Internet-based sales channel strategies of born global firms

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Abstract

Recent changes in the technological environment have had a significant impact on the available sales channel alternatives. At the forefront of this development are the born global firms, which have been relatively quick to adopt Internet-based channels. Interestingly, many of these firms have relied not only on Internet-based channels, but also used combinations of conventional channels and the Internet. This study describes and analyzes the structure and development from single towards multiple sales channels. It develops a framework consisting of three independent factors: (1) the globalization process, (2) market structure and Internet suitability, and (3) long-term channel relations. These are examined in a multiple case study consisting of 35 cases. The Internet-based multiple sales channels proved to be more common in born globals that had reached a higher globalization degree than in those which were still at a preliminary stage. A novel finding was that relationship development with small local channels and MNCs also remains important when Internet sales channels are used. These results contribute to a relatively under-researched area focusing on international Internet-based sales channels and use of multiple channels.

Introduction

The existence and importance of born global firms has proved to be significant in many markets (Knight and Cavusgil, 1996, Madsen and Servais, 1997, Oviatt and McDougall, 1994, Rennie, 1993, Zahra, 2005). Born globals have been researched in over 20 countries, including many small and open economies such as Ireland, New Zealand, Greece, Israel, Finland, Norway, Denmark, Sweden, and Australia. However, they have also originated in larger economies such as the US, Japan, Germany, France, the UK and Canada (e.g., Dana, 2004). The research has also identified the characteristics of born globals (Madsen, Rasmussen, & Servais, 2000) and the factors facilitating early and rapid globalization of these firms (Rialp, Rialp, & Knight, 2005). Nevertheless, more emphasis on development of theory and conceptual frameworks has been called for in research on born globals (Jones and Coviello, 2005, Rialp et al., 2005). Although the international and global marketing literature has contributed much to our understanding of the marketing strategies of large global firms (e.g., Levitt, 1983, Yip, 1989), little has been written specifically on the marketing strategies of born globals with the exception of a few studies (e.g., Knight, 1997). Moreover, few of these studies are related to the challenges facing born globals in their strategic marketing channel selection (Gabrielsson & Kirpalani, 2004).

This is striking, given the great changes that have taken place in the marketing environment due to introduction of the Internet and other modern technologies that enable bypassing of conventional channels (Frazier, 1999). It therefore seems justifiable to study the Internet-based channel strategies of born globals (Moen, 2002). It is particularly interesting to examine the global expansion of the born globals and their use of the Internet as a sales channel (Servais, Madsen, & Rasmussen, 2007). Furthermore, earlier literature has examined single channel strategy alternatives (direct/indirect), but has focused limited attention on multiple channel strategy alternatives (Anderson, Day, & Rangan, 1997). The multiple channel alternatives are of considerable importance for the investigation of Internet-based sales channel strategies. Hence, Internet-based channel strategies as a means of international expansion have been under-researched and clearly form a research gap (Gabrielsson, Kirpalani, & Luostarinen, 2002, p. 93). This leads to the following research questions:

  • (1)

    What kind of Internet-based sales channel strategy alternatives are available for born global companies?

  • (2)

    What factors impact the selection of the Internet-based sales channel strategies of born globals?

This research examines the Internet-based sales channels from the perspective of born global firms. In this research, a born global firm is defined as one that “from inception, seeks to derive significant competitive advantage from the use of resources and the sales of outputs in multiple countries” (Oviatt & McDougall, 1994, p. 49).

Section snippets

Multiple sales channel strategies and the Internet

The internationalization process literature recognizes two main groups of marketing operations that form the base for channel strategies; these are export operations and sales subsidiary operations (Johanson and Vahlne, 1977, Luostarinen, 1979, p. 110). The marketing literature becomes useful in a further examination of the sales channel structures in countries. Accordingly, the conventional sales channel can be one of the two main alternatives, a direct sales channel in which the producer

Theoretical framework and proposition development

This research briefly presents three theoretical approaches for explaining the sales channel strategy choice and development. These approaches are namely (A) the globalization process (Luostarinen & Gabrielsson, 2004; see also Johanson & Vahlne, 1977), (B) the sales channel economic structure, namely transaction cost analysis (Williamson, 1975), and (C) long-term relations (Dwyer, Schurr, & Oh, 1987).

The internationalization process literature focuses on explaining the pattern of stages that

Research design, data gathering and analysis

Multiple case study research was selected as the methodological approach for investigating Internet-based sales channel strategies of Finnish small and medium-sized born globals. The method is especially appropriate for answering “how” and “why” questions (Yin, 2009, p. 9) and permits a more thorough understanding of the behavior of the born globals examined than a survey or other more deductive research methods. The Internet-based sales channel strategies are complex and therefore a thorough

Internet-based channel strategies

It was of considerable interest to identify the Internet-based sales channel strategies adopted by the 35 Finnish small and medium-sized born globals in their global expansion endeavor. In order to achieve this, the companies were asked about their type of channel structure and the role of the Internet in their sales channel (see Table 3). The channel strategies of the case companies were then examined more thoroughly with case methodology techniques. The table below shows the Internet-based

Discussion and conclusions

This article has examined the Internet-based sales channel strategies of born global firms, which has been covered to a limited extent in earlier research (e.g., Moen, 2002, Servais et al., 2007). An interesting result was that almost half of the born global firms examined had adopted Internet-based sales channel strategies that went beyond providing information and consisted of two-way interaction between born globals and their customers or channel members via the Internet in order to process

Acknowledgements

We would like to thank the Finnish Funding Agency for Technology and Innovation (Tekes) for financial support, and also extend our gratitude to the entire research group and participating firms.

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