The Role of the Internet in Facilitating International Business - Google Inc - Case Study Example

The Role of the Internet in Facilitating International Business: A Case Study of Google Inc Introduction International Business is a concept commonly used to refer to commercial transactions carried out by individuals, business entities or governments that occur beyond national or regional political boundaries (Radebaugh & Sullivan 2007). Over time, business environments in almost all countries have increasingly become competitive. As a result, many companies which used to operate within national boundaries have expanded their operations beyond their home country in order to enhance their growth and profitability. Hence the concept of international business. As the world is increasingly becoming globalised, companies are continuously shifting their focus to the international market in order to sell their products and services (Cullen & Parboteeah 2009). In the past five decades, the world economy has changed dramatically. Some of the major changes that have been experienced over these years can be attributed to technological innovation. One of the most notable technological innovation in history is the invention of the internet. The advent of the internet has significantly shifted the way in which business is conducted today. The internet has particularly impacted on the operation of international businesses (Barfield, Heiduk, & Welfen 2003). Not only has the internet broadened the marketing capabilities of international businesses but it has also helped to enhance efficiency, reduce operation costs and enhanced productivity (Hamel 2014; Kursan & Mihic 2010; Litan & Rivlin 2010). Despite of the various benefits associated with the use of the internet in international business, there are also a wide range of implications and challenges that come along with the use of the internet in international business (Cullen & Parboteeah 2009). This paper seeks to critically examine the role of the internet in international business using Google Inc as the case study. In reference to Google Inc, it examines the role that the internet plays in facilitating international business. Moreover, it examines some of the implications and challenges imposed on international business by the internet. Literature Review There is compelling evidence in literature that suggests that the internet has brought about significant shifts in the way in which international business is conducted. In a study conducted by Yip & Dempster (2005), it was established that the internet plays an important role in shaping the global strategy used by most international companies. Yip and Dempster (2005) found that the internet has helped companies to globalise and execute their global strategies. The internet makes it economically feasible for international companies to operate in multiple foreign markets and roll out new products and services with ease. The internet has made it easier for international companies to implement their global strategy by enabling worldwide access of customer information, billing and the coordination of operations in different areas simultaneously without the need of transportation or setting up premises (Yip & Dempster 2005). Similarly, Meltzer (2014) argues that the internet provides a conducive platform for international trade. He observes that the internet has opened up new opportunities for both small and medium-sized companies to tap into the global market. It has provided opportunities for international businesses to access cheaper telecommunications, legal and consulting services and information about overseas markets. By simply developing a website, Meltzer (2014) argues that international companies can easily access and engage with suppliers, distributors and customers from different part of the world (Kursan & Mihic 2010). In reference to the New Trade Theory which suggests that effective international trade patterns hinge on network effects and economies of scale. It is evident that the internet enables international businesses to maximize on economies of scale and network effects. As established by Sinkovics & Bell (2005), the internet is a powerful tool that has enabled many companies to overcome managerial and physical barriers to internalisation. Besides this, it has enabled both small and medium sized companies to broaden their scale of operations, increase their output, size and realise cost advantage. Moreover, the internet provides international companies access to a wide network of suppliers, distributors and customers across the world (Mathews & Bianchi, Constanza 2010; Sinkovics & Bell 2005; Yip & Dempster 2005). Some studies consider the internet as a mechanism that enables companies to grow in new markets and businesses (Gibbs & Kraemer 2004). Aspelund & Moen (2004) suggest that, by capitalising on the internet small firms can create competitive advantage in the international markets. In contrast to classical international trade theories which suggest that large companies with sizeable capital capabilities may have an upper hand when it comes to internationalization, Arnott & Bridgewater (2002) argue that by capitalizing on the internet both small and medium size companies can internationalise and enhance their international networks with moderate investments. Buttriss & Wilkinson (2003) further observe that aspects of internationalisation have changed due to the internet (Petersen, Welch, & Liesch 2002). In a qualitative study carried out by Mathews & Healy (2008), it was established that the internet has enables companies to tap into the international market in three major ways. Firstly, the internet provides access to a diversified international customer base. Secondly, it enables companies to enhance international communication efficiencies and opportunities by simplifying the access and dissemination of information. In addition to this, it enables companies to interact with their customers at a deeper level and more frequently (Hamel 2014; Mathews & Healy 2008). Although there is substantial evidence in literature that suggests that the internet plays a positive role in facilitating international business (Hamel 2014; Kursan & Mihic 2010; Litan & Rivlin 2010; Yip & Dempster 2005), some studies have found that in some instances the internet imposes significant challenges to international businesses. While exploring the challenges that the internet imposes on international businesses, it is perhaps also crucial to examine some of the major issues that affect international businesses. Firstly, issues in the political and legal environment that international businesses operate in imposes certain risks. Since political structures, legal frameworks or laws vary from country to country, international businesses have to contend with a wide range of issues emanating from the different markets that they operate in. Political ideologies (collectivism or individualism) and political structures (democracy and totalitarianism) can affect the autonomy of businesses (Vyuptakesh 2011). Moreover, the enactment of stringent procurement policies, environmental regulations, consumer protection policies, intellectual property laws and technology transfer laws can make it difficult for some businesses to operate effectively in certain markets. For businesses which rely on the internet to carry out their businesses cyber/ internet laws enacted in some countries could be a major hindrance. In some countries such as China, India, Russia, Saudi Arabia and Burma among many others, the internet content is strictly censored. Consequently, it is difficult for some businesses operate in these markets (Vyuptakesh 2011; Trout 2005). Secondly, culture is also another issue that affects international businesses (Cullen & Parboteeah, 2009). Culture is a multi-dimensional concept and is often considered to be a system of values, beliefs, norms or traditions that are held by a particular group of people. Culture affects the way in which people behave, their overall expectations and how they interpret reality or create meaning (Dash 2004; Samovar, Porter & McDanies 2011). Since international businesses operate in different national contexts characterised by cultural diversity, a wide range of issues are likely to emerge. Key among these issues include; language barrier, communication and negotiation challenges and the management of a cultural diverse workforce. If not managed well, these issues can be detrimental to the overall functioning and performance of international businesses. These cultural issues are also likely to emerge when it comes to the use of internet in international businesses. It is therefore essential for businesses to take into account and effectively manage the various issues that are likely to emerge as a result of cultural differences businesses (Cullen & Parboteeah 2009). Globalisation is also another major issue that international businesses have to deal with. According to Lechner (2009), globalisation can be defined the process in which people across the world are becoming more connected in different ways. Globalisation can also be defined as a continuous process of international integration brought about by exchange in products, ideas, worldviews and different aspects of culture. Some of the key factors that instigate globalisation include; international trade and advances in telecommunications. Globalisation and international business have a symbiotic cause and effect relationship. International business is a major driver of globalisation and vice versa. The tremendous growth of international transactions or trade spurs globalisation. As individuals or businesses from different nations continue to engage in business transactions, exchange in products, ideas, worldviews and different aspects of culture occurs, this in turn instigates globalisation. On the other hand, globalisation also impacts on international businesses in two major ways. Firstly, it breaks down market barriers thus enabling companies to operate in multiple markets other than their home country. As a result of globalisation, different countries have engaged in negotiations and come up with different trade treaties in order promote effective international trade. In some markets, this has in turn led to impositions of lower tariffs and fewer restrictions making it easier for international companies to cross borders and operate in foreign markets. However, in some markets globalisation has prompted governments to enact protectionist trade policies in order to safeguard the economic interests of the countries. Protectionism economic policy often tend to restrain between countries by imposing restrictive quotas and tariffs in a bid to ensure fair competition between good imported and good produced in the home country. Protectionism acts as a major hindrance to free trade. Thus impeding on the operations of international business operations (Perdikis & Read 2005). Another way in which globalisation impacts on international businesses is by influencing costs of products and services. Globalisation has enabled the outsourcing of services and materials from countries where there are cheaper. This has in turn enabled some companies to gain price advantage. As a result, this has made it less costly to produce thus improving the costs of some products and services. However, outsourcing of some services and materials has brought about negative impacts on jobs in some countries, led to economic slowdown and unemployment. Globalisation has caused international companies to outsource services or shift production to other countries where raw materials or labour is cheaper (Stiglitz 2003). International Business Issues: A Case Study of Google Inc Overview of Google Google is an American multinational corporation founded by Larry Page and Sergey Brin in 1998. The company specialises in the provision of internet related products and services such as cloud computing, software, online search and messaging technologies and advertising technologies among many other services (Hamen 2011). Since the inception of the company, it has played a significant role in facilitating the global patterns of trade. Currently Google operates in over 90 countries around the world. Through the internet-based products and services that it provides, it helps to enhance global trade patterns. For instance, one of Google’s core businesses involves the provision of online advertising technologies which help business get exposure of their products and services around the world. Secondly, through it Google search engine it “Google” the company facilitates access to information to the entire world in every language (Smith & Williams 2009; Steiber 2014). In the information technology industry Google has strong competitive advantage. It also has the largest market share. To date Google has the largest access to internet users worldwide. As a compared to other companies operating in the information communication technology industry Google has a stronger market share due to its excellent culture of innovation and strong patent portfolio (Smith & Williams 2009; Steiber 2014). Over the years, the company’s operations have had a significant impact on the economic, legal and cultural systems of the countries that it operates in. Through its revolutionary search engine, Google has enhanced the accessibility and dissemination of information. Moreover, through some of its products and services such AdWords, Google Fibre, Google Apps and Cloud Computing, the company has transformed the way in which companies around the world conduct business. It has enabled companies to gain access to worldwide markets and improve the efficiencies of their business operations. Furthermore, through services such as Google+, the company has enhanced cultural communication and homogenisation (Smith & Williams 2009; Steiber 2014). The role the internet plays in facilitating Google’s operations in the global market The presence of Google is felt in almost every country around. Thus Google is an apposite international business. The internet is the primary mechanism that Google uses to develop and propel its products and services in the international market. It can be argued that the success of Google Inc as an international business largely hinges on the internet. For instance, the main revenue model for Google is advertising through the internet. As mentioned earlier, Google generally provides online advertising technologies which help business get exposure of their products and services around the world (Smith & Williams 2009; Steiber 2014). Other Google products and services such as; AdWords, Google Fibre, Google Apps and Cloud Computing among others are internet based. Therefore, in the case of Google it can be argued that the internet provides a platform for the company to launch its chain of products and services to the market (Smith & Williams 2009; Steiber 2014). Marketing and advertising is also another major role that the internet plays in facilitating Google’s business in the international market. Besides having internet-based products and services, Google takes advantage of the internet to market its products and service offering to a global audience. In most cases, Google tend to target businesses in its marketing. In essence it mainly executed business to business (B2B) marketing by providing and promoting a wide range of products and services that offers business solutions to companies worldwide. For instance, products and services such Google Analytics, AdWords, Google Fibre and Cloud Computing are often marketed and advertised to businesses. The company also targets individual consumers (Smith & Williams 2009; Steiber 2014). Google also capitalizes on the internet to outsource services in countries where it is cheaper to provide such services. For example, the company outsources some of its services to countries such as India, the Bahamas and China where services are relatively cheaper. Outsourcing not only enables the company to cut down it costs but also enables the company to focus on its core services and become more efficient (Smith & Williams 2009; Steiber 2014). In addition to this the internet has played an invaluable role in the growth and expansion of Google’s business. Currently, Google operates in over 100 countries around the world while only having operations in 40 countries. The internet has enabled the company to operate in multiple foreign markets and roll out new products and services with ease (Google 2014; Steiber 2014). Challenges faced by Google as an International Business Despite of Google’s tremendous growth and success in the international market, the company is still faced with a wide range of challenges. Similar to other international businesses, Google is susceptible to the various issues and challenges that emanate from the international market. Foremost issues from the political and legal environment that Googles operate in poses several serious challenges. As observed earlier in this paper, for companies which rely on the internet to carry out their businesses cyber/ internet laws enacted in some countries act as a major challenge (Trout 2005; Vyuptakesh 2011). For instance, in China Google faces a lot of challenges as a result of stringent censorship laws. Due to China’s large population, growing economy and extensive use of information technology, it provides a huge and viable opportunity for Google to enhance its profitability. However, despite of the opportunities that the Chinese market provides, stringent censorship laws pose a serious challenge to Google. The Chinese government enacted the “Great Firewall of China” a sophisticated national censorship system that restricts and controls the stream of internet communication that enters or exits China. These stringent censorship laws significantly hamper Google operations. China is not the only country that has stringent censorship laws. Other countries in the world such as India, Russia, Saudi Arabia and Burma among others also have stringent censorship laws which also poses serious challenges on Google’s operations (Harrison & St. John 2013). Moreover, as a company operating in the international market, Google has to deal with a wide range of issues revolving around cultural differences. Managing a culturally diversified workforce can impose numerous challenges. Firstly when it comes to recruitment, the company has to not only find professional and talented people but it also has to find people who are fit for different cultural environments. It is worth noting that, not every employee despite of their knowledge or skills can adjust to different cultural environments. Furthermore, due to cultural differences, communication issues are also likely to arise. When the company hires employees from other cultures who English is not the first language, managers and employees are likely to experience difficulties when it comes to communicating with one another (Mujtaba 2009). Although the internet provides a wide range of benefits to Google’s business, it is not an “end-all” or “be-all” solution to Google’s business. As a company whose core businesses hinge on the use of the internet, rapid technological changes that occur globally pose a significant challenge to Google. Often times the company has to be on its toes in order to ensure that it uses current technology in its business operations. Failure to keep up with current technology could see other competitors in the market use advanced internet –based technology to develop a competitive advantage over other players in the industry. As a result, Google has to spend a considerable amount of its revenue to Research and Development (R&D) in order to keep up with the rapid changes in technology (Smith & Williams 2009; Steiber 2014). The impact of globalisation on the international market is also another issue that Google has to contend with. Despite the fact that globalisation has broken down market barriers and enabled companies to operate in multiple markets, in some markets that Google operates in there are protectionist trade policies which hinder free trade. As a result of protectionist trade policies enacted in countries such as China and some European countries Google has to pay high trade tariffs (Smith & Williams 2009; Steiber 2014; Perdikis & Read 2005). Besides this, globalisation has also intensified the competition in the industry that Google operates in. In the industry that Google operates in, there are no long time entry barriers. As a result, many competitors from different parts of the world have emerged offering the same products and services with better interfaces that are likely to affect Google’s market share and profitability in the market in the near future. Currently, some of Google’s major competitors in the international market include; Amazon, Yahoo, Facebook, MSN, Nasper, Tencent and Baidu among many others (Hitt, Ireland & Hoskisson 2012; Smith & Williams 2009; Steiber 2014). Conclusion Generally, this paper has examined various issues that revolve around international business. It has particularly focused on the role of the internet in international business using Google Inc as the case study. The findings of this paper suggest that The internet has particularly impacted on the operation of international businesses Not only has the internet broadened the marketing capabilities of international businesses but it has also helped to enhance efficiency, reduce operation costs and enhanced productivity. However, despite of the various benefits associated with the use of the internet in international business, there are also a wide range of implications and challenges that come along with the use of the internet in international business. As a company that operates in the international market, Google has to contend with a wide range of issues. For instance, issues from the political and legal environment that Googles operates in poses several serious challenges. Some countries have enacted some stringent cyber/ internet laws which impede on Google business operations. For instance, in China Google faces a lot of challenges as a result of stringent censorship laws. 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Yip, J. & Dempster, A., 2005, ‘Using the Internet to Enhance Global Strategy’, European Management Journal vol 23, no.1, pp. 1-13 Read More