International Marketing Review 14,5 300

The Internet and international marketing

Jim Hamill
Internet Export Resource Centre, Department of Marketing, University of Strathclyde, Glasgow, Scotland
Introduction It is now widely accepted that the information technology revolution will have a profound effect on the conduct of international business as we move towards the new millennium. The most important development, in this respect, has been the explosion of international marketing activity on the Internet and the associated emergence of the global information superhighway. There are an estimated 40 million individuals and organizations currently linked to the Net, with connectivity growing at an average of 10 per cent per month. A recent study by IBM predicted 500 million active users by the year 2000 (Financial Times, 1996). Even the most conservative estimates suggest 200-300 million users by the turn of the century. The Internet can no longer be considered a fad or the preserve of techies and computer nerds. Commercial uses of the Net have become the fastest growing part of the World Wide Web (WWW). Used properly, the Internet can be a powerful source of competitive advantage in global markets and an increasing number of companies are developing Internet-based strategies to support overall business development. The explosion of international business on the WWW raises several very important issues for international marketing educators. First, the growing popularity of Internet marketing calls into question many of the fundamental tenets on which most of our research and teaching is based. Issues such as the barriers to internationalization faced by small and medium-sized enterprises (SMEs); incremental internationalization; the importance of overseas agents and distributors to export success; country screening; market concentration versus market spreading etc., take on an entirely new perspective when viewed from cyberspace. The Internet provides a fundamentally different environment for international marketing and requires a radically different strategic approach. Much of what we teach may already be outdated, a fundamental reassessment of the results of past research may be necessary and new international marketing paradigms may have to be developed to explain internationalization processes in the electronic age (see Hamill and Gregory, 1997; Hoffman and Novak, 1996a; Quelch and Klein, 1996). Second, despite the challenge presented to existing paradigms, the mainstream academic literature has largely ignored the growing importance of Net-based international marketing strategies. While numerous guides exist on How to do business or How to make money on the Internet, there have been

International Marketing Review, Vol. 14 No. 5, 1997, pp. 300-323. MCB University Press, 0265-1335

few serious academic studies of the topic and little attempt has been made to The Internet and develop conceptual frameworks for evaluating Internet-enabled international international marketing. A major research initiative is required to improve our understanding marketing in this area, especially the extent to which the Net provides a gateway to global markets for SMEs. In the absence of such an initiative, the mainstream academic literature will no longer accurately describe the reality of 301 international business. The research could build on the pioneering work of the Project 2000 Group (http://www2000.ogsm.vanderbilt.edu/) based at Vanderbilt in the USA. This work, which is reviewed later, has contributed greatly to our understanding of the marketing impact of electronic commerce, although not specifically from an international marketing perspective. Third, as international marketing educators, we need to ensure that our students understand the strategic importance of the Internet; become confident and fluent in using it; and are familiar with the wealth of international marketing-related information available on the WWW. This can be achieved through using WWW-based teaching and assessment methods and by ensuring that all international marketing programmes include formal training in the strategic and marketing management applications of the Internet. The response of one institution to this challenge is described in Hamill (1997). This paper examines the Internets impact on the study and practice of international marketing. Following a brief section on origins and evolution, section two presents a conceptual framework for evaluating international marketing applications of the Net, especially in the context of SME internationalization. The framework is then used in section three to examine the extent to which the explosion of international business activity on the WWW calls into question the basic tenets of much international marketing teaching and research. The need for new international marketing paradigms is assessed in relation to four main research areas namely, barriers to SME internationalization; critical success factors; internationalization processes; and the importance of strategic planning to successful internationalization. The final section offers some general conclusions and establishes an agenda for future research on Internet-enabled international marketing. The Internet: origins and growth A brief overview of the origins, growth and evolution of the Internet is presented in this section as background to the rest of the paper. More detailed historical overviews and discussions of Internet demographics can be found in Commerce Net/ Nielsen (1995); FIND/ SVP (1996); Gupta and Pitkow (1995); Hardy (1993); Hobbes (1996); Hoffman and Novak (1995); Lottor (1996); Merit (1996); and Network Wizard (1996). Links to good sources of information on Internet growth and current demographics can be found at the Internet Export Resources Web site (http://web.ukonline.co.uk/ Members/ jim.hamill/ contents.htm The key to understanding the Internet is the concept of connectivity. The capability of even the most expensive PC is extremely limited when operated on

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a stand-alone basis. Essentially, it is a word and data processing device whose use remains largely internal to the office in which it is located. When networked to other PCs, however, it becomes a very powerful communications and information search vehicle. Networks may take the form of LANs (local area networks such as the internal e-mail systems operated by most large offices) and WANs (wide area networks linking offices in different localities). The most extensive form of networking, and the one with the greatest business potential, is the Internet. Simply speaking, the Internet is a network of interlinked computers throughout the world operating on a standard protocol which allows data to be transferred between otherwise incompatible machines. The word itself simply means a network of networks. Participants on the Net include individuals, companies, governments, universities, research establishments and many others. Any form of data can be transferred over the network including text, graphics, video, software, voice etc. Recent estimates show that there are currently 9.5 million host computers, 93,671 networks and 240,000 domains connected to the Net (Hobbes, 1996) (see Table I).

Year 1990 1991 1992 1993 1994 1995 1996

Hosts 313,000 617,000 1,136,000 2,056,000 3,212,000 6,642,000 9,472,000

Networks 2,063 3,556 7,505 16,533 25,200 61,538 93,671

Domains 9,300 18,000 18,100 28,000 46,000 120,000 240,000

Table I. Internet growth

Source: derived from Hobbes (1996)

The origins of the Internet date back to the early 1970s when the US Defence Department established the Advanced Research Projects Agency (ARPAnet) to link various military and research institutions. One of its major achievements was the development of a standard protocol which allowed dissimilar computer systems to communicate. This protocol, known as TCP/ IP (Transmission Control Protocol/Internet Protocol) remains the most commonly used on the Net today. During the late 1980s, the National Science Foundation (NSF) used the ARPAnet technology to expand its own NSFNET a high speed backbone network linking campuses and research centres to NSFs supercomputers. The original users of the Internet were predominantly government sponsored or university sponsored researchers. Public interest exploded in the early 1990s as the Net was opened up to other groups, including individuals and companies. Full commercial Internet connections became available in 1991 with the

establishment of the Commercial Internet Exchange Association whose aim was The Internet and to encourage greater business participation. This led to a proliferation of international commercial sites which remain the fastest growing part of the Net today. marketing Commercialization resulted in a major clash of cultures between original users (mainly researchers), who emphasized the free exchange of information, and new, corporate users emphasizing the commercial opportunities available. The 303 cultural clash, however, was short lived and marketing on the Internet has now become a generally accepted part of the WWW, so long as proper Netiquette is observed (Dinsdale, 1995; Donaton, 1994; Krol, 1992). There can be little doubt that the Internet will transform international business as we approach the new millennium. Although the majority of users are still based in developed countries (the USA in particular), the Internet has become truly global in scope. Connectivity has increased rapidly in both developed and developing countries, with one of the fastest growing regions being Asia. Malaysia, for example, is currently spending $5 billion on building a Multimedia Super Corridor. The Internet and SME internationalization Commercialization of the WWW has led to a proliferation of publications providing general advice to companies on how to get connected and how to make money on the Internet (Aldridge, 1995; Clark, 1994; De Angelis 1996; Kiam, 1995; Levinson and Rubin, 1995; Littman, 1993; Verity et al., 1996). While much useful advice has been given, many of these publications are of the get rich quick variety and it has only been very recently that attempts have been made to incorporate Internet applications into the mainstream academic literature on strategic marketing. While serious work in this area is still in an embryonic state, useful studies have been published by Cronin (1994; 1996a; 1996b); Ellsworth and Ellsworth (1994; 1996); Poon and Jevons (1997); Quelch and Klein (1996); Sterne (1995) and by the Project 2000 Group. Authors such as Hagel and Armstrong (1997); Hammond (1996); Martin (C) (1997); Martin (J) (1996); and Tapscott (1996) have published thought provoking studies covering the type of innovative business and marketing strategies required to maintain competitive advantage in a digital economy. Ellsworth and Ellsworth (1995; 1996) list ten main business uses of the Internet, namely; communications (internal and external) using e-mail; corporate logistics where tools such as MUDS (Multi-User Dialog) and MOOS (MUD Object Oriented), IRC (Internet Relay Chat) etc. are used to achieve real time communications across distances; globalization and a levelling of the corporate playing field with SMEs using the Internet to achieve more rapid internationalization; the use of the Internet to achieve competitive advantage, for example, by creating new product opportunities, erecting barriers to entry etc.; cost savings, from the use of online communications; online support of inter-firm collaboration, especially in R&D; the use of the Internet as an information search and retrieval tool; the establishment of company Web sites for marketing and sales promotion; and the transmission of any type of data

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including manuscripts, financial information, CAD/CAM files. Sterne (1995) lists the following potential advantages of effective Internet marketing: improved corporate image; improved customer and investor relations; finding new prospects (customers); increased visibility; cost reduction; market expansion; and improved internal communications. These general uses of the Net can translate into specific improvements in business performance. Cronin (1996a), for example, presents a strategic positioning matrix for identifying the forces that influence and shape the type of Internet application most likely to add value and lead to competitive advantage at different stages of a companys development. The matrix, which represents one of the first attempts to develop a conceptual model of Internet business uses, is shown in Figure 1. According to the author, the Internets competitive value for a particular organization will reflect the interaction of customer connectivity and external competitive forces with internal network access and core applications. Four main competitive advantages are available from Internet connectivity including: cost/efficiency savings achieved through substituting the Internet for other communications channels with vendors, information providers and business partners; performance improvements from the widespread internal use of the Internet to integrate information resources, support virtual teams and facilitate distributed decision making and organizational flexibility; market penetration which can be achieved from high external connectivity with customers, including public Web sites and online customer support; product transformation including the development of Internet-based products and services that redefine the companys strategic position. The research being undertaken by the Project 2000 Group makes a particularly important contribution to the literature on Internet marketing. The

Internal drivers: Collaboration/information and systems requirements/cost containment High Market penetration External drivers: Customer connectivity/ competition/technology Cost/ efficiency Figure 1. Strategic positioning for Internet applications Source: Cronin (1996) Low Performance improvement Product transformation

project, which is being co-ordinated by the Owen Graduate School of The Internet and Management, Vanderbilt University, is a five year sponsored research effort international devoted to the academic study of the marketing implications of marketing commercialization hypermedia computer-mediated environments including the Internet and WWW. The Projects Homepage (http://www2000.ogsm. vanderbilt.edu/) contains a number of very interesting papers relevant to the 305 theme of this article. These include papers concerned with the Internets impact on buyer-seller relationships (Steinfield et al., 1995); the Internet and network organizations (Nouwens and Bouwman, 1995); financial services marketing on the Internet (Crede, 1996); commercial opportunities and challenges of the WWW (Hoffman and Novak, 1995); the Internet and marketing intermediaries (Sarkar et al., 1995); and various market research reports covering Internet size, growth, the number and demographics of users etc. (Kalsbeck and Novak, 1996). Overall, the group poses the fundamental question of whether new marketing paradigms are required in an era of increasing electronic commerce (Hoffman and Novak, 1996b). Although we are beginning to see the emergence of more serious academic studies covering Internet based marketing, there has been little attempt to examine the specific role of the Net in the internationalization of SMEs, the main focus of this paper. Only the study by Quelch and Klein (1996) has addressed this issue. The authors argue that the Internet will revolutionize the dynamics of international commerce and, in particular, lead to the more rapid internationalization of SMEs. The WWW will reduce the competitive advantages of scale economies in many industries making it easier for small companies to compete on a worldwide basis. Global advertising costs, as a barrier to entry, will be significantly reduced as the Web makes it possible to reach a global audience more cheaply. Small companies offering specialized niche products will be able to find the critical mass of customers necessary to succeed through the worldwide reach of the Internet. Overall, the authors argue that the Internets low cost communications permits firms with limited capital to become global marketers at an early stage in their development. A number of other international marketing implications of the Internet are identified. First, the Net will lead to the increasing standardization of prices across borders, or at least, to the narrowing of price differentials as consumers become more aware of prices in different countries. Second, the Internet, by connecting end-users and producers directly, will reduce the importance of traditional intermediaries in international marketing (i.e. agents and distributors). To survive, such intermediaries will need to begin offering a different range of services. Their value-added will no longer be principally in the physical distribution of goods but rather in the collection, collation, interpretation and dissemination of vast amounts of information. The critical resource possessed by this new breed of cybermediary will be information rather than inventory. Third, the Internet will become a powerful tool for supporting networks, both internal and external to the firm. Fourth, the Net is an efficient new medium for conducting worldwide market research e.g. gaining

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feedback from customers; establishing on-line consumer panels; tracking individual customer behaviour etc. Deriving from the pioneering work summarized above, the proposition developed in this paper is that the Internet can provide SMEs with a low cost gateway to global markets by helping to overcome many of the barriers or obstacles to internationalization commonly experienced by small companies. An Internet connection can substantially improve communications with actual and potential customers, suppliers and partners abroad; generate a wealth of information on market trends and developments worldwide; provide an ear to the ground on the latest technology and R&D; and be a very powerful international promotion and sales tool. These applications arise against a background where Net access is becoming cheaper, the range of services available is multiplying daily and, with the advent of new hardware and software, the computer know-how required to surf the Net is now in the grasp of even the most techno-phobic executive. Table II presents a conceptual framework for identifying strategic uses of the Internet in international marketing, especially from an SME perspective. The model is presented as a guide to future research which should explore the way in which SMEs are actually using the Net to develop international markets and the success of these efforts. According to the model, the three principal applications of the Internet in international marketing are network communications; market intelligence; and global sales promotion. Intended targets include all of the actors in the firms network including foreign customers, agents, distributors, partners, governments, R&D institutions etc. A variety of tools are available for implementing Internet based international marketing strategies including e-mail and other forms of online communications; information search and retrieval software; and the establishment of company Web sites.
The Internet and World Wide Web Communications Tools: e-mail; Usenet; Listserv; voice mail; IRC; video conferencing; MUDS, etc. Target: customers; suppliers; agents; distributors; partners; research centres; governments Market intelligence Tools: WWW; information search and retrieval software Netscape; Microsoft; Gopher; Archie; WAIS; Veronica, etc. Target: country and market research reports; industry specific reports; trade contacts; agents and distributors; trade leads Marketing and sales promotion Tools: World Wide Web site Target: Global customers (actual and potential)

Table II. Internet applications in small and medium-sized exporters

Communications The Internet and In an era of network or relationship marketing and just-in-time manufacturing, international maintaining effective communications with foreign customers (actual and marketing potential), suppliers, agents and distributors is critically important to successful internationalization (Axelsson and Easton, 1991; Blankenburg, 1992; Blankenburg and Johanson, 1992; Christopher et al., 1991; Cowles, 1996; 307 Grnroos, 1996; Gummerson, 1996; Mattson, 1996; Johanson and Vahlne, 1977; 1990; 1992). The Internet provides various tools for improving or supporting communications with the different actors in the firms international network including e-mail; usenet and listserv groups; Internet Relay Chat; MOOS and MUDS; video conferencing etc. The most widely used and best known of these is e-mail. E-mail has a number of advantages over more traditional forms of communications such as the telephone, postal (snailmail) and fax systems most commonly used by companies. It is a more cost effective method, especially when large distances are involved, and does not rely on real-time presence, which is a particular advantage when different time zones are involved. It is a very reliable and flexible method since graphics, drawings etc. can be transferred as well as text. Individuals may become more rather than less communicative using e-mail, which is best seen as supporting rather than replacing personal, face-to-face relationships. The question facing SMEs is not whether they should use or can afford to install an e-mail facility. A more appropriate question is whether they can afford not to. As an increasing number of competitors start to form relationships with international suppliers, partners, agents etc. supported by electronic communications, SMEs who are not connected face being shut out of the network. In a very short period of time, a business card without an e-mail address will be as useful as one without a telephone number. While e-mail is the best known form of communicating over the Net, there are several other ways in which an Internet link can improve contacts with foreign customers and partners. There is an extremely large number of mailing lists and specialized discussion groups that SMEs can subscribe to free of charge. These can be a particularly useful vehicle for making industry contacts and keeping up to date with industry developments. If a relevant group does not exist, SMEs can start their own. It is also possible to hold online, real time discussions on the Net through MOOS and MUDS, although these require considerable advanced planning, and in some areas, such as video conferencing, the technology is still emerging. A recent paper by Poon and Jevons (1997) has shown the way in which SMEs can use Internet technology to improve network relationships. Based on previous work by Golden and Dollinger (1993), four main types of SME interorganizational relationships are identified namely, confederations in which firms continue to compete with one another but have some horizontal contractual collaboration such as joint advertising, shared transport, joint purchasing, joint venture etc.; conjugate collectives where co-operation is

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vertical through the value-added chain including joint research and formal buyer-seller networks; agglomerate collectives where co-operation is noncontractual including industry-wide pricing, agreement on industry standards etc.; and organic collectives representing traditional networking such as joint board membership. The way in which the Internet can be used to support such networks is shown in Table III.

Inter-organizational relationship Confederation (e.g. small business groups sharing resources through contractual agreements)

Internet usage strategy Central management provides resources for network members to market their products and services on the Internet (e.g. a virtual agency service) Include in the agreement to provide reciprocal homepage links between members included in the contract Allow reciprocal links on members homepages Make available market intelligence on the closed groups intranet with login control Share market intelligence in order to improve supplier-buyer relationship Trade association provides market intelligence data (local and international) on its homepage for member use Mutual agreement between (international) trade associations to market the members products and services Advertise products and provide low cost/free services for charity members of community networks on the Internet (e.g. LinkNet) Link community calendar of events to ones homepage

Conjugate collectives (e.g. closed group agreements between supplier and customer)

Agglomerate collectives (e.g. trade associations

Table III. The Internet usage strategy framework: mapping interorganizational relationship types to Internet usage strategy

Organic collectives (e.g. community service Groups)

Source: Poon and Jevons (1997)

Marketing intelligence Marketing is essentially an information processing activity which links an organization to the external environment in which it operates. Processing information is now generally accepted as the fifth P of the marketing mix and a large number of studies have shown that effective management of information systems/ information technology can be a powerful source of competitive advantage (Cecil and Goldstein, 1990; Cole, 1985; Earl, 1989; Feeney, 1988; McFarlan, 1984; Peppard, 1993; Porter and Miller, 1985; Ward et al., 1990; Turbin et al., 1996).

The need for effective management of information is particularly important The Internet and in international marketing where the firm will be dealing with a range of international diverse and complex environments subject to rapid and often unexpected marketing change. Empirical evidence shows that effective export marketing research is a critical success factor discriminating successful from unsuccessful SME exporters (see Aaby and Slater, 1989). One study concludes that the key to 309 success in entering new markets is to systematically gather and analyse accurate and timely information. Intelligent decisions cannot be made until you are able to find, collect and evaluate relevant information about the idiosyncrasies of the market, the needs and tastes of consumers etc. (Department of Trade and Industry, 1993a). While the importance of export marketing research is generally accepted, the evidence also shows that few SMEs adopt systematic procedures in this respect (Cavusgil, 1984). Several reasons have been suggested for this including the view that export marketing research is too expensive; the scope of the task is too complex and difficult; the SME is too concerned with day-to-day problems and has little scope for adopting a longer-term strategic perspective; and that SMEs lack in-house marketing research personnel, knowledge or resource. The use of the Internet for marketing intelligence is one of the most important ways in which connectivity can improve SMEs ability to develop international markets. Buying or commissioning market research reports can be a prohibitively expensive business. For a fraction of the cost, and in many cases free of charge, much of the same information can be gathered from the WWW. The volume of relevant international marketing information available on the Web is too extensive to describe in detail in this paper but includes numerous on-line newspapers and journals; an extensive list of individual country and industry market research reports; trade lists of suppliers, agents, distributors and government contacts in a large number of countries; details on host country legislation covering imports, agency agreements, joint ventures etc.; relevant international marketing listserv and discussion groups; and numerous other sources of information. Essentially, there are two main ways of accessing and finding the right information. First, typing in key words using one of the WWW search engines such as InfoSeek, Alta Vista or Magellan. This can be very time consuming in shifting through the mountain of information thrown up and is probably best used by experienced Net users or where the information required is very specific. A second and much easier method is to access one of the international business directories already available on the Net such as the Yahoo Business Directory and others. The authors own website, Internet Export Resources (http://web.ukonline.co.uk/ Members/jim.hamill/contents.htm), contains links to the best WWW sites for undertaking general country screening and export marketing research including, International Business Resources on the WWW (http://ciber.bus. msu.edu/busres.htm) maintained by Michigan State University; State-usa (http://www.Stat-usa.gov/), a service provided by the US Department of Commerce; Worldclass Supersite (http://web.idirect.com/~tiger/supersit.htm);

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Dolphin Marketing: International Trade Links Page (http://merkury.saic.com/ dolphin/tradelnk.html); the Global Export Marketing Information System (http://lcweb2.loc.gov:8081/glin/x-gem-lk.html), which provides country specific information on new, emerging markets; and Internet Resources for Exporters (http://www.exportusa.com/resources.html). All of the sites provide access to a very large number of foreign market research reports and other services useful to the SME exporter. Global sales promotion Until recently, direct advertising on the WWW was frowned upon by most Internet users (see Kimball, 1993). However, this attitude has changed significantly with the increasing commercialization of the Web. More and more companies are setting up their own Web sites as a means of disseminating useful company and product specific information to potential customers and encouraging customer feedback and interaction. For SMEs, a well designed Web site can provide an attractive, low cost method of sales promotion to global customers. Ellsworth and Ellsworth (1996) argue that marketing and sales promotion, both business to business and direct to customers, have been revolutionalized by the WWW. A good Web site can be used for advertising, corporate visibility, brand name recognition, public relations, press releases, corporate sponsorship, direct sales, customer support and technical assistance. The key to achieving these benefits is a well designed site and effective marketing of the site to ensure a large number of hits. Successful business Web sites, according to the authors, have a number of common characteristics including: information-rich and regular updating to encourage repeat visits; clear navigation paths to allow smooth movement around the site; the provision of value-added to the user in the form of real information and services rather than just a place for marketing and sales; interactivity and responsiveness to user feedback; the site should be designed to allow the gathering of information about users; integration of the site with other marketing channels used by the company; and institutional support, i.e. the site should have its own budget and be supported by the whole organization rather than being the responsibility of a small group of techies. Finally, the site needs to be marketed properly in order to ensure high access. This can be done in various ways including registering the site with all of the online search engines; establishing reciprocal cross-linkages to other sites; and ensuring that the URL address is used in all company correspondence etc. Similar advice concerning the design and marketing of company Web sites is provided by Sterne (1995). The need for new international marketing paradigms? There is an extensive academic literature on the internationalization of SMEs (Aaby and Slater, 1989; Abdel-Malek, 1978; Axinn, 1988; Baker, 1979; Barker and Kaynak, 1992; Bilkey, 1978; 1985; Bilkey and Tesar, 1977; Bradley, 1984; British Overseas Trade Board, 1987; Cannon and Willis, 1986; Cavusgil, 1984;

Cavusgil and Zou, 1994; Chetty and Hamilton, 1993; Dichtl et al., 1990; Eshghi, The Internet and 1992; Johanson and Vahlne, 1977; 1990; 1992; Joynt and Welch, 1985; Kau and international Tan, 1989; Kaynak, 1985; Madsen, 1989; Miesenbock, 1988; Rabino, 1980; Roy marketing and Simpson, 1981; Styles and Ambler, 1996; Weaver and Pak, 1990; Yaprak, 1985; Young et al., 1989). Four major research themes have dominated this literature, namely, the barriers or obstacles to internationalization facing SMEs; 311 critical success factors in SME internationalization; starting to export and the internationalization process; the importance of export planning and the need for adopting a strategic approach to international market entry and development. Based on the conceptual model presented in Table II, this section examines the extent to which previous research findings in these four areas will remain valid in an international marketing environment characterized by extensive use of the Internet for communications; market intelligence and global sales promotion. Barriers to SME internationalization The main barriers or obstacles experienced by SMEs when going global are summarized in Table IV. Psychological barriers relate to SME perceptions concerning the costs, risks and profitability of exporting including an
Psychological Ethnocentric rather than geocentric orientation Short-term perspective Lack of commitment to exporting Exporting seen as not for us or too much trouble or too risky Fear Organizational Limited resources (both financial and managerial) Lack of knowledge of foreign markets Lack of internationally experienced personnel Lack of formal education/training in export marketing Product/market Products may not be suitable for foreign markets Foreign market differences Need for costly product adaptation Problems in identifying and selecting the most appropriate foreign markets (limited resources for country screening and export market research) Tariff and non-tariff barriers to trade Profitability of exporting Operational Export documentation and management of export operations Language problems Delays in receiving payment and financial risk

Sources of competitive advantage abroad Problems in finding suitable overseas representation (agents/distributors) Source: The author, derived from the literature

Table IV. Barriers to exporting in SMEs

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ethnocentric rather than geocentric orientation; short rather than long term perspectives; the view that exporting is too risky, not for us, too much trouble, someone elses problem and so on. Operational barriers refer to the problems encountered by SMEs in dealing with export paperwork, documentation, language problems, delays in payment etc. Organizational barriers arise from having limited resources available to devote to the export effort and the limited international experience of most SMEs. Product/market barriers relate to the suitability (or lack of suitability) of the firms product or service for foreign markets and the country selection decision. The Internet does not provide a panacea for such problems. However, used effectively, it can be a very powerful tool to assist SMEs in overcoming the main barriers experienced, resulting in more rapid internationalization. This is shown in Table V which extends the conceptual model presented in the previous section to include the main advantages which SMEs can derive from an effective Internet strategy and the way in which these can help to overcome the internationalization obstacles experienced. Thus, the use of the Net for market intelligence and to support international networking can lead to a more positive, geocentric orientation towards the strategic importance of international markets. Electronic trading can overcome many of the operational barriers relating to paperwork and export documentation, with Singapores TradeNet system being a very good example (Turbin et al., 1996). The establishment and proper marketing of a Web homepage can be used to overcome the product suitability/country market selection decision allowing
Barriers to SME internationalization Psychological Internet applications/advantages Increase in international awareness, confidence and commitment through access to global information sources; participation in global network communities; enquiries and feedback to WWW site from potential global customers Simplified export documentation through electronic data transfers; electronic payments; online export assistance, etc. Access to low cost export market research resources; improved knowledge of international markets and culture; reduced dependence on traditional agents and distributors through direct marketing; establishment of virtual network of partners Country/market selection decision made easier by online export market research; consumer/market orientation through customer, agent, etc. feedback and comment; costs savings through electronic market research, communication cost savings improving the profitability of exporting; adoption of global niche rather than country centred strategies

Operational

Organizational

Product/market Table V. Internet application in SMEs: overcoming the barriers to SME internationalization

SMEs to develop global market niche strategies rather than country oriented The Internet and strategies. international One very important implication derives from the comments made above and marketing from Table V. Most governments throughout the world have introduced export promotion schemes targeted specifically at the SME sector. The aim of such schemes is to turn non- or passive exporters into active exporters by providing 313 export advice and training, subsidizing exports and participation in trade fairs, country missions etc. The logical conclusion deriving from the analysis presented above is that training in the use of the Internet to support SME internationalization should be an integral part of government export promotion and support. There is little evidence, however, that this is the case or that the various export promotion agencies are paying much attention to the internationalization benefits associated with an effective WWW presence. Critical success factors Closely related to the issues discussed in the previous section is the question of critical success factors in SME internationalization. Numerous empirical studies have compared the characteristics of successful and unsuccessful SME exporters in order to identify the factors influencing export performance (see earlier list of references). The overall conclusion emerging from this work is that there is no such thing as an absolute success factor in the sense of guaranteeing good performance abroad since the factors influencing export success are complex and varied (Aaby and Slater, 1989; Styles and Ambler, 1996). However, there is sufficient empirical evidence to arrive at some general conclusions concerning the importance of agency/distributor choice; effective management of the agency/distributor relationship; strong management commitment to exporting; international awareness, knowledge and orientation; selectivity in market choice; adopting a strategic, long term perspective and so on. Derived from the extensive empirical evidence on this topic, the most important factors in successful exporting are listed on the left hand side of Table VI. The way in which the Internet can be used to operationalize these critical performance factors is shown on the right-hand side of the figure. Thus, finding the right overseas agent or distributor has been identified as a critical success factor in SME internationalization. Lists of agents and distributors for different products and different countries can be found on the WWW making the agency search and evaluation process considerably easier. Identifying foreign markets offering the most attractive growth potential is a critical success factor and various models of market selection and country screening have been developed in the literature (Cannon and Willis, 1986; Root, 1987; Young et al., 1989). A frequent complaint of SMEs, however, is that they lack the necessary financial and human resources to engage in formal country market screening. Again, the Internet offers a solution owing to the wealth of country/ market specific information available on the WWW, much of which is free of charge. Other ways in which the Internet can be used to support critical success factors include market intelligence to support export planning and the

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Critical success factor Finding the right overseas agent or distributor

Internets contribution Use of online databases and searches to find suitable overseas representation; and/or reduced dependency on agents/distributors through direct selling, etc. Electronic communications to support more traditional forms of collaboration and contact; creation of virtual communities based on mutual trust Increase commitment to overseas markets through participation in global electronic networks Increase in international awareness, confidence and commitment through access to global information sources; participation in global network communities; enquiries and feedback to WWW site from potential global customers Significantly simplified through Internet-based export market research resources Closer company/customer relationships through electronic communications, feedback, interactivity, etc. Utilization of the Webs potential in strategic export planning Electronic communications with foreign agents/ distributors; customers; partners governments, etc. Targeted marketing Internet resources supporting the development of longer term export objectives

Effective management of the agency/ distributor relationship

Strong commitment to exporting International awareness, knowledge and orientation

Selectivity in market selection Respect for and orientation to foreign customers Export planning and strategy development Table VI. Critical success factors in SME internationalization: the Internets contribution Fast communications and documentation procedures Effective marketing mix policies Long-term perspective

development of export strategies; electronic communications to support networks and so on (see Table VI). The internationalization process The extensive literature under this heading has focused on two inter-related issues, namely, examination of the initiating factors which motivate nonexporters to begin exporting and research on the internationalization process. As regards the former, one model views the SMEs decision to begin exporting as being the mental process through which an individual decision maker passes from knowing about the possibility of exporting (the initial exposure to the idea) to acting upon the opportunity (Jatusripitak, 1986). The process starts with the decision-makers initial exposure to the idea and awareness of its importance to the firms business performance, then moves through the information search stage to the evaluation and adoption stages (i.e. the final decision to export). Four main steps are involved, namely: triggering cues which arouse the firms awareness of the importance of exporting; information search whereby the firm

undertakes market research to identify export opportunities; evaluation stage The Internet and during which decision makers evaluate the probability of successful export international market expansion; leading to the final decision to begin exporting. marketing Jatusripitaks framework, and most other models of export initiating factors, are firmly rooted in the stages of development view of SME internationalization. The essence of this approach is that internationalization is an evolutionary, 315 incremental process whereby SMEs become more and more international over time; the driving forces being increased international knowledge, experience and confidence which are seen as breaking down the cultural barriers and reducing the risks associated with further internationalization. This evolutionary, incremental view of SME internationalization was first developed by Johanson and Wiedersheim-Paul (1975), based on the experiences of four Scandinavian companies. Since then, a large number of other studies have applied the model to different samples of companies (Bilkey and Tesar, 1977; Cavusgil, 1980; Czinkota, 1982; Johanson and Mattson, 1988; Johanson and Vahlne, 1992; Reid, 1981). Although some important differences exist, the various studies agree that internationalization is a step-wise process which evolves through various stages; for example, the completely uninterested firm, the partially interested firm, the exploring firm, the experimental firm, the experienced small exporter, the experienced large exporter (Czinkota, 1982). As a consequence of the extensive work undertaken in this area, the incremental school of thought has become one of the dominant paradigms in the international marketing literature. Although occupying a centrally important position in international marketing research and teaching over the last 20 years, the stages of development model has been heavily criticized by some authors (Hamill, 1994; Turnbull, 1987). One of the main criticisms made is the models failure to adequately explain the realities of internationalization in an era characterized by the increasing globalization of business and competition; crossborder mergers, acquisitions and strategic alliances; and the need for companies to globalize much earlier and more quickly than in the past, a process made considerably easier by the rapid improvements that have taken place in global telecommunications and information technology. It is the contention of this article that the relevance of the incremental school is further called into question by the recent and very rapid explosion of international business activity on the WWW; and that a fundamental reappraisal of the model needs to be undertaken to determine whether it should continue to occupy such a centrally important position in international marketing teaching and research in the emerging electronic age. Slow, incremental internationalization no longer makes sense when the technology exists to provide SMEs with a low cost, instant gateway to global markets. The importance of export planning and the need for a strategic approach The need for SMEs to plan their international market expansion has been identified in numerous studies including Aaby and Slaters (1989) extensive

International Marketing Review 14,5 316

review of the empirical evidence on export performance factors. The authors found a very strong positive relationship between export performance and export planning and concluded that the empirical evidence supports the view that the implementation of a process for systematically exploring, analysing and planning for exports is a very powerful discriminator between successful and unsuccessful exporters. In other words, export planning pays. Similar conclusions were derived in a more recent paper by Cavusgil and Zou (1994) who argued that the type of export strategy adopted by companies will have a major impact on subsequent export performance. This article does not dispute the importance of export planning or the need for adopting a strategic approach to international market development. It is argued strongly, however, that traditional approaches to export strategy development should now be complemented by the development of Internetbased support strategies. Some authors such as Hagel and Armstrong (1997), Hammond (1996), Martin (1997), Martin (1996), and Tapscott (1996) have gone further than this, arguing that traditional strategic planning models do not work in cyberspace and that a completely new approach to strategy development is required; one that emphasizes speed, agility and flexibility. In particular, Hagel and Armstrongs (1997) book on the importance of virtual communities to competitive success in online marketing is highly recommended. Conclusions and implications The overall conclusion of this paper is that the commercialization and global spread of the Internet will have a profound impact on both the study and practice of international marketing as we move towards the new millennium. Four main implications derive from this conclusion. First, as international marketing educators, we need to ensure that our students receive formal training in the strategic and marketing management applications of the Internet to prepare them for future careers in an era characterized by the growing importance of international electronic commerce. In this respect, the WWW offers numerous teaching and assessment opportunities including scope for international student collaboration. Second, while the Net will have a major impact on international marketing, this has not yet been reflected in the academic literature which is in danger of becoming seriously outmoded. A major research initiative is required to examine more fully the international marketing implications of the Internet and this should obviously be an international collaborative project. A non-exclusive research agenda is given below in order to stimulate interest and collaborative efforts: Impact of the Internet on internationalization processes, especially the extent to which effective use of the Net provides a low cost gateway to global markets for SMEs. The Internet and international marketing theory; are new paradigms required?

Export marketing research and the Internet. The Internet and international The Nets impact on international marketing intermediaries (agents and distributors). marketing The Internet, electronic networks, relationship marketing and strategic alliances. 317 The Internet and international pricing policy; will the Net lead to the closer convergence of price levels. Global advertising and corporate communications on the Internet. Electronic commerce and financial transactions on the Internet, including consumer attitudes towards Internet commerce. Designing, implementing and managing an Internet supported international marketing strategy. Case, country and industry studies of effective Internet marketing. Internet education and training needs of companies; the impact of the Internet on higher education. Corporate intranets. Third, and deriving from the above, new international marketing paradigms will need to be developed to take account of Internet-enabled internationalization. We can no longer base much of our teaching and research on models (such as the stages of development, incremental school of internationalization) developed during a non-electronic age. Finally, the arguments developed in this paper have important implications for the nature of government export promotion policy. Internet training for SME exporters (actual and potential) should now be a top government priority.
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