part 4

Ecommerce Readiness
Globally, the US has been the quickest to develop and adopt new Ecommerce business models. This assertion can be explained in terms of its overall societal tendencies towards collaboration and community, the nature of its consumers to engage in liberal credit card spending limited fear of the risks inherent in Ecommerce, its established role as a leader in the IT industry, as well as its superior telecommunications infrastructure.
First of all, the Internet is by nature a social tool utilized to share information and experiences as well as for conducting business. The US is a highly social/interactive country as evidenced by its emphasis on consumers social interaction and team-oriented collaboration in the workplace. It therefore follows that one of the primary points of emphasis in the design of Internet products and services is their ability to facilitate interaction. In the US Ecommerce society, examples of this nature abound. Online communities such as Yahoo, Excite and Geocities which focus on sharing experiences and information, social buying forums such a Amazon.com which

MCGANN, KING AND LYYTINEN/GLOBALIZATION OF E-COMMERCE
foster interaction and deliver content and services in addition to goods, B2B marketplaces and exchanges such as Arriba and Commerce One which promote a high degree of interaction between business, and groupware/collaborative business tools such as Lotus Notes are all examples of the commerce-oriented use of the Internet in a highly interactive and social fashion which the US has embraced on a large scale.
Second, US consumers have a higher propensity to engage in liberal spending, especially with the use of credit cards. A report issued by Metagroup states that percapita, the US ranks in the top four countries with respect to the number of credit cards issued. Of those issued, the US has the top ranking in credit card utilization. This is highly significant when considering the fact that nearly all consumer online spending requires the use of a credit card. Furthermore, according to Forrester Research, the average American who is utilizes the Internet for Ecommerce spends about 250 dollars a month online. Third, according to a report by Cahners In-Stat issued in March of 2000, US consumers are more prone to tolerate the security risks that online shopping and B2B Ecommerce entails. Even in light of recent individual and corporate level attacks by hackers on Ecommerce sites which have caused denial of service, theft of personal information such as credit card numbers, and widespread virus infection, healthy Ecommerce growth continues to occur and is projected to do so into the foreseeable future. The report also went onto state that US Internet users tend to be much more liberal with the divulgence of sensitive personal information in the Ecommerce process. This is a key point when one considers the fact that the availability of this information is a key to the effectiveness of most Ecommerce sites. Furthermore, investment in telecommunications structures and equipment has been growing substantially in recent years. As Figure 1 shows, investment in year 2000 reached approximately USD 140 billion, up from less than USD 60 billion in 1988. In addition, price-performance improvements in telecommunications technology have dramatically increased the capability of the telecommunications infrastructure. Especially important in the 1988-2000 time frame is the growth of mobile communications, and particularly cellular telephony. Virtually unknown prior to the deregulation of the telephone industry in the mid-1980’s, cellular telephony has swept the world. It is now estimated that more than 1 billion people use cellular telephones. Although the US lags behind Asia and Europe in the use of cellular telephony, it has among the higher penetration rates among developed countries, as was discussed earlier in Table 3. According to these OECD statistics, the US has about 315 wireless subscribers per 1000 people, compared to the OECD average of 325. The next five years will be very telling as the world sees the position that the US takes in the rollout of 3G, GSM and Mcommerce strategies.

MCGANN, KING AND LYYTINEN/GLOBALIZATION OF E-COMMERCE
Figure 1. Investments in Communication Infrastructure and Equipment, 1988-2000
Source; Congressional Budget Office based on data from the Department of Commerce Bureau of Economic Analysis.
Flat Rate Telecom Service
In this assessment of the readiness of the US for Ecommerce it seems vital to discuss the uniqueness of its telecom rate structure. In most regions, CLECs offer a service for local phone service in a flat rate structure. Under this type of an arrangement, consumers pay one monthly fee for unlimited calls in their local dialing area. This is vital as the majority of Internet service providers have points of presence (POPs) in most areas. ISP subscribers can therefore dial in to the Internet for as long as they wish without incurring any additional cost from their CLEC. This is a key difference between the US and most of Europe or Asia, which charge a per-minute fee for local calls. Users in these continents must pay by the minute to access the Internet, which acts as a significant barrier to the length of time required to shop on the Internet
Diffusion of E-commerce
Exact measures of the diffusion of electronic commerce are difficult to find. Although there are now a number of analysts and forecasters issuing assessments on regular basis, the variance between the analysts’ reports of electronic commerce diffusion can be significant. However, despite their apparent discrepancies in precision, they are consistent in their indications of the trends in US Ecommerce. With the exception of the measure of Ecommerce dollars, these trends will be the primary focus of this analysis. In this section we use three primary groups of measures to determine the diffusion of electronic commerce: availability and use of Internet infrastructure, measures of activity on that infrastructure and measurements of the actual dollar amount of electronic commerce transactions taking place.
Availability and Use of Internet Infrastructure
A key measure of Ecommerce diffusion is the use, availability and penetration of Internet service such as dial-up, DSL and cable access. As Table 5 suggests, the US leads the world by a

MCGANN, KING AND LYYTINEN/GLOBALIZATION OF E-COMMERCE
wide margin in the diffusion of Internet use. Figure 2 gives a recent history of computer use and Internet penetration in US households. Table 6 gives comparative data on connection rates to Internet infrastructure across the US and several other countries. Based on this estimate, it is safe to assume that somewhere between one-third and one half of global Internet users are in the United States. This is a function not only of the extensive penetration of the Internet in the population, but the large population size of the United States.
U.S.
45.02%
Germany
5.56%
Canada
5.00%
Korea
4.57%
Japan
4.35%
Other
35.5%
Table 5: Distribution of Internet Users Worldwide as of January 2001.
Source: StatMarket
Figure 2: US Households with Computer and Internet Access over Time.
Source: US Department of Commerce and US Bureau of the Census.
France
4,718,000 (19.6% of population)
Germany
9,976,000 (29.2% of population)
Spain
2,031,000 (15.6% of population)
UK
8,487,000 (35.9% of population)
USA
53,488,000 (51.6% of population)
Table 6: Percentage of Population Connected to the Internet in 5 European Countries
Source: Netvalue, December 2000. ©Sprouts, 2(2), pp 59-86. http://sprouts.case.edu/2002/020205.pdf 71
MCGANN, KING AND LYYTINEN/GLOBALIZATION OF E-COMMERCE
S
ry
s
ness needs and consumer activity is blurring and broadband is encompassing
oth requirements.
Table 7 shows the North American market statistics for residential use of broadband for Internet access, and Table 8 shows the relative household broadband penetration in the US and several other countries. Use is significant and growing, with the US leading. This is extremelyvital as bandwidth requirements become greater for Ecommerce applications. The widespreadavailability of broadband will play a key role in consumer and businesses’ ability to transact Ecommerce. Although broadband is becoming ubiquitous and is therefore widely available to mostbusinesses and consumers, it is still in the early stages of adoption. Of the 68.4 million current UInternet access subscribers, only about 7 million are utilizing DSL and Cable, the two primabroadband mediums. However, with investments that have been made in broadband access infrastructure to increase quality and availability, the US is positioned well for future growth in theuse of the Internet as a tool for conducting Ecommerce. Further, growth in small business offices, branch offices and telecommuting are playing a key role in driving broadband demand. The result ithe line between busi
b
DSL
Cable
Total Subscri
6/1/01 Subscrib
3/31/01 Q1-01 Sub
Additions Q1-01 Avera
Table 7: North American Reside
Region
2001
2005
France
2.0%
22.6%
Germ
4.8%
27.4%
Italy
1.1%
10.6%
Nether
6.1%
33.9%
Spain
3.6%
21.9%
Swed
9.4%
37.3%
UK
0.9%
19.5%
Total Europe
3.3%
24.2%
f Ecommerce Activity The Internet by itself is merely infrastructure for electronic commerce. A more telling indication of the extent to which the Internet is being used for electronic commerce can be seen by examining the comparative presence of sites with particular Top Level Domains (tlds). As shown in Figure 3, the .com tld that designates a US commercial site currently accounts for approxim

MCGANN, KING AND LYYTINEN/GLOBALIZATION OF E-COMMERCE
half of all sites. Table 9 shows the breakdown of the number of Internet hosts by the US and selected countries, derived as an estimate of the number of sites specifically registered under the .utld as well as those early tld’s (.com, .edu, .org, .gov, .mil, .net) that can be attribu
d
5% Figure 3: Leading Top-Domain Name Compo
Count
# Hosts
# Users
USA
81,223,800
183,004,000
Japan
6,548,600
48,587,000
Germ
4,313,280
37,605,400
UK
4,431,550
50,315,300
Canada
5,972,720
27,171,900
Australia
1,898,260
11,723,500
Finland
1,012,300
3,204,330
Netherlan
2,012,830
12,177,900
Sweden
1,655,320
6,991,790
Table 9: Number of Int
Yet another way to assess the level of electronic commerce is to examine the level ospecific sites to see how the tld profiles compare. Data from Netvalue shown in Table 10 demonstrate clearly the dominance of the .com domain; indeed, only one of the eleven top sites listed fails to have a .com tld, and that one (aol.prop) is a subsidiary of a very large commercial si(America On-Line). Table 11 provides a picture of the top World Wide Web properties. Again,commercial sites that offer either Internet serv

MCGANN, KING AND LYYTINEN/GLOBALIZATION OF E-COMMERCE
Domain
% of users
Unique Visitors
yahoo.com
59.7 %
50,038,000
msn.com (*)
52.3 %
43,842,000
aol.com
38.5 %
32,282,000
aol.prop
30.8 %
25,868,000
passport.com
29.8 %
24,973,000
lycos.com
25.4 %
21,304,000
microsoft.com
25.1 %
21,011,000
netscape.com
20.3 %
17,057,000
ebay.com
18.9 %
15,838,000
amazon.com
17.0 %
14,294,000
Table 10: Top Domains in the US, May 2001
Source: Netvalue
Property (multiple domains)
Reach (active)
Unique Audience
AOL Time Warner
62.61 %
63,531,959
Yahoo!
53.71 %
54,493,102
MSN
47.67 %
48,371,258
Microsoft
25.37 %
25,745,577
Lycos Network
21.65 %
21,971,353
Excite@Home
19.65 %
19,938,445
About The Human Internet
15.76 %
15,994,150
Ebay
15.72 %
15,949,118
Walt Disney Internet Group
14.78 %
14,995,364
Amazon
14.74 %
14,952,600
Table 11: Top Web Properties, June 2001
Source: Nielsen//NetRatings
Considering the new opportunities that Ecommerce presents small and medium-sized businesses (SMBs), it is prudent to look at the level of diffusion that has taken place in that sector. The initial expectation was that the Internet would level the playing field so that SMBs could compete with larger firms. Although this has taken place to a certain extent, the SMBs have been much slower to implement Ecommerce than originally expected. Almost three-quarters of small businesses are accessing the Internet, according to International Data Corp. (IDC), up from about two-thirds just a year ago. SMBs are also moving quickly to establish their own home pages, with 2 million small firms maintaining their own Web sites. However, at the end of 2000 only 725,000 small firms were actively selling online, even though a far greater number had planned to do so. The diffusion level has been below that projected, but the opportunity for that sector to thrive in the world of Ebusiness is still prevalent and expected to be a factor in the future as these firms develop the strategies and resources to implement Ecommerce.