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 to better create products especially for a certain target audience. This makes it difficult for consumers to compare products and lessens the competition and keep prices high.
As electronic commerce expands it has a greater social impact. The social impact of e-commerce is characterized by the globalization of markets, the shift towards an economy based on knowledge and information, and the growing prominence of technology in everyday life (Jones, B., n.d.). As e-commerce expands, there becomes a greater need to improve education about the business and technical side of e-commerce. Traditional educational institutions will have to incorporate e-commerce market and information technology into the curriculum to prepare new graduates for the new marketplace. The health sector is also being affected by the development of e-commerce. In some cases the use of these e-commerce sites can be help the system work more efficiently in turn be more cost effective. By reducing costs using these methods more money can be made available to other areas of the health sector (Electronic Commerce, n.d.).
Another aspect of society that is affected by electronic commerce is the sense of community. Consumers can now belong to a more global community by being able to buy goods from around the world; however this has its own societal effects (Brondmo, H., 2000). There is a loss of direct physical interaction between individuals. There is also less consumer loyalty due to the global aspect and the lack of physical interaction of e-commerce. Companies now have to deal with an entire global market and many face difficulties in catering to specific customers to solidify their loyalty. For traditional businesses that do not conduct business online, they may begin to suffer electronic commerce continues to grow.
As well, e-commerce helps to increase the use and improve computer technology that can be used by society. As more people begin to use e-commerce, more companies begin to create new technology to increase productivity. With the invention of new technology, there can be a better infrastructure and easier access to the Internet in order to encourage an even larger market (Hasan, H., n.d.). New technology also leads to more resources of the Internet easier to attain to more people in society. Again, as companies look better methods to expand their online-businesses new technologies may be developed. These new technologies may not only help e-commerce, but may be useful in other parts of society as well (Electronic Commerce, n.d.).
An adverse effect of e-commerce is the manner is which consumers are now shopping. It is argued that the Internet and the availability of e-commerce increases societyâ€™s tendency to impulse buy. Impulse buy is usually seen as short term, but with the introduction of e-commerce, the tendency to impulse buy is becoming more long-term due to the accessibility and the convenience of online shopping. On-line shoppers are more impulsive than non-shoppers, seek more variety, are less risk averse and less brand and price conscious; characteristics that have shown to be consistent with urge-driven impulsive purchasing behavior that ignores long term consequences (Fellenstein, C. & Wood, R., 2000). Impulse buying is considered short-term but consumers can become chronic compulsive buyers by shifting their enjoyment from specific purchases to the overall shopping experience (LaRose, R., 2000). Unregulated on-line buying could become a significant social problem as e-commerce grows. The growing compulsive buying tendencies of consumers coupled with their affinity for the Internet, causes special concern. It is speculated that there will be social costs from reduced productivity, personal bankruptcies, disrupted families and ruined lives due continued unregulated buying from consumers.
Today's consumers benefits from a selection of products and services that has been unparalleled in traditional channels in the past (Windham, L. & Orton, K., 2000). Without leaving the comforts of home and with a click of a button, consumers can access thousands of web sites and obtain any type of information or purchase any product they desire. The net economic growth due to the digital revolution will also benefit society by creation of highly skilled jobs. It is important that the current workforce and few workers be well-educated and trained in order to qualify for such jobs. E-commerce will be the largest and most diverse way of doing business in the future since it has the ability to reach nearly every market, every person, and every business and do so simultaneously and instantaneously (Electronic Commerce, n.d.).
Electronic commerce provides a unique way of doing business that comes with its own set of benefits and consequences. The size of the global market has increased which provides businesses with more customers and offers customers more choices. Through e-commerce, it is easier for consumers to individualize products and services to their specification (Meech, J. & Marsh, S., n.d.). E-commerce also limits the amount of links between the retailer and the consumer. Products can now be shipped directly from the manufacturer to the customer, which in turns makes online transactions cheaper than traditional transactions. Though there are many benefits to both consumers and business, the use of electronic commerce comes with its share of economic, social and legal issues. Consumers are hesitant to use online business because they often have limited guarantees about the privacy of their information. If the privacy issues can be addressed, electronic commerce has the potential to play a positive role in helping improve the world of business. E-commerce systems could help further businesses establish personal relationships with customers, target specific niche markets, facilitate trust and leverage a range of other social effects that will become increasingly important in the future (Electronic Commerce, n.d.).
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