Case Studies in Globalization

CNET features an in-depth Knowledge@Wharton article on the adventures of American-based Internet companies as they expand globally.

Here’s an excerpt…

    As growth in the United States inevitably slows, companies like eBay, Yahoo and Amazon increasingly have to expand internationally to support their stock valuations. Each company, however, will face unique hurdles. For eBay, it may be local laws restricting ties to banks and other financial institutions. Yahoo may have to restrict certain types of advertising deemed unacceptable to a local government. Amazon needs local ties to suppliers and facilities with customized systems.

    “We have relatively little experience in purchasing, marketing, and distributing products or services for these market segments and may not benefit from any first-to-market advantages,” says Amazon in its filings. “It is costly to establish international facilities and operations, promote our brand internationally and develop localized Web sites, stores and other systems.” Nevertheless, Amazon adds that it will continue to expand abroad over time. It will have to because the opportunity may be too much to ignore.

The lesson of the story: global expansion may be inevitable but global success is not.

Here are a few of the many dangers that face Internet companies expanding abroad:

    • Cultural differences

    • Longer payment cycles

    • Laws favoring local competitors

    • Credit risk and higher levels of payment fraud

    • Legal and regulatory restrictions

    • Currency exchange rate fluctuations

    • Higher costs

    • Diverting management attention

You can read the article here.

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