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Chapter
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10Multinational E-Commerce:
Strategies and Structures
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Learning Objectives
• Define the forms of e-commerce• Appreciate the growing presence of e-commerce in the
global economy• Understand the structure of the Internet economy• Identify the basic components of successful
e-commerce strategy
• Define the forms of e-commerce• Appreciate the growing presence of e-commerce in the
global economy• Understand the structure of the Internet economy• Identify the basic components of successful
e-commerce strategy
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Learning Objectives
• Know the basic multinational e-commerce businessmodels
• Identify the practicalities of running a multinationale-commerce business
• Understand the function of enablers in multinational
e-commerce operations
• Know the basic multinational e-commerce businessmodels
• Identify the practicalities of running a multinationale-commerce business
• Understand the function of enablers in multinational
e-commerce operations
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The Internet Economy
• Internet Economy• Growing faster than any other business trend in
history• Companies face issues similar to those faced by
traditional multinational companies
• Internet Economy• Growing faster than any other business trend in
history• Companies face issues similar to those faced by
traditional multinational companies
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What Is E-Commerce?
• efers to the selling of goods or ser!ices o!er theInternet
• Includes goods or ser!ices deli!ered offline- E"g"# Ama$on"com shipping boo% !ia U&'
• Also includes goods and ser!ices deli!ered online- E"g"# downloaded computer software
• efers to the selling of goods or ser!ices o!er theInternet
• Includes goods or ser!ices deli!ered offline- E"g"# Ama$on"com shipping boo% !ia U&'
• Also includes goods and ser!ices deli!ered online- E"g"# downloaded computer software
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Types of E-CommerceTransactions
• ()C* business-to-consumer transactions- (uying toys from e+oys
• ()(* business-to-business transactions- ,a%es up . to /01 of current e-commerce
business• C)C* consumer-to consumer transactions
- Anyone selling online
• C)(* consumer-to-business transactions
• ()C* business-to-consumer transactions- (uying toys from e+oys
• ()(* business-to-business transactions- ,a%es up . to /01 of current e-commerce
business• C)C* consumer-to consumer transactions
- Anyone selling online• C)(* consumer-to-business transactions
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Exhibit 10 1! E-Commerce"a#$e Chain
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The Internet Economy
• +wo indicators of the global presence of e-commerce- 'ecure ser!er* an Internet host that allows users to
send and recei!e encrypted data- Internet hosts* computers connected to the Internet
with their own I& addresses
• 2ECD dominate the Internet with o!er 3.1 of Internethosts
• +wo indicators of the global presence of e-commerce- 'ecure ser!er* an Internet host that allows users to
send and recei!e encrypted data- Internet hosts* computers connected to the Internet
with their own I& addresses
• 2ECD dominate the Internet with o!er 3.1 of Internethosts
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Exhibit 10 %! &ec$re &erversan' Internet (osts in &e#ecte'
OEC) Co$ntries
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The Internet Economy
• In 4334# 5 million people used the Internet and almostnone used it for e-commerce"
• +he growth in the use of the Internet or the 6orld 6ide6eb for e-commerce is so dramatic that its impact isdifficult to estimate
• 'ome say that the Internet will ha!e more impact onthe world than the industrial re!olution
• 2ffers tremendous opportunities for multinationals
• In 4334# 5 million people used the Internet and almostnone used it for e-commerce"
• +he growth in the use of the Internet or the 6orld 6ide6eb for e-commerce is so dramatic that its impact isdifficult to estimate
• 'ome say that the Internet will ha!e more impact onthe world than the industrial re!olution
• 2ffers tremendous opportunities for multinationals
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Exhibit 10 *! +ercentage of(o$seho#'s ,ith Internet
ccess
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Exhibit 10 .! The /$mber of roa'ban'&$bscribers over Time for a /$mber of&e#ecte' Co$ntries
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The Internet Economy
• Internet economy has four layers4" +he infrastructure)" +he applications infrastructure5" +he Internet intermediaries7" +he Internet commerce layer
• Internet economy has four layers4" +he infrastructure
)" +he applications infrastructure5" +he Internet intermediaries7" +he Internet commerce layer
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Layer 1
• +he Internet infrastructure is the bac%bone of theInternet# including the Internet ser!ice pro!iders 8I'&s9#
e"g"#- Communications 8:west# ,CI# 6orldCom9- Internet ser!ice pro!iders 8,indspring# A2;#
Earthlin%9- # =&9
• +he Internet infrastructure is the bac%bone of theInternet# including the Internet ser!ice pro!iders 8I'&s9#
e"g"#- Communications 8:west# ,CI# 6orldCom9- Internet ser!ice pro!iders 8,indspring# A2;#
Earthlin%9- # =&9
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Layer %
• +he applications infrastructure- Companies and consultants that build web systems
and supporting software• Consultants 8'cient9• Commerce applications 8
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Layer *
• +he internet intermediaries- Companies that pro!ides lin%ing ser!ices on the
Internet and deri!e re!enues from commissions#ad!ertising# and membership fees• 2nline tra!el agencies 8+ra!elweb#
+ra!elocity"com9• 2nline bro%erages 8E + ADE9• Content aggregators 8C
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Layer .
• +he Internet commerce layer- Companies that conduct commercial transactions on
the 6eb• E-retailers 8wine"com# diamond"com9• ,anufacturers selling directly 8hpshopping"com#
Dell9• 'ubscription-based companies 8@ (2"com9• +ransportation ser!ices 8most airlines9
• 'hipping ser!ices 8 edEF# U&'9
• +he Internet commerce layer- Companies that conduct commercial transactions on
the 6eb• E-retailers 8wine"com# diamond"com9• ,anufacturers selling directly 8hpshopping"com#
Dell9• 'ubscription-based companies 8@ (2"com9• +ransportation ser!ices 8most airlines9• 'hipping ser!ices 8 edEF# U&'9
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$n'amenta#s of E-Commerce
• E-commerce is e!ol!ing >uic%ly"• ailures of many start-ups show it s not without ris%s"
• E-commerce presents significant opportunities andthreats"
• E-commerce is e!ol!ing >uic%ly"• ailures of many start-ups show it s not without ris%s"
• E-commerce presents significant opportunities andthreats"
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Exhibit 10 2! E-Commerce$siness 3o'e#s
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&teps for &$ccessf$#E-Commerce &trategy
• ;eadership- 'uccessful e-commerce is only possible through
dynamic and strong leadership"• (uild on current business models and eFperiment with
new e-commerce models
- Use e-commerce to search for ways to reduce costsor enhance the business"
• ;eadership- 'uccessful e-commerce is only possible through
dynamic and strong leadership"• (uild on current business models and eFperiment with
new e-commerce models
- Use e-commerce to search for ways to reduce costsor enhance the business"
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&teps for &$ccessf$#E-Commerce &trategy 4cont 5
• ,eet the challenge of de!eloping an e-commerceorgani$ation
- Entire firm 8not only top management9 must beprepared to embrace the e-commerce model"
• Allocate resources to the e-commerce business
- Commit financial# human# and technologicalresources to de!elop e-commerce capabilities
• ,eet the challenge of de!eloping an e-commerceorgani$ation
- Entire firm 8not only top management9 must beprepared to embrace the e-commerce model"
• Allocate resources to the e-commerce business
- Commit financial# human# and technologicalresources to de!elop e-commerce capabilities
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&teps for &$ccessf$#E-Commerce &trategy 4cont 5
• (uild a superior e-commerce infrastructure as a basisof a differentiation strategy
- &ro!ide superior online eFperiences• =a!e an e-commerce strategy
- Use strategic management to implement a strongand ade>uate strategic e-commerce plan
• (uild a superior e-commerce infrastructure as a basisof a differentiation strategy
- &ro!ide superior online eFperiences• =a!e an e-commerce strategy
- Use strategic management to implement a strong
and ade>uate strategic e-commerce plan
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&teps for &$ccessf$# E-Commerce &trategy 4cont 5
• De!elop appropriate e-commerce systems- 6or% hard to remo!e traditional barriers to ensure
that there are increased coordination andinformation flows among the !arious functionalareas
• ,easure success- =a!e metrics in place to measure e-commerce
success
• De!elop appropriate e-commerce systems- 6or% hard to remo!e traditional barriers to ensure
that there are increased coordination andinformation flows among the !arious functionalareas
• ,easure success- =a!e metrics in place to measure e-commerce
success
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Exhibit 10 6! &$mmary of E-Commerce 7'on8ts9 base' on
est +ractices
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E-Commerce &tr$ct$re!Integrate' or $tonomo$s
• Company needs to decide how e-commerce fits intoeFisting design
• ight miFture of bric%s and clic%s- =ow much to integrate Internet into traditional
businesses
• (ric%-and-mortar* traditional or non-!irtual businessoperation
• Company needs to decide how e-commerce fits intoeFisting design
• ight miFture of bric%s and clic%s- =ow much to integrate Internet into traditional
businesses
• (ric%-and-mortar* traditional or non-!irtual businessoperation
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E-Commerce &tr$ct$re!Integrate' or $tonomo$s
• Degree of interaction between bric%-and-mortaroperations can occur anywhere in the !alue chain
• Can range from near seamless operations 8e"g"# 2fficeDepot9 to the mostly independent operations 8e"g"#(arnes H
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E-Commerce &tr$ct$re!Integrate' or $tonomo$s
• +he independent benefits- aster and more entrepreneurial
- reed from corporate bureaucracy• +he integrated benefits
- Cross-promotion# shared information# increased>uantity purchases# use of same distributionchannels
• +he independent benefits- aster and more entrepreneurial
- reed from corporate bureaucracy• +he integrated benefits
- Cross-promotion# shared information# increased>uantity purchases# use of same distributionchannels
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Exhibit 10 :! ;ey )ecisions inthe Integration vs &eparation
)ecision
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E-Commerce &tr$ct$re!Integrate' or $tonomo$s
• 6ays companies can integrate their online and offlineoperations
- Keep customers informed- Integrate business operations- 'hare customer data across channels
• 6ays companies can integrate their online and offlineoperations
- Keep customers informed- Integrate business operations- 'hare customer data across channels
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''itiona# Operationa#Cha##enges for an E-Commerce
$siness• inding partnerships and alliances with customers or
third parties
• Attracting# retaining# and de!eloping employees in thee-commerce unit
• Inade>uate e-commerce training
• E-commerce employee retention• Deciding what e-commerce functions to outsource
• inding partnerships and alliances with customers orthird parties
• Attracting# retaining# and de!eloping employees in thee-commerce unit
• Inade>uate e-commerce training
• E-commerce employee retention• Deciding what e-commerce functions to outsource
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+$re E-b$siness CompanyTas
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Tas
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Exhibit 10 =! Organi>ationa# Changes in3ajor 3$#tinationa# Co $i#'ingE-Commerce
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E-Commerce &ec$rity
• E-Commerce security* refers to the degree to whichcustomers feel that their pri!ate# personal information
can be safeguarded in the hands of online companiescollecting such information
• E-Commerce security* refers to the degree to whichcustomers feel that their pri!ate# personal information
can be safeguarded in the hands of online companiescollecting such information
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E-Commerce &ec$rity
• Companies need to be concerned about a number ofinformation security issues such as
- Confidentiality* ma%ing sure that pri!ate information isprotected- A!ailability* ensuring that information is accessible to
authori$ed users
- Integrity* ensuring that the information collected is accurateand reliable
- Authentication* ha!ing systems in place to ensure that
persons using the systems are legitimate
• Companies need to be concerned about a number ofinformation security issues such as- Confidentiality* ma%ing sure that pri!ate information is
protected- A!ailability* ensuring that information is accessible to
authori$ed users
- Integrity* ensuring that the information collected is accurateand reliable
- Authentication* ha!ing systems in place to ensure thatpersons using the systems are legitimate
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E-Commerce &ec$rity
• +o ensure that these Internet security issues areaddressed# eFperts suggest the following
- Use firewalls# intrusion detection software# andanti!irus shields
- Encrypt data
- e>uire two-phased authentication- Use web site monitoring tools- Abide by pri!acy rules
• +o ensure that these Internet security issues areaddressed# eFperts suggest the following
- Use firewalls# intrusion detection software# andanti!irus shields
- Encrypt data
- e>uire two-phased authentication- Use web site monitoring tools- Abide by pri!acy rules
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#oba#i>ing Thro$gh theInternet
• Internet is enabling the emergence of a new form ofmultinational# the born-global firms
• (orn-global firms are able to obtain a significantportion of their re!enues from sales in internationalmar%ets
• (orn-global firms tend to adopt a global !iew ofmar%ets and de!elop competiti!e ad!antages tosucceed in the !arious mar%ets
• Internet is enabling the emergence of a new form ofmultinational# the born-global firms
• (orn-global firms are able to obtain a significantportion of their re!enues from sales in internationalmar%ets
• (orn-global firms tend to adopt a global !iew ofmar%ets and de!elop competiti!e ad!antages tosucceed in the !arious mar%ets
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3$#tinationa# E-Commerce&trategy orm$#ation
• Depends on- uirements
- +elecommunications infrastructure to mo!einformation
- &ayment infrastructure to mo!e money
- &hysical infrastructure to deli!er products
• Depends on- uirements
- +elecommunications infrastructure to mo!einformation- &ayment infrastructure to mo!e money- &hysical infrastructure to deli!er products
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ttractions of E-Commerce
• Cost reduction- ;ess eFpensi!e to reach international customers
• +echnology- Already a!ailable
• Efficiencies- ,ore efficient
• Cost reduction- ;ess eFpensi!e to reach international customers
• +echnology- Already a!ailable
• Efficiencies- ,ore efficient
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ttractions of E-commerce4cont 5
• Con!enience- 6eb is operating all the time regardless of location
• 'peed of access- Company s products or ser!ices can be accessed
immediately from anywhere in the world
• Con!enience- 6eb is operating all the time regardless of location
• 'peed of access- Company s products or ser!ices can be accessed
immediately from anywhere in the world
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E-Commerce)eterrents@Cha##enges
• eturnJreceipt burden and cost of deli!ery- EFpect 5.-7.1 return rate
• Costs of site construction# maintenance# upgrades• Channel conflicts• Easily copied models
- Competitors can easily see and copy businessmodel
• eturnJreceipt burden and cost of deli!ery- EFpect 5.-7.1 return rate
• Costs of site construction# maintenance# upgrades• Channel conflicts• Easily copied models
- Competitors can easily see and copy businessmodel
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E-Commerce )eterrents
• Cultural differences- 6eb sites must be appropriate culturally
• +raditional cross-border compleFities remain- EFchange rates# different taFes# and go!ernment
regulations• 'tandard or local web sites• Customer trust and satisfaction
• Cultural differences- 6eb sites must be appropriate culturally
• +raditional cross-border compleFities remain- EFchange rates# different taFes# and go!ernment
regulations
• 'tandard or local web sites• Customer trust and satisfaction
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+ic
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+ic
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Exhibit 10 A! E-Bea'iness of&e#ecte' Co$ntries
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3$#tinationa# E-Commerce&trategy Imp#ementation
• e>uires building an appropriate organi$ation andde!eloping the necessary technical capabilities to
conduct electronic transactions
• e>uires building an appropriate organi$ation andde!eloping the necessary technical capabilities to
conduct electronic transactions
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The 3$#tinationa# E-CommerceOrgani>ation
• +hree-tiered miFing of global and local functions• =ead>uarters
- @ision# strategy# leadership for worldwideelectronic mar%eting
- Also pro!ide shared ser!ices such as networ%infrastructure
• +hree-tiered miFing of global and local functions• =ead>uarters
- @ision# strategy# leadership for worldwideelectronic mar%eting
- Also pro!ide shared ser!ices such as networ%
infrastructure
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The 3$#tinationa# E-CommerceOrgani>ation 4cont 5
• 'hared functional ser!ices- &ro!ide = ,# mar%eting# partner management to
regions• ;ocal subsidiaries
- Deli!er goods# manage functions better done locally
such as the supply chain
• 'hared functional ser!ices- &ro!ide = ,# mar%eting# partner management to
regions• ;ocal subsidiaries
- Deli!er goods# manage functions better done locally
such as the supply chain
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Exhibit 10 10! Organi>ationa#&tr$ct$res of the 3$#tinationa#
E-Corporation
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Technica# Capabi#ities for3$#tinationa# E-commerce
• Ability to process multiple currencies• Ability to calculateJshow purchase information on
international shipping# duties# and local taFes such as@A+
• 'ystems that chec% compliance with local and
international laws
• Ability to process multiple currencies• Ability to calculateJshow purchase information on
international shipping# duties# and local taFes such as@A+• 'ystems that chec% compliance with local and
international laws
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Technica# Capabi#ities for
3$#tinationa# E-commerce• Ability to pro!ide support in multilingual ser!ice centers• raud protection
• Electronic payment models in addition to credit cards
• Ability to pro!ide support in multilingual ser!ice centers• raud protection
• Electronic payment models in addition to credit cards
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Web &ites! To Loca#i>e or&tan'ar'i>e
• 'tandardi$ed web site* companies web sites are fairlysimilar in layout and design around the world
• ;ocali$ed web site* !alues# appeals# symbols# ande!en themes in the communication content is adaptedto the local culture
• 'tandardi$ed web site* companies web sites are fairlysimilar in layout and design around the world
• ;ocali$ed web site* !alues# appeals# symbols# ande!en themes in the communication content is adaptedto the local culture
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Exhibit 10 11! (igh-Context an' Lo,-ContextC$#t$res an' T,o of (oftse'e8s C$#t$ra#)imensions an' +otentia# Inf#$ence on Web)esign an' Layo$t
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73ission-Critica#9 actors toComm$nicate to #oba#
$'ience4" ;in% all 6eb sites to corporate 6eb site)" 6eb site should contain all nonelectronic local contact
information for feedbac% or comment5" &ro!ide a prominent list of languages used by the
company s 6eb site
7" Use different languages for downloads
4" ;in% all 6eb sites to corporate 6eb site)" 6eb site should contain all nonelectronic local contact
information for feedbac% or comment5" &ro!ide a prominent list of languages used by the
company s 6eb site
7" Use different languages for downloads
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73ission-Critica#9 actors toComm$nicate to #oba#
$'ience 4cont 50" ;ocali$e by language the parts of the parent company
6eb site that recei!e the most access
" &ro!ide a site map" &ro!ide the firm s pri!acy statement in all locallanguages
0" ;ocali$e by language the parts of the parent company6eb site that recei!e the most access
" &ro!ide a site map" &ro!ide the firm s pri!acy statement in all locallanguages
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73ission-Critica#9 actors toComm$nicate to #oba#
$'ience 4cont 5/" Guard against local piracy by putting your policies in
local languages
3" ;ocali$e your graphics and written material4.";ocali$e content management
/" Guard against local piracy by putting your policies inlocal languages
3" ;ocali$e your graphics and written material4.";ocali$e content management
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Exhibit 10 1%! 3ajor +rob#emsI'entifie' in Web &ite
#oba#i>ation
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To $i#' or O$tso$rceTechnica# Capabi#ities?
• +wo options- un all e-commerce functions internally or outsource
to e-commerce enablers• E-commerce enablers* fulfillment specialists that
pro!ide ser!ices such as 6eb site translation
- &ro!ide ser!ices and software that translate 6ebsites# calculate shipping# !alue-added taFes# duties#and other charges uni>ue to each country
• +wo options- un all e-commerce functions internally or outsource
to e-commerce enablers• E-commerce enablers* fulfillment specialists that
pro!ide ser!ices such as 6eb site translation
- &ro!ide ser!ices and software that translate 6ebsites# calculate shipping# !alue-added taFes# duties#and other charges uni>ue to each country
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