reached 100 percent, but penetration is only 60
percent in firms with less than 50 employees. The main uses of the internet by SWFPs include accessing commercial databases or services,
information searches, marketing, monitoring prices, and email applications. The
main advantages SWFPs associate with e-commerce are
strengthening customer relationships, reaching new markets, optimizing business
processes, and reducing costs.
Only 11 percent of SWFPs
are using the internet to undertake transaction facilitation activities. A
major barrier to e-commerce adoption among SWFPs is the
lack of awareness of the potential benefits of e-commerce. The survey findings
suggest that although the majority (72 percent) of SWFPs
had positive expectations of how the internet would affect their penetration of
export markets, they generally were not well prepared for e-commerce. Only six
percent of SWFPs had a formal e-commerce policy,
while 17 percent of companies were attempting to generate sales through the
internet. Only 39 percent of SWFPs had a corporate
website. SWFPs are using their websites primarily as
online brochures rather than for online trading. Currently, less than five
percent of SWFPs have e-commerce systems in place.
Table 2
trade and Employment Data dor
South Africa, 1995-1999*
Table 3
Net Export Data for South Africa, 1995-1999
(US$'000)*
Making the transition to e-commerce will not
be easy, as there are formidable obstacles to overcome. These include the
following:
* Limited awareness among SWFPs of the potential of e-commerce;
* Evolutionary path dependencies that focus
on the reduction of labor and input costs as competitive advantage rather than
on pursuing a knowledge and innovation-intensive growth trajectory;
* Management's insular mentality, which have
locked firms into an inwardly oriented way of thinking;
* The lack of adequate e-commerce
infrastructures, skills, and capabilities. Many SWFPs
simply lack the basic knowledge and technical skills to implement e-commerce
strategies; and
* The relatively high initial investment
costs involved in developing e-commerce strategies.
Conclusion: The Policy Challenge
The policy challenge is to create an
enabling and nurturing environment aimed at promoting and accelerating the
diffusion of e-commerce technologies and strategies among
* Diffusion, including dissemination of
information on e-commerce (success stories, best practice, and opportunities
and obstacles related to the use of the internet and e-commerce), training,
skills development, and human resources; and
* Enabling, such as network infrastructure
and transaction security covering authentication and certification.
Government needs to become involved actively
in developing training courses and workshops on e-commerce for SWFPs. The establishment of a center to provide
comprehensive information, advice, and training on business usage of the
internet as well as support services for the establishment of e-commerce
activities is of critical importance. Training and skill formation should be
carried out in conjunction with business and industry associations and with a
consortium of small firms in order to gain economies of scale in developing and
delivering training services.
A policy priority is to liberalize the
highly regulated and concentrated South African telecommunication market and to
promote competition in order to stimulate new investment, to increase demand
for communications access and services through falling prices, and to promote
greater efficiency and innovation in the provision of infrastructure and
services. Policy initiatives to lower network infrastructure costs and internet
access charges for SWFPs are important. This is
likely to provide a stimulus to the growth of e-commerce among SWFPs. In the Organization for Economic Cooperation and
Development (OECD) (1999a) countries, for example, the availability of
affordable access to high-speed telecommunication infrastructure is closely
linked with firm migration to e-commerce.
The magnitude of the e-commerce challenge is
such that there is a need for various public-private and multipartnerships,
alliances, and consortia. There is an urgent need for the forging of
partnerships to
* Develop e-commerce solutions and systems
that are tailored to SWFPs;
* Assist SWFPs to
access capital for their e-commerce ventures;
* Encourage small firms to form networks and
clusters in order to share knowledge, to reduce the average costs of their
input transactions, and to increase their relative market power in e-commerce
transactions;
* Develop knowledge and trust-based
collaborative relationships in the South African wood furniture value chain;
* Develop human capacities and skills;
* Educate firms about e-commerce and to make
them aware of e-commerce opportunities, challenges, and risks; and
* Assist SWFPs in
building internet-based pipeline linkages with lead firms in the
Close coordination and effective
collaboration among the different stakeholders is essential if scarce resources
are to be deployed efficiently. Although SWFPs are
lagging behind larger furniture firms in the adoption of e-commerce, there is
evidence suggesting that early-adopting smaller firms outperform other similar
sized firms (OECD 1999b). The aim is to enable small firms to benefit from the
positive gains of internet-driven networking and from "first-mover"
advantages.
E-commerce will play an instrumental role in
establishing and in sustaining global linkages and in so doing will provide
leverage for SWFPs linking into export markets. Interfirm e-commerce capabilities are important for SWFPs as they are struggling to compete in a globalized and interconnected world that is organized
around knowledge and information flows. Of course, the transition to an
integrated internet trading system will not be easy. It is a long-term project
that will require a great deal of commitment from the different stakeholders.
E-commerce technologies are becoming
increasingly important for
Journal of Small Business Management 2003
41(3), pp. 317-324
* The Canadian International Development
Research Centre (IDRC) provided the funding for this study. Their generous
financial support is appreciated sincerely and hereby is acknowledged. The
usual disclaimers apply.
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September-1st October.
This article by Lannette Sheldon and Troy Strader
deals with managing issues that will arise when a web-based business will go
international. The authors give several reasons
why a business may go international. One
instance is that a business that was intended for domestic purposes may get
international orders and is then faced with a magnitude of issues. This paper discusses the four main problems
that a web-based electronic business will face.
The first problem is the
problem of getting the web-based electronic commerce internationalized. The second problem is the ability to accept
international payments. The third issue
deals with shipping to international locations.
The last and very significant point that the others make is the problem
of international and foreign laws that have to be fully understood.
The authors then go into
detail of each point. In regards to the
internationalization process of a web-based electronic commerce business, the
authors mention several internationalization strategies. One of the strategies
is to have the website in US English only.
Another strategy is to translate the website partially. The most expensive form of internationalization
is to have several mirror site in the localized
language. In any case an internationally
operating business has to ensure that the content is legal and acceptable in
all target countries. Another problem with
internationalization of a web-based company to have a website in place that
uses only internationally accepted symbols.
Also in order to make the web site less confusing only international
time standards should be used so it is less confusing when the times of
operations are. The authors also suggest
that with measurements there should be only a metric system and the English
system as standards. Another potential
problem that internationally targeted websites have to address according to the
authors are forms.
Many countries have different regulations what needs to be in a
form. Therefore, it is essential that
someone running an international e-commerce business is aware of these
regulations.
The second problem the
authors are discussing in detail is the acceptance of international payments. Generally speaking there are very little or
no issues with accepting credit cards in
The third point that the
authors are making is about international shipping. International transportation requires a solid
understanding of involved costs and also legal issues. In order for someone to ship internationally
someone has to understand that there are many forms involved such as a bill of
lading, commercial invoice, and an insurance certificate as well as other
documents depending on the country where the merchandise is going to be
shipped. For some products there a
special taxes and fees involved that all add to the price of the product. Also there are different shipping companies
that should be used for different product amounts. For relatively small quantities and easy to
transport products, companies such as FedEx, DHL, and
The fourth point the authors are discussing are legal issues in
different countries. For example the
European Union is extremely strict on how much data on a customer can be
collected and stored. May practices in
the
In conclusion the authors
say that a company that is aware of the above issues is better prepared to
handle international web-based electronic commerce and also has a higher chance
to succeed. Companies that not fully
understand these issues may fail and also have a higher chance of wasting
money.
I can recommend this article
since it addresses many issues that are essential to start an e-commerce
business internationally or to expand an e-commerce business to take
international orders. The article could
go in more detail. Especially when it
comes to international shipping and the associates costs. Costs of goods sold are oftentimes
significantly higher when the carrier is too expensive or the custom clearance
is not done correctly. Also the article
is more geared towards small e-commerce businesses than large ones. The article briefly comments on different
paper work that needs to be filed for large importers. But the paper work for security clearances
for the
Full-text
source:
Author: Sheldon, Lannette
A; Strader,
Introduction
Electronic commerce (e-commerce) involves
the automation of commercial transactions using computer and communications
technologies such as the Internet and World Wide Web (Westland & Clark,
1999). It has brought about a fundamental change in the way individuals and
businesses access data, information, and services without the limitations of
time or distance. The numerous advantages that accompany e-commerce such as
lower product promotion costs, lower transaction costs, and an expanded
customer base, have prompted even the smallest businesses to deploy e-commerce
Web sites (Quelch & Klein, 1996; Strader & Shaw, 1997). However, after implementing an
e-commerce site, many companies often discover that, although their business
was intended to remain purely domestic, they soon receive international
recognition and may even get orders for their products or services from abroad.
Domestic companies frequently find that they are incapable or ill prepared for
handling these global orders. The question addressed by this study is: What
issues will companies face while attempting to take their Web site global with
the intent of obtaining international orders?
The issues involved in adapting an
e-commerce site to suit an international audience are complex, and this paper
concentrates on four of them. While these issues are important to all
companies, they are especially relevant for small- to medium-sized firms that
may lack the internal resources and expertise to adequately address them. The
issues include: 1) internationalization issues, the standardization of content
and appearance, 2) financial issues, the acceptance of foreign payments,
exchange rates, and common financial transfer schemes, 3) transportation
issues, the logistics of moving products abroad together with customs, tariffs,
import/export restrictions, and documentation, and 4) legal issues, national
and regional laws businesses should be aware of when engaging in global
e-commerce. The primary perspective taken on these issues is that of a
Web Site Internationalization Issues
Following the decision to include global
buyers as part of the target market for a business's Web site, adjustments must
be made to the site to encourage global visitors to buy products.
Internationalizing the Web site will aid in the attraction and retention of
foreign users by allowing them easier access to the information and functions
it presents in a standardized, more simplified manner. According to Adam Jones,
director of customer programs at SimulTrans, a
translation company based in
1. Use only American English.
2. Translate portions of a given Web site
into a target language.
3. Translate the entire Web site into a
target language.
4. Culturally localize the site for a target
audience.
5. Develop content in a target country,
independent of the
Most businesses lack the resources and
expertise to develop separate Web sites accompanied by the independent channels
of distribution, marketing, and production facilities required for each target
market they plan to enter. Therefore, these businesses are likely to enter into
the global arena on a smaller scale, sticking to levels one and two when
redesigning their Web sites with an international focus.
Even a company accustomed to doing business
solely in its home country, and unwilling to incur the costs of translating the
site into numerous languages, can still make the number of modifications that
will make the site more user-friendly to foreign customers. Some of these
involve the following:
* Icons. When you see a gray mailbox at the
bottom of a page with a red flag sticking up, do you think of anything but
mail? Or e-mail? However, a mailbox in
* Telephone numbers. Internationalizing
contact information is extremely important if a company wants global customers
to be able to make inquiries regarding products or services. The 800 numbers
listed on must U.S. Web sites do not work outside the
* Time. In connection with providing a phone
number, contact hours should be listed in an internationally friendly format.
For example, instead of merely stating Office Hours 8-5 CST, use the format
Office hours 8-17 CST (
* Dates. Dates should be written in an
internationally recognizable format such as 11-Oct99 or
* Measurements. Since the majority of the
world either uses, or is in the process of adopting, the metric system, any
form of measurement should be listed in both the metric and English standard.
This includes volumes, weights, sizes, and temperatures (Tuominen,
1998).
* Currency. A key piece of information for
any buyer contemplating the purchase of a product is, of course, how much it
costs. A vague price description, such as $139.99, can lead a customer to
wonder if it is
* Forms. Forms are considered one of the
biggest hassles to an overseas buyer when using online commerce. Many
Internationalizing a company's Web site can
be as big or small a task as desired. Generally, the effort and dedication put
into redesigning a company's Web site will depend on just how actively global
customers are pursued. If a company intends to target a key area of the world,
it may consider developing an entirely new Web site devoted solely to that
particular audience. If a broad global customer base is targeted, then
superficial adjustments such as standardizing contact numbers and forms may be
an adequate solution.
Financial Issues
One of the ultimate outcomes of order
fulfillment is getting paid. When conducting business domestically, the method
of payment for goods or services is often 67, no. 3 (Summer 2002): p. 22-30one
already common in that country and is in the country's local currency. For
example, in the United States, if U.S. consumers were to buy a product online
from a domestic company they would probably pay by credit card, personal check,
money order, or even cash on delivery, all in U.S. dollars. However, it is
unlikely that a potential customer from a Baltic country is going to use (or
have access to) a credit card to pay for the goods, and the business is
unlikely to accept (or know what to do with) a personal check from abroad in a
foreign currency. Therefore, the issue remains: How to collect their money from
foreign customers?
* Credit Cards. If an order is placed online
by a customer based in areas such as Western Europe, Australia, Canada, or the
U.S., then a widely accepted credit card, most likely a Visa or MasterCard
card, may be used to conduct the transaction right over the Internet. Once the
Web site captures their account number, the credit card company can handle the
transaction from there, including paying the company in its native currency,
and deducting the payment from the customer's account in their currency. The
credit card company will also assess the buyer any fees required in the
currency exchange.
* International Money Orders. International
money orders are safe and relatively easy method of payment for buyers who do
not have, or do not wish to use, their credit card online. These orders are
convenient for businesses to process and are relatively easy for customers
abroad to obtain, as most banks will write an international money order for a
small fee. With international money orders the check clearing process, which
significantly reduces the time the buyer must wait for products to be shipped,
can be avoided.
* Personal Checks. Personal checks from a
foreign country are by far the most risky of the alternative payment schemes
listed so far. Although more convenient for the buyer, businesses dislike the
uncertainty associated with accepting a check from a foreign buyer and trusting
that the funds in the related account are, in fact, there. The chances of fraud
are much higher with foreign personal checks, and the laws governing buyer
default, or bounced checks, vary from nation to nation. Some, although not
many, businesses are willing to accept personal checks from abroad provided the
goods are shipped after a successful check clearing process. For example, many
These three methods of payment are the ones
most commonly used by companies engaging in trade with customers in more
advanced countries. If the company is selling a relatively expensive product,
or a large quantity of a lower-priced product, to a single buyer, then payment
methods such as a letter of credit or the wiring of funds may be advisable.
There are chances of fraud with any form of payment, but credit cards and money
orders are for the most part considered safe and give both the business and the
customer a relatively easy and efficient way to exchange funds.
International payments can become even more
complicated when dealing with buyers in less advanced nations where foreign
exchange may not be as readily accessible. For example, some countries in
Better online payment systems continue to be
developed. Businesses specializing in online payment transactions, like PayPal, Billpoint, and Bidpay, are encouraging an increasing number of consumers
to pay online. The services these and similar businesses provide range from
instantaneous online authorized credit card transactions to the online purchase
of money orders by customers to be sent directly to businesses. The development
of other more advanced payment systems, although not often used or accepted by
most businesses today, include the use of smart cards and computergenerated
cash, such as Digicash and e-cash. As consumer
confidence in the security and safety of online transactions grows, newer
methods of online payment should evolve. The key for a business selling abroad
is to offer flexible payment options and work with their bank or credit card
agency to help protect against fraud.
Transportation Issues
In this section we focus on issues related
to transporting physical goods. For digital products, such as software that can
be transmitted over the Internet, these issues are less relevant. A major part
of a transaction involving the purchase of a physical good is getting that
product from the seller to the buyer. Within the
* Process. To begin, the seller checks the
customer database (or wherever else records of online customer orders are kept)
and first notes the buyer's country. It is the selling company's responsibility
to then check with the Department of Commerce to determine whether or not an
export license is required to ship a product to this destination. Most products
do not require a specific license but can be shipped under a
Bill of Lading. These documents are contracts between the owner of
the goods and the carrier. There are two types: a straight bill of lading,
which is nonnegotiable, and the negotiable/shipper's order bill of lading,
which can be bought, sold, or traded while goods are in transit and is used for
letter-ofcredit transactions. The customer usually
needs a copy as proof of ownership to take possession of the goods.
Certificate of Origin. Certain nations require a signed statement of the
origin of the export item so they can monitor import tariffs and quotas. Such
certificates are usually obtained through a semiofficial organization, such as
a local chamber of commerce, and must be certified by that organization.
Commercial Invoice. As in a domestic transaction, the commercial invoice
is a bill for the goods from the buyer to the seller. A commercial invoice
should include a description of the goods, addresses of the shipper and seller,
and the delivery and payment terms. The buyer needs the invoice to prove
ownership and arrange payment. Some government agencies use the invoice to
access customs duties.
Destination Control Statement. This statement appears on the commercial invoice,
ocean or airway bill of lading, and the shipper's export declaration to notify
the carrier and all foreign parties that the item may be exported only to
certain destinations. Export License. An export license is a government
document that authorizes the export of specific goods in specific quantities to
a particular destination. This document may be required for most or all exports
to some countries or for other countries only under special circumstances.
Insurance Certificate. If the seller provides insurance, the insurance
certificate states the type and amount of coverage. In the case of an exporter
holding an open insurance policy, he or she cannot send that sole policy to all
the buyers and for all the shipments made over a period of time. Therefore, the
exporter issues an insurance certificate for each shipment.
* Using a Freight Forwarder. The amount of
documentation required for shipping overseas is often overwhelming for first
time exporters. If a business has a relatively low volume of international
orders and is dealing with consumer goods directed at the end user, it should
consider working with a global integrated express carrier, like DHL,
Other Costs. In addition, it is important to consider the effects
of tariffs, value-added taxes, port handling fees, currency fluctuation
transaction costs, customs duties and inspections when determining your
product's final transportation costs. Tariffs, custom duties, and taxes are
extra charges imposed by a foreign government on the importation of goods usually
for the purpose of protecting domestic producers or earning extra revenue.
Depending on the country of import, these charges can be either nonexistent or
quite substantial in relation to the overall value and price of the product.
(In many nations, items below a certain value may not be charged any duties or
tariffs at all). Hence, businesses must take into account the potential taxes
and tariffs that may be levied against their products along with the various
other costs associated with transporting their product as these costs can
significantly impact the business's projected product revenue. Typically, the
importer will pay these added charges. However, these expenses should be
considered carefully when pricing the product competitively, as they will
likely influence how much the buyer is willing to pay.
* Reverse Logistics. Another factor in
international transportation often overlooked by smaller businesses is that of
reverse logistics, or the returning of a product that does not meet customer expectations
or that is damaged and must be returned for repairs. The value of returned
merchandise purchased online is expected to reach an estimated $5.8 billion in
2005, representing 90 million items (Cox, 2001). A number of companies provide
reverse distribution and logistics services. Some examples include ReturnCentral (www.returncentral.com), Return.com
(www.return.com), and ReTurn, Inc.
(www.returninc.com). There are three key elements to effective reverse
logistics management for an online retailer: 1) Collect the data necessary to
understand a consumer's reason for the return, 2) Efficiently redistribute the
goods including planning for sufficient warehousing space for the returned
products, and 3) Effectively report why customers are returning goods to help
minimize future returns.
Legal Issues
E-commerce is still a relatively new
phenomenon and nations all over the world are scrambling to enact laws that
protect their citizens from harmful online practices. Just as trade laws differ
from nation to nation, so do Internet laws. There is little conformity among
the current laws already enacted by many nations, making it difficult, if not
impossible, for a business to properly follow all these regulations.
* Consumer Privacy Protection: The EU Directive.
A big area of concern for many nations is protecting the online treatment of
personal information of their citizens. Several countries have revised, or are
in the process of revising, laws that will regulate what information a company
can collect from its customers and how this information can be used. The
European Union has enacted a set of regulations collectively known as the
European Union Data Protection Directive, which requires that any personal
information obtained must be used solely for the stated purposes it was
collected for and that consumers must have the right to access and change their
data if it is incorrect. The directive also states that personal data may not
be sent from
* Advertising Claims. Every nation has its
own laws that protect consumers from fraudulent advertising. When advertising a
product on the Web, a company should be as specific as possible about
warranties, including what is covered and for how long, and give the specific
terms of the guarantee. If a company guarantees that the product will be
received in 30 days or less, and it is not, the compensation the buyer will
receive should be stated. Advertising claims mean different things to different
people, so it is best to avoid any confusion and possible legal action by
accurately stating exactly what a claim means. A company should also consider
the audience addressed by the ad.
* Content Regulation. Some countries have
laws to regulate what content may be displayed on Web sites in their nation.
For example, some
* Other Legal Concerns. Some other areas of
legal concern include: pricing regulations, import/export restrictions,
prosecuting fraud, seeking compensation from foreign buyers, enforcing
contracts created online, applying various taxes required by certain nations,
and following product specification regulations imposed by different nations.
Laws regarding ecommerce are still being implemented and tested around the
world. The issues of jurisdiction and enforcement are key areas that are
continuously under examination. A company engaging in foreign trade may find
that it is dealing with buyers that are used to playing by a different set of
rules. To help protect against foreign litigation, a Web site should identify
the country where the business is located and registered. It may also be
beneficial to include a link to the various business-related laws and
regulations to which the company adheres. For example, if a business is located
in the
Conclusion
Having a Web site will automatically give a
company a global presence. However, simply building traffic to one's Web site
from other countries is not enough to guarantee global success. Companies must
consider Web site content, financial, transportation, and legal issues as they
weigh selling to customers outside their home country. Web-based commerce is
constantly evolving. Businesses that are well informed of the issues presented
in this paper, and are able to develop thorough, cohesive strategies to manage
these issues, will find themselves in a better position to reap the advantages
and rewards of global e-commerce.
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Lannette A. Sheldon, Cargill, Inc.
Troy J. Strader,
In this article the authors
analyze the speed of the internationalization of e-commerce companies with the
help of empirical data. The authors are
using a comprehensive approach by avoiding a myopic view and applying micro-
and macro-economic concepts to full explain the rapid speed of the
internationalization of e-commerce companies.
The micro-economic view
focuses on local markets and demands and the macro-economic view focuses on
global demands and a global economic environment. The authors are beginning to explain the
speed of internationalization of e-commerce companies by exploring some
traditional views on how a company should grow.
The article states that the traditional way of expanding internationally
is to operate from a strong local base.
This traditional view generally applies to manufacturing companies that
grow their business locally before expanding.
The authors then state that this explanation model is not sufficient to
explain the rapid growth because this approach is timely and oftentimes
characterized by set backs and slow expansion.
However, the authors explain
that traditionally expansion into foreign markets come with some difficulties
that need to be overcome in order to be successful. For example foreign markets need to be
understood by the company that wants to expand into foreign markets. There are not only cultural and language
differences but also legal and taxation issues that need to be understood.
However, there are also
inhibitors that are psychological and knowledge related in nature. It may also be that a foreign market is not
understood and opportunities are not obvious.
It seems that traditionally most companies are using an iterative
approach that starts off with a low risk and low investment strategy that can
potentially evolve in a high risk, high investment strategy.
However, the authors are not
satisfied with this explanation model for three reasons. Electronic Commerce
Companies are different from traditional companies and do not necessarily need
to follow the traditional steps since information and product flows are
multidirectional. Secondly Electronic
Commerce Companies are more integrated with the market and therefore are more
tuned in with customer requirements.
This also forces Electronic Commerce companies to be flexible in
nature. The third reason is that
Electronic Commerce Companies are not so much culturally constrained in
comparison to traditional companies.
The authors then continue to
explain that the market entry for Electronic Commerce Companies differs
significantly from traditional firms in the sense that for example small ECCs are heavily influenced by their executive managements
international experience. It is possible
that the executive management of a small company knows a foreign market and
sees more opportunity and to a lesser extent risks. Analyzing micro- and macro-economic
indicators can also be interpreted differently for ECCs
than for traditional companies.
The authors therefore
conclude that there are significant differences in the internationalization
process between traditional companies and Electronic Commerce Companies that
can be summarized in several steps:
The transfer of high tech
know how has become more difficult and therefore makes the market entry into
new markets easier in the sense that technology can not easily be copied which
protects the entering company. Marketing
competency is the next step in creating traffic for the company in an
international environment. This
marketing capability is also closely related to the success of the
company. Meaning the more successful the
marketing campaign and the more sophisticated the marketing strategy is, the
faster and deep the internationalization of the
The most important
macro-economic factor besides a strong foreign market is the technical
infrastructure in the foreign country.
An
I think that the conducted
research is important. The hypothesis
tested held true in most cases. I think one really important factor in the
speed of internationalization e-commerce companies is the local infrastructure
and consumer protection. I think if the
infrastructure is bad, this can be said for many African nations, the
e-commerce will not grow or expand.
Also, when the consumer is not protected, the chances of fraudulent
activity will increase and make consumer cautious.
I found this article
interesting since it deviated from the approach that an electronic e-commerce
company always has to grow from a local base.
I think any business on the internet can call the world its local base,
if three factors are right. The business
needs to have a product that people like and which adds value. It can be shipped easily across borders
without major taxation or legal limitations.
The last factor is cost of shipping that ideally should be only a
fraction of the total price.
Author: Luo, Yadong; Zhao, John Hongxin Du, Jianjun Source:
International Marketing Review 22, no. 6 (2005): p. 693-709 ISSN:
0265-1335 Number: 956680611 Copyright: Copyright Emerald Group
Publishing, Limited 2005
Abstract
Purpose - This study aims to explain the
internationalization speed of e-commerce companies (ECCs).
Design/methodology/approach - Based on the
archive data of the American ECCs, the study used
multiple regression analysis to estimate the influences of a number of micro-
and macro-factors.
Findings - The results show that the speedy
foreign market entry by ECCs was positively
influenced by top management team's international experience, and innovative
and marketing capabilities.
Research limitations/implications - The
study did not deal with the entry mode of ECCs
inviting more future research efforts in this direction. Additionally, as
established MNEs have integrated e-commerce into
existing business, future research can be devoted to examine the impact of this
integration on the internationalization of firms.
Originality/value - Extant literature has
addressed the internationalization of ECCs with a
focus on the level of internationalization. This study contributes to the
current literature by extending research on globalization of ECCs and incorporating both micro- and macro-level factors
affecting the speed of international expansion.
Keywords Electronic commerce,
Paper type Research paper
Information technology has been reshaping
global business. Fueled by the fast deployment of telecom and computer
technologies, e-commerce is experiencing an explosive growth, with about $1
trillion worldwide internet transactions (Iyer et
al., 2002). Correspondingly, e-commerce companies (ECCs)
have surged, steering both domestic and global economies. No other firm-level
forces have alone so evidently triggered the borderless of international
business like ECCs (Learner and Storper,
2001; O'Brien, 1999). While established companies are scrambling to reconfigure
and restructure their business strategies to compete successfully in a global
marketplace, ECCs are changing the way businesses
operate and the wisdom of management philosophies and practices. It is true
that ECCs still face numerous challenges and pitfalls
in operating overseas (e.g. in foreign emerging markets, they encounter even
stronger interventions by host governments than traditional multinationals), ECCs, enabled by internet capability, are generally subject
to fewer physical barriers in transcending national borders and are less
susceptible to entry barriers associated with expensive physical presence and
startup facilities.
Broadly denning
e-commerce as buying, selling, marketing, or servicing of products, services,
and information via a variety of computer networks, this study examines in what
ways the internationalization speed of ECCs (defined
as those companies whose business activities are entirely internet-based) are
influenced by both micro- and macro-level factors. Extant research has
addressed the internationalization of ECCs with a
focus on the level of internationalization (Fujita et al, 1999; Kotha et al, 2001; Oxley and Yeung,
2001; Zaheer and Manrakhan,
2001). To extend the current research of ECCs, we aim
to examine the speed of internationalization using an integrated model of both
micro- and macro-level factors. Micro-level factors refer to those reflecting
Though reality and the nature of ECCs suggest that
This attempt is of several theoretical and
managerial interests. The internationalization models so far assume that firms
need to build a strong home base before entering a foreign market and to follow
an evolutionary approach to expand globally (Anderson and Gatignon,
1989; Buckley and Casson, 1985; Johanson
and Vahlne, 1977; Vernon, 1966; Welch and Loustarinen, 1988). Under this assumption, the speed of
internationalization is slow, incremental, time-dependent, and
experience-accumulative. This assumption is traditionally geared to typical
manufacturing MNEs and seems problematic when it is
applied to ECCs whose unique ability to benefit from
a globally connected economy through internet-enabled business activities
enable them to leapfrog some of conventional barriers or difficulties
associated with international entry. This may challenge assumptions of extant
evolutionary perspective, especially in the speed of international expansion,
since ECCs operate in a
rather peculiar environment, subject to different institutional parameters
(Oxley and Yeung, 2001). By exploring these
parameters as well as organizational attributes that accelerate or deter the
speed of foreign market entry, business managers with a global vision in ECCs will have a richer knowledge base concerning their own
path or pattern of international investment strategies.
Theoretical underpinnings and hypotheses
Internationalization theories
The internationalization theories, whether
emphasizing the behavior rationale, transaction cost logic, or product life
cycle reasoning, commonly agree that the internationalization is a gradual
learning process in which the rate, sequence, and direction of international
expansion are a function of a firm's experience, capability, and evolution. In
this view, a firm's participation in a specific foreign market proceeds in
sequential steps indicating an increasing resource commitment and an increasing
experience accumulation Qohanson and Vahlne, 1977; Welch and Loustarinen,
1988). These theories also hold that firms enter new markets involving
successively greater psychic distance. Thus, firms start internationalization
in those markets they can most easily understand, where perceived market
uncertainty is low and it is easy to spot opportunities. This strand of
research also emphasizes the importance of knowledge accumulation. As firms
become more familiar with the foreign markets, firms will gradually reach a
fairly advanced stage of international involvement evolving from exporting to
high forms of international operations (Chang and Rosenzweig,
2001).
The strand of transaction cost logic adds a
control dimension to explaining internationalization (Anderson and Gatignon, 1989). This strand stresses two factors, cost and
risk, and links them with entry mode and international expansion. It advocates
a gradual process from low-cost, low-risk entry strategies to higher-cost,
higher-risk strategies (Buckley and Casson, 1985).
Opportunism and asset specificity force firms to make trade-offs among the
entry modes in the internationalization process (Williamson, 1985). The strand
of product life cycle model posits a stepwise sequence from domestic innovation
and production to exporting and to foreign direct investment (
Despite different emphases, these theory
streams all suggest an incremental pace at which firms expand into overseas
markets, an evolutionary sequence by which firms escalate their international participation, and a limited and cautious coverage at least
in the early stages of internationalization. Two interrelated key concepts
underlying these shared tenets are the psychic distance (Kogut
and Singh, 1988) and experiential learning (Fina and Rugman, 1996). Incremental and sequential international
expansion of firms is constrained by the psychic and geographic distances. The
psychic distance epitomizes knowledge and information deficiency that increases
the uncertainty of undertaking overseas business and the costs of coordination,
which in turn influences the foreign expansion. Consequently, firms select and
enter foreign markets exhibiting great similarities in economic, cultural, and
political systems. The incremental process is justified as firms initially lack
knowledge of the foreign market and confront cultural hurdles. However, the
commitment of firms to more sophisticated forms of foreign operations increases
as firms improve their knowledge of foreign markets through experiential
learning (Buckley and Casson, 1981).
Internationalization of ECCs
We question that the above theoretical logic
may not be adequately applicable to ECCs, and thus
some modification of these theories may be necessary to develop an alternative
sector-specific framework that accommodates ECCs. Our
attempt should be seen as an effort to complement or enrich, rather than
dispute or challenge, extant theories of internationalization. For traditional MNEs, their speed of entry is incremental. For ECCs, their speed is likely to be rapid. This proposition
arises from the following uniqueness of ECCs compared
to traditional MNEs.
First, an
second, compared to a traditional MNE, an
Third, ECCs are less physically- and culturally-constrained than
traditional businesses. Knowledge and business transactions conducted by
traditional MNEs located in different countries are
limited by physical and cultural boundaries as suggested by previous research
(Chang, 1995; Davidson, 1980). This limitation compels them to sequentially
probe their ways into new foreign markets due to cost and affordability
reasons. Since e-commerce is featured with information transmission and sharing
in a dimensionless space where suppliers and consumers interact, an
Entry speed of ECCs
The proceeding descriptions of ECCs suggest that the existing internationalization model
may not be sufficient to explain the phenomenon of speedy entry into foreign
markets by ECCs. To this end, we develop an alternative framework that integrate both micro- and
macro-level factors to explain the speedy internationalization of ECCs. This study argues that an
Micro-level conditions. Within a group of ECCs, an
individual
International experience. Every organization reflects the background of its
most powerful top managers (Chaganti and Sambharya, 1987). Top management team (TMT) can be viewed
as the knowledge hub within an organization for integrating and
institutionalizing information into decision-making. This team has a powerful
influence over forming and developing a strategic contour of the firm (Hambrick and Mason, 1984) and this powerfulness depends on
executives' experience base (Boeker, 1997). Because a
TMT's strategic decision is consistent with their
cognition (Reger and Huff, 1993), which is in part a
function of values and experience, the team's foreign experience is likely to
be associated with international strategic moves. Several recent studies find
that international expansion of small high-tech firms was influenced by their
founder's foreign experience (McDougall et al, 1994). The management with more
foreign experience may feel more confident to lead firms into foreign markets.
To expand the findings of these researches, this study argues that an
Hl.
Innovative capability. Firms are perceived as a bundle of tangible and
intangible resources characterized as uniqueness, rare, and inimitable (Barney,
1991). Following this view, ECCs can be viewed as
possessing various specialized entrepreneurial competencies in core technology
know-how and marketing ideas that are often difficult to imitate and
substitute. Thus, the internationalization of ECCs
can be interpreted as leveraging in foreign markets their innovative and
marketing competencies to achieve competitive advantages (Zahra et al, 2000).
Innovative and marketing know-how are major sources of competitive advantage
and are especially valuable to ECCs, for they can
generate large traffic volume needed for survival in a competitive market and
reduce uncertainties, build reputation, and differentiate products and services
(Crocker, 1997; Iyer et al, 2002).
One key motive that drives ECCs to international markets fast is to leverage their
innovative capabilities in foreign markets. Innovative activities of ECCs enable them to generate traffic volume through
enhancement of network connectivity. To generate large traffic volume, ECCs have to undertake innovations
to constantly improve the connectivity. Thus, when business opportunities
emerge in foreign markets, moving into international markets to exploit the
advantages of network connectivity is a logical step for ECCs
to generate extra traffic volume, hence additional revenue. Thus, innovative
activities that help ECCs enhance their internet
connectivity are likely to prompt ECCs to quicken
their internationalization that could in turn stimulate sales growth in foreign
markets. We thus predict:
H2. An
Marketing capability. Marketing capability of ECCs
can be exploited in foreign markets not only for attracting traffic but also
for reducing uncertainty, building reputation, and differentiating products and
services. Process and demand are two typical uncertainties associated with
e-commerce (Liang and Huang, 1998). Process
uncertainty arises from users' unfamiliarity and the newness of the medium.
Demand uncertainty arises due to rapid technology obsolescence. Since these
uncertainties can be major hurdles to e-commerce transactions, particularly
when such transactions take place across national boarders, the development of
innovative marketing ideas will facilitate frequent interactions among users
and between suppliers and buyers, which in turn can lead to the emergence of
norms of reciprocity and mutual trust. In addition, marketing competency is
critical for ECCs in building reputation and customer
loyalty. Those who intend to take a long-run position in a foreign market would
certainly like to build and leverage reputation in that market. For example,
extensive entries into foreign markets by Yahoo! depend largely on its
reputation as a pioneer in search services. However, such reputation building
can only be accumulated and realized through continuous development of
marketing capability (Dierickx and Cool, 1989).
Though internet technology may permit ECCs to reach a
larger number of geographical markets, diverse buyer preferences still exist to
call for differentiation. Thus, differentiation and customization mean a
smaller market for each product or service. To quickly move into foreign
markets, ECCs' marketing capabilities must be
developed to differentiate themselves in encouraging customers' involvement in
improving products or services (Berthon et al.,
1996). We, therefore, anticipate:
H3. An
Location agglomeration. Studies of economic geography suggest that high-tech
firms benefit from the clustering of economic activities embedded in the local
network (Malecki and Tootle,
1996). A key concept of this line of inquiry is that firms located in
"innovative regional milieu" (Hansen, 1992) that facilitates access
to innovative ideas and technology competencies. Extending the concept of
location agglomeration to internationalization process, a number of studies
found that firms clustered in certain locales tend to involve in international
activities at the early stage of their growth, because they try to exploit a
specialized technology niche emerging in different foreign markets (Oakey, 1993). Findings also suggest that if a firm can
establish successful local links, it is also more likely to be able to secure
international links, because of the global nature of the technological market
niche (Fujita et al, 1999). As the globalization process makes the constraints
of geography on social, cultural, political, and economic arrangements recede
(Waters, 1995), ECCs are in a superior position than
traditional firms to capitalize its specialized niche in a significantly larger
market domain. In this sense, location agglomeration at home nourishes the
firm's further expansion and its ability to cash in its existing niches. More
critically, ECCs clustered in a location with firms
in the same industry that have developed international linkages and reputation
may benefit from knowledge spillovers through networking with peers, suppliers,
and buyers. Spillovers of knowledge on market entry and foreign operations
among peer firms in a clustered location are documented as efficient in
accumulating industry-specific knowledge (Porter, 1986). For example,
H4. An
Macro-level conditions. The speed of internationalization is not determined
only by the above micro-factors. Infrastructure conditions of target foreign
markets always affect inflows of foreign investments (Caves and Mehra, 1986) and an investor's expectation of risks and
returns (Benito and Gripsrad, 1995). Managers of ECCs are particularly concerned with to what extent their
e-commerce business can be supported by a host country's technological
infrastructure such as the intensity or breadth of internet usage and technical
support for e-business activities, and legal infrastructure such as protection
of intellectual property rights (
Internetability. E-commerce is internet-enabled. Internetability
refers to the actual usage of the internet technology in a country, which is
often manifested by the proportion of a nation's population who uses internet (Iyer et al, 2002). The internet is a massive global network
of interconnected packet-switched computer networks (Krol
and Huffman, 1993). The fast deployment of internet technology outpaces the
speed at which established companies rethink their corporate strategy, but
creates a new frontier in the global markets for ECCs.
A country with a large percent of its population using internet naturally
presents itself as a more attractive market for ECCs
to start their business. Economically, a country's internetability
can shape marginal costs of e-business transactions and it is an indicator of
market size for participating ECCs. Greater internetability provides ECCs
with a larger market or consumer base, thus increasing a larger income stream
or decreasing unit cost as a result of economy of scale. The speed of foreign
market entrance thus hinges on a market's internetability.
We, therefore, conjecture:
H5. A foreign nation's internetability
(the percentage of the population in a country that uses internet) contributes
positively to the speed of
Technology supportiveness. One contextual force that is intuitively crucial to
international expansion decisions of ECCs is
technology supportiveness. Technology supportiveness concerns the spontaneous
emergence and existence of computer and telecom technologies that form the
basic platform in which ECCs conduct e-business
internationally. Technological support for e-commerce exists when both the
availability of computers and accessibility to telecom services are high in a
given economy. This technological condition acts as a globalization driver that
stimulates ECCs to become global (Yip, 1992). Since
e-commerce is technology-driven and internet-based, ECCs'
internationalization efforts are not possible or cannot be implemented
effectively without the significant presence of comparable technology.
Therefore, the swift international expansion by ECCs
is likely to be explained by parallel technology deployment in computers and
telecom in foreign markets that provide the basis for e-commerce. We,
therefore, hypothesize:
H6. A foreign nation's technology
supportiveness is positively associated with the speed of
Legal protection. Lack of legal protection of
H7. A foreign nation's legal protection of
Regulatory transparency. E-commerce is a newly emerging sector in most
foreign economies. Government regulations and policies on this sector have not
yet been fully developed (Kobrin, 2001). Regulatory
frameworks on foreign direct investment in general and on e-commerce in
particular are opaque in many countries (Watson et al., 2000). Non-transparency
is expected to create many serious problems for ECCs
such as unpredictability of market conditions, uncertainty of cash flow and
disturbance of strategic planning. Facing such anticipated risks and
uncertainties, ECCs will be reluctant to promptly
move into this country, ceteris paribus. E-commerce is immensely vulnerable to
the transparency of government policies given its strong tendency of
interacting with the society or the public. Low regulatory transparency thus
hampers an
H8. A foreign nation's regulatory
transparency is positively associated with the speed of
Research methods
Data collection
To test above hypotheses, we used data from
multiple sources. In selecting
Variable measurement
Internationalization speed is the dependent
variable. It is measured by the difference between the year of a firm's
inception and the year it undertakes the first international expansion activity
(inversely rescaled in a regression analysis). The measures of independent
variables are described below.
Of micro-level variables, international
experience of TMT was measured by a ratio of the number of executive managers
with prior international business experience to the total number of executive
management team. Data for this variable were gathered from the biographic
information filed in IPO documents and/or on the web sites of each
Among macro-level conditions affecting an ECCs speed of internationalization, internetability
was measured by the number of people per 1,000 accessing internet in a country
an
Results
The mean, standard deviations and
correlations of the variables are provided in Table I. To examine how micro-
and macro-level factors affect ECCs' speed we
conducted a multiple regression analysis. Prior to the regression tests, we
checked on the potential threats of multicollinearity.
The test shows that VIF values (≤ 3.50) indicate an absence of serious multicollinearity threats. The results of multiple regression are reported in Table II. High levels of adjusted
R^sup 2^ suggest that the data fit the model well.
When microand macro-level factors are separated into
two models, each model delivers a significantly explanatory power in predicting
variances of speed, with micro-level determinants (model 1) exerting a slightly
stronger collective influence on this speed than macro-level determinants
(model 2). The results in full model (model 3) exhibit that TMT's
international experience and an
Among macro-level determinants, internetability and technological supportiveness both have
a significant and positive influence on the speed at p < 0.05 level or
lower. Similarly, legal protection and government transparency are strongly and
positively linked to this dependent variable (model 3). This result implies
that both hard-side and soft-side infrastructures are important in affecting
the speed decision. The results confirm that ECCs
select countries exhibiting high level of internet usage. This is further
reinforced by the finding that technology infrastructure in a foreign country
(# of computers per thousand people) contributes positively to the speed of ECCs' entry into this country.
Table I.
Descriptive statistics and Pearson
correlation matrix for ECCs (N = 93)
Table II.
Regression results on speed of
Two control variables, namely, firm size and
cultural distance, exhibit different results. Size is positively associated
with the speed but cultural distance is not (model 3). The insignificant effect
of cultural distance accords with our premise that ECCs
differ from traditional firms in how cultural barriers affect their
internationalization process. The previous model holds that there exists an
inverse link between entry speed and cultural distance and that firms first
enter markets that are less culturally distant. Size effect, nevertheless,
exists, suggesting that larger ECCs tend to move even
faster than smaller ECCs. This size effect is
consistent with the finding that innovative capability and market capability
are important to the speed of foreign market entrance, for in the e-commerce
sector larger ECCs often have more resources for
improving innovation and marketing (Watson et al., 2000).
Conclusion
The objective of this study is to examine
the underlying factors for the fast speed of
As we construed, a foreign country's
e-business infrastructures, including both physical (technology supportiveness
and internet use) and regulatory (legal protection and government
transparency), are confirmed to be important variables luring the rate of
This study contributes to the current body
of knowledge in international expansion. It represents one of few attempts to
explain patterns of mternationalization of ECCs by integrating both micro- (organizational) and
macro-level (environment) factors. Our effort may extend an explanatory power
of extant theory of internationalization. One limitation of the extant
internationalization theory is the lack of explanation of conditions under
which the speed of international expansion increases or decreases (
There are several limitations to this study.
First, we limit our focus on the speed of international expansion, leaving
other important entry decisions such as entry mode, sequences and market
diversification unstudied. ECCs operate in real-time
and in virtual workplace with "no walls, no boundaries" (Langhoff, 1995). This distinct nature of e-commerce may
place ECCs in advantageous positions in reducing
substantial costs by establishing direct contacts with customers and subjecting
themselves to less physical constraints by simultaneously sharing information
with business partners and customers. These advantages in turn enable ECCs to go through different internationalization paths and
allow them to enter into and cover a large number of international markets. To
capture these distinct advantages and their relationships with foreign market
entry behavior of ECCs, future studies may need to
make efforts in developing benchmarks to contrast with ECCs
in these various attributes of foreign market expansion and to identify and
test systematically variables based on the N-OLI framework (network-based
ownership-location-internalization developed by Singh and Kundu
(2002)).
second, as traditional MNEs
increasingly integrate e-commerce into existing business while e-commerce
expands into boundaries of traditional businesses, global business is rapidly
evolving into an interwoven two-tier market (physical and virtual), with
boundaries between the two being blurred. The increasing amalgamation of this
two-tier market may be captured by spontaneity (rate), multi-directionality
(distance), and variety (mode) that constitute three distinct yet
interdependent dimensions. Future research should explore how this new model of
internationalization proceeds, how it affects efficiency improvement or cost
reduction.
Lastly, it will provide more valuable
insights in future studies that could examine the performance consequences of
speedy entry into foreign markets by ECCs. Because
entry decisions such as location, speed, timing, entry mode, and capital
commitment are often simultaneously made in an integrated formula (Anderson,
1993; Benito and Gripsrud, 1995; Erramillia
and Rao, 1990), it would be a worthy attempt to
investigate how entry speed is jointly interacted with other entry decisions
and how such interactions impact overall evolutions of
The authors wish to thank Boeing Institute
of International Business for financial support for this project.
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Further reading
Afuah, A. (2000), "How much do your co-operators'
capabilities matter in the face of technological change?",
Strategic Management Journal, Vol. 21 No. 3, pp. 387-404.
Yadong Luo
Department of Management, School of Business
Administration, University of Miami, Coral Gables, Florida, USA
John Hongxin Zhao
Boeing Institute of International Business,
John Cook School of Business, Saint Louis University, St Louis, Missouri, USA,
and
Jianjun Du
Received August 2004
Revised March 2005
Accepted June 2005