Global E-Commerce Challenges Due to Term Paper
- Length: 10 pages
- Subject: Education - Computers
- Type: Term Paper
- Paper: #38688476
Excerpt from Term Paper :
As household penetration increases, competition for products in the online marketplace also increases in those areas, as does the need for components to access the online marketplace. Further, as internet skills increase in companies and households around the world, the competitive advantage achieved from coordinating marketing across countries can be significant (Steinbock, 2000).
Microsoft, for example, has developed a huge online presence in response to household penetration increases and increases in online competition. As of November 2005, Microsoft operates websites specifically designed for each of 139 countries worldwide. Each web site contains information in the language of the country, contains products, services, and even images that reflect the culture of the country, and is aimed specifically at the household consumer and business consumer within that country. For example, when accessing the home page for the United States, advertising related products display information for new software called Microsoft Streets and Tips 2006, which is designed for interface with GPS systems to provide assistance during vacations of business travel. On the home page for the Middle East, however, advertising is related to a product called Windows Mobile, a product designed to bring the Windows operating system environment to mobile internet devices (Microsoft.com, 2005).
In both cases, advertising is directly related to household consumers in the respective areas, but is aimed at products those groups of individuals would more require. In the affluent United States, advertising aimed at leisure and higher end technology is necessary, whereas for the Middle East, advertising related to online access is a must, since their infrastructure is currently in a much less stable state. Clearly, Microsoft has recognized the penetration of the World Wide Web as a tool for pushing the boundaries of effectiveness in competitive markets.
The second factor that relates household penetration to global marketing is that of cost. Quite obviously, a physical presence in a given country for a company is much more expensive than the maintenance of an online presence in the same area (Steinbock, 2000). As penetration increases in areas such as China, where United States businesses are rarely able to maintain a physical presence, the United States company is able to penetrate the households in a far more cost effective way than ever before. As a result, companies such as Microsoft are able to maintain a presence in even the countries with the smallest online communities, thereby increasing their overall profits by distributing products into areas where they would otherwise not be able to access.
As discussed, Australia actually has the smallest number of online consumers (Internet World Statistics, 2005). However, because of the household penetration effect of reducing overall costs of marketing, Microsoft is able to maintain an Australian-based website at the same level for which they provide a United States-based site. The Australian website offers products, services, and even online training for individuals in Australia. Whether use in Australia increases or remains stable, the cost effectiveness of online marketing in the area will not change, since the household penetration factor alone is enough to warrant global marketing strategies to the area in a cost effective way.
Third, and most importantly, the market its self is a strong driver for global marketing. As household penetration increases in any given area, the market for products and services also increases substantially. Common consumer needs, global business consumers, the need for global training, and global market channels all increase as household penetration of the World Wide Web increases. As usage explodes in certain areas of the world, companies such as Microsoft, who provide online training and marketing coordination, benefit dramatically if they are able to market their products and services to these developing areas (Steinbock, 2000). Global marketing strategies, when done well, can serve to not only increase short-term profits in these situations, but also serve to create a vast customer base within these areas, providing for a stable source of revenue in the future.
Microsoft, for example, has developed the EMEA to specifically address market issues in Europe, the Middle East, and Africa. This is an area of high household penetration in the last few years, and as such, the market has expanded. By developing the EMEA, which is a team dedicated to research, product development and distribution, sales and marketing, customer service and support, and partner support in the area, Microsoft has been able to market products specifically designed for consumers in the region. These products have been specifically tailored to meet the needs of consumers, and include such products as Microsoft Office in 40 different local languages, Windows in 37 regional languages, support teams who speak over 50 different languages, and employees in over 139 local countries (Microsoft.com, 2005).
In addition to having an overall effect on global marketing abilities, household penetration also directly influences global marketing strategies, in terms of how products and services are marketed worldwide (Luk, et al., 2002). Companies such as Microsoft would be virtually unable to market their software in areas such as Melawi, Africa, since the area is not developed enough to support the technology market. However, through the use of online marketing strategies, anyone in the area of Melawi can access Microsoft products online, with no additional cost factor incurred by Microsoft. In this way, the household penetration of the web enables companies to compete in the global market, even in areas where the market would typically not support such global marketing strategies (Luk, et al., 2002).
The level of household penetration also affects international marketing in terms of how well the company understands the meaning behind the penetration. Understanding the reasons behind low penetration in a certain area is vital to understanding the types of products and services the area requires in order to increase that penetration, which would thereby increase revenue for the company (Fill, 2002). For example, in Namibia, Africa, low penetration levels are the result of a lack of infrastructure, as well as poverty and illiteracy (Microsoft, 2005). Noting this, Microsoft and the Namibia government partnered in a project called African Pathfinder, a joint effort to provide the most economically and educationally disadvantaged areas of the region with surplus computer systems and online abilities, as well as training and coordination of ICT strategies (Microsoft, 2005). By recognizing the need for increased capability, Microsoft has created a technology market in an area where previously no market could have existed.
The same strategy can be used in areas of growing penetration (Fill, 2002). As mentioned, Africa has the highest growth rate of any continent, in terms of household penetration. Recognizing this market as a potential growth market, Microsoft has established offices within the country, in some of the areas with the highest growth potential due to economic advantage and existing infrastructure, such as Gauteng, Africa. Marketing techniques in the area have increased over 200% in the last two years alone, and include web casts for educational use, increased productivity representation, and increased local presence (Microsoft.com, 2005). By recognizing a developing market, Microsoft has capitalized on the possibilities, and increased their market share in the area.
Understanding household penetration rates can also assist in promotion for already existing high market areas (Fill, 2002). For example, research in the United States has found that use of the internet tends to be highest among more economically advantaged individuals under age 65 (Taylor, 2002).
By combining this information with information regarding spending habits of the affluent populations in the United States, companies like Microsoft can develop marketing strategies aimed at this already high market. For example, research has shown that those in higher income brackets in the United States spend more leisure time and money on technological products than those in lower brackets (Harris Poll #97, 2004). By combining this knowledge with the knowledge that this same group also has the highest penetration level, Microsoft can plan marketing strategies such as pop-up web advertising, email campaigns, and company website advertising strategies specifically orientated to young, wealthy users. The advertised products may include gaming devices, such as the XBOX 360, Microsoft digital media software, or multimedia music, since these are the technologies research has shown to be most popular within the population currently highest in terms of household penetration (Microsoft.com, 2005).
Clearly, household penetration by the World Wide Web can have a direct impact on promotion strategies in the global marketplace. By combining knowledge of penetration statistics and their relationship to market drivers, companies such as Microsoft are able to maximize the benefits of global marketing while still keeping costs in check. Further, by using household penetration statistics to identify high and low market areas, as well as growing market areas, companies can specifically design their global marketing to meet the needs of each area independently, further increasing revenue at a fraction of the cost of a physical presence. By targeting developing countries as well as existing global markets though proper global marketing strategies, companies with an international presence can drastically improve their overall performance and secure a user base for generations to come.…