Transcript Chapter 5

Global Marketing
Management
A European Perspective
Information Technology
Environment
Warren J. Keegan
Bodo B. Schlegelmilch
Overview
IT-Environment: Important Facets
The Age of Technological Discontinuities
New Challenges in Marketing
Evolution in Business Context and Strategies
Summary
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Global Marketing Management: A European Perspective
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Learning Objectives
Understand the main drivers of the information
and communication technology (ICT)
Appreciate the role of the internet in providing a
platform for e-commerce
Learn how the new technological environment
impacts on global marketing activities
Know the components of the electronic value
chain
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IT-Environment: Important Facets
E-Commerce
Extranet
Internet
Portals
Web Browser
World Wide Web
Virtual Reality
EDI (electronic data exchange)
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The Age of
Technological Discontinuities
The speed of technological change has accelerated
dramatically
Our environment is characterised by
technological convergence and
technological ubiquity
The internet is the most important driver of
technological change
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Uptake of Consumer Technologies
120
Telephone
100
80
Cable
Millions
of Users 60
Radio
Internet
40
20
Source:
Morgan Stanley,
The Internet
Advertising Report
TV
0
19 19 19
20 25 30
19 19 19 19 19 19 19
35 40 45 50 55 60 65
19 19 19 19
70 75 80 85
19 19
90 95
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Development of Internet Hosts
120.000.000
100.000.000
80.000.000
60.000.000
40.000.000
20.000.000
01
20
99
19
97
19
95
19
93
19
91
19
89
19
87
19
85
19
83
19
19
81
0
Source:
Adopted from: http://www.mids.org/mapsale/data/trends/trends-199907/sld004.htm, 30. Aug. 1999
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Geographical Distribution of
Internet Users
Source:
http://www.nua.ie
/surveys/graphs_c
harts/1998graphs
/location.html,
30. August 1999
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New Challenges in Marketing
Electronic markets
Virtual organisations
Symbiotic relationships
New forms of cooperation
Corporate boundaries are blurring
Organisational hierarchies become flatter
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The Evolution of E-Commerce
tom orr ow
today
yesterday
New
Marketing
Tool
New
Distribution
System
Evolution
New
Drive for
Efficiency
New
Business
Model
Revolution
Source: Roland Berger & Partner ( 1999) Erfolgsfaktoren im Electronic Commerce: Auszug aus
den Ergebnissen der Studie, Wien/Frankfurt am Main, p. 12
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Middlemen as Networks of Specialists
Payments
Specialist
SUPPLIER
Context
Supplier
Sales
Agents
Market
Makers
Logistic
Specialist
Purchase
Agent
Context
Supplier CUSTOMER
Source:
Adapted from Paul F. Nunes and Brian S.
Pappas, ”Der Vermittler auf der Suche
nach Reichtum und Glück,” Outlook,
Andersen Consulting, Heft 1, 1998, p. 55
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Location of Value Chain
Across Countries
Supplier
Purchasing
R&D
Production Sale
Customer
Service
Customer
Country A
Country B
Country C
Country D
Country E
Support Level
Support Level
low
Legend:
Source:
Adapted from J. Griese,
Auswirkungen globaler
Informations- und
Kommunikationssysteme auf die
Organisation weltweit tätiger
Unternehmen, in W.H. v. Staehle and
P. Conrad (eds)
Managementforschung 2, (Berlin /
New York), de Gruyter, 1992, p. 423
medium high
In Country Presence
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Evolution in Business
Context and Strategies
Old Economy
New Economy
Market share
Technology as an enabler
Seller-centric market
Physical assets
Vertical integration based on size
Decreasing return to scale
Firm-centric marketing strategies
Strategic control
Technology as a driver
Buyer-centric markets
Knowledge assets
Vertical integration based on speed
Increasing return to scale
Network-centric marketing strategies
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New Economy Forces Companies to ...
1. secure a dominant market position as quickly as
possible
2. form alliances based on their potential for market
access and synergies
3. anticipate very high start-up investments
4. defend positions through an ongoing process of
innovations.
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1. Importance of
Dominant Market Positions
Cases where returns achieved through increased
market share grow until market saturation has
been reached i.e.
in markets
with high fixed costs
with high degree of intellectual factor input
when the product becomes more valuable when used
by more people („network effect“)
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2. Importance of Strategic Alliances
Strategic alliances = cooperation of legally
independent firms
ICT leads to a reduction of transaction costs
3 types of alliances
vertical (eg manufacturer & retailer - marketing of an
innovative product)
horizontal (in the same industry, eg r&d)
diagonal (different industries, eg r&d)
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3. Importance of Anticipating
High Start-up Investments
In many e-based industries high start-up costs are
necessary to achieve the desired market share
Money is needed
either from well established financially strong partners
or from the stock exchange („internet stocks“)
Payback might only be achieved on a long-term
basis (in comparison with traditional companies)
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Market Valuations:
New Versus Old Economy
Digital Economy Valuations
(1998)
Company
Annual
Market Cap
Revenues ($m)
($m)
AOL
2,600.0
149,800
Yahoo
203.3
34,500
ebay
47.4
24,000
Amazon
610.0
23,000
Priceline
35.2
17,900
@Home
48.0
16,800
E*Trade
CMGI
RealNetworks
285.0
91.5
64.8
12,900
11,200
5,700
Traditional Economy Valuations
(1998)
Market Cap
Annual
Company
($m)
Revenues ($m)
149,800
14,700
Pfizer
34,700
15,100
Allied Signal
24,300
18,400
J.P. Morgan
23,000
15,500
Alcoa
17,700
15,900
Fed Ex
16,900
26,300
Lockheed
Martin
13,500
19,200
AMR
11,400
8,300
Ingersoll Rand
5,500
11,200
Toys “R” Us
Sources:
Fortune, April 26 and May 24, 1999; Hoover.com; Arvind Rangaswamy, ”Toward a Model of eBusiness
Performance,” Presentation at the American Marketing Association Summer Educators’ Conference, San Francisco,
August 7-10, 1999.
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4. Importance of
Ongoing Innovations
Diffusion speed of new products has increased
significantly
Innovation is necessary to keep a compny´s
market share
ICT leads to greater efficiencies in all stages of the
new product development process
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Summary
The rapid advances in ICT are profoundly
affecting the way global marketing is conducted
(„New Economy“).
additional distribution and communication channels (ecommerce)
precise targeting (segment of one), customisation and
interaction
fundamentally new business models (network
organisations)
empowered customers
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