A Study on its Effects & Opportunities
Ecommerce results in reducing Transaction Costs:
In
a business process, transaction costs are the sum of all costs that a purchaser
and seller incur during the purchase-sale transaction, where, sales commissions, cost of gathering information, investment made by the seller or
purchaser in hiring employees or acquisition of equipment etc. are a part of
it.
The term ‘market’ may be understood
as a place or organization, where, a potential seller of a good come in contact
with a potential purchaser, and a medium of exchange is available between them
to undertake the transaction process or simply, commerce activities. The medium
of exchange between the purchaser and seller is usually through currency or
exchange of goods/property.
When the transaction costs are very high, and the transaction process is complex, people usually form organizations to replace market-negotiated transactions. The structure of these organizations are usually hierarchical, and include supervision and work monitoring elements, such as, information system and coordination of activities, and these organizations spend a lot in collecting, monitoring, and evaluating the system. E commerce reduces the cost of search for actual purchasers, sellers, and by the by increasing the number of market participants. E commerce is also responsible for reducing the transaction cost of human resources through telecommuting.
When the transaction costs are very high, and the transaction process is complex, people usually form organizations to replace market-negotiated transactions. The structure of these organizations are usually hierarchical, and include supervision and work monitoring elements, such as, information system and coordination of activities, and these organizations spend a lot in collecting, monitoring, and evaluating the system. E commerce reduces the cost of search for actual purchasers, sellers, and by the by increasing the number of market participants. E commerce is also responsible for reducing the transaction cost of human resources through telecommuting.
E
Commerce creates Network Effects:
Today
a large number of companies/organizations operate in a network structure, and
they strategically ally, which may be project-specific, their resources,
skills, and strategies through a long-term, stable, & mutual relationship
with other firms or individuals, and if all these alliances occur in the web,
then they are called as virtual companies. Generally, technology based
industries that are information sensitive, categorically called as network
organizations. E commerce creates network organizations very easily, through
information sharing. In a network, the value of the network to each growing user
increases due to simultaneous technological advancement, and it is called as ‘Network Effect’, and e commerce creates network effects in many business processes of a
lot of network organizations.
E
Commerce Opportunities:
A value chain is
a method of organizing the activities that a specific business unit undertakes
to purchase, design, produce, market, promote, deliver, support after sales
service, and manage human resources, and industry value chain is the
integration of at least two value chains of two strategic business units. E
commerce and internet technologies can be used as business solutions in an
industry value chain, to reduce costs, improve product quality, reach new purchasers
or suppliers, and innovate new methods of selling products.
It is to remember that, when companies
are introducing e commerce, the value chain concept is an excellent ways and
means to organize/reorganize the business processes, and hence it will create
opportunity for them to improve their business goals.
Business houses usually use SWOT analysis to find out their strengths, and weaknesses, and then identify opportunities,
keeping the possible outside/inside threats in mind.
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