European Management Journal Vol. 23, No. 1, pp.
1–13, 2005
doi:10.1016/j.emj.2004.12.005
Using the Internet to
Enhance Global
Strategy
GEORGE YIP, London Business School
ANNA DEMPSTER, Birkbeck College, University of London
How does the Internet affect globalization and glo-
bal strategy within firms? How should multina-
tional companies re-evaluate their global
strategies to best take advantage of the Internet?
Both managers and researchers have assumed that
a correct and appropriate use of Internet technolo-
gies by companies speeds up globalization of
industries and enables firm use of global strategies.
This paper provides empirical evidence on the
exact uses of the Internet by global companies,
how their use affects key globalization drivers
and how they believe this, in turn, affects perfor-
mance. We derive ten lessons on how companies
can use the Internet to enhance their global
strategies.
Ó 2005 Elsevier Ltd. All rights reserved.
Keywords: Internet, Globalization, Global strat-
egy, Multinational companies
Can companies use the Internet to enhance their glo-
bal strategies? Both in the sense of expanding their
geographic scope, and in the sense of globally oper-
ating more-integrated strategies, the ubiquitous nat-
ure of the Internet (and its application in the World
Wide Web) should make it easier for companies to
globalize (Govindarajan and Gupta, 2001; Yip,
2000). This paper provides a framework for thinking
about this issue and provides evidence from a survey
of 115 multinational companies, primarily based in
Europe. We address the following questions:
v Does industry make a difference? Which indus-
tries offer more potential for using the Internet
to enhance global strategies?
v Does use of the Internet make it easier for compa-
nies to implement global strategies?
v Which aspects of Internet use help most with
implementing global strategies?
European Management Journal Vol. 23, No. 1, pp. 1–13, February 2005
Ó 2005 Elsevier Ltd. All rights reserved.
Printed in Great Britain
0263-2373 $30.00
v Which aspects of website design and functionality
affect global strategies?
v Does using the Internet improve the performance
of multinational companies?
The Internet as a Driver of Globalization
What characteristics cause some industries to make
more use of the Internet? Observing the more suc-
cessful applications, commentators and researchers
have suggested a number of industry characteristics
which promote Internet use (Andal-Ancion et al.,
2003): digitizability of the end product (e.g., most
information-based products such as directories and
encyclopedias), time sensitivity of the end product
(e.g., airline travel), high search costs (e.g., books),
potential for customization (e.g., clothing retailers),
insufficient matching of buyers and sellers (e.g., busi-
ness-to-business exchanges and consumer-to-con-
sumer auction sites), and a tradeoff between
richness and reach (e.g., retail brokerage, Evans and
Würster, 1999). We propose an additional industry
characteristic—globalization—that also increases
use of the Internet by firms.
One of the main difficulties in assessing the effects of
the Internet per se is that it has come at a time of other
significant developments in the global economy
(Nadler and Tushman, 1999). The various drivers
of globalization that have blurred geographical
boundaries for business have also introduced global
opportunities as well as increasing operational
complexities. However, taken as a whole Internet
technologies have in many cases accelerated global-
ization processes through a number of key techno-
logical characteristics that have made it particularly
suitable for driving the globalization tendencies of
multinational firms:
1
USING THE INTERNET TO ENHANCE GLOBAL STRATEGY
v Designed as a decentralized network with no central
control, no single body or person can dictate what
goes in, comes out, or how it is used (although
some national governments increasingly try to
selectively block or monitor Internet access and
use). Companies and sub-units can use and adapt
the Internet according to their specific needs.
v The effect of this decentralization of transactions and
information transfer raises major questions about
the role of bodies which would have traditionally
had functions of control, such as governments and
regulatory institutions. In terms of transferring,
accessing information, companies are now much
less dependent on local infrastructures.
v As a technology, the Internet is designed with dis-
regard for established boundaries such as geographi-
cal, political and legal.
v Borderless communications mean that distance in no
way hinders communications. International man-
agement teams who use the Internet are not lim-
ited by geographic scope.
v As an interactive medium, the Internet can be used
for collaboration and identity building across a
dispersed community such as those in a global
firm.
v Cost and speed advantages are also substantial. The
Internet is a much less expensive way to send
information, and this information can be received
in real time anywhere in the world. For global
businesses this has massive implications for the
possible scale and scope of operations and rede-
fines the traditional trade-off between richness
and reach, allowing both to be achieved for rela-
tively little cost. 1
v Nomadic/mobile computing has become a reality as
the Internet, the World Wide Web, and their
accompanying technologies, such as WAP and
3G, continue to evolve.
So it seems that the Internet is at least highly comple-
mentary to the already powerful trends that are forc-
ing companies to become global, and at most a key
driving force of the continued globalization of exist-
ing companies.
While the Internet seems all pervasive in daily life,
research on its dominant effects on globalization is
limited and empirical work on the precise use of
Industry Use of
Globalization Global
Drivers #1 Strategies #3
#2
Note: (#) indicates Path numbers as discussed in text.
Exhibit 1 Overall Framework of Globalization and Internet
2 European Management Journal Vol. 23, No. 1, pp. 1–13, February 2005
the Internet and its repercussions on multinational
firms are only just emerging (Bakos and Brynjolfsson,
1999).
A Framework for the Internet and
Globalization
Our framework for the Internet and globalization
builds on extensive previous research on the relation-
ship between industry characteristics, particularly
industry globalization drivers, and global strategy
(Porter, 1986). Exhibit 1 illustrates the core compo-
nents of our framework. Industry globalization driv-
ers, such as globally common customer needs or
global scale economies (outlined in detail in the next
section), encourage firms in specific industries to use
various global strategies—such as global market par-
ticipation, global products, global activity networks,
global marketing, and global competitive moves
(Path 1). There is also a direct effect between these
industry globalization drivers and Internet use (Path
2). Firms using global strategies are likely to make
more use of the Internet to exploit the latter’s global
capabilities (Path 3). In turn use of the Internet fur-
ther enables the implementation of global strategies
(Path 4). Lastly, Internet-enabled global strategies
contribute to improving the global performance of
a firm (Path 5).
To investigate our questions and to test our frame-
work we designed a questionnaire and had it com-
pleted by 115 multinational companies from
Europe and other parts of the world. We also con-
ducted follow-up interviews with a selection of par-
ticipating firms. Appendix ‘Research Methodology’
describes our methodology in detail.
How much should a Company use the
Internet?
How much of its business should a company expect
to book over the Internet? During the Internet
bubble, commentators and promoters expected tradi-
Enabling of Improved
Use of Internet Global Global
#4 Strategies #5 Performance
 USING THE INTERNET TO ENHANCE GLOBAL STRATEGY

Sales Service and Customer Information (both at 4.3),

Worldwide Revenues Booked Over the Internet
Industry Sector % of Industry
Chemical/Pharmaceutical 5.0
Construction/Capital Goods 6.5
Energy/Resource 5.2
Financial/Property 4.8
Logistics/Transport 6.2
Retail/Grocery 10.2
Technology/Media/Telecommunications 9.6
Average 6.8
n = 115 companies
Exhibit 2 Use of the Internet by Industry
tional companies to rapidly shift the bulk of their
business to the Internet or die. This credo was
typified by General Electric’s ‘‘destroyyourbusi-
ness.com’’ initiative. We found that only 6.8% of
industry revenues and 4.9% of firm revenues were
booked over the Internet. But there were, of course,
differences by industry sector. Two sectors scored
notably higher than the others did. Both the Re-
source/Support and Technology/Media/Telecom-
munications sectors had much higher levels of
revenues booked over the Internet at both the indus-
try and firm level (Exhibit 2). These industries were
particularly well suited to take advantage of the var-
ious characteristics and cost benefits of the Internet
and adopted it much more quickly.
However, it was clear that managers in all industries
made sure that the Internet was taken into consider-
ation in nearly every individual activity. We found
that most individual activities of the majority of com-
panies made some use of the Internet (Exhibit 3). The
greatest use at the time of the questionnaire was for
R&D, Customer Information, and Marketing (all at
3.1 out of 5.0). Most companies reported they would
greatly increase each activity’s use over the next
three years, with the greatest predicted uses for After
and Marketing (4.2).
% of Firm
Lesson 1: Don’t worry about booking huge percentages of
3.6 your revenues over the Internet but make sure that nearly
2.0 every activity takes the Internet into consideration.
6.2
3.5
4.4
7.6 Does Industry Globalization Affect
7.0
4.9
Use of the Internet?
Industries differ in their globalization potential and
in their degree of Internet use. How are the two
related?
Market Globalization Drivers
Market globalization drivers depend in particular on
globally common customer needs and tastes, which in
turn allow multinational companies to sell products
(goods or services) with a high degree of global stan-
dardization. The higher the degree of global com-
monality in an industry, the easier it is for
companies to use the Internet and the Web to offer
information and transactions to customers around
the world. Examination of the two ends of the spec-
trum makes this point clear. At one extreme, compa-
nies in an industry in which all customers around the
world want only one globally standardized product
could reach and sell to these customers with the sim-
plest of websites, and these websites should have a
high degree of global standardization. At the other
extreme, companies in an industry in which custom-
ers in different countries want nationally unique
products would have to provide far more complex
websites, and these websites should need a high de-
gree of local customization, not just in their content
but also in their format.

3.1
research and development 3.9
2.0
production 3.0
2.6
distribution / logistics 3.9
3.0
marketing 4.1
2.3
selling 3.7 Now
2.3 In Three Years
after-sales service 3.8
1.8
billing and collection 3.6
3.1
customer information 4.3
2.6
supplier information 4.0
2.5
OVERALL ACTIVITIES 3.8

1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0

Exhibit 3 Firm Use of the Internet by Activity

European Management Journal Vol. 23, No. 1, pp. 1–13, February 2005 3
USING THE INTERNET TO ENHANCE GLOBAL STRATEGY
We measured market globalization drivers in terms
of the extent to which customers have globally com-
mon needs and tastes. We found this measure to
have a large positive correlation (.27) with expected
future use of the Internet, measured as average of
all individual activities (even though it did not have
a significant relationship with use of the Internet
now). This finding implies that in industries where
companies have customers with more globally com-
mon needs and tastes, firms are more likely to in-
crease their use of the Internet across various value
adding activities (as listed in Exhibit 3). Industry sec-
tors (see list in Appendix on Research Methodology)
which rated high in our survey of globally common
needs and tastes include: chemicals and pharmaceu-
ticals; technology, media and telecoms; logistics, dis-
tribution and transportation; and energy and
resources. This list matches those found in other
studies (Morrison, 1990; Johansson and Yip, 1994).
Cost Globalization Drivers
Key cost globalization drivers include global econo-
mies of scale or scope, global sourcing efficiencies,
cost differences in producing in different countries,
and high product development costs. Each of these
spurs MNCs to implement global strategies such as
global factories, global production networks, global
buying, relocation of activities to low cost countries,
and development of global rather than national prod-
ucts. Each of these strategies is made easier by use of
the Internet: including to coordinate a global network
of production sites, to coordinate global buying both
in terms of internal customers and external suppliers,
and to coordinate national needs in the development
of global products.
We measured cost globalization drivers in terms of:
(a) the importance of global scale or scope economies,
(b) potential savings from global sourcing efficiencies,
(c) extent of cost differences in producing in different
countries,
(d) ratio of new product development costs relative to
expected lifetime revenues.
We found that new product development costs had a
significant and positive correlation (.22) with current
uses of the Internet although the others did not. All
four measures, however, have large positive correla-
tions (from .18 to .27) with expected future use (the
average of all individual activities.) This finding im-
plies that companies in industries which have stron-
ger cost globalization drivers are more likely to
increase their use of the Internet across their various
value adding activities (as listed in Exhibit 3). Indus-
try sectors that rated high in our survey on cost glob-
alization drivers include: logistics, distribution and
transportation; and chemicals and pharmaceuticals
for scale/scope economies; logistics, distribution
4 European Management Journal Vol. 23, No. 1, pp. 1–13, February 2005
and transportation for sourcing efficiencies; energy
and resources; and retail and groceries for cost differ-
ences; and technology, media and telecoms for new
product development costs.
Government Globalization Drivers
Government actions affect industry globalization by
raising inter-country trade and investment barriers
or, in some cases, by providing inducements. The
existence of trade and investment barriers should
encourage the use of the Internet as ways to bypass
them, particularly import duties and taxes. Unless a
government is actively engaged in monitoring and
censoring Internet traffic, as is the case of a few
authoritarian regimes, most governments find it
impossible to track or tax services delivered over
the Internet. For goods and services ordered over
the Internet but delivered physically across borders,
governments should, in theory, be able to tax these
at the frontier. In practice, however, most govern-
ments miss significant proportions of the increasing
number of relatively low value items.
Other government globalization drivers include glo-
bal standardization of technical standards and global
commonality of marketing regulations. Differences
in technical standards among countries affect the ex-
tent to which products can be globally or regionally
standardized. Industries moving to global technical
standards should generally make more use of the
Internet as ways to make these standards more acces-
sible and transparent, which in turn should encour-
age adoption of global standards. Differing
marketing regulations affect the extent to which uni-
form global marketing approaches can be used. Mar-
keting across borders over the Internet is easier in
industries with globally common regulations.
We measured government globalization drivers in
terms of:
(a) level of favorable global trade and investment policies,
(b) global standardization of technical standards,
(c) global commonality of marketing regulations.
We found that level of favorable global trade and invest-
ment policies had a significant positive correlation
(.22) with current use of the Internet at the time of
the questionnaire, although the other measures did
not. But all three measures had a large positive corre-
lation (from .19 to .25) with expected future use (aver-
age of all individual activities). This finding implies
that companies in industries that have stronger gov-
ernment globalization drivers are more likely to in-
crease their use of the Internet across their various
value adding activities (as listed in Exhibit 3). Indus-
try sectors that rated high in our survey include:
none in particular for favorable trade and investment
policies; energy and resources; technology, media
 USING THE INTERNET TO ENHANCE GLOBAL STRATEGY
and telecoms; logistics, retail and groceries; and dis-
tribution and transportation for standardization of
technical standards; and technology, media and tele-
coms for commonality of marketing regulations.
Competitive Globalization Drivers
Globalization requires companies to be particularly
sensitive to competitive actions and reactions. The
Internet heightens this global rivalry in several ways.
First, ‘‘Internet time’’ accelerates the necessary speed
of moves and countermoves. Second, the Web creates
a public forum for signaling, making it easier for
competitors to communicate with each other. Third,
comparison of competitors becomes much easier for
potential customers, particularly in terms of price
transparency—the Web allowing for both cross-com-
petitor and cross-border comparisons. Fourth, the
Web makes it easier for companies with a given com-
petitive advantage to transfer and leverage that
advantage globally in a variety of ways discussed
above (such as by reducing the amount of physical
investments needed). Fifth, for existing industry
leaders or incumbents, the Internet era has created
the phenomenon of ‘‘born global’’ rivals—via the
Internet these companies have global reach from
the day they put up a Website (such as Amazon
and eBay).
We measured competitive globalization drivers in
terms of the average of all the individual industry
globalization drivers listed above. We found this
measure to have a significant positive correlation
with both current (.25) and expected future (.45)
Internet use (average of all individual activities). In
a further test, we ran a regression of average activity
use of the Internet now against average industry global-
ization drivers. The result showed a significant slope
of 0.31, meaning that a 1.0 unit increase in the
strength of industry globalization drivers results in
an average .31 unit increase in the use of the Internet
in company activities (Exhibit 4). This finding im-
plies that companies in industries that have stronger
5.0
4.0
Average
Slope = 0.31
Activity 3.0
Use of
Internet
2.0
1.0
1.0 2.0 3.0 4.0 5.0
Average Industry Globalization Drivers
Exhibit 4 Effect of Industry Globalization Drivers on
Use of Internet
European Management Journal Vol. 23, No. 1, pp. 1–13, February 2005
competitive globalization drivers are more likely to
increase their use of the Internet across their various
value adding activities (as listed in Exhibit 3). Indus-
tries that rated high on the average of all the global-
ization drivers in our survey include: technology,
media and telecoms; and distribution and trans-
portation.
Lesson 2: Most companies in more globalized industries
make more use of the Internet in order to better exploit
globalization potential. The competitive implication is that
companies in such industries need to carefully monitor
how rivals are making use of the Internet, and lead or
match rivals’ activities.
Global Strategies and Use of Internet
The previous arguments and analyses show that
companies in more globalized industries should
make more use of the Internet. It is also well estab-
lished that companies in more globalized industries
should and do make more use of global strategies.
These strategies include global market participation,
globally standardized products and services, global
activity networks, global marketing, and global com-
petitive moves (Yip, 1992). So the next question is
whether companies that make more use of global
strategies should make more use of the Internet,
and conversely, whether use of the Internet actually
helps them to implement global strategies.
Overall, we found that the average use of global strate-
gies was positively correlated (.22) with the average
use of the Internet in firm activities, and also with the
use of the Internet for two individual activities:
after-sales service (.23) and customer information (.24).
However, these findings do not imply causation. It
could be either that greater use of global strategies
leads to more use of the Internet or that greater use
of the Internet leads to more use of global strategies.
The truth is probably both. A related finding does
provide evidence that the effect flows from use of
the Internet. We asked about the extent to which
use of the Internet made it easier for the companies
to implement various global strategies. We found that
use of the Internet had at least a moderate effect
(2.5 or higher on 1 to 5 scale) on all global strategies,
with the greatest effects for operate global activity
networks and co-ordinate globally dispersed activities
(Exhibit 5).
We found further support for this enabling effect on
global strategies of use of the Internet by conducting
some correlation analysis. We found that greater use
of the Internet, as measured by the average use of the
Internet in firm activities was positively correlated
with every measure of the extent to which the Internet
made it easier to implement global strategies (detailed in
the next sections) and with the average of these mea-
sures (correlation of .39).
5
USING THE INTERNET TO ENHANCE GLOBAL STRATEGY
participate in foreign markets
globally rollout new products and services
quickly
offer standardised products or services
offer localised products or services
locate activities outside home country
operate global activity networks
co-ordinate globally dispersed activities
have a globally uniform marketing
use global competitive moves
Mean
1.0
Exhibit 5 Internet Effects on Implementation of Global Strategies
Internet Effects on Global Market Participation
By substituting for or supplementing physical activ-
ities, the Internet makes it easier for companies to
participate in foreign markets. The advent of global
strategy in the 1980s meant that companies started
to pull back from smaller or non-strategic markets
in order to reduce costs. The Internet makes it more
economically feasible to once again serve these
non-core markets. Ironically, the Internet is allowing
companies to return to the multinational era when
companies sought a presence in as many countries
as possible. Today, companies can participate in core
countries with physical presence supplemented by
Web activities. At the same time, they can participate
in non-core countries with a Web presence supple-
mented by some physical activities.
We measured global market participation in terms of
the extent to which companies:
(a) participate in foreign markets,
(b) globally roll out new products and services quickly.
We found that participate in foreign markets was not
significantly correlated with any measure of current
use of the Internet (path 3 in Exhibit 1). As participa-
tion in foreign markets typically takes years, even
decades, to build up, this finding implies that compa-
nies have not yet responded in their Internet activi-
ties to their existing patterns of foreign market
participation. However our survey found implica-
tions for current efforts to expand foreign market
participation. We found that the use of the Internet
in many activities was correlated with making it
easier to implement the strategy of participate in for-
6 European Management Journal Vol. 23, No. 1, pp. 1–13, February 2005
2.6
2.6
2.5
2.6
2.8
3.2
3.1
2.6
2.6
2.7
1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0
Score
eign markets (path 4): production (.30), distribution/
logistics (.20), marketing (.20), selling (.40), after-sales
service (.45), billing and collection (.48), customer infor-
mation (.32), and overall activities (.34). Hence, current
use of the Internet in various activities is starting to
make it easier to participate in foreign markets, with
powerful implications for the future.
For the other measure of global market participation
we found that to globally roll out new products and ser-
vices quickly was significantly correlated with use of
the Internet in overall activities (.22) and with many
individual activities such as selling (.23), after-sales
service (.32), billing and collection (.25), customer infor-
mation (.27), and supplier information (.20). The differ-
ence between (a) participate in foreign markets is not
surprising, as the former reflects prior activities,
while (b) globally roll out new products and services
quickly, clearly reflects current activities. So compa-
nies using this latter strategy are more likely to use
the Internet to enhance it. We also found that the
use of the Internet in many activities was correlated
with making it easier to implement the strategy of
globally roll out new products and services quickly (path
4): including selling (.23), after-sales service (.32), billing
and collection (.25), customer information (.19), and over-
all activities (.19). Hence, current use of the Internet in
a large range of activities is starting to make it easier
to globally roll out new products and services
quickly.
Lesson 3: Use of the Internet enables global market partic-
ipation, particularly if a company uses the Internet in mar-
keting related activities, including: distribution/logistics,
marketing, selling, after-sales service, billing and collec-
tion, and customer information.
 USING THE INTERNET TO ENHANCE GLOBAL STRATEGY

Internet Effects on Global Products and Services global and local products shows that the Internet
helps solve one of perhaps the greatest dilemmas in
Global products and services are seldom totally stan- globalization: how to be both global and local at
dardized worldwide, but they are designed with glo- the same time. This dual capability of the Internet
bal markets in mind, and they have as large a for globalization parallels its other dual capability
common core as possible. Some industries and cate- of increasing both reach and richness simultaneously
gories, such as personal computers and air travel, (as discussed earlier).
allow the potential for a very large common core,
while others, such as furniture and legal services, Lesson 4: Use of the Internet enables both globally stan-
allow for less commonality. Deciding on the extent dardized and locally customized products and services.
of global standardization poses a major dilemma Companies can now use the Internet to lessen the global-
for MNCs. Use of the Internet and websites eases this ization tradeoffs they have had to make in regard to prod-
dilemma by making it easier to offer an array of glo- ucts and services.
bal, regional, or local products, and local customiza-
tion options for standard core products. While the Internet Effects on Global Activity Location
same can be done through traditional media (bro-
chures or sales calls), the Web provides more options The Internet helps to solve the long-time dilemma
and the interactivity of the Internet provides for cus- facing multinational companies—how much of their
tomization by the customer (as in Dell Computer’s value chain to recreate overseas? In earlier eras of
ordering system). poor transportation and communications, the solu-
tion generally required the foreign location of a lot
We measured global products and services in terms of expensive assets and activities. In the global era,
of the extent to which companies: beginning in the 1980s, many companies found that
they could reduce duplication by operating physical
(a) offer globally standardized products or services, networks with specialized nodes. As an electronic net-
(b) offer locally customized products or services. work, the Web, through both intranets and extranets,
completes this process of de-
Of the different measures of cur- duplication. Many down-
rent Internet use, we found that
customer information and overall
The Internet helps solve stream and support activities
lend themselves well to Web-
activities had significant positive based replacement for local
correlations (.20 and .23) with one of perhaps the greatest di- physical presence. Globalizing
the measure of (a) offer globally R&D operations has been a
standardized products or services. lemmas in globalization; how key objective of global compa-
We found that offer locally stan- nies. But centralization at one
dardized products or services was to be both global and local at location has been the tradi-
not correlated with any measure tional strategy to achieve the
of current Internet use. the same time needed scale in R&D. The
Web now enables virtual
We found, however, that use of R&D teams that concentrate
the Internet in many activities and pool expertise and re-
was correlated with making it easier to implement sources from separate locations, so that companies
the strategy of (a) offer globally standardized products can both tap into local expertise and achieve global
or services (path 4): production (.22), selling (.28), scale. The Web can also be used to co-ordinate glob-
after-sales service (.38), billing and collection (.47), cus- ally dispersed production activities. Many compa-
tomer information (.26), supplier information (.18), and nies now handle their global after-sales service
overall activities (.32). Hence, current use of the Internet through their Websites.
in various activities is starting to make it easier to
offer globally standardized products or services. We measured global activity location in terms of the
Interestingly, the effects were even more extensive extent to which companies:
for the strategy of (b) offer locally standardized products
or services : production (.24), distribution/logistics (.25), (a) locate activities outside home country,
marketing (.19), selling (.27), after-sales service (.24), (b) operate global activity networks,
billing and collection (.28), customer information (.22), (c) co-ordinate globally dispersed activities.
and overall activities (.33).
First, we found that operate global activity networks
The above findings imply that on the one hand com- was significantly and positively correlated with cur-
panies are not yet making much use of the Internet rent use of the Internet for after-sales service (.19), cus-
relative to globally standardized or locally custom- tomer information (.27), and overall activities (.25). We
ized products. But on the other hand companies are also found that co-ordinate globally dispersed activities
finding great potential from Internet use for enabling was significantly and positively correlated with cur-
both these strategies. Also, the applicability for both rent use of the Internet for production (.18) and overall

European Management Journal Vol. 23, No. 1, pp. 1–13, February 2005 7
USING THE INTERNET TO ENHANCE GLOBAL STRATEGY
activities (.24). However, we found that locate activities
outside home country was not significantly correlated
with any measure of current Internet use (path 3 in
Figure 1). These three findings imply that just the
act of locating activities overseas does not in itself
spur Internet use. But operating global activity net-
works and coordinating globally dispersed activities,
which both require a degree of global integration, do
require use of the Internet for appropriate activities.
When we looked at how use of the Internet might en-
able these global strategies, we found many effects.
We found that use of the Internet in many activities
was correlated with making it easier to implement
the strategy to locate activities outside home country (path
4): selling (.22), after-sales service (.36), billing and collec-
tion (.21), customer information (.20), and overall activi-
ties (.21). For the strategy of operate global activity
networks, the enabling activities were after-sales service
(.19), customer information (.24), and overall activities
(.25). For the strategy of co-ordinate globally dispersed
activities the enabling activities were after-sales service
(.29), customer information (.27), and overall activities
(.28). Interestingly, use of the Internet for the production
activity was not correlated with the enabling of these
three strategies. These findings imply that firms found
it is more important to use the Internet for customer-
related activities, than production-related activities,
in order to support strategies of global activity loca-
tion. This may not be surprising if we consider that a
primary role of the Internet is to reduce distance,
and there is usually a greater distance between a com-
pany and its customers than within a company.
Lesson 5: Use of the Internet enables the global location of
activities, especially if a company applies the Internet to
customer-related activities.
Internet Effects on Global Marketing
Research on global marketing shows that different
elements of the mix need to have different degrees
of global uniformity (Syzmanski et al., 1993), with
brand names and packaging having the most unifor-
mity, pricing, advertising and distribution moderate
uniformity, and selling and promotion the least (Yip,
1997). Hence even global marketing involves a com-
bination of global and local elements. The Internet
should make it easier for MNCs to provide such
combinations—Websites can easily provide local
adaptations around core elements. Conversely, glo-
bal marketing on the Web requires some specific
choices: whether to provide Websites in different for-
eign languages, whether to have a globally common
look for different country Websites, and whether to
have a globally common content.
We measured global marketing in terms of the extent
to which companies have a globally uniform marketing
mix. We found that to have a globally uniform marketing
mix was not significantly correlated with any measure
8 European Management Journal Vol. 23, No. 1, pp. 1–13, February 2005
of current Internet use (path 3 in Figure 1). On the
other hand, we found that use of the Internet in some
marketing-related activities was correlated with mak-
ing it easier to implement the strategy of have a glob-
ally uniform marketing mix (path 4): after-sales service
(.28), billing and collection (.34), and customer informa-
tion (.25). These findings imply that companies have
not yet made much use of the Internet to help with
the strategy of having a globally uniform marketing
mix, but those who do are finding it useful.
Lesson 6: Use of the Internet helps companies to have a
globally uniform marketing mix, especially if a company
applies the Internet to customer-related activities.
Internet Effects on Global Competitive Moves
Perhaps the hardest element in global strategy is that
of making globally coordinated competitive moves,
such as monitoring competitors globally and making
cross-country counter-parries (Porter, 1986). The
Internet and Web provides additional tools, such as:
v using the Web to monitor competitors more
closely
v responding more quickly via Web offerings
v using deep linking, metatags and other techniques
to hijack potential customers from competitors’
websites
v choosing the right mix of competitive and co-
operative behavior with rivals and other partners
v establishing global standards to limit or pre-empt
competition
We measured global competitive moves in terms of
the extent to which companies use such moves. We
found that to use global competitive moves was signifi-
cantly and positively correlated with current use of
the Internet for after-sales service (.23), billing and collec-
tion (.18), and customer information (.27). Also, we
found that use of the Internet in most activities was cor-
related with making it easier to implement the strat-
egy of use global competitive moves (path 4): research
and development (.21), production (.20), selling (.29),
after-sales service (.44), billing and collection (.38), cus-
tomer information (.33) and overall activities (.25). These
findings imply that companies are currently using the
Internet in mostly selling and customer-related activ-
ities to help with the strategy of global competitive
moves. But companies are also finding that Internet
use in other activities such as R&D and production
also helps enable global competitive moves.
Lesson 7: Use of the Internet helps companies to make glo-
bal competitive moves.
Nature of Multinational Firm Websites
In addition to examining the effects on globalization
of use of the Internet, we also investigated the effects

different foreign
languages
globally common
look
globally common
content
1.0 1.5 2.0
Exhibit 6 Languages and Commonality of Websites
of Website design in regards to: languages used, glo-
bal commonality, transactional capability, and spe-
cific functionality.
Languages and Global Commonality
There are many arguments that multinational com-
panies should maintain their websites in different
foreign languages, in order to better serve foreign
customers. A separate argument, independent of lan-
guage, is that multinational companies should main-
tain a globally common look for different country
websites, or even globally common content to
strengthen branding. We found that the companies,
on average, made only moderate use of these three
aspects, but planned to greatly increase their use
over the next three years (Exhibit 6).
We also investigated whether these three aspects of
website design made any difference to the imple-
mentation of global strategies. We found that having
different foreign languages helped companies to par-
ticipate in foreign markets, and that having a glob-
ally common content or a globally common look
each helped to implement a globally uniform mar-
keting mix and to use global competitive moves.
Lesson 8: Having foreign languages and a globally com-
mon content or look helps with some global strategies.
Functionality of Websites
Beyond being transactional, other aspects of website
functionality might affect globalization. We investi-
gated several aspects and found that the companies
in our sample currently make the most use of provides
advertising and marketing, followed by provides detailed
product information (Exhibit 7). When asked about
European Management Journal Vol. 23, No. 1, pp. 1–13, February 2005
USING THE INTERNET TO ENHANCE GLOBAL STRATEGY
2.7
3.8
Now
2.6 In Three Years
3.7
2.3
3.4
2.5 3.0 3.5 4.0 4.5 5.0
planned use in three years’ time, these two remained
the top items, although provides detailed product infor-
mation overtook provides advertising and marketing.
The lowest uses were for offers competitor comparisons
online and monitors online customer satisfaction.
We also investigated whether these different func-
tionalities helped with the implementation of various
global strategies (by looking for significant and posi-
tive correlations between each functionality and each
global strategy). We found that many website func-
tionalities help to enable many global strategies. Cer-
tainly, none hurt.
Lesson 9: The more multifunctional a company website,
the more it enables globalization.
Effects of Internet Use on Global
Performance
Our fifth and last research question was whether use
of the Internet improves a firm’s global performance.
We used several measures of performance and asked
about the effects of Internet operations on the firm’s
global performance in terms of each measure. Exhibit
8 shows that the overall effect was positive, though
moderate, at a mean of +.66 in a possible range from
2.0 to +2.0. All measures were on average positive,
with brand awareness and brand image enjoying the
greatest positive effects. Profitability enjoyed the
least positive effect at +.25, market share enjoyed a
below average gain of +.43, while sales enjoyed an
average effect of +.65.
Lesson 10: Use of the Internet improves all aspects of global
performance, but more for brand and customer measures
than for profitability.
9
USING THE INTERNET TO ENHANCE GLOBAL STRATEGY

collects data on 1.2

consumer 3.7
offers competitor 1.5
comparisons online 2.5
monitors customer 1.6
online satisfaction 3.6
1.8
offers online support 3.9
offers accounting 1.9
online 3.1 Now
2.1 In Three Years
offers booking online 3.2
offers purchasing 2.3
online 3.7
provides detailed 3.2
product information 4.4
provides advertising 3.4
and marketing 4.2
2.1
AVERAGE 3.6

1.0 2.0 3.0 4.0 5.0

Exhibit 7 Nature of Multinational Firm Websites

brand/company image 1.1

brand/company awareness 1.1

customer satisfaction 0.7

customer retention 0.6

channel relationship 0.6

customer gain 0.5

market share 0.4

profitability 0.3

AVERAGE 0.7

-2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0

Exhibit 8 Effects of Internet on Global Performance

Conclusions and Implications work Economy at London Business School for the
funds that supported this study.
Our Study confirms that using the Internet does in-
deed help companies to globalize and to implement
global strategies. We have drawn eleven lessons for
managers from our findings. Perhaps the most
Appendix
important lesson is that the Internet helps companies
be both global and local at the same time. Web de- Research Methodology
sign is also important, which means that managers
responsible for globalization need to include Web Our main research method was to collect data from
designers on their global strategy teams. Competing large multinational companies in Europe and else-
in Internet time also means competing in Internet where worldwide using a specially designed
global space. questionnaire.

Acknowledgment Questionnaire
The authors thank the Vice Chancellor’s Office at the A two-page questionnaire was developed on the fol-
University of Cambridge and the Centre for the Net- lowing items:

10 European Management Journal Vol. 23, No. 1, pp. 1–13, February 2005
 USING THE INTERNET TO ENHANCE GLOBAL STRATEGY
v The strength of specific globalization drivers for a
designated industry in which the firm
participates.
v The percentage of industry and firm revenues
now booked over the Internet.
v The extent to which various firm activities make
use of the Internet, now and in three years time.
v The extent to which the firm uses various aspects
of global strategy.
v The extent to which the Internet makes it easier
for the firm to use the same aspects of global
strategy.
v What the firm’s website does, now and planned
for three years’ time.
v Whether the website offers foreign languages,
and whether it has a globally common look or
content.
v Effects of Internet operations on the firm’s global
performance in terms of: revenue growth; profits;
market share; channel relationships; customer
satisfaction, gain and retention; and brand/firm
awareness and image.
The questionnaire was pre-tested on ten MBA stu-
dents of several nationalities in a leading UK-based
business school. Based on the students’ comments
we made various amendments.
Sample
The targeted population was the 1000 largest interna-
tional companies in each of the UK and Continental
Europe, and the 500 largest companies in the United
States. Given their size, these companies can all be con-
sidered incumbent firms, i.e., not Internet start-ups.
The questionnaire was mailed to firm CEOs with re-
quests to pass it on to the head of International Busi-
ness if necessary. All returned questionnaires were
filled out by senior managers: largely by CEOs, pres-
idents, VPs, heads of strategy or heads of e-business
who specified their position.
A number of the mailings were returned as undeliv-
erable (55 for the United Kingdom, 73 for Continental
Europe, and 47 for the United States). A total of 79
completed surveys were received from the first mail-
ing. A postcard reminder was sent two months after
the first mailing and a further 26 surveys were re-
ceived. After deducting the undeliverable addresses,
our response rates were as follows: 4.1 % for the Uni-
ted Kingdom, 5.5% for Continental Europe, and 1.8%
for the United States.
Ten extra questionnaire replies were collected
through an executive education program held at Lon-
don Business School in March 2001. All ten responses
were collected after the original deadline of the ques-
tionnaires and therefore classed as ‘late’ responses.
The respondents came from a number of regions
including those outside Europe and the United States.
European Management Journal Vol. 23, No. 1, pp. 1–13, February 2005
The additional questionnaires were reliably filled out
by willing participants and had the benefits of increas-
ing sample size and providing a late responses sub-
sample that could be compared with the earlier ones.
Checking for Non-response Bias and Nationality
Differences
We checked whether responding companies might
be significantly different from non-responding ones
by comparing the responses of the sample that re-
sponded to the first mailing and the sample that re-
sponded to the reminder, a standard technique for
inferring the differences between respondents and
non-respondents. To the extent that there is a re-
sponse bias, we should assume that our sample rep-
resents companies who make greater use of the
Internet and/or have more interest in it. Therefore,
any bias will be to report higher levels of use, etc.,
than might be the case in the total population of large
international companies.
We found no significant differences in means at the
95% confidence level between early and late respond-
ers in terms of firm size, percent international, or use
of the Internet (% of industry revenues booked over
the Internet, % of firm revenues booked over the Inter-
net, and overall firm use of the Internet for various
value-adding activities. Therefore, we can conclude
there is unlikely to be significant non-respondent bias.
Similarly, we found no significant differences be-
tween the European and non-European samples in
terms of the percent of industry revenues booked
over the Internet (European 6.5% and non-European
6.7%), in terms of the percent of industry revenues
booked over the Internet (European 4.3% and non-
European 4.8%), or in terms of overall firm use of
the Internet for various value-adding activities. This
lack of differences allowed us to combine all the
observations in one larger sample.
Sample Characteristics
Firm Nationality
Most of the sample comprised companies headquar-
tered in Europe (85%), as follows:
Home Country of Firm Number of Respondents
UK 42
Germany 15
Switzerland 9
Portugal 7
Belgium 5
Italy 4
Finland 3
France 3
Netherlands 3
(continued on next page)
11
USING THE INTERNET TO ENHANCE GLOBAL STRATEGY

(continued ) Firm Interviews

Home Country of Firm Number of Respondents To complement the questionnaire data, we con-
ducted interviews with the heads of Internet strategy
Spain 2 of four large UK-based companies that had com-
Sweden 2 pleted the survey: HSBC Group (banking), Royal &
Austria 1 Sun Alliance (insurance), and TBWA/GGT Direct
Denmark 1 (advertising and media), and part of the TBWA
Norway 1 group and Corus group (steel). We also reviewed a
TOTAL EUROPE 98 = 85% case study on a fifth firm (British Airways) that
had participated in the survey (Anderson et al.,
USA 10 2001).
South Africa 3
Argentina 1
China 1
India 1 Analysis
Israel 1
We used various analytical techniques, including
TOTAL USA & OTHER 17 = 15% multiple regression and structural equation model-
ing. We report in this paper only the bivariate analy-
TOTAL SAMPLE 115 = 100% ses such as correlations (significant at the 5% level,
two-tail), but all the significant relationships have
Firm Size been confirmed in multivariate analyses.
The size in annual revenues of the companies ranged
from $0.5 million to $50 billion with a mean of $6.4
billion and a median of $2.0 billion. There was some
variation in firm size by nationality. Non-UK Euro-
Note
pean respondent companies reported the largest
mean annual revenues ($9.3 billion) followed by US
1. Evans and Würster (1999) argue that, unlike traditional bricks-
companies ($6.5 billion), UK ($3.1 billion), and Other and-mortar companies, for very little money an e-business can
($2.4 billion). provide a wide base of customers (reach) with access to a broad
range of products (also reach), and detailed complete informa-
Percent International tion about each product (richness). It can also collect huge
amounts of information about each customer (richness again)
On average, international revenues accounted for and use it to sell more products and services.
52.9% of total firm revenues, with a standard devia-
tion of 26.2%.
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GEORGE S. YIP, Lon-
don Business School, Sus-
sex Place, Regent’s Park,
London NW1 4SA. E-
mail: gyip@london.edu
George S. Yip is Lead Fel-
low of the UK’s Advanced
Institute of Management
Research and Professor of
Strategic and International
Management at London
Business School. A prolific
author, his most recent book is Total Global Strategy II
(2003), an updated and prize—winning book from
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awards.
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ANNA M.
DEMPSTER, Birkbeck
College, University of
London, Malet Street,
London WC1E 7HX. E-
mail: a.dempster@ bbk.ac.
uk
Anna M. Dempster is
Lecturer in the School of
Management, Birkbeck
College, University of
London. Her research is
broadly concerned with strategic innovation, including
the evolution of Internet ventures in the UK, role of
corporate announcements and real option evaluation of
disclosure strategies.
13