Successful Internet Businesses Match Strategy and Transaction Efficiencies

Small and incumbent businesses seek to make their way online and into the global marketplace. Like new sprouts they try and break ground into a profitable entity. According to research by Howard Rasheed those businesses that embrace online product distribution create significantly higher international sales growth (2009). They studied 240 small businesses who engage in Internet based consumer marketing to find which types of businesses are likely to succeed. 

In the contemporary market, some owners may decide to create truly Internet based businesses that capitalize on the movement of information. Existing businesses may attempt to strengthen their approaches by developing their brick-n-mortar models into brick-n-click businesses that develop a hybrid approach to marketing. In today’s world, few truly brick-n-mortar companies exist in the international market. 

E-commerce businesses often fail due to lacking strong market knowledge, sound business ideas, balanced approaches to development, and failure in long-term planning, poor external relationships, and the improper thinking of management (Martinson, 2006). The internet based businesses are quick and fast paced in the market but often do not think strategically enough to obtain a sustainable threshold. 

Four different types of companies will use the internet for their business: e-commerce companies that market goods with the Internet; content experts who gather and display information from multiple sources; market makers who develop places to sell products; and those that provide Internet services (Afuah & Tucci, 2000). Ultimately each type will have a strategy that fits uniquely to their product and service goals but is inherent to their model.  

When companies do fail it is because they have not developed brand equity. Brand equity is the value of the brand in terms of customer perceptions of loyalty, quality, association, image and awareness (Yoo,  et. al., 2000). The businesses simply weren’t able to create a strong enough following through the murky and often saturated information game. They were unknown and would need to expend greater effort in creating public awareness. 

Online success is due to the high speed travel of information that allows companies to integrate into the various aspects of the market. The Internet provides cheaper transaction costs that help to coordinate activities (Clemmons et. al. 1993).  The author found that purely Internet base firms are more likely to succeed than other businesses but when they do fail it is because of their internal decision making processes. Product sales and distribution in the online environment appear to have advantages but small organizations may have a hard time achieving appropriate pricing against more established businesses. Those services that can digitized, and therefore lower transaction costs across multiple perspectives, appear to have the highest success rates. 

Afuah, A and CL Tucci (2000).Internet Business Models and Strategies. NewYork, NewYork: McGraw-Hill Irwin.

Clemmons, E., et. al.  (1993). The impact of information technology on the organization of economic activity: The move to the middle hypothesis. Journal of Management Information Systems, 10(2), 9–35.

Martinsons, M (2006). Strategic management lessons from e-commerce.Handbook of Business Strategy, 7(1), 337–340.

Rasheed, H. (2009). Contrasting e-commerce business models: performance implications for small enterprises. Journal of Developmental Entrepreneurship, 14 (1).

Yoo, B., et. al.  (2000). An examination of selected marketing mix elements and brand

equity.Academy of Marketing Science Journal, 28, 195–211

Lego Expands Internationally as Movie Sparks Additional Interest

Lego is going global with their products as they capitalize on the new movie and 11% increase in profits. Their plan is to use their base in Connecticut to expand into London, Singapore and Shanghai. The expansion will allow them to increase sales and draw in top international managers to help foster future growth. They are trying to bring their products brick-by-brick to new places that have never heard of the company. 

A decade ago the company was losing 26% of profits and now it is realizing tremendous growth (1). The owing family gave up the reins to new management and they have been innovating 60-70 new products a year expanding their sales capacity tremendously. They have seen year after year growth for the past ten years and now they are ready to explode onto the global market. 

The CEO Jorgen Vig Knudstorp states that their success is focusing on their core strengths and reinvesting their profits back into their abilities and expansion efforts (2). The company decision-makers have the ability to strategize long-term and have been putting resources into their plan. Because they are a privately held company they are a little more nimble than those with public shareholders. 

The Lego movie with an announced 2017 sequel is contributing to their growth. Lego has attracted core followers who have grown up with the bricks and still use the product as adults. More children are being introduced to their toys through the movie creating an expanding customer base. Warner Brother’s movie acts as another brand marketing campaign and the sequel will maintain the interest into the near future.

Cultural and Motivational Intelligence Contributes to Exports

Proper staffing with relevant skills is important to any business. In large firms the export manager should understand the cultures in which he or she is working within. The researchers looked at 153 U.S. companies to determine if an exporting manager’s cultural intelligence impacts the success of the company in engaging in international sales. Such skills allow for greater adaptation through understanding. 

Companies naturally move through marketing-mix adaptations whereby they change the way in which they handle internal and external pressures.  When done well it increases the strategic, financial, and competitive objective achievements into specific markets (Cavusgil & Zou, 1994). Much of this adjustment is based on the manager’s ability to understand the markets and make connections to the people within that market. 

According to Resource-Advantage Theory when firms can deploy the proper mix of financial, physical, legal, human, organizational, informational and relational resources they can become more productive (Hunt, 2000). The human aspects of R-A Theory relate closely to the marketing manager. This requires the skills of the international marketing manager to match with their motivations and metacognitive cultural intelligence to encourage additional product sales. 

Motivational Cultural Intelligence is the ability to continually put forward energy to learn about new cultures and situations where culture is important. It rests on the four dimensions of motivation, behavioral, cognitive, and metacognitive (Ang et al, 2007). It is a process of understanding norms, cultural rules, underlying values, and mental models of other people that can help in negotiations and business. 

When metacognitive CQ is high it contextualizes thinking with sensitivity to the embedded nature of culture and stronger cognitive flexibility that adjusts to changes in the environment (Klafehn, et. al, 2009). This helps managers understand their customers better from the perspective of their culture and create higher levels of business opportunities. It provides a context to the other’s culture and how to relate information to raise the value of products. 

The research found mixed results in terms of performance but does provide support that motivational CQ and metacognitive CQ can understand culture better, are willing to make adaptations, and can enhance strategic thinking within the organization. The study did have a limitation in terms of measuring how much control these managers have over the processes and whether or not any of their suggestions have been implemented. Simply having personnel with strong skills doesn’t mean there is going to be a benefit without some way of ensuring their ideas are heard and strong ideas are implemented.

Ang., et. al. (2006). Personality correlates of the four factor model of cultural intelligence. Group and organizational management, 31 (1). 

Cavusgil,S. & Zou, S. (1994). Marketing strategy performance relationships: an investigation of the empirical link in export market ventures. Journal of Marking, 58. 

Klafehn, et. al. (2009). Navigating cultures: the role of metacognitive cultural intelligences, “in Handbook of Cultural Intelligence: Theory, Measurement, and Applications.” Soon Angand and Linn Van Dyne, eds. Armonk, NY: M.E. Sharpe.

Magnusson, P. et. al. (2013). The role of cultural intelligence in marketing adaptation and export performance. Journal of International Marketing, 21 (4).