affect the globalization potential of individual industries and the global strategies
that companies should adopt. It argues that the Internet does not have a uniform
effect across industries but has very different effects on speeding up globalization
in particular industries. The reader will learn how to diagnose Net effects on their
own industry. The paper also shows the reader how to use the Internet to better
exploit five types of global strategy: global market participation, global products
and services, global activity location, global marketing, and global competitive
moves.
Globalization and the rise of Internet are the two most powerful forces affecting
business now and for at least the next decade. Much has been written about each
subject, but separately. This article provides the first ever in-depth analysis of their
joint effects. How does the Internet era affect global strategy? How should
the Internet and the Web? This article provides a systematic diagnostic approach that
managers can apply. It demonstrates that the Internet does not have equal effects on all
industries. It interacts with existing industry globalisation drivers and strategies, having
more of a multiplicative than an additive effect. Hence, managers need to understand the
twin phenomena of globalisation and the Internet together rather than separately.
Together these two forces determine the potential to use global strategy. We will look
first at how the Internet affects industry globalization drivers, then at the effects on
Industries differ in their globalization potential (Yip 1989 and 1992) and in their degree
ways. In addition, use of the Internet still varies greatly by country—from now nearly
50% of the adult population in the United States to under 5% in Russia, China and India.
When customers in an industry have needs and tastes that are mostly common across
countries, companies can make more use of global strategies, especially in offering
globally standardised products and services. The Internet and the Web further expose
customers to global offerings and other lifestyles. Individuals can now travel on the Web
rather than physically but can have similar global exposure and global learning effects.
So they are more likely to migrate to the highest or most popular global standard. This
The Internet has two effects. First, it reinforces the appeal of those brands that
are already globally recognised. Potential customers can get more information about
these product offerings and have their desires further reinforced. At the same time, the
Web creates more opportunities and churn in the next tier of contender brands.
Relatively unknown brands will be able to rapidly build up word of mouth via the
Internet and global presence via the Web. Superior design in Web sites can make up for
currently low recognition. Both Schwab and Dell Computer completely shifted their
marketing and ordering systems to the Web. The dramatic effects on their businesses are
well recorded. Less obvious is that this shift helped propel both companies from the
“possible” category of suppliers to the “must consider” category. Even if someone does
there are many obstacles, both external (finding and co-ordinating with vendors around
the world) and internal (agreeing and co-ordinating requirements across international
subsidiaries). The Internet and the Web make it even easier to become global customers.
Customers can search the Web for suppliers from anywhere in the world. Or they can go
even further and place requests for proposals on their own websites and wait for vendors
to bid. General Electric created The Trading Partner Network as an on-line auction site
for customers and suppliers of non-production goods, such as office and computer
supplies and other non-production products and services that help to run day-to-day
business operations.
may be channels of distribution that buy on a global or at least a regional basis. Their
presence makes it more necessary for a business to rationalise its worldwide pricing,
other terms of trade, and even its product offerings. The Web has accelerated the growth
channel firms to more easily complete their networks. And, of course, “clicks-and-
limited-mortar” firms like Amazon.com jump straight into existence as global channels,
although the real Amazon distribution system was Amazon + Ingram (the United States’
largest book wholesaler, based in Seattle, since displaced by Amazon’s own warehouse
operations) + United Parcel Service in the United States and various other package
deliverers elsewhere.
agreements. The new Internet channels bypass these relationships to seek out the best
deals either on a national basis (as Autobytel does in the United States) or on a pan-
consumer association). The immediate effect is that carmakers are rethinking their
now try to use as much as possible global rather than national marketing. The Internet
inherent global reach. Second, users share a common style of interaction—they have
working knowledge of English, itself the far dominant language of the Internet, even
though more than half of the 280 million Internet users speak languages other than
In terms of demanding global marketing, the Internet and the Web mandate
that vendors use globally standard brand names. A simple example suffices to
have been Amazon.com in Brazil only, but Mississippi.com in the United States,
China. In the Internet era, the founder of Amazon.com chose the world’s largest river
in countries that are industry leaders of innovation, fashion or prestige. The Internet has
two effects. First, it makes it easier for customers to identify lead countries and to
monitor their offerings. The Web lets everyone visit Paris or Tokyo or Los Angeles.
Consumers can rapidly identify the trends and fashions in lead countries and will
become increasingly dissatisfied with inferior domestic offerings. The fall of the
Berlin Wall cut demand for East German cars, such as the Trabant, from a ten-year
backlog to zero. The Web brings down Berlin Walls all over the world.
Several cost drivers have spurred globalization over the last two decades. The Internet is
business.
The Internet drives down global economies of scale and scope. Global scale
economies or scope economies apply when single-country markets are not large enough
businesses generally reduces minimum efficient scales. First, many physical activities
are being replaced by web-based virtual activities. Therefore, many scale and investment
barriers to global spread are bypassed. For example, many already globalized companies
are running down their international distribution systems, while newly internationalising
companies need spend much less on international distribution. Second, value chains and
business systems are being broken up or “deconstructed” (Evans and Würster 1999).
stages and therefore a larger scale. On the one hand this means that there is less pressure
on the new entities to globalise. But on the other hand, these new entities have a clearly
focussed business model and competitive advantage that is easily transferable and
leverageable internationally.
This reduction in economies of scale and transaction costs will particularly help
smaller firms from emerging markets. For example, small firms in Asia will be able to
combine to achieve global reach, reducing the customer proximity advantage of firms in
developed economies.
The Internet enhances global sourcing efficiencies. The market for supplies
may allow centralised purchasing to achieve savings in the cost of production inputs. A
primary Web phenomenon has been the creation of Web-based purchasing systems that
are global. Before the Net globally centralised purchasing required complex, paper- and
suppliers. With the Net, subsidiary requirements can be managed in a more efficient and
democratic process through Intranets. And relationships with vendors can be managed
on a global basis on Extranets. For example, the Big Three U.S. automakers created the
parts suppliers. ANX defines a set of technology and service-quality standards for
exchanging critical transaction and planning documents over the Web (Frook 1998).
electronics, Matsushita is building Internet links among its 100 factories in Japan, and
transportation cost enhances the ability to concentrate production into global-scale units.
Company created the Boeing partners network to connect with its 40,000 trading
partners around the world. For example, 45 separate regulatory agencies in the United
States, Canada, Japan, Russia, and several European nations, use the Boeing Intranet to
collaborate on its space station project. These networks can also be supported by third
and skills can provide a strong spur to globalization. The Internet does not change
relative country costs and skills but it enables many activities to be shifted to lower cost
countries. First, the Internet can used as a means of efficient communication and co-
ordination to make possible the “off-shoring” of activities that would otherwise be too
complex to manage. For example, some consulting firms have shifted their document
production work to India, communicating via the Net and taking advantage of time zone
differences as well as lower costs. While U.S. and Europe-based consultants sleep,
when they do sleep, their documents and presentations are being produced for them.
customer service (particularly for information-rich services) that can easily be shifted to
lower cost locales. The information database can remain in the home or other key
country while being accessed by Internet from lower cost and perhaps less secure
countries.
need a global sales base to amortise the development costs. The Internet has several
effects. First, it can reduce development costs in a number of ways. Some aspects of the
product, particularly supplementary ones such as service, can be shifted out of the
product with lower development (and production) costs. In some cases, the customer can
do the final customisation online. Both Nike and IDwatch from Idtown (a Hong Kong
firm) allow customers to design and order their own customised products. Another cost
reduction arises when companies use Intranets to manage globally dispersed product
companies to globalise and operate globally integrated strategies. The Internet weakens
potential in a number of major ways: import tariffs and quotas, non-tariff barriers,
export subsidies, local content requirements, currency and capital flow restrictions,
these barriers in several ways, particularly in the bypassing of import duties and taxes.
For services delivered over the Internet, most governments find it impossible to
monitor or tax these, unless the government is actively engaged in monitoring and
censoring Internet traffic, as is the case with a few authoritarian regimes. For services
ordered over the Internet but delivered physically across borders, governments should,
in theory, be able to catch these at the frontier. But in practice, most governments
miss significant proportions of the increasing numbers of relatively low value items.
standards among countries affect the extent to which products can be globally or
process, and should encourage the spread of globally compatible standards. For example,
Japan is lobbying other G8 nations for unified global rules on e-commerce financial
trading.
regulations affect the extent to which uniform global marketing approaches can be used.
rules on Internet marketing can themselves pose a barrier to globalization. For example,
the European Union is applying increasingly strict rules to prevent marketing e-mail
from originating outside the EU. So many e-marketers are finding that, just like old
economy producers, they need to set up operations inside the EU. Germany forbids all
unsolicited marketing contact of consumers, including via e-mail. France forbids e-Bay
and similar Internet auction services from allowing French users to access websites
The Internet depends on legal systems. Both overly weak and overly strong
critical issue with the Web revolves around the protection of free speech. Jurisdictions
pornography and defamation. With pornography the problem lies with the huge
deemed criminal elsewhere. With defamation, some jurisdictions allow portal and web
operators the defence that they do not know what is mounted by content providers. Other
jurisdictions do not allow this defence. In response many portal and web operators are
global reach exposes them to the laws, especially consumer protection ones, of all
countries. The European Union poses a special case of this general problem, with
currently conflicting legislative proposals (Dibb Lupton Alsop 2000). On the one hand, a
proposed EU Directive would apply the internal market clause common in the EU. This
would allow an e-operator to adhere only to the laws of its own country, and rely on the
jurisdiction over suppliers for goods and services, thus exposing e-operators to the
varying laws of all fifteen EU states. Companies can try to protect themselves with
disclaimers such as “this site is not open to contractual offers by French consumers.” But
valid. Adoption of the “operator country of jurisdiction” rule would favour smaller,
national companies (who lack the resources to understand and comply with the laws of
fifteen states). Adoption of the “consumer country of jurisdiction” rule would generally
discourage e-commerce but also favour larger, multinational companies, who can
access to the Internet, both in general and for types of sites and content. The Indian
Federal government even considered requiring all Internet cafes to record the names and
addresses of customers and of the sites they visited. Fortunately, this proposal was
dropped but some Indian state governments may still implement such restrictions.
reactions. The Internet heightens this global rivalry in several ways. First, “Internet
time” accelerates the needed speed of moves and countermoves. Second, the Web
creates a public forum for signalling, making it easier for competitors to communicate
with each other legally. Third, comparison of competitors becomes much easier for
both cross-competitor and cross-border comparisons. Fourth, the Web makes it easier for
companies with a given competitive advantage to transfer and leverage that advantage
globally in the ways already discussed (by reducing the amount of physical investments
needed). Fifth, for existing industry leaders or incumbents, the Internet era has created
the phenomenon of “born global” rivals—via the Internet these companies have global
In summary, widespread adoption of the Internet and the Web has accelerated both
general and industry-specific globalization drivers. The phenomenon has also taken to its
logical extreme the information and communications revolution begun by the fax
machine.
Let us now look in more detail at how the Internet era changes different aspects of global
strategy.
By substituting for or supplementing physical activities, the Internet makes it easier for
companies to participate in foreign markets. The advent of global strategy meant that
companies started to pull back from smaller or non-strategic markets in order to reduce
costs. The Internet makes it more economically feasible to once again serve these non-
core markets. Ironically, the Internet is allowing companies to return to the multinational
Web activities, while they can participate in non-core countries with a Web presence
The instant global reach of the Net, also means that companies need to rethink
their polices on new product rollouts. In the pre-global era, international rollouts took
years, even decades, to reach most markets. In the global era, the inherent
connectedness of markets meant that companies had to move much faster, entering all
major and strategic markets as quickly as possible. For example, in the 1980s, General
Electric recognised that they did not have the luxury of a gradual rollout of their new
programmable controller’s product line. Instead they rapidly entered the key markets
of the United States, Germany, Japan, and the United Kingdom. By 1995, Microsoft
had redefined the benchmark target for a global rollout, by launching Windows 95
In the Internet era, even 24 hours looks slow, Internet services have, by their
nature, very strong network effects and related first mover advantages. Failure to
rapidly extend into key markets can allow local rivals to take pre-emptive positions.
Perhaps the most dramatic example of this effect is America Online’s slowness in
international expansion. Its delay allowed ISPs (initial service providers) in other
UOL in Brazil, T-Online in Germany, and Tiscali in Italy. On the other hand, start-
One of the reasons for the dramatic failure in 2000 of boo.com, the U.K.-based
that some of the largest e-business companies never attempted. Boo.com should have
realised that, as a speciality retailer and not an ISP, pre-emption and first mover
advantage were not nearly as important as developing a viable business in at least one
country.
But the implication is not just a change in speed. With a website, a company
reaches overseas customers from the start, even if it is not ready to serve them.
Unsolicited foreign orders will start coming in. So companies will have to backfill
quickly to provide support operations and services. Of course, a company can choose
to not serve some or all foreign customers and post such notices prominently on their
websites. But that creates negative messages on first contact. By the time the
company is ready to serve those markets, they may have lost significant goodwill.
Even those companies who intend to serve markets still have a lot to learn about the
design of their websites. It can be as simple as getting their geography right. The
website for one major Japanese electronics firm somehow fails to locate the United
Kingdom within Europe nor offers the United Kingdom as a standalone choice
potential customers).
Global products and services are seldom totally standardised worldwide, but they are
designed with global markets in mind, and they have as large a common core as
possible. Some industries and categories, such as personal computers and air travel,
allow the potential for a very large common core, while others, such as furniture and
Websites lend themselves marvellously to be both global and local at the same
time. A global portal can offer the user a large number of regionally or nationally
their products, they can avail themselves of this duality of the Web. New economy
companies that sell primarily over the Internet have to race to increase the number of
their national websites. As of early 2000, fewer than one-third of major online
companies had localised websites for their international customers (Kushner 2000).
Even Amazon.com still offers only two non-U.S. websites, for the United Kingdom
and Germany. On the other hand, Elle, the leading women’s fashion magazine, has
twelve national websites covering five continents. Companies also need to think about
Amazon.com does a minimal job, with common blue horizontal bars. MTV does not
even try. Their U.S. and U.K. sites currently have no elements in common. In
contrast, Yahoo has identical home pages for its 24 national Websites. Lastly,
companies need to think about whether they wish to make cross-country web-hopping
easier or more difficult—easier if users can transfer to other countries’ sites without
The ability to individually customise the website for regular users raises
interesting issues of global product and service design. The vendor can totally vary
just American styles and sizes by a clothing company, but whatever national
preferences stated. At the same time, companies have to consider supply chain issues
of offering everyone, everything anywhere. Citibank, as yet the only retail bank with
significant global presence pursues a strategy of letting its customers do business with
Lastly, where the service is delivered over the Net companies may
increasingly seek to design globally standard offerings that have maximum global
appeal. Perhaps the ultimate example is the launch in 19 April 2000 of the world’s
first virtual broadcaster, Ananova. This product of the British national news agency,
the Press Association, was designed as a simulated female “cybercaster” with broad
global appeal (with a mid-Atlantic accent and vague ethnic origin), out-globalling the
real life newscaster, Christiane Amanpour of CNN fame. But Ananova and Amanpour
make an interesting contrast. The former is global by virtue of being from nowhere,
while the latter is global in combining three very specific but contrasting origins:
Iranian, British, and American. Companies, too, can choose to position their products
The Internet helps to solve the long-time dilemma facing multinational companies—
how much of their value chain to recreate overseas? In earlier eras of poor
location of a lot of expensive assets and activities. In the global era, beginning in the
1980s, many companies found that they could reduce duplication by operating
companies are shifting the burden of proof in two ways. First, they ask what activities
have to be conducted physically rather than on the Web. Second, they ask what
activities have to be physically duplicated in more than one country (the one country
replacement for local physical presence. Globalizing R&D operations has been a key
objective of global companies. But centralisation at one location has been the
traditional strategy to achieve the needed scale in R&D. The Web now enables virtual
R&D teams that concentrate and pool expertise and resources from separate locations,
so that companies can both tap into local expertise and achieve global scale. The Web
can also be used to co-ordinate globally dispersed production activities. Its Intranet,
Socrates, helps General Motors co-ordinate its 100,000 workers spread across 125
countries. In global distribution, third party providers, such as DHL, are using the
Web to improve their services. DHL is piloting a Web system to let shippers
determine duties and tariffs before their products cross international borders. Maersk
global after-sales service through their Web sites. Cisco, for example, handles 80
The Web also helps with the age-old dilemma facing international markets—how
much to adapt elements of the marketing mix. Research on global marketing shows
with brand names and packaging the most uniformity, pricing, advertising and
distribution moderate uniformity, and selling and promotion the least. So Net effects
also vary by element of the mix. But let’s start with language and national style.
pre-Net, generally translated to the local language, unless there were special reasons,
Amazon.com stayed English-only for the first three years of its life, until it added a
German website in 1998. But sooner rather than later, e-marketers will have to build
fully fluent foreign language websites, not necessarily for their biggest foreign
markets but for the biggest foreign markets for whom the e-marketer’s home language
The advent of Web translation software for both Web creators and Web users
will reduce the problems of language. But companies probably want to control the
translation rather than rely on third party software translating for their users.
Automatic translations will not be able to avoid the translation mistakes common in
National style on the Net -- Translation may not be enough. Like traditional
advertising, Net ads may need to adapt for national styles. Pioneering web users and
e-business customers to date have tended to be younger (the generation that grew up
with personal computers) and for these “Netizens” a Net style has overridden national
styles. A 1999 study comparing Korean and American Web advertising found
commerce reaches into older and more traditional segments of populations, national
culture and style will become more important. Two issues seem prominent: the degree
Global brand names on the Net -- As argued earlier, the Net mandates globally
uniform brand names, at least at the umbrella level (e.g., FedEx), and perhaps even at the
customers may stay mostly within national sites, it is very easy to stray. Becoming an
will find it increasingly difficult to maintain national variations in brand and sub-brand
names. FedEx used to keep different brand names in different countries. But now, it uses
The Net also makes it easier to build global branding and recognition,
particularly for Web names with the right connotations. Chinadotcom was a tiny,
Hong Kong company that jumped to almost instant global recognition by virtue of its
name. The brand recognition led to a highly successful initial stock offering, building
through the Internet, pictures of them are often displayed on Websites. Companies
need to think out a deliberate policy as to whether they wish to facilitate or discourage
want our customers comparing prices and items across our different national
Websites. But then they may migrate to competitors’ sites that make comparison easy.
possible (Porter 1980). In 2000, it is both insulting and futile to try to keep net-savvy
customers ignorant. The competition is not down the street or in the next town or
Global advertising on the Net -- Companies that sell over the Net (e.g., book
and travel sellers) and those that only present or advertise themselves on it (e.g.,
automakers) face different international challenges, while those who do both (e.g.,
The international advertising challenge for e-sellers is to find e-copy (graphics, words,
and click structure) that is either equally compelling for all target nationalities and
countries or else find simple ways to customise. For example, Amazon.com simply
changes the books featured on its home page in each country site. In addition, a side
bar on the home pages lists the top 100 books sold on that country’s Amazon site—a
convert their traditional media copy to accessible and relevant e-copy. Some
companies offer the ability to download TV commercials or magazine stills, but only
for those used in the country of the website address. Would globally minded users
also want to access advertising from other countries without having to separately enter
Much has been debated about the pros and cons of global advertising in
traditional media. The Net provides a uniquely global medium that marketers may
well wish to use to try out global advertising. They can still run national advertising in
traditional media.
selling generally need the most local adaptation as they usually take place in the
country, involve dealing with local buyers, and make country-specific offers.
marketing activities more locally and treat the more strategic or above-the-line
activities, such as positioning and advertising, more globally. The same holds true on
the Net. E-marketers can use the old above- and below-the line distinction literally on
the Net. The upper (higher) pages, or even the upper parts of pages, can be used for
more global, strategic presentations and messages, while the lower (deeper) pages and
parts can be used for more local, tactical messages. The tree structure of the Web
lends itself perfectly to such an approach. For example, British Airways has a
common first page for both the United Kingdom and the United States, while later
pages offer specific and different promotions for the two countries.
the Net blurs the marketing mix. Traditional marketing can easily separate each
element of the mix they have separate physical embodiments and are often presented
to the buyer at different times. On the Net, all elements of the mix can appear on the
same page at the same time and even the distribution element can be performed over
the Net. But the different elements still play different roles--for example, advertising
copy creates an image for the offer, a picture of the product constitutes part of the
offer itself, and the price and terms of sale constitute an attempt to close the sale. In
global marketing, distinguishing between these different roles becomes even more
interfacing with multiple customer nationalities and segments. The global e-marketer
The Net clearly creates new forms of competition and among previously separated
players. Focusing on just the global aspects, The Internet creates global competitive
Amazon.com’s U.S. web site has become a powerful competitor for bookstores on the
other side of the world. Several of the largest automobile producers are developing a
suppliers. General Motors, Ford, DaimlerChrysler, Nissan and Renault have created
Covisnt to work with about 35 leading suppliers to the automotive industry. Before
the Web, local suppliers enjoyed some advantages of proximity over distant rivals.
Now they compete on virtually equal footing. The upshot of all this is that
multinational companies need to plan their global moves much more effectively.
Issues include:
• using deep linking, metatags and other techniques to hijack potential customers
• choosing the right mix of competitive and co-operative behaviour with rivals and
other partners
The Internet and the Web are accelerating the forces of globalization. But different
customer needs and tastes, prevalence of global customers and channels, global
marketing is acceptable, and lead countries are key --will see greater acceleration of
globalisation from use of the Internet. In some cases, the Internet may tip the balance
to the industry becoming global. For example, consumer financial services have been
struggling against various barriers to globalisation. The Internet should enable the
and scope, global sourcing efficiencies, global logistics, and large differences in
country costs—will see powerful opportunities to use the Internet to exploit these
global drivers. For example, the Internet is rapidly completing the globalisation of
• Industries that have been held back from globalisation by government barriers will
find ways to bypass those barriers. Industries, such as healthcare, that are have
differential national regulations but common customer needs, will offer opportunities
to use the Internet to bypass those barriers. The “flying doctor” may be replaced by
escalated by the Internet. For example, engineering consulting firms will face much
Internet Era. Managers should use the concepts and frameworks in this article to conduct
a combined Internet and globalisation potential analysis of their industry and their global
1. Which strategies and activities should be on a global (or regional basis) rather than a
national basis?
In both cases, an aggressive posture would shift the burden of proof--assume that
activities should be global and on the Internet unless you can prove otherwise. The most
innovative companies now live by this creed. Is your company ready to embrace this
boards, including for an Internet start-up. From January 2001, he will be Professor
taught at Harvard, Oxford, Stanford and UCLA. His books include Total Global
Strategy (published in nine languages), Asian Advantage, and Strategies for Central
The Internet:
• increases global commonality in customer needs and tastes
• enables global customers
• facilitates global channels
• makes global marketing possible
• highlights lead countries
The Internet:
• drives down global economies of scale and scope
• enhances global sourcing efficiencies
• speeds up global logistics
• exploits differences in country costs
• reduces product development costs
The Internet:
• side-steps trade barriers
• spurs global technical standards
• confronts diverse marketing regulations
• depends on legal systems
The Internet:
• accelerates needed speed of moves
• creates public forum for signalling
• makes competitor comparison easier
• aids global transferability of competitive advantages
• creates “born global” rivals
• Reduces need to have local physical presence in many downstream and support
activities
• Allows virtual networks that concentrate and pool expertise and resources from
separate locations
Global Marketing
Industry
Globalisation
Potential
Effect of
Internet Use
Strength of
Globalization Drivers
Use of Internet
in Industry and
its Key Country Market
Use of Global
Strategy
Industry
Globalization
Drivers
direct effects
feedback effects
0 10 20 30 40 50
United States
Sweden
Canada
Singapore
Australia
Britain
South Korea
Hong Kong
Germany
Taiwan
Japan
Italy
France
Spain
Russia
Brazil
Mexico
Argentina
China
India
Source: www.ananova.com