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E Commerce Goes Global


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E Commerce Goes Global

  1. 1. E-commerce goes Global Via Acquisitions Arun Kottolli
  2. 2. Introduction <ul><li>INTERNET reaches all countries around the world, one would think that e-commerce would have been global from the very beginning </li></ul><ul><li>Reality is not so…Due to differences in </li></ul><ul><ul><li>Language & Culture </li></ul></ul><ul><ul><li>Business Environment </li></ul></ul><ul><ul><li>Legal Rules & regulation </li></ul></ul><ul><ul><li>Business infrastructure </li></ul></ul><ul><ul><li>Computer usage </li></ul></ul><ul><li>As a result most e-commerce was confined within a country’s borders </li></ul>
  3. 3. Regional Focus <ul><li>Most E-commerce sites such as,,,,, etc are created with an American customer in mind </li></ul><ul><li>The above sites are useful for only 5% of the world population – Does not have a global appeal!! </li></ul><ul><li>Result – Most of e-commerce was local and not global </li></ul><ul><ul><li>Americans buy from American sites </li></ul></ul><ul><ul><li>Japanese buy from Japanese sites </li></ul></ul>
  4. 4. Early Global Pioneers <ul><li>Early pioneers like Yahoo, Alta-vista ventured early into the global markets </li></ul><ul><ul><li>Mostly limited their global operations to portal services based on advertisement revenue </li></ul></ul><ul><ul><li>Avoided e-commerce </li></ul></ul><ul><li>E-commerce like all other commerce had to follow local rules & regulation </li></ul><ul><ul><li>Yahoo got into trouble in France for selling Nazi paraphernalia </li></ul></ul><ul><li>Following local rules required local physical presence for order fulfillment, payment etc. </li></ul>
  5. 5. International Expansion <ul><li>Amazon was the first to expand e-commerce operations abroad </li></ul><ul><li>In April 1998 Amazon acquired ABC Bucherdienst in Germany & Bookpages Ltd. in the U.K </li></ul><ul><li>Acquisition marked Amazon’s international operations </li></ul><ul><ul><li>Web Sites were localized – local editorial, local language & local book recommendations </li></ul></ul><ul><ul><li>&quot; and will provide a whole new level of convenience and customer service for book buyers,&quot; -- Jeff Bezos </li></ul></ul>
  6. 6. Recent Global Expansions <ul><li>Ebay acquires Baazee in India – June 2004 </li></ul><ul><ul><li>Acquired EachNet in China in 2003 </li></ul></ul><ul><li>Yahoo has launched Yisou in China, acquired Kelkoo in Europe </li></ul><ul><li>Google has acquired a minority stake in Baidu, a Chinese search engine </li></ul><ul><li>E-trade acquired in Israel </li></ul><ul><li> acquired Jobline international in Europe –To get access to 20 international job sites </li></ul><ul><li>eFunds acquires Access Cash International </li></ul>
  7. 7. Why Acquisition? <ul><li>In theory, challenges of localization can be met by acquisitions of local companies abroad </li></ul><ul><ul><li>Local firms have local market knowledge </li></ul></ul><ul><ul><li>Have experience working in the local regulation environment </li></ul></ul><ul><ul><li>Local firms are more responsive to local needs </li></ul></ul><ul><li>Acquisitions help firms offset slowdowns in the U.S. market </li></ul><ul><ul><li>As growth in the U.S. slows, companies like eBay, Yahoo and Amazon increasingly have to expand internationally to support their stock valuations </li></ul></ul><ul><li>Acquisitions are a faster and safer means to expand abroad </li></ul>
  8. 8. Challenges of Global expansion <ul><li>Going Global is not easy </li></ul><ul><li>Business models are often fine-tuned to a local economy </li></ul><ul><ul><li>What works in US may not work internationally </li></ul></ul><ul><li>Ability to localize a global business is a major challenge </li></ul><ul><li>Challenge is to identify the core business model/practices responsible for domestic success </li></ul><ul><li>Challenge is to make the core business model succeed in a different institutional setting </li></ul>
  9. 9. Major Risks <ul><li>Major Risks in acquisitions as cited by e-commerce firms are: </li></ul><ul><ul><li>Cultural differences; </li></ul></ul><ul><ul><li>Longer payment cycles; </li></ul></ul><ul><ul><li>Laws favoring local competitors; </li></ul></ul><ul><ul><li>Credit risk and higher levels of payment fraud; </li></ul></ul><ul><ul><li>Legal and regulatory restrictions; </li></ul></ul><ul><ul><li>Currency exchange rate fluctuations; </li></ul></ul><ul><ul><li>Higher costs (operating); </li></ul></ul><ul><ul><li>Diverting management attention. </li></ul></ul>
  10. 10. Other Challenges <ul><li>Acquisition is not the final solution </li></ul><ul><li>Managing an acquisition is not easy – Firms will have to overcome the cultural differences </li></ul><ul><li>Inexperience in managing global operations or even foreign operations will impose a huge challenge </li></ul><ul><li>Ability to learn the ways of doing business in that country from the acquired firm is critical </li></ul><ul><li>Knowledge management during and after acquisition plays a major role in determining the success or failure of the acquisition </li></ul>
  11. 11. Unique Challenges <ul><li>Challenges faced by each firm expanding abroad is unique to that firm </li></ul><ul><ul><li>E-bay will have to adapt to different means of payment collection in India </li></ul></ul><ul><ul><li>Google will have to avoid certain types of advertisements which are prohibited in China </li></ul></ul><ul><ul><li>Amazon will have to build network of local suppliers and distributors to service customers in UK and Germany </li></ul></ul>
  12. 12. Global Success <ul><li>Success of recent acquisitions is yet to be seen </li></ul><ul><li> has been successful in U.K but is struggling in France </li></ul><ul><ul><li>&quot;It is costly to establish international facilities and operations, promote our brand internationally and develop localized websites, stores, and other systems.“ – </li></ul></ul><ul><li>Firms will avoid repeating their earlier mistakes – an advantage for US based firms as they have learnt from the crash – But will make new mistakes in their global expansion </li></ul>
  13. 13. Closing Thoughts <ul><li>Global success will involve lots of trial and errors, lots of missteps – till firms learn the art of doing e-business abroad </li></ul><ul><li>E-businesses in Asia and India like or can either build a strong market position to defend their market share or look to make a profit by selling out to global e-giants </li></ul><ul><li>The global expansion stage is just the beginning – we will soon hear stories about a few successes and lots of disasters in the new era of global e-Commerce </li></ul>