About 20 years ago, the lines between an organization and its customers, suppliers, and partners were clear. A business wasn’t expected to make very much, if any, information available to anyone else outside the corporation. Production was totally separate from finance and the human resources division wasn’t connected to manufacturing. That is no longer the case in today’s business world. In order to remain competitive, businesses are expected, if not required, to make most, if not all, information available across all divisions and to the outside world.
To explain the changing economics of information, let’s say you’re ready to buy a car. You’ve checked the prices and information on various Web sites and secured a good deal because of your research. Now, you need a loan and insurance for the new car. Your bank loan seems high and your insurance agent’s rate also seems high. But wait. You check out the Web sites and find a better loan rate and better insurance rate. Because you were able to gather information from the Internet rather than traveling from business to business, your search costs were lower.
The bank and insurance company no longer had the advantage of information asymmetry; you had access to more information to compare pricing. The richness and reach of information on the Internet has allowed businesses and consumers to establish new types of relationships.
E-commerce is divided into three categories that distinguish the types of transactions that take place:
· Business-to-consumer (B2C): most visible; involves retailing products to consumers.
· Business-to-business (B2B): greatest dollar amount of transactions; sales of goods.
· Consumer-to-consumer (C2C): greater geographic reach; consumers selling to consumers.
There are many products and services offered through traditional web sites, and as businesses continue to expand the reach of the Internet to wireless devices, they are creating new ways to offer products and services through handheld wireless devices known as mobile commerce or m-commerce.
The emerging digital company now has more opportunities to reach customers, suppliers, and partners through the Internet. The Internet has given digital companies the opportunity to create new business models or reshape current models. New models include: web portals like Google to track preferences and online retail stores called e-tailers used to check inventory and make orders.
Digital companies need money too, so various revenue sources have been explored – from running advertisements, such as, banner ads, to developing their own digital goods, like ebooks, special reports, even programs and web utilities. Most companies use a combination of the following revenue models: advertising, sales, subscription, transaction fee, and affiliate.
The last thing you want to do is throw up a web page, include an e-mail address, and call it done! You have to determine how your electronic commerce efforts will best fit your current business processes. Some companies have built a Web site without thinking through the entire process only to find out they have seriously hurt their normal operations.
Facts to remember: It’s not cheap, It’s not easy, it’s not fast.
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