International E-Commerce: Language, Cultural, and Infrastructure Issues, Challenges, and Solutions

Magdi N Kamel. Electronic Commerce: Concepts, Methodologies, Tools, and Applications. Editor: S Ann Becker. Volume 1, Information Science Reference, 2008.


The phenomenal worldwide growth of the Internet and the World Wide Web has made it an important vehicle for both business-to-business (B2B) and business-to-consumer (B2C) commerce. Forrester Research predicts that in 2004, online commerce for both B2B and B2C will reach $6.8 trillion (Worldwide eCommerce Growth, 2001). International Data Corporation predicts that while only 26% of Internet commerce was conducted outside the US in 1998, the ratio is expected to be over 50% in 2004 (Glasheen, Gantz & Emberley, 2004). The opportunity is particularly great for certain countries with current low participation rates, like China, who in 2003 had about six million Internet users, but potentially can have over a billion users in the future.

While the Web offers great opportunities for international electronic commerce by eliminating the barriers of time and space, language, cultural, legal, and infrastructure issues present major impediments to global Internet commerce.

In this chapter we address language, cultural, legal, and infrastructure issues as barriers to international electronic commerce. Specifically, the chapter presents a framework for identifying and addressing language, cultural, legal and infrastructure issues. The goal is to help organizations meet the challenge of providing online international visitors with a high quality experience, regardless of location, language, business practices, and culture, while complying with legal requirements.

The chapter is organized as follows. A background section introduces the concepts of localization, internationalization, and globalization, presents the main issues of the chapter, and provides a literature review emphasizing the importance of the issues. The section entitled “Language Issues” addresses important issues of translating Web sites to other languages. These issues include what to translate, writing for translation, language tone and formality, automated translation and maintenance, translation for different dialects, text expansion from translation, translating graphics, serving the correct localized site, directing traffic to a multilingual site, and content management workflow. The section entitled “Cultural Issues” addresses considerations for developing Web sites for different locales and cultures. These issues include cultural subtleties, local standards and conventions, graphic and design elements, color, layout, and cultural attitudes toward e-commerce. Legal issues are tackled in the “Legal Issues” section and include discussion of jurisdiction, recognition of electronic contracts, consumer protection, dispute resolution, and privacy. A discussion of Infrastructure as a barrier of electronic commerce follows and includes issues of limited bandwidth, language representation technical issues, local connection costs, and support infrastructure. Finally the chapter concludes with a summary and discussion of future and emerging trends.


It is estimated that about 70% of the Internet content available today is in English, yet 93% of the world are non-native English speakers, and about 65% of today’s Web users are non-English speaking (Global Reach, 2004). Over the next few years, Internet use is expected to grow by 79% in Asia, 123% in Latin America, and over 2000% in Japan. As a result, by 2004, it is expected that more that two-thirds of Internet users will be outside the United States and that 65% of Web use and 52% of electronic commerce sales will involve at least one party outside the United States (Glasheen, Gantz & Emberley, 2004). Further, research have shown that customers are more likely to buy goods and services from Web sites in their native languages, even if they can speak and understand English well.

Realizing the global potential of the Internet, many companies in their efforts to reach customers in other countries begin by providing local language versions of their sites. However, translation alone is usually not adequate. Web sites need to be localized for each national audience by taking into consideration multiple elements of the local environment. Localization involves translating and culturally adapting software user interfaces, Web pages, visual and graphical elements, help files, documentation, and other content for one specific national audience (Schwartz, 2000).

Numerous studies in the literature stress that, in order to attract and retain more customers, it is vital to adapt the Web site to a local community. For example, Nielsen and Del Galdo (1996) emphasize that localization should encompass more that a “surface-level” adaptation, by acknowledging underlying cultural differences such as interface design preferences and the local culture’s perception of usability. Evers and Day (1997) discuss the role of culture in interface acceptance. Barber and Badre (1998) suggest the existence of cultural markers, Web design elements that are prevalent in Web sites of different cultures. Further, Sheppard and Scholtz (1999) conducted pilot studies that suggest the absence or presence of cultural markers affects the user’s performance. Marcus and Gould (2000) apply Hofstede’s five cultural differences dimensions (1997) to global Web interface design and provide suggestions and guidelines to produce successful localized Web sites.

It is important to note that before attempting to provide local versions of their sites, through localization, companies wanting to do business in different countries need to consider first globalizing their e-business by making their products and services appealing enough to persuade people in other countries to buy them. Globalization addresses all of the logistical and organization issues, its supporting content, assets, and message, across cultures and markets.

To facilitate the process of localizing their Web sites, companies should consider Internationalization during the development of their main Web site. Internationalization involves making programs and their user interfaces more readily localizable by including support for issues such as handling non-English characters, sorting and string comparison, case conversion, parsing input, word delimiters, concatenated strings, date/time formats, measurement scale, etc. For example, the ASCII encoding scheme widely used to represent English characters uses a single byte to represent Latin characters. This scheme is not suitable for representing characters of other languages such as Japanese, Korean, and Arabic. An extended encoding scheme that uses two bytes, such as Unicode, is needed to represent characters of these languages. Internationalized software must be able to understand this type of extended encoding scheme. Additionally, a fully internationalized code should not contain hard-coded, locale-dependent content. Text strings should be stored in external files and then translated. The software must be able to recognize the coding scheme of the newly translated string and know how to process that language. Internationalization prior to localization allows companies to avoid the full development and testing cycle for each localized version. It also reduces maintenance cost since there is only one set of source code to maintain (Perinotti, 2001).

Language Issues

In this section we address some important translation and language issues, as translation activities are central to localization. These issues include what to translate, writing for translation, language tone and formality, automated translation and maintenance, translation for different dialects, text expansion from translation, translating graphics, serving the correct localized site, directing traffic to a multilingual site, and content management workflow.

What to Translate. Many companies provide a complete translation of all of the Web pages on their site. This approach however may not be feasible for others. The home page and all first-level links should be translated in all supported versions. Pages describing product information, marketing and establishing brand should also be included in the translation. The decision on which pages get to be translated should be made by the department responsible for maintaining that page. Pages devoted to local news and interests, might be created and maintained only in the local language (Schneider, 2003).

Writing for Translation. Writing for translation assists both the human translator and the translation software. Good writing practices not only improve the readability of a Web site, but they almost always make it easier to translate. In addition some practices improve the efficiency of the parsing operations used by the translation software, other practices improve the translation itself, and still other practices mitigate locale-dependent content, thus simplifying the translation and maintenance of local sites.

Practices that improve the efficiency of the parsing operation when translating from English to other target languages include the following (Harkus, 2000):

  • Using an article or descriptor to clarify the part of the speech of a word. For example, using words such as “a” and “the” provide syntax cues to both translation software and human translators.
  • Including relative pronouns even when they are not required. For example, “the book that he wrote” instead of “the book he wrote.”
  • Writing list items as complete clauses or complete sentences.
  • Avoiding phrasal verbs, such as “set up” or “shut down,” and using single word alternatives. Most commercial translation products are unable to analyze phrasal verbs, except for the most common ones.

Similar practices could be adapted from the list when translating from other languages.

Practices that improve the translation itself include:

  • Minimizing ambiguity.
  • Avoiding homographs (words that are spelled alike, but have different meanings). If an English word has several meanings, it should be used consistently with one meaning and its alternate word to express other meanings. For example, if “right” is used as the opposite of “left,” then the word “correct,” not “right” should be used as the opposite to “wrong.”
  • Using words with their primary dictionary meaning.

Recommendations provided by the translation software should followed as much as possible to optimize the translation output.

Practices that minimize the impact of locale-dependent content include:

  • Restricting the use of acronyms
  • Avoiding abbreviations
  • Using standard ISO notation
  • Using month name in date to simplify interpretation
  • Avoiding special characters that have varying applications (e.g., $, @, and #)
  • Tagging all items that may be locale dependent (acronyms, measurements, dates, currency, etc.)

Language Tone and Formality. There are certain “levels” or “registers” of language used in particular situations in different countries that determine formality and directness. The use of humor, metaphors, and idioms varies from one country to another. It is important to understand what the norms in a target market are for particular types of texts in order to connect with potential clients and successfully market a product or service. For example, it is common in the US to see a Web site in which a registered user is greeted with the text: “Welcome back, Bob!” While it may be appropriate to address an American by his first name, a registered Japanese visitor to the above site could take offense at such a casual greeting. A more formal greeting such as, “We are honored by your return visit, Mr. Tanaka” would make the sales pitch more receptive.

Automated Translation and Maintenance. Translating and maintaining Web pages in multiple languages could be a costly endeavor. Companies should consider use of translation software for translating their Web sites. Software translation can reach speeds in excess of 400,000 words per hour compared to 400 to 600 words per hour for a human translator. Automated translation however is generally not good enough to be published without considerable human post-editing, and for key portions of the site a competent human translator is essential to capture the exact and subtle meanings of the text to be translated.

An attractive alternative to machine translation software is translation memory software, which is designed to enhance human translation effort rather than replace it. Translation memory software typically stores matching source and target language segments that were translated by a human translator in a database for future reuse. As the translation effort progresses, the translation database grows. New segments to be translated are compared with translated segments in the database, and the resulting output is reviewed and completed by a translator (Heuberger, 2001).

More importantly companies should consider software that automates the process of maintaining a Web site in multiple languages. This type of software typically tracks the portion of the site that needs translation and inserts the translations into the proper section of all sites that include that language. Using XML tags in the text of each translated Web site is a particularly good approach. Software that employs an XML approach relates each text element with a corresponding text element at the company’s main Web site. When text in a page at the main Web site changes, the software sends a notification the shows which pages need to be updates and tracks the exact location of the change in every page needing updating. When the translation is completed, manually or automatically, the software automatically inserts the translated text in the correct locations.

Translations for Different Dialects. Some languages may require different translations for different dialects. For example, the Spanish used in Spain is different from the one used in Mexico, which is different from the one used in Latin America. The US spelling and meaning of certain words is different from the British Dialect. For example, the US spelling of “color gray” becomes the “colour grey” in Great Britain, and the meaning of “bonnet” changes from a type of hat in the US to the hood of a car in Great Britain. The Chinese language has two systems of writing: a traditional one used in Hong Kong and Taiwan, and a simplified one used in mainland China.

Text Expansion from Translation. Text will expand or contract when translated from one language to another. For example, when translating from English to European languages text expands by as much as 20% (Yunker, 2001). Conversely, Asian target text often contracts when translated from English. It is therefore important to allow enough space for the text to expand without impacting the overall design of the site. Particular attention should be given to providing extra white space for columns, frames and tables.

Translating Graphics. Graphics that contain text must be translated with the rest of the site (Hopkins, 2000). This can usually be accomplished by having graphic artists retouch GIF and JPEG files by cutting the source language text, repair the background and paste in the target language text using an appropriate font. A better approach is to use pictures with layers for each component (text, shadow, borders, etc.). This approach enables the localizer to remove text, translate it, resize shadows or borders, and reinsert the translated text into the layered file. It is recommended however to avoid text-in-graphics as much as possible to avoid reprocessing images during translation.

Serving the Correct Localized Site. The process by which a specific version of a Web site is displayed could be automated through the HTTP request message that a browser makes to a server when establishing a connection, or could be left to the visitor who must select one of the languages by clicking the appropriate link on the home page. Web sites that use the later approach should make sure that the links are clearly identifiable to their multilingual visitors. One approach is to present images of fags that represent the different available versions of the site. This approach is suitable for Web sites containing country-specific content, rather than language-specific content, because fags represent countries, not languages. Using a fag from Spain to represent Spanish may alienate users in Mexico or other Spanish speaking countries. A preferred approach for language-specific sites is to let users select a language-specific version of a Web site by clicking on buttons or navigational images with the name of each available language version written in that language (Hanrahan & Kwok, 2002).

Directing Traffic to a Multilingual Site. It is important to list a multilingual site with US and international search engines. Most US search engines, such as Yahoo!, Google, MSN, and Alta Vista, maintain international directories. It is also important that a localized Web site META tags are translated so a foreign language search engines can identify them.

Content Management Workflow. Content management workflow is a potentially powerful approach for Web sites’ translation and localization. Today, most companies with a need to deliver information to a global audience still rely on a manual, paper-based process for localizing their content. Human intervention is required at all stages, from the origination of source language data through translation, review, quality assurance, and final delivery of localized information. There are inherent inefficiencies to this process, which lead to longer translation turnaround times and higher localization costs (Isogen International, 2002). A content management workflow system can streamline the localization processes and reduce the cost of delivering localized information products by automating the processes of translation, review of translation for cultural context, marketing approvals, and other related steps.

Cultural Issues

While translation is an important activity of localization, it is not sufficient alone. As discussed in the Background Section, cultural differences have a profound impact on the usability, acceptability, and user performance of Web sites. We define culture as the difference among people of different countries and regions in core values, traditions, customs, norms, opinions about social and ethical issues, business and social practices, tastes, gestures, treatment of people of certain gender or age, and so on. Companies developing Web sites for different cultures must learn and understand culture differences and reflect this understanding in the design of their sites. User interfaces, visual and graphical elements, help files, documentation, and other Web site content needs to be culturally adapted for each specific country or region.

In this section we address some of the important cultural areas that need to be considered when localizing Web sites. These areas include language and cultural subtleties, local standards and conventions, graphics and design elements, color, layout, and cultural attitudes towards e-commerce.

It should be noted that the Internet is particularly viewed as a challenge to cultural identity for its potential of imposing the culture of one country upon others. In particular, many countries view the Internet as dominated by an American culture and fear the potential of “Americanization” of its younger generations. As a result some governments feel compelled to limit Internet access to its citizens in an effort to curb the undesirable cultural influence.

Language and Culture Subtleties. Lack of language and cultural subtleties can have a dramatic negative impact on a company’s efforts to sell its goods and services in different countries as the following classic examples presented in Schneider (2003) illustrate. General Motors was perplexed on why its Chevrolet Nova model was not selling well in Latin America, only to discover that “no va” means “it won’t go” in Spanish. Pepsi’s expensive “Come Alive” advertising campaign in China was a disappointment since the message came across as, “Pepsi brings back your ancestors from the dead.” Gerber baby food did not realize that in Africa many people associate the picture on a container label with its content. Therefore, when Gerber started selling their baby food using the Gerber baby pictured on the baby food jars, Africans interpreted the labels as jars of human babies. When the Totes rain gear company was about to open a German office, the company decided it would simply call the new subsidiary “Totes Deutschland,” only to realize after the press releases had gone out that “Totes Deutschland” means “dead Germany” (Sprung, 1999). These examples illustrate the importance of understanding language and cultural subtleties early on to avoid costly mistakes later.

Local Standards and Conventions. Careful attention should also be given to different standards and conventions used by different countries. While the US and the United Kingdom use the English system of weights and measures, the majority of the world uses the metric system. Differences also exist in representation of dates, times, number formats, addresses, and phone numbers. The US uses the format of month, day, year, while the rest of the world uses a day, month, year format. This could lead to confusion and misinterpretation for dates such as 4/6/01. Similarly, times are represented differently in different countries. Some countries use a twelve-hour time while others use a twenty-four-hour time (also called military time). Number formats differ mainly in the use of a decimal separator. Some countries use a period to represent the separator (e.g., USA), while others (e.g., Europe) use a comma for the same purpose. Address formats also differ from one country to another. Some countries represent the address in the format of street number, street name, and city name while others use street name, street number, and city name. Phone number formats also vary in different countries, with some countries including the country and city code as part of the phone number.

Graphic and Design Elements. Web designers must take care in the selection of icons and graphic elements on Web pages. Symbols that are commonly used in some cultures may not have the same meaning or impact in other cultures. For example, the shopping cart is an understandable metaphor for US shoppers. This symbol however may cause confusion with European shoppers who shop at the market with a basket. Another classic example is the American mailbox with a little fag to indicate there is new mail. This symbol used on many sites to indicate e-mail may not be recognizable by people in other parts of the world. Some hand and finger gestures are considered obscene in certain cultures. The use of certain images is considered inappropriate in some cultures. In India, for example, it is inappropriate to use the image of a cow in a non-revered setting.

Color. Color is another aspect of Web site that designers need to consider carefully as it could be interpreted differently by different cultures. For example, while black may be considered “cool” and “edgy” in the US, it is the color of mourning and has a sinister connotation in countries of the Middle East and in Europe. On the other hand, white (and also the number four) is the symbol of death in the Japanese culture.

Layout. Beyond avoid offending visitors from different cultures, companies should thrive to do more to attract visitors by catering to their visual and shopping preferences. Different cultures are attracted by different visual elements and their arrangement on a Web page. For example in Scandinavian countries, a crisp, less cluttered, clean design feels more comfortable to the visitors of these countries than one that is busy yet more informative.

Cultural Attitude towards E-Commerce. Consumers in many countries have a completely different view on electronic commerce from that of the US For example, many shoppers prefer to pay in cash or by cash transfer instead of a credit card. Many also have reservations on using a credit card online. Companies need to find innovative and unconventional solution to attract and encourage these shoppers to conduct business with them. An example of such innovation is eS-Books venture in Japan that allows customers to order items online, and then pick them up and pay for them in cash at the local 7-Eleven store.

Legal Issues

One of the biggest obstacles to international e-commerce is the lack of a single law that governs transactions on the Internet. The Web extends a company’s reach beyond a single border, making it subject to potentially numerous laws of many countries. There are however certain issues that policy makers and companies conducting international electronic commerce need to work out, any one of which can seriously threaten the success of international e-commerce. In the following we discuss five key legal issues that affect international e-commerce: jurisdiction, recognition of electronic contracts, consumer protection, conflict resolution, and privacy.

Jurisdiction. Jurisdiction refers to the question of whose rules will apply to a transaction when the buyer and seller are located in different countries (Ham & Atkinson, 2001). Traditionally the jurisdiction of courts has been defined to coincide with geographic boundaries based on the notion that consumers will shop and do business near where they live. International electronic commerce throws this notion into chaos. For example, if a person located in Country A purchases an item from a supplier in Country B by connecting to a server in Country C, it is not clear whether the laws of Country A, Country B, or Country C would apply. With so many jurisdictions involved, uncertainties arise as to the regulations and mechanisms that should apply to protect both consumers and businesses. Left unresolved, businesses and consumers are likely to shy away from international electronic transactions and stick to domestic ones.

There are two main views to the issue of jurisdiction. The first view defines jurisdiction by considering a cross-border electronic transaction as taking place in only one country. This country could be either the buyer’s country (country of destination) or the seller’s country (country of origin). The second view favors making the laws and regulations the same in every country through a process of harmonization.

The country of destination view is supported largely by government regulators and consumer rights advocates. This view arises from the assumption that consumers are at a disadvantage during an international transaction and therefore should be protected by the legal system of their countries. In spite of its intuitive appeal, this approach would raise the costs of international electronic commerce and therefore reduce the number of companies engaged in its conduct, since sellers need to learn and comply with myriad laws of many countries. Such an undertaking would be too expensive and never be justified by the revenue returned.

The country of origin view is favored by the seller companies. In this view, buyers assume the burden of factoring the different legal requirements of the countries they are conducting business with into their purchasing decisions. Buyers however may be intimidated by the prospect of fling a lawsuit in a foreign country to resolve disputes with sellers resulting from either innocent misunderstanding or outright fraud. For this reason, the consumer will more likely to buy an item locally at a higher price knowing that he has the assurances of his own laws and the ability to take the seller to court and win an enforceable judgment if necessary.

Proponents of harmonization seek to unify the regulatory and tax structures that govern international electronic commerce. This harmonized structure would provide a predictable environment for both buyers and sellers who engage in cross-border transactions. This approach however would require a high level of international cooperation and agreement, something that is difficult to achieve. In addition, it is generally agreed upon that flexibility, rather than the enforcement of global laws is a better model for international electronic commerce. Given the complexity of defining jurisdiction over global e-commerce, other approaches that combine governmental and private solutions are proposed. Example of such solutions include the following:

  • Active/Passive Presence. Under this approach, jurisdiction is determined by the sophistication of the seller’s Web site to conduct electronic commerce. A static Web site is considered passive and therefore is not subject to foreign jurisdiction. A dynamic interactive Web site with information exchange is subject to foreign jurisdiction depending on the level of interactivity and commercial nature of the exchange.
  • Jurisdiction based on targeting. Under this approach, a company would be subject to the laws of another country if it targets its marketing at the consumers in that country. The definition of targeting however can be extremely complicated, and countries must agree, therefore, on what constitutes targeting.
  • Safe Harbor Agreements. A safe harbor agreement is an agreement negotiated between two countries to reach a middle ground when the laws and regulations of the two countries are too different. Usually this middle ground agreement is less strict than the regulations of the more stringent country but more strict that those in the less stringent country. Each country’s rules and regulations still apply on domestic transactions. As a result, safe harbor agreements can achieve some of the benefits of harmonization while maintaining sovereignty.
  • Private Contractual Jurisdiction. Under private contractual jurisdiction, the buyer and seller agree on the terms of the transaction and how to enforce the contract privately. The power of this approach is that the buyer and seller can choose any law, although it is most likely that transaction-based private contracts will favor a country of origin rule.

Through a combination of these approaches a workable system for international electronic commerce can be built. It is impossible at this point however to predict exactly how the system will look like.

Recognition of Electronic Contracts. An important step in facilitating international electronic commerce is to remove any legal obstacles to the recognition of contracts entered into by electronic means. In many countries, the law requires certain contracts to be in writing, or to be signed. Two questions arise for contracts entered into by electronic means (GIPI, 2002): (1) Is an exchange of electronic messages a “writing”? and (2) Can an electronic notation serve as a “signature?” Other related questions when entering into electronic contracts—when will an e-mail message be considered sent, and when is it received, such that a party is bound by it?

Provision to address these issues can be drawn from the Model Law on Electronic Commerce, promulgated by the United Nations’ Commission on International Trade Law (UNCITRAL) in 1996. The UNCITRAL Model establishes several principles of general applicability rather than requiring amendments throughout a country’s entire legal code. The following are the main provisions of the UNCITRAL model (UNICTRAL, 1996):

  • Legal recognition of data messages:Information shall not be denied legal effect, validity, or enforceability solely on the ground that it is in electronic form. (Article 5)
  • Writing:Anytime the law requires a writing, that requirement is met by information in electronic form if it accessible so as to be useful for subsequent reference. (Article 6)
  • Signature:Where the law requires a signature of a person, that requirement is met in relation to a data message if a method is used to identify that person and to indicate that person’s approval of the information contained in the data message, and that method is as reliable as was appropriate for the purpose for which the data message was generated or communicated, in light of the circumstances, including any relevant agreement by the parties. (Article 7)
  • Original:An electronic data message meeting certain functional criteria can be treated as an “original.” (Article 8)
  • Retention of data messages:Where the law requires that certain documents, records or information be retained, the Model Law specifies that such requirement is met by retaining data messages, provided certain specified criteria are satisfied (Article 10)

The UNCITRAL Model law recognizes that there might be some exceptions to the use of electronic documents, such as land transactions, divorces, adoptions, wills, where the existence of a signed paper original is still desirable. The exact list of exception is left to each nation to specify, based on local considerations.

Consumer Protection. Jurisdictional issues aside, existing national legal protections available to consumers in more traditional forms of commerce should be extended to online commerce. Consumers shopping online should enjoy transparent and effective protection that is no less than the level of protection provided to them in the off-line world. Specifically online laws should be enacted for fair business, advertising, and marketing practices; clear information about an online business’s identity, the goods and services that it offers, and the terms and conditions of any transaction; a transparent process for the confirmation of transactions; the right of withdrawal; liability of defective products; secure payment mechanism; protection against fraudulent charges; fair, timely, and affordable dispute resolution; and privacy protection. As an example of areas of legal protection for online commerce, see the Directive 2000/31/EC of The European Parliament and of the Council of June 8, 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (Directive on electronic commerce, 2000).

Technology could be used to support and enhance consumer protection. Electronic agents and specialized computer software can be used to identify the country, laws, regulations, protections, and remedial options that will apply to a given transaction given the particular parties involved. After such disclosure, the parties can then decide whether to continue with the transaction.

Dispute Resolution. Another important challenge to international electronic commerce is how to resolve the disputes between buyers and sellers, such as failure to deliver requested goods or services, payment disputes, etc., in an effective yet inexpensive manner. In a majority of international electronic transactions, where relatively small amounts of money are involved, recourse to the courts, even when the jurisdiction is known, is not a practical option. To help address these situations, it is better to use alternative mechanisms that allow a fast, low-cost, and easily accessible resolution to these disputes. It is important therefore for governments to encourage the use of electronic alternate dispute resolution (ADR) mechanisms, in addition to the providing recourse through the court system.

An example of a low-fee, Internet-based mechanism of alternative dispute resolution is provided by SquareTrade (Han & Atkinson, 2001). When a dispute arises between two parties, each party connects to the SquareTrade Web site to tell its side of the story and answer a multiple-choice questionnaire. Based on the input of both parties, a computer automatically generates a list of options for resolving the dispute based on historical data of similar arbitrations. If the parties can agree on one of the computer-generated resolutions, the dispute is settled. If not, a human mediator takes over for further negotiations. If a resolution still cannot be reached, the dispute goes to binding arbitration. A major appeal of this approach is it low cost and accessibility. By automating the first level of dispute resolution, the expense of having expensive arbitrators spend time on uncomplicated disputes is eliminated. In addition, it as a lot easier to access the online ADR at any time than having to take time to go to court.

On the long run, ADR may prove to be a better approach for conflict resolution than dealing with complicated jurisdictional issues of international electronic commerce. By effectively resolving a vast majority of international electronic transactions, ADR can significantly reduce the complexity of a required legal environment to resolve electronic commerce disputes.

Privacy. Privacy issues are of particularly great concern to Internet users. Internet technology allows for the easy collection and wide dissemination of personal information and online behavior. The data collected could be used in objectionable ways, from minor inconveniences such as unsolicited mail (“spam”) to potentially significantly harmful uses, such as employment discrimination and blackmail.

Different countries have different views of the proper balance between consumer privacy and corporate needs and hence approach privacy in different ways. The United States, for example, favors a sector-specific approach, mandating protections for sensitive privacy areas such as medical and financial data, self regulation by Internet companies, and placing the responsibility on the Internet users to decide if the privacy policy of a company meets their comfort levels. Other countries, the European Union in particular, view privacy as a human rights issue that should be regulated by the government to protect its citizens. In 1998, the European Union adopted the Directive on Data Protection, which mandated strict privacy policies for any Web site that collects data from citizens of EU states (Directive 95/46/EC of the European Parliament, 1995). The directive provides the following principles:

  1. Personal data can be collected only for specified, explicit, and legitimate purposes and not further processed in a way incompatible with those purposes
  2. Personal data may be processed only upon consent
  3. Individuals or companies collecting personal data must identify themselves to the subject
  4. Individuals have the right to obtain confirmation that data about them are processed, to whom the data are disclosed, and the source that provided the data
  5. Individuals have the right to unconditionally prohibit the use of personal data in certain circumstances (e.g., direct marketing)

These provisions of the directive are in clear conflict to the practices of US companies. Recognizing that the restrictions would negatively impact international electronic commerce of many US companies, the US government negotiated a safe harbor agreement with the European Union, which entered into effect in 2000 (International Trade Administration Electronic Task Force, 2000). The safe harbor agreement is a voluntary self-registration scheme designed to bridge the gap between the traditional US approach of sector-specific self-regulation and EU legislative, top-down approach. US companies that wish to conduct business with EU member states must certify to the US government their compliance with the safe harbor principle either through self-certification or by joining a third-party seal program that guarantees compliance with the principles.

The privacy safer harbor agreement is a good model of international cooperation to promote the growth of international electronic commerce while respecting the sovereignty of the nations involved. It provides a predictable international regulatory environment without impeding the rights of governments to legislate domestic data privacy regulation.

Technology can also play an important role in privacy protection. One of the best examples is the Platform for Privacy Preferences Project (P3P) developed by the World Wide Web Consortium (W3C) (Berkey, 2002). This technology allows companies to write privacy statements in a language readable by a Web browser. A user specifies a desired privacy level in the browser. If the privacy level of a Web site is below the predetermined level set by the user, the Web browser warns the user.

Infrastructure Issues

Limited Bandwidth. In most countries connections to the Internet have limited bandwidth not suitable to download media rich in executable content (e.g., Java applets and Flash). The design of the Web site should take this fact into consideration by, for example, offering two version of the sites, one for wide-bandwidth and another for narrow-bandwidth lines. Additionally, hosting must be regional, and mirrored to ensure acceptable download times.

Language Representation Technical Issues. Presenting information using different languages presents some technical challenges. While English characters are represented using 7 or 8 bits, some languages require 16-bit extended-character sets that require additional efforts in programming Web and database servers.

Local Connection Costs. Unlike the US, which has a fat-rate access system, local connection costs in many countries can be very high, as the cost of a local call is proportionate to the duration of the call. It is therefore important to provide Web site visitors with the information quickly, with fewer bells and whistles than, for example, a corresponding US site. Many believe that the fat-rate access system in the United States has been a key factor to the success of electronic commerce.

Digital Security Infrastructure. A fundamental requirement for the recognition of electronic documents is the ability to verify the identity of a person online and to link a document to a particular person, ensuring that a sender of a message is the person he or she claims to be. Further, a receiver must verify that a document has not been tampered with during transmission or storage. Digital signature technology using a public key infrastructure (PKI) is the most commonly used technique to ensure these requirements. PKI requires a third party to verify identities through the use of public and private “keys.” A regulatory structure for licensed certificate authorities that manage the key infrastructure is therefore needed. This does not mean, however, that every nation creates their own regulatory structure for licensed certificate authorities, since creating such structures is a complex effort in an evolving industry, and carries the risk of leading to a patchwork of national systems that adversely affect international legal interoperability. A better approach is to rely on a few, larger-scale schemes that could be tailored for a region, or a particular legal system. Such an approach would lead to increased international legal interoperability.

Support Infrastructure. An often-overlooked aspect of localization is the need to provide localized e-mail and phone support. When a company commits to an international market, it has to provide a corresponding support infrastructure—staffing up with support personnel fluent in the appropriate languages to manage all aspects of customer service and marketing including e-mail, phone, and Web-based help. This may require installing localized operating systems and e-mail software for communication and support. Because of the resources required for such an undertaking, many companies do not plan for a support infrastructure and often find themselves reacting to customer service issues on a “crisis-by-crisis” basis. A better approach is to plan and budget for a support infrastructure upfront and be clear on the Web site as to what types of support are or are not provided (Yunker, 2001).

Other Issues

In this chapter we focused on language, cultural, legal, and infrastructure issues as the main barriers to international e-commerce. There are however many other barriers to global e-commerce (Turban et al., 2004). They include other legal issues, financial issues, and security issues.

Other Legal Issues. Other legal issues not addressed in this chapter include export/import regulations, intellectual property enforcement, contract laws, tax laws, and cross-border transactions laws.

Financial Issues. Financial barriers to international e-commerce include custom duties, taxes, tariffs, currency exchange, and banking and electronic payment systems.

Security Issues. Security issues include identification and authentication of buyers and sellers, digital signatures, digital certificates, trust, and encryption standards.


Companies seriously targeting customers outside their countries and building Web sites for that purpose should give careful consideration to language, cultural, legal, and infrastructure issues. This chapter presented a framework for identifying and proposing solutions to address these issues.

It is important to note that the issues of international electronic commerce are both numerous and complex. It is likely that many issues have not been considered because they are not foreseen. As international electronic commerce continues to grow, new challenges, particularly legal ones, will most likely emerge, and some existing ones will likely disappear. As innovations on the Internet are occurring at lightning speeds, it is important for companies and international regulatory bodies to continually address these issues and develop strategies on how best to deal with them.