In the last few decades, there has been a revolution in computing and communications, and all signs are that technological advancement and application of information technology will continue at a fast pace. Accompanying and supporting the dramatic increases in the power and application of new information technologies has been the declining cost of communications as a result of both technological advancements and increased competition. These advances present many important opportunities but also pose key challenges. Today, innovations in information technology have wide-ranging effects across numerous domains of society, and policymakers are acting on issues involving economic growth, intellectual property rights, privacy protection, and affordability of and access to information.
Choices made today will have long-lasting consequences, and attention has to be paid to their social and economic impacts. Among the most crucial outcomes of the progress of information technology is most likely electronic commerce over the Internet, a new method of conducting business. Though just a few years old, it may radically alter economic activities and the social environment. It suggests the smooth application of information and communication technology along the whole value chain of a business that’s conducted electronically. The impacts of information technology and electronic commerce on business models, trade, market structure, office, labor market, education, personal life and society as a whole.
1. Business Models, Commerce and Market Structure One significant way in which information technology is impacting work is by decreasing the significance of distance. In many businesses, the geographical distribution of work is changing significantly. As an example, some software companies have discovered they can conquer the tight local market for software engineers by sending jobs to India or other countries in which the salaries are much lower. Moreover, such arrangements may take advantage of the time differences so that critical projects can be worked on almost around the clock.
Thus the technology can allow a finer division of labor among countries, which then affects the relative demand for a variety of skills in each nation. The technology enables various kinds of employment and works to be decoupled from one another. Firms have greater liberty to find their economic activities, producing greater competition among areas in infrastructure, labor, capital, and other source markets. Additionally, it opens the door for regulatory arbitrage: businesses may increasingly choose which tax authority and other regulations apply. Computers and communication technologies also encourage more market-like types of production and distribution.
An infrastructure of computing and communication technology, supplying 24-hour access at a reduced cost to virtually any sort of cost and product information needed by buyers, will reduce the informational obstacles to efficient market performance. This infrastructure may also provide the means for Commodities real-time trades and create intermediaries such as sales clerks, stock agents and travel agents, whose role is to provide a vital information link between sellers and buyers, redundant. The removal of intermediaries will reduce the costs in the manufacturing and distribution value chain.
The information technology has facilitated the evolution of improved mail-order retailing, where goods can be arranged quickly by using phones or computer networks and then discharged by providers through integrated transport businesses that rely extensively on computers and communication technologies to control their operations. Nonphysical products, such as applications, can be sent electronically, eliminating the whole transport channel. Payments can be done in new ways. The end result is disintermediation through the distribution channel, with the price reduction, lower end-consumer costs, and higher profit margins.
The effect of information technology on the companies’ cost structure can be best exemplified on the electronic commerce example. The key areas of cost reduction when carrying out a purchase via electronic commerce as opposed to in a conventional store involve physical institution, order placement and implementation, customer support, powerful, inventory carrying, and supply. Although establishing and maintaining an e-commerce website may be costly, it’s certainly less expensive to keep such a storefront than a physical one as it’s always open, can be obtained by millions around the world, and contains few variable costs, so it can scale up to meet up with the demand.
By maintaining one’shop’ rather than many, duplicate inventory costs are removed. Additionally, e-commerce is quite good in reducing the costs of attracting new clients, because advertising is typically less costly than for other media and more concentrated. Additionally, the digital interface allows e-commerce retailers to check that an arrangement is internally consistent and that the order, receipt, and invoice match. Through e-commerce, firms have the ability to move much of the customer service online so that clients can access databases or manuals directly. This significantly cuts costs while generally improving the quality of support.
E-commerce stores require much fewer but high-skilled, workers. E-commerce also permits savings in inventory carrying costs. The quicker the input could be ordered and delivered, the less the need for a big inventory. The effect on costs associated with decreased inventories is most pronounced in industries where the product has a limited shelf life computer, or where there’s a rapid stream of new products (e.g. books, music). Although shipping costs can increase the cost of many products purchased via electronic commerce and add substantially to the last cost, supply costs are significantly reduced for digital products like financial services, software, and travel, which are significant e-commerce segments.