Global e-commerce challenges from internet access and household availability

Global E-Commerce Challenges Due to Internet Availability

In the Average Household

There can be no question that technological advance in countries around the world has dramatically influenced global marketing concepts for many companies. As smaller developing nations begin to access the World Wide Web and as household penetration of the Internet increases across the world, nearly all companies are able to have a global presence with the addition of a single website. By targeting these developing countries though proper global marketing strategies, companies with an international presence can drastically improve their overall performance and profit margins.

This paper discusses and research the various levels of Internet use among the continents of Asia, Africa, Europe, North and South America and Australia. This analysis will focus on examining the primary reasons for these variations. This paper will also discuss the impact of these various levels on a single company with a global marketing agenda, that of the Microsoft Corporation, in an effort to clearly show how differences in household penetration directly influence and influence international marketing.

Different Levels of Household Penetration by the World Wide Web

When examining household penetration by the World Wide Web across continents from a global marketing standpoint, there are numerous factors to consider. While it is certainly important to examine overall Internet penetration statistics for a given area, it is also important to examine the growth of use within that area. If a company is attempting to reach global consumers, a cost-effective method must be developed to target not only those areas with the highest Internet penetration, but also to target areas in which Internet use is quickly expanding.

Further, it is vital to recognize Internet use in terms of overall local and worldwide population percentage. Consider the following example to illustrate this concept. If a company were to only examine overall Internet penetration statistics and growth potential for continent A, that company may find overall penetration at 85%, and may note growth at an average of four hundred percent annually. Alone, these statistics would indicate this country to be a primary area for global marketing strategy implementation. However, further statistical information may show that, on a global level, this country's population only makes up one percent of the total internet users in the world. In light of the fact that this country would only make up one percent of a worldwide user base, the company may choose to focus on an area with a higher overall population percentage, in an effort to generate far more revenue for their global marketing dollars.

Research on household penetration of the World Wide Web is abundant in today's society, for these very reasons. Most global companies will spend thousands of dollars for reports outlining use statistics worldwide, in an effort to narrow their potential market to those with the greatest impending growth, in terms of the company products. This paper will examine reports based on the Internet Usage and World Statistics, which compiles data from Nielsen, the International Telecommunications Union, and local NICs (Internet World Statistics, 2005).

According to the compilation of data, household penetration by the World Wide Web is highest in North America with 68% of the population using the World Wide Web. In Australia, penetration is at nearly 53% of households. In Europe, 37% of the population uses the web, while in South America, only 13% of households use the web. Asia household penetration of the World Wide Web is at 9%, while Africa reports only slightly over 2.5% household penetration (Internet World Statistics, 2005).

While these statistics can be helpful, they are also somewhat misleading. Based solely on the above statistical data, a company may decide to target North America and Australia, since those two continents appear to have the highest rate of World Wide Web penetration, and as such, would logically generate the highest possible revenue. However, by examining another factor, that of the percent of the world's population made up of those areas, one can see that in the case of Australia, such marketing would actually not generate mass amounts of revenue. This is because the population of Australia makes up only.5% of the total world population (Internet World Statistics, 2005). In other words, while over half of the population of Australia uses the World Wide Web, the actual number of individuals using the web is smaller than in Africa, since the African population makes up nearly 14% of the total world population (Internet World Statistics, 2005).

When one examines the actual number of individuals using the web within these continents, Asia actually rates the highest, with over 327,066,000 individuals using the web. This continent is followed by Europe, with 273,262,000 individuals, and then by North America, with 223,779,000 online consumers. South Americans make up 70,669,000 of online users, while Africans make up 23,867,000 users. Australia actually has the smallest number of users, with only 17,655,000 individuals using the Internet (Internet World Statistics, 2005).

Yet another statistic needs to be examined in order to determine true marketing potential within a given population, that of the rate of growth in Internet usage over time. According to the Internet World Statistics, Africa held the highest growth rate between 2000 and 2005, with an over 428% growth rate. South America also grew substantially, with an over 290% growth rate. The other countries reported growth rates as follows: Asia, 186%, Europe, 165%, Australia, 131%, and North America, 107% (Internet World Statistics, 2005). Thus, while World Wide Web penetration is highest in Asia, Africa has the highest rate of growth.

From a global marketing standpoint, then, Asia appears to have the greatest marketing potential. From the standpoint of existing users, Asia currently ranks number one. However, their population is so large that even though their current users make up the most in the world, they still have a huge growth potential. By targeting Asia, a company would have the advantage of marketing to a high number of existing users, while still retaining potential to reach a high number of users in the future.

Reasons for Variations of Household Penetration

The variations seen in the usage of the World Wide Web among these different continents are due primarily to social, economic, and structural factors. According to the International Telecommunications Union, the primary divider for most continents is economic in nature (2003). For largely underdeveloped nations, such as Africa, the population of individuals living in poverty is massive in comparison to those in developed nations. These populations of individuals have difficulty finding funding for food and clothing, let alone for computers and internet access, and as such, have smaller rates of household penetration (International Telecommunications Union, 2003). Additionally, areas with lower socioeconomic average income levels and higher rates of poverty, such as Melawi in Africa, tend to have less developed educational systems, and thus, are less likely to experience Internet penetration due to illiteracy rates (World Fact Book, 2004). South America and Asia, both of which have lower socioeconomic statuses, have also experienced smaller rates of household penetration than those of more affluent, developed areas such as North America and Europe (World Fact Book, 2004).

Another cause for this variation in household penetration is that of social issues. In some developing countries, such as certain countries in Africa, Internet use is lower due to social customs restricting the rights of women. In countries such as India, social restrictions on certain groups of religious organizations may lower overall internet usage, as well. Even in South America, access to the Internet is often limited in certain areas to those in political power, thus reducing the overall number of users (International Telecommunications Union, 2003).

The third factor resulting in varied household penetration rates is that of the infrastructure. While this component is often related to socioeconomic status, it is important to note that even in some countries with at least a minimal standard of living, the infrastructure that exists does not support household penetration. Since web penetration requires an internet connection, homes without telephones or cable televisions are at a severe disadvantage. In areas such as Europe, for example, 77 of every 100 households has at least one phone line. On the other hand, in countries such as Peru, only four households per 100 have a telephone (ITU World Telecommunication Indicators Database, 2002). This lack of infrastructure also contributes to the varied rate of household penetration.

Implications on International Marketing

These variations in household penetration have profound implications for international marketing, primarily due to three driving factors of globalization. As household penetration increases, firms such as Microsoft recognize that these three factors, typically thought of as the three classes of determinants that propel companies towards globalization, are directly impacted by household penetration in any given area (Steinbock, 2000). Each of these factors will be discussed below in terms of how household penetration relates to them, and how Microsoft deals with each determinant through global marketing strategies.

First, competitive forces drive companies such as Microsoft to participate in the global market with an online presence in multiple countries. 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).