E-Commerce and the Global Market
By: Artur • Research Paper • 1,892 Words • January 26, 2010 • 655 Views
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Electronic commerce (e-commerce) over the Internet is the fastest growing method for consumers to conduct business. Less than ten years old and it already has radically altered the potential to economic activities and the social environment. There are nearly 200 million Internet users worldwide currently. Of these 200 million users, roughly 40 percent reside in the United States (Styliano, A., Robbins, S. & Jackson, P., 2003). E-commerce currently affects large sectors such as communications, banking and the retail industry. E-commerce has also had an effect on the education, health and government (Wyckoff, A., & Colecchia A., 1999). It is predicted that commerce on the Internet could total tens of billions of dollars by the turn of the century. E-commerce's most significant impact will be on sectors that transmit information (postal service, communications, radio and TV) and those that produce it (finance, entertainment, travel agents or stockbrokers) (Jones, B., n.d.). One of the most surprising but indirect impact e-commerce have had is associated with the way society has incorporated it into their everyday lives and its ability to drastically change the way businesses now interact with their employees, consumers, and business partners. Entrepreneurs are now able to start new businesses more easily, with smaller up front investment requirements, by accessing the Internet's worldwide network of customers (Jones, B., n.d.). China, with the third largest user population, is expected to gain market share-particularly in light of the prediction that it will surpass Japan and become the largest Asian Internet market during the coming year (Styliano, A., Robbins, S. & Jackson, P., 2003). E-commerce gives small businesses the competitive edge against large multinational organizations in the global market. Now that electronic commerce has become an integral part of everyday business, we now must take a look at how the emergence of e-commerce has affected the global marketplace and how has e-commerce changed the standard and quality of living. It would also be important to discuss some of the drawbacks or adverse effects that e-commerce has had on society.
Electronic commerce has had a profound effect on global trade in services. World trade involving computer software, entertainment products, information services, technical information, product licenses, financial and professional services has grown rapidly in the past decade, now accounting for well over $40 billion of U.S. exports alone (Jones, B., n.d.). E-commerce allows consumers to have more suppliers, sometimes including foreign suppliers. Consumers can now search online to find the lowest price. E-commerce has made the global marketplace larger which makes the marketplace become more competitive. The increase in competition is advantageous to consumers. The increased competition lowers prices for consumers and other businesses. Further, the increase in information and choice available can help increase the efficiency of the supply and demand equilibrium (Electronic Commerce, n.d.). The increase in competition also forces companies to become more efficient. As e-commerce grows, other countries are increasing their participation in the global digital economy. Companies now have to introduce new technologies or methods to reduce overhead costs and increase productivity which is also brings lower prices to consumers.
The leading products in both the business-to-business and business-to-consumer markets are electronically delivered products such as software, travel services, entertainment, and finance (Windham, L. & Orton, K., 2000). Due to the nature of such products, business is increased globally. Business-to business markets are growing quickly because e-commerce has a significant impact on overhead cost reduction and business efficiency. Businesses that use the Internet to buy, sell, distribute and maintain products and services are realizing significant cost savings and increased sales opportunities and the benefits only increase as the network of businesses conducting electronic commerce grows (Electronic Commerce, n.d.).
There have been some negative effects on the economy due to the emergence of e-commerce. It is assumed that the availability of goods online should increase competition but this does not always occur. Reputable companies who have majority control over their industry can sometimes maintain high prices. Further, the Internet allows companies to obtain pricing information from their competitors companies easily and allows them to react immediately to external changes. Company monitoring can also work against consumers. Since other companies can quickly change their price, the original company would not make any extra revenue from increased sales (LaRose, R.,2000). There is also the issue of product differentiation. Increased competition due to ecommerce allows companies