Why e-Business is important to the world economy Essay
Why e-Business is important to the world economy
While the terms e-business and e-commerce are often used in the same context there is a difference between the two. E-commerce generally refers to financial transactions that take place on the Web, whereas e-business refers to all types of transactions over the Web. The use of the Web, or Internet, is perhaps one of the greatest changes in business practices today. “The transforming power of this mode of business extends far beyond the obvious points of convenience for the customer and cost savings for the business. The most powerful implementations of e-business enable a complete restructuring of business models” (Ware, 1999). The extensive acceptance and relatively low cost access is making a change in the world’s economy. This paper will attempt to identify some the reasons that e-business is important to the world economy.
Many businesses are interested in e-business for the most simple of reasons, which is the increase of profits and, generally, a decrease in costs. Often the decrease in costs is associated with paperwork, employee pay and overhead, and these savings can be passed on to the buyer. An example is Cisco Systems who today sells the majority of its computer networking equipment over the internet. According to Schneider:Because no customer service representatives are involved in making these sales, Cisco operates very efficiently. In 1998, the first year in which its online sales initiative was fully operational, Cisco made 72 percent of its sales on the Web. Cisco estimated that it avoided handling 500,000 calls per month and saved $500 million in that year alone. (2004, pg. 15).
In a business-to-business (B2B) transaction, if a buyer can purchase more of a product for a lesser amount, they can sell more as well. Selling more helps to stimulate the economy in any country. In addition, when a company does a good job of advertising on the Web, it allows them to get the message about their product or service out to potential customers around the world. This can lead to an increase in sales and also helps the buyer with purchasing prospects. E-business can also provide a larger selection of products and services for a buyer to select from.
The ability of the internet to transfer information has made the world a somewhat smaller place. The use of e-business allows for communications and transactions to happen extremely quickly. Before the use of the internet, trading among countries could take weeks. “Such circumstances lent themselves to fragmented individualized markets with subsidiaries run by family members or close friends” (Wright. N/D). Now, businesses can interact with their subsidiaries, business partners, vendors, and buyers in a time and cost efficient manner. Many companies, such as Hewlett-Packard and Dell have taken the opportunity to open offices and plants in other countries as this can greatly reduce production costs. The opening of production facilities has in turn created many jobs for many people in those countries, and this helps to stimulate economic growth.
According to Gary Schneider “the inherently global nature of electronic commerce leads to many opportunities and a few challenges” (2004. pg. 41). While there are obvious concerns about trust, culture, and language legalities, more and more businesses are conducting e-business. E-business has opened the door for many countries to participate in business ventures that they did not have previously, therefore generating a cash flow for that countries economy. This type of business has allowed for some countries to openly sell their best products to the highest bidder and to expand market share. When done on a global scale such as this, every country has the opportunity toshare the wealth, which helps the global economy.
Schneider, G. (2004). Electronic Commerce: The Second Wave. (5th ed.) Thomson. Course Technology.
Ware, B. (1999). Syracuse University research centers. Retrieved January 18, 2008 from http://www.syr.edu/research/ebusiness/benreport.htmlWright, N. S. (n/d). Global economy. Business Encyclopedia. Retrieved January 18, 2008 from http://www.answers.com/topic/world-economy?cat=biz-fin