The Internet: business growth environment (I)

  • by admin
  • Posted in Online internationalization
  • March 23, 2015
The Internet: business growth environment (I)

“It is true that the Internet will change everything. It is not true that everything will change.”

– Paul Deninger, CEO of Broadview Capital Partners, quoted by Reuber and Fischer (2011, p. 661)

Chattell (1998) showed that the Internet is more available than ever to all kind of companies offering benefits that include: the reduced importance of economy of scale, lower marketing communication costs, greater opportunities for price standardization, reduced information float time, temporal a-synchronicity, increased contact between buyers and sellers and changes in intermediary relationships. Therefore it can be said that Internet provides invaluable resources and information for helping SMEs in the internationalization process.

The Internet’s origins are linked to early 1970s, when the US Defense Department established the Advanced Research Projects Agency (ARPAnet) to link various military and research institutions (Hamill and Gregory, 1997). The discovery that took place then, 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) remained the most commonly used on the Internet until 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 centers to the NSF’s supercomputers (Hamill and Gregory, 1997). While the original users of the Internet were predominantly government sponsored or university sponsored researchers, public interest exploded in the early 1990s as the Internet 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 to encourage greater business participation (Hamill and Gregory, 1997). This led to a proliferation of commercial websites which is still the fastest growing part of the Internet today. 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 culture clash, however, was for a short time, and marketing on the Internet has become a generally accepted part of the World Wide Web (Hamill and Gregory, 1997).

Like an explosion, for the past decade the Internet not only attracted the attention of the world, but also created sufficient uncertainty to limit the ability to see what is happening and in what direction it is heading. As part of the confusion has disappeared, it began to realize what has changed dramatically and what is still standing strong, as ever (Meyers and Gerstman, 2001).

According to Figure 1 in 2012 the number of internet users worldwide reached 2.4 billion, more than twice what it was 5 years ago, 1.15 billion. It is well known that the Internet is big, but this kind of expansion gives us all the reasons to reflect in a different perspective.

Figure 1: Internet users in the world by geographic regions – 2012, Q2

regiconia internet world stat

According to the observation in Hamill and Gregory (1997), the Internet has the power to enhance communications with existing foreign customers, suppliers, agents and distributors, identify new customers and distributors, generate a wealth of information on market trends and on the latest technology, research and technical developments.

Reuber and Fischer (2011) consider the advances in information and communication technologies as enablers of international entrepreneurship (IE). The late developments in communication and transactions, which have led to increased quality and speed and decreased their cost have made internationalization more realistic for the companies constrained by the resources (Reuber & Fischer, 2011). It is more likely for technology-based companies and innovative businesses than classic SMEs to rapidly internationalize, according to Bell and Loane (2010).

The evolution of Internet technologies made it possible for SMEs to adopt more complex methods of using the new Internet resources, such as ecommerce (Bell and Loane, 2010; Reuber and Fischer, 2011). By involving the application of Information & Communication Technologies (ICT) (Bell and Loane, 2010, Hamill and Gregory, 1997), the transactions with distributors and suppliers have become possible to process within the company. But the new innovative applications that were developed using Web 2.0 technologies are likely to lead to internationalization activities involving a much higher level of complexity (Bell and Loane, 2010; O’Reilly, 2007; Addison, 2006).

Many of the early contributions saw and explained the Internet as a facilitator that allowed firms to become international, to communicate more in a more cost efficient way, and to obtain critical information on international markets. Updating these contributions, the Internet was also viewed as an enabler, allowing firms to transact online, introduce new e-offerings, adopt new business models and operate in supply chains (Bell and Loane, 2010; Chandra and Coviello, 2010; Freeman et al., 2006).

In the most recent contributions, the Internet is seen as a creator or driver of innovative international opportunities that involve co-creativity and collaboration. In internet-enabled markets an important role is played by online reputation because the competition is fierce (Hamill et al., 2010; Loane, 2006; O’Reilly, 2007; Rialp et al., 2005; Weerawardena et al., 2007). Companies rarely have the advantage to run their business in a blue ocean.

Early achievement of online reputation can yield substantial competitive gains in international internet-enabled markets, because the general behavior of online customers is to imitate the purchase decisions of previous buyers. Online reputation can be gained by being visible online and being seen as providing high-quality goods and services (Arenius et al., 2006; Loane, 2006)…

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