Internet-enabled International Marketing - A Small Business Network Perspective
Simpson Poon*
School of Information Technology
Murdoch University
Murdoch, WA
AUSTRALIA 6150
Tel: +61 8 93606072
Fax: +61 8 93602941
email: spoon@murdoch.edu.au
Colin Jevons
School of Management
Swinburne University of Technology
John St. Hawthorn, Victoria
AUSTRALIA 3122
Tel: +61 3 9214 8536
Fax: +61 3 9819 2117
email: cjevons@swin.edu.au
Please direct all correspondence to the author with a “*”
1
Abstract
Many small businesses in the 1990s are compelled to compete beyond their comfort zone
(local markets) due to the globalization and internationalization of the marketplace. At the
same time, the commercialisation of the Internet has created unprecedented opportunities for
small businesses to engage in national and international marketing campaigns which could
have been unaffordable due to the huge amount of resources required. This paper discusses
why the Internet is particularly important for small business international marketing. It then
investigates how small business network exchange can be initiated and supported using the
Internet, which in turn provides a platform for international marketing. It also explores
strategies for carrying out marketing activities on the Internet, considering the different kinds
of inter-organisational relationships that exist within small business networks. Finally, it is
argued that marketing is only one aspect of how small business networks can gain strategic
advantage in using the Internet. The fundamental issue is to build useful inter-organisational
systems to support not only marketing activities among small businesses on the Internet but
also to transform activities on different parts of the small business value chain.
Simpson Poon is Associate Professor of Electronic Commerce and the Director of the Centre
for Electronic Commerce and Internet Studies at Murdoch University, Perth, Australia. He
has published papers in the area of strategic impacts on small business by the Internet. His
research interests include inter-organisational systems and the use of information
infrastructure to improve strategic positions. This paper is the result of a project investigating
how small businesses can gain strategic advantage through using the Internet.
Colin Jevons is a lecturer in the School of Management at Swinburne University of
Technology and a Fellow of the Asia-Australia Research Centre. His career background is in
the publishing industry; his research interests are now in the measurement of attitudes to
service quality internationally, differences between marketing in countries in transition from
command to market economies and fully-fledged market economies, and how traditional
theories of competitive advantage should be modified for business on the Internet.
2
Introduction
Until the early 1990s, the Internet was largely an academic research network. The
membership of this network was mainly from teaching and research institutions together with
government organizations directly or indirectly involved in research activities. The Internet
then had a set of strictly enforced Acceptable User Policies (AUPs) which restricted nonteaching and non-research traffic, with particular emphasis on restricting profit-oriented
commercial activities. AUPs applied throughout the Internet, mostly based on the US
APRANet AUP, and were enforced internationally (eg. AARNet in Australia).
Following the gradual withdrawal of US Government funding of the NSFNet (the backbone
infrastructure of the US portion of the Internet) in the early to mid 1990s, the portions of the
NSFNet not directly linking the super-computer centres were ‘outsourced’ to commercial
carriers for management and development (Zakon 1996). The traditional AUPs which restrict
the non-commercial use of the Internet became impractical. Consequently, commercial use of
the Internet has exploded. Commercialisation of other parts of the Internet (eg. AARNet in
Australia) followed. In 1994, the number of commercial domains1 exceeded the number of
academic, research and government domains for the first time (December and Randell 1994).
One of the earliest and still most popular commercial activities on the Internet is advertising
and promotion. Until the early 1990s, applications on the Internet were essentially nongraphical, and all Internet-based marketing activities were performed by sending plain text
messages on the Internet. Examples include announcements made on Usenet newsgroups by
computer firms (eg. biz.digital.announce, comp.sys.sun.announce) and the use of electronic
mail (eg. flash@flashback.com) to distribute product updates to customers. Much of the early
commercial use of the Internet was from organisations in the Information Technology (IT)
industry. For example, shareware vendors made available their products on computers on the
Internet worldwide for potential customers. Many shareware vendors are themselves small
businesses and the Internet as a promotion tool has been proven to be cost-effective as
compared to traditional media. This ‘try-before-you-buy’ strategy ideally requires a carefully
targeted customer base. Such bases are emerging on the Internet, for example specialist
newsgroups and email lists. In their absence, the minimal cost of generating and broadcasting
junk mail seems to outweigh the disadvantages, to the sender at any rate.
The birth of the World Wide Web (WWW) in 1993, particularly its graphical user interfaces
(often referred to as web browsers), offers opportunities which were unimaginable during the
text-based era of the Internet. The WWW allows hypertext navigation (so-called point-andclick) as well as graphical displays. Marketing activities on the Internet are no longer limited
to plain text messages. Moreover, the WWW allows interactive marketing because the user
1A
domain is an Internet name given to a group of computers on the Internet (eg.
swin.edu.au becomes part of the Internet name of all Internet-connected computers at
Swinburne University, Australia)
3
is actively involved in responding to the vendor’s promotion campaign. This kind of
interactivity is not commonly found in marketing activities conducted through traditional
broadcast and print media, with the exception of interactive television. The most recent
developments of the WWW allow full multi-media interactive animations to execute over the
Internet almost instantaneously. The WWW also offers tremendous potential for direct
marketing and early stage marketing (Berthon, Pitt and Watson 1996).
Despite all the exciting marketing potential offered by the Internet, early attempts to conduct
promotion activities on the Internet have not been highly successful. In applying techniques
which have proven successful in traditional media, marketing professionals find that their
efforts often achieve disappointing results on the Internet. Different explanations have been
put forward to explain this phenomenon, among those, the special demographic
characteristics of its users (Gupta, Pitkow and Recker 1995), the traditional ‘voluntary
contribution’ culture that exists on the Internet, and the suggestion that the Web is an
alternative to real-world environments, not a simulation of one (Hoffman and Novak 1996).
In addition, we believe the still non-ubiquitous nature of the Internet as compared to
traditional media hinders the impact of Internet marketing efforts when presented as if to
traditional mass markets.
Hoffman and Novak (1996) point out that marketing
communications on the Internet differ from traditional, one-to-many, mass media advertising
principles in that communication is on a many-to-many basis. Although the Internet opens the
opportunity for direct marketing (O’Connor and O’Keefe 1995; Berthon, Pitt and Watson
1996), hard-selling and advertiser-push promotion strategies do not work well on the Internet.
Initiatives which try to sell the ‘How to make-money-fast on the Internet’ concept have only
resulted in prime targets for deletion on electronic mailing lists and Usenet newsgroups. The
philosophy of a still significant number of users on the Internet that products and services
available on the Internet should be free or available at a very low cost (Gupta, Pitkow and
Recker 1995) requires different strategies to Internet promotion. For example, Qualcomm
Inc., makes available a low-end version with basic features of its email program Eudora to
potential customers on the Internet, free. At the same time, the low-end product contains
information on its high-end counterpart. Potential customers can try out the functionalities of
the low-end product and decide whether it is worth purchasing. At the same time, these users
are led to perceive how the additional features contained in the high-end product can improve
productivity and efficiency. Netscape gives free copies of its market-leading Web browser to
academic institutions for educational purposes to encourage loyalty through familiarisation by
the future executive decisionmakers among the students. On the other hand, it has been
suggested (Montgomery 1996) that the lack of broad business and marketing expertise within
the web design community has led to competition on price to such an extent that an
unsustainably low price ceiling on intellectual property has developed. Wigand and
Benjamin (1995) suggest, in contrast, that it is the provision of price information that
decreases seller welfare and draw parallels with undifferentiated commodity markets. There
are therefore a number of possible explanations for the high level of price-sensitivity among
Web users, who are relatively affluent and highly educated compared to the population as a
whole (Gupta, Pitkow and Recker 1995).
Also very important is the trust and confidence which must exist between the vendor and
potential customers. The need to guarantee protection for customers from being cheated in
Internet sales is important, particularly for more significant sales transactions (see, for
4
example, The First Virtual Internet Payment System2). Security issues about the Internet still
hamper the smooth transition from communication to sales. Until now, payments for Internet
sales are often still made through traditional means (eg. faxing off credit card details). Recent
work by White (1996) showed that ordering an inexpensive food product over the telephone
was approximately equal in preference to on-line ordering, with little difference in preference
between sites with a secure order form and those without security. White also found that
there was considerably greater (by a factor of two to three, depending on quality of site)
likelihood of purchase at a retail level as a result of Web communications, suggesting that
Internet communication is currently a more effective promotion than a sales tool - at least
within a small geographic area.
Some researchers (see, for example, Poon and Swatman 1995; Hamill 1996; Quelch and
Klein 1996; Berthon, Pitt and Watson 1996) have already identified the need for a paradigm
shift to pursue international marketing on the Internet. We add that such a paradigm shift is
necessary both in terms of attitude and practice, and is particularly important for small
businesses when attempting to engage in low-cost and effective international promotion
campaigns. The Internet is more important for international marketing by small business
rather than large corporations is because small businesses, despite their flexibility, ability to
adapt to change, venture orientation and ability to specialise in products and markets; are also
disadvantaged by resource constraints (Bhide 1994), lack of appropriate strategic planning
and difficulties in expanding market share (Stephenson and Duncan 1993). In this way use
of the Internet can be seen as another way in which the small player can produce
communications of quality as high as the largest marketers through the use of relatively
inexpensive technology, such as has happened in recent years with fax machines and laser
printers.
When using the Internet for international promotion campaigns, a small business can either
do so as an individual organisation (eg. create a web page and make it accessible through
Internet search facilities) or more effectively through small business networks of various
kinds. By building different inter-organizational systems3 on the Internet to facilitate and
support inter-organizational relationships, small businesses can assist each other to access
potential markets which would otherwise require expensive marketing research and
communications campaigns. Given that marketing has been observed as a major weakness
among small businesses (Watkins 1982; Cromie 1991), such relationship-based networks are
reported (Perrow 1992) to have a significant role in furthering marketing activities for their
memberships.
Small Business Networks and the Internet
2URL
http://www.firstvirtual.com
systems are defined by Cash et al. (1994) as ‘networked information
systems used by two or more separate organizations to perform a join business functions’.
3Inter-organizational
5
A small business network, which is also referred to as a co-operative alliance (Golden and
Dollinger 1993) or strategic alliance (Forrest 1990) describes a group of small businesses
which have joined forces to share resources, information and support and improve
competitiveness (Stephenson and Duncan 1993). Such networks as described by Furukawa et
al. (1990) as an organisation having autonomous parts each pursuing their own objectives and
have no definite hierarchy nor formal authority-responsibility relationship. Through the
process of sharing resources, each member can obtain necessary resources externally without
going through a market mechanism. Similar observations have been made by Perrow (1992)
in describing small-firm networks which are involved in sharing information, equipment,
personnel and orders even while they compete.
When formed over the Internet, this kind of network can have membership from both local
and international business communities. The concept of resource sharing and support often
takes the form of information exchange, sharing of customer orders or project collaboration.
In the past, small businesses usually dealt with customers within local regions, just as many
of the networks formed were made up of small businesses and associates from the same
geographic region (Johannisson 1987; Curran, Jarvis, Blackburn and Black 1993; Larson and
Starr 1993). Prior to forming networks, small business operators have usually met at
functions often organized by third parties (such as Business Development Centres,
exhibitions, or trade organisations). Such gatherings provide excellent opportunities to
develop future contacts for business collaboration. Hall (1992) identified that the building of
cross-border networks with other small businesses and then shifting knowledge and rights
across such borders through franchises, licenses and similar techniques is often observed in
the small business globalization process. As the globalization of business partnerships
becomes an important issue for the survival of even micro-sized organizations (Poon and
Swatman 1996), using traditional avenues to form national or international strategic networks
becomes impractical due to geographic barriers.
The commercialisation of the Internet provides opportunities for many entrepreneurial small
businesses to begin sharing information and experiences across this electronic medium, both
in addition to and instead of their former, purely physical methods of communication. Figure
1 illustrates a scenario of how small businesses and other business network members can be
connected through the Internet by accessing services provided by Internet Service Providers
(ISPs). The business exchange carried out on the Internet is remarkably similar to the
discussion and exchange of experiences which took place in the early stages of the formation
of strategic networks through physical contacts. It is apparent that this electronic medium is
an important way in which small business networks, particularly those with international
membership, can exchange information and maintain network dynamics.
6
Other firms (eg.
Cybermediaries,
Information Brokers)
Customers/Suppliers
Internet
Service
Provider
Modem
slip/ppp
Modem
Minicomputer
Desktop
computer
Desktop
computer
Internet
Service
Provider
The
Internet
Desktop
computer
Minicomputer
Server
Internet
Service
Provider
Desktop
computer
Modem
slip/ppp
Minicomputer
Modem
Small business (which
maybe only a mobile
office)
Modem
slip/ppp
Modem
Other Companies in a
Small Business Network
Desktop
computer
Figure 1. An example showing a small business network through the Internet
Sarkar, Butler and Steinfeld (1995) suggest a multi-part classification of new network-based
intermediaries - cybermediaries. These are directories (general, commercial and specialised),
search services, malls, publishers, virtual resellers, web site evaluators, auditors, forums, fan
clubs and user groups, financial intermediaries, spot market makers and barter networks, and
intelligent agents. Hoffman, Novak and Chatterjee (1995) suggest a slightly different sixcategory classification of online storefront, internet presence, content, mall, incentive site and
search agent. Whatever the classification scheme, it is apparent that there is a multiplicity of
communication management styles available to Internet users.
Emerging Patterns of Interactivity within Small Business Networks
An illustration of how strategic networks can be formed to enable inter-organizational
exchange on the Internet is given by Bottoms (1994). Using the World Wide Web service, it
brings together business services such as on-line promotion and order entry, collaborative
engineering, product data exchange and other transaction services such as payment using
EDI. The issues to be resolved are mainly management oriented, rather than technical
(Swatman 1994).
7
As small businesses continue to experiment with the Internet for business activities, different
examples of promotion efforts surface. Many of these examples are implemented using ‘offthe-shelf’ Internet application services (eg. Web browsers, File transfer, Log onto remote
computers - Telnet, Electronic mail and Video/Audio-conferencing - CUSeeMe). Wellknown examples such as using Usenet Newsgroups to broadcast promotion messages and
collect market intelligence (see, for example, misc.entrepreneurs, alt.business.import-export,
alt.business.multi-level), software companies allowing the downloading of products, services
and information (eg. www.shareware.com) and benchmarking IT-products online (Thorell
1994). More recent examples include the formation of virtual shopping malls on the Internet
(eg. www.imall.com), regional small business networks (eg. www.link.net.au,
www.regionlink.com) and a virtual advertising agency (eg. www.aussie.com.au).
Since the Internet creates a ‘borderless’ virtual business platform on which suppliers,
customers, competitors and network partners can freely interact without going through the
pre-defined channels on the value chain, members of the same business network or of
different networks can by-pass the traditional interaction patterns and form virtual value
chains (Benjamin and Wingard, 1995).
8
Supplier
Customer
response
monitoring and
Intelligence
gathering
Competitor
Purchase,
Ordering and
Delivery
Business
Partner
Small
Business
Product
specification
exchange,
Sales order
processing
Joint projects
and Information
sharing
Customer
Internet-enabled
channels providing bypasses during interorganisational exchange
Business activities which can
be carried out on the Internet
Figure 2. A diagram showing Internet-enabled by-passes in the context of a small
business network
For instance, there is nothing stopping a company’s competitors from directly contacting their
customers through the Internet. At the same time, customers can bypass their distributors and
easily approach different suppliers to negotiate deals and obtain products. Such activities will
have a profound effect on the roles different actors play in the traditional value chains. From a
marketing point of view, this means re-thinking the promotion campaign taking in to
9
consideration the different groups of target audiences. Figure 2 illustrates the four main types
of business entities with which a small business will have to interact - suppliers, customers,
alliance partners and competitors. There are many ways in which each of these relationships
can be developed and this diagram highlights the fact that such interactions can be
transformed by the Internet. The white arrows indicate interactions which are typical of the
traditional roles played by these businesses. The black arrows illustrate the defined methods
of interaction described by the white arrows which can be by-passed or transformed over the
Internet as shown. Furthermore, each small business can now be part of many business
networks regardless of geographic location. Initial entry into such networks can be done by
first contacting the group via the Internet. Thus, the Internet enables the formation and
maintenance of business network links which would otherwise be prohibited by barriers such
as distance, time and limited resources. Sarkar, Butler and Steinfeld (1995) describe the
formation of new cybermediaries, as well as a direct marketing process taking advantage of
the reduction in transaction costs resulting from Internet usage, existing intermediaries that
are threatened by Internet marketing, and existing intermediaries that would be assisted by
Internet marketing. (Their discussion is somewhat parochially based on the American NII,
but the principles apply generally to the WWW). The savings in shortening the so-called
value chain in a traditional, non-electronic, market from a four-stage chain involving
producer, wholesaler, retailer and consumer to a simple direct sale from producer to consumer
have been reported by Wigand and Benjamin (1995) as 62% for a high-quality shirt. In such a
case the longer chain could more appropriately be termed a cost chain rather than a value
chain.
Matching Inter-organisational Relationships with Internet Usage and Marketing
Strategies
Golden and Dollinger (1993) further classify these inter-organizational relationships by
exploring the interaction between the strategic posture of small firms and their propensity to
form cooperative linkages. Their findings indicate the existence of four main types of interorganizational relationship:
 Confederation - Firms which compete with one another but which maintain some
contractual functional activities in common, co-ordinated by a central management.
 Conjugate Collectives - Firms which have contractual arrangements for symbiotic
purposes.
 Agglomerate Collectives - Firms which compete within the same industry but have no
contractual "business" arrangements.
 Organic Collectives - Firms (or the representative thereof) which engage in traditional
networking, such as board memberships or other voluntary organization, in an indirect and
non-contractual form.
10
They then conclude that small businesses which assume a variety of strategic postures tend to
participate in different kinds of strategic networks. This understanding of small business
inter-organizational strategies is critical to the strategic use of the Internet to support network
activities. The business exchanges resulting from such strategies are important for the
creation and replication of strategic networks on the Internet.
In order to rationalise the way in which the Internet can be used to help these different kinds
of inter-organizational relationship, particularly in carrying out international marketing
activities, a framework (Table 1) is presented which maps business network structural
characteristics against Internet usage and marketing strategies. A detailed listing of the ways
in which the Internet and its applications can be used be used to support inter-organisational
activities with customers, suppliers, network partners and even competitors was described in
Poon and Swatman (1995).
Inter-organizational Relationship
Confederations (eg. small business groups
sharing resources through contractual
agreements).
Conjugate Collectives (eg. Closed group
agreements between supplier and
customer).
Agglomerate Collectives (e.g. Trade
Associations).
Organic collectives (e.g. Community
Services Groups).
4URL
Internet Marketing Strategy
- Central management provide resources for
network members to market their products and
services on the Internet (eg. A virtual agency
service)
- Include in the agreements to provide
reciprocal homepage links between members
included in the contract.
- Allow reciprocal links on members’
homepages.
- Make available market intelligence on the
closed-group’s intranet (if available) with
login control.
- Share market intelligence in order to
improve supplier-buyer relationship
- Trade Association provide market
intelligence data (local and international) on
its homepage for members 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 (eg. LinkNet4).
- Link community calendar of events to one’s
homepage.
of LinkNet is http://www.link.net.au
11
Table 1. Mapping inter-organisational relationship types to Internet marketing
strategies.
Beyond Marketing Activities - Internet-based Inter-organizational Systems for Small
Businesses
Although promotion and advertising has been the most discussed issue related to Internet use,
we believe that this is only one kind of activity with which small business should use the
Internet. The fundamental issue is to understand how the Internet can be used to set up small
business inter-organizational systems to support inter-organisational activities and
relationships. To do this, it is important to first identify the important issues and hence the
business drivers for small businesses to use the Internet. Welsh and Cummings (1993) believe
that the following issues are critical for small businesses in the 1990s:






Increased global competition at all business levels
Increased competition for capital
Increased consumer demand for quality in all products and services
Increased partnerships between large/intermediate and small businesses
Rapidly changing market environment
Growing need for immediate access to current business information from a variety of
sources
 Greater need to track legislation affecting small businesses
 Growing need to stay flexible
Business Drivers
Increased global competition at all business
levels.
Increased competition for capital.
How to use the Internet strategically
- Use the worldwide coverage of the Internet
to gather information and set up contacts.
- Access information sources provided by
overseas small business development
centres.
- Information gathering from different
information sources.
- Access funding bodies (eg. Small Business
Development Centres) for information and
search for funding possibilities, both locally
and internationally.
- Informal networking with other small
businesses, both local and international, to
share opportunities and experiences.
12
Increased consumer demand for quality in all - Allow timely customer feedback and
products and services
suggestions.
- Rapid damage control by handling Internetbroadcasted complaints promptly.
- Flexible and timely exchange of product
design and information with members on the
supplier-customer value chain.
Increased partnerships between
- Use the Internet to support activities of
large/intermediate and small businesses
different kinds to fulfil common interests and
goals.
- Allow the formation of virtual business
communities to better compete for market
share.
- Electronic exchange of documents and
information/intelligence.
Rapidly changing market environment
- Provide and access timely and reliable
market information among network
members.
Growing need for immediate access to
- Each network member can contribute and
current business information from a variety
retrieve useful information as reciprocal
of sources
favours.
Greater need to track legislation affecting
- Kept informed of the latest changes in
small businesses
government and industry regulations by
accessing government information services.
Growing need to stay flexible
- Be able to access quality and timely
information to support management
decisions.
- Using the Internet to access different virtual
business networks.
Table 2. Mapping business drivers facing small businesses worldwide and Internet
usage strategies.
In addition to viewing business drivers from a small business strategic perspective, it is
equally important to understand the environmental factors which affect the success of such a
network. Porter and Millar (1985) explained the way in which "conventional" information
technology permeates the value-chain and thus transforms the way value activities are
performed. It is logical to suggest that in order to benefit from the competitive advantage the
Internet offers, each value-activity within the value-chain needs to be made "Internet Ready".
Furthermore, small businesses need to re-think how to improve their activities such that their
use of the Internet can provide a competitive advantage over other firms with similar valuechain activities not using the Net. The following five steps, adapted from Porter and Millar
(1985) provide an idea how such an alignment can be carried out:
13
 Assess information intensity by concentrating on the potentially high information intensity
activities on the value chain, or the potentially high information intensity
products/services.
 Determine the role of the Internet in the industry structure by predicting the impact of
using the Internet in terms of likely changes in the industry structure and organizational
boundaries.
 Identify and rank the ways in which the Internet might create competitive advantage by
reducing cost, improving knowledge exchange and enhancing links between valueactivities and between organizations.
 Investigate how the Internet spawns new businesses. Determine how the Internet provides
new or emerging business opportunities (eg. Information brokerage, Information provision
and Consultancy).
 Develop a plan to take advantage of the Internet. An action plan which ranks the strategic
investments necessary to proceed with the organizational change necessary to reflect the
new linkages.
Conclusion
The transformation of the Internet from an academic and research communication tool into
the world’s largest commercial network has offered small businesses significant opportunities
to be more versatile and dynamic when competing in the global marketplace. By using the
Internet, small businesses can conduct marketing activities on a global scale in an affordable,
effective and professionally competitive manner. There is no ‘fool-proof’ approach to
marketing successfully on the Internet, but we believe that one attractive approach for small
businesses is to market through Internet-mediated networks. Given the potential membership
of these Internet-based business networks, there are very strong possibilities for them to
become an important channel for international marketing among small businesses.
Furthermore, the particular characteristics of Internet communications can result in
transformation of existing marketing channels as well as creating new ones.
In identifying different kinds of small business networks, it is suggested that different
approaches can be used to pursue marketing activities over the Internet. Moreover, marketing
activities should be considered as part of broader exchanges within small business networks.
The fundamental issue is to make use of the Internet to construct inter-organisation systems to
strengthen and maintain information linkages within small business networks. This can be
done by considering the critical issues facing small business today and, based on these
business drivers, to derive strategic approaches to using the Internet.
Finally, lessons learned from understanding how conventional information technology has
transformed value activities on a value chain have been applied to understand what needs to
be done to capitalise on the potential of the Internet to achieve sustainable competitive
advantage.
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Acknowledgements: The authors would like to thank Associate Professor Chris Christodolou
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