Processes in the Internet Economy

Contents

Abbreviations

Figures

1. Introduction

2. Conditions of the Internet Economy
2.1. Internet Economy and related terms
2.2. Technological Basics of the Internet
2.3. Implications of the Internet as a network

3. Change in the processes
3.1. Business processes
3.2. Concept of the value chain by Porter
3.3. Business processes modelling

4. Strategic dimension
4.1. Electronic markets
4.2. Transformation of the focus
4.3. Representative business segments
4.4. Value added concepts

5. Summary

Bibliography

INTERNET-search

Abbreviations

illustration not visible in this excerpt

Figures

figure 1: Actors of the Intenet economy and the importance of their business connections

figure 2: Internet and Intranet

figure 3: The Internet economy expands

figure 4: E-business management (Holst/Janßen 2001 /E-Business Management/ p. 105)

figure 5: Porter’s value chain (Porter, M.E. 1985 /Competitive Advantage/ p. 37)

figure 6: Business model

figure 7: Electronic markets: The phases of adjunction

figure 8: Internet economy affects Porter’s forces of competition

1. Introduction

In the last ten to fifteen years the internet economy has changed our understanding of business. An integrated e-business and computer-aided structures of the company are no longer an option, but have become a “must”.^[1]

Even when the general ecnomic laws have not changed, there were changes in the mediums and terms how they are taken out in the every-day praxis. So for example the office has revolutionized its conditions completely by the new media Internet.

Important are not only the well-known “death of time” and “death of distance” when you use the Internet as a distribution channel, but also the creation of virtual communities as new forms of corporation or the conception of new interactive and virtual products, like for example computer based learning.

New models of business processes have been developed. Most of them use tools of the information technology (IT) to mange the information overflow. One of the goals was the paper-free office. But the information seems to enlarge extremely, because even with common IT-tools you are able to get an amount of data you could never imagine before in the business world. That is why no longer the collecting and storing of information, but the selection of the relevant data and information sources becomes higher important.^[2]

In general the management of information is one of the significant challenges in the short term. Statistics prove that information on the Internet doubles every three months.^[3]

That does not only refer to the high-developed countries.

Global networks connect scientists and enterprises all over the world. They give also the less-developed countries the chance to join the internet economy. Especially the Asian state Malaysia is an example for a career in the IT. In the end of the 1990ies Malaysia built a multimedia super corridor between the Kuala Lumpur City Centre and the International Airport. Now this corridor counts to the most productive economic zones of the world with universities, high-skilled computer-firms and financial service companies. An equal development can be noticed in Singapore.^[4]

We also do not have to forget the rising of China and India with an extraordinary growth in the computer business. So the Asian competitives of the European Union and the USA were able to exert a big pressure towards the industry of the so called developed countries that have immense problems to hold their productivity and the income levels of their populations.

2. Conditions of the Internet Economy

2.1. Internet Economy and related terms

Meanwhile the Internet has occupied all areas of the private and public life. It takes influence on customers’ habits, what customers buy, how they buy it and why they buy it (e-commerce). It changes structures of manufacturing processes and how employees work (e-production), and it changes the internal arrangements of organizations (e-administration). These are only a few examples for the requirements of the Internet economy.

In fact the Internet economy has many names. It is called E-Conomy or New Economy to lay a focus on the modifications it has caused. Others entitle it Network Economy to make clear the complex arrangement of the Internet economy and its many various links as a global network. A general definition defines the Internet economy as the branch of business that was created or inspired by the Internet.^[5]

The business that runs the Internet economy is called the e-business. Chen defines the e-business as the conduct of business on the internet, not only buying and selling but also servicing customers and collaborating with business partners.^[6]

Following the common categorization, the e-business is classified into the aspects business-to-consumer (B2C), business-to-business (B2B), consumer-to-consumer (C2C), and consumer-to-business (C2B).^[7]

B2C is the most famous kind of e-business. It refers to the many online-stores and shopping sites on the Internet. Even small retail stores offer their products online. Also many companies in the real world use the Internet as a channel of direct distribution. But there is also a rising amount of virtual companies that only exist in the net and design virtual products for the customers. A typical example can be given by the internet schools producing CBT applications for their students.

An area with much larger revenues and a higher importance for the global business is the B2B branch of the e-business. Manufacturers use the Internet to offer and sell everything to other businesses, from software or equipment for offices to big machine parks. The e-business here also includes online procurement and customer support.

The fastest growing sector of e-business is the C2C field. Well-known examples are the auction sites by e-bay, where individuals behave like sellers of the retail trade. Here the e-business shows advantages, because it provides a platform to bring buyers and sellers together. That works not only for the local market, but also for national and international transactions.

The C2B sector is actual small and not very relevant. Examples are accountants and lawyers who offer their services like freelancers to companies of the business sector.

Some authors interpret the government as an additional subject of e-business, so the combinations enlarge to nine possibilities.^[8]

Figure 1 shows the nine possibilities and the actual importance of the sectors. The business sector has accepted the e-business tools best. The other sectors need more support.

illustration not visible in this excerpt

figure 1: Actors of the Internet economy and the importance of their business connections

E-Business management is a holistic strategy to manage a company’s appearance in the Internet economy. It supports the alignment of the company and connects the different business segments of a firm.^[9]

The main field of the e-business is the so called e-commerce. It deals with the support of internal and external processes, especially trading processes with the company’s stakeholders, their optimization, design and development. Literature does not show a homogeneous definition between e-business and e-commerce. Some authors even use them as synonyms, but most of them interpret e-commerce as an integrated part of e-business.^[10]

2.2. Technological Basics of the Internet

Since the 1990ies the discussion about the utilization of the information technology (IT) has reached a new level. Within only five years the Internet appeared to the highest spread data network of international data exchange.

The development was forced by the progress in the processor technology, data compression and data transformation, and the growing digitizing of information.^[11] The Internet has become a technological mainstream similar to the invention of the book-printing by Gutenberg. That made literature and education available for the public. Many technological leaps introduced an Internet revolution.^[12]

The technology of the Internet consists of the global connections between all IP networks. So it is the greatest combination of computer networks worldwide. Its connections base on the communication protocol TCP/IP (Transmission Control Protocol / Internet Protocol).^[13]

In peculiar all knots of the Internet have the same status. That means they can operate independent. The decentralized structure protects the security of data transfers when parts of the network break down. But that structure of the Internet is also annoying for many governments that would like to introduce stricter control of the contents that are posted by the Internet users. The decentralized structure makes every kind of control more difficult.^[14]

The Internet proves a big bargaining power. It has a global circulation that sets global standards for the transfer protocols. These standards set norms for the designers of hardware and software, who must try to be compatible with their products. The critical mass of users was reached recently, so it was profitable for many businesses to have a claim in the net. The strong competition between the firms leads to the result that the Internet is permanently improved to make it more attractive for new users^[15].

At the moment many scientists all over the world are engaged in the technological development of the Internet. The more people join the net and its services the longer are the waiting times. One preferred solution is the joint use of the electric power system. It would build a permanently open connection to the Internet.^[16]

[...]

^[1] Skyrme, D.J. 2002 /Capitalizing on Knowledge/ p. 39.

^[2] Frischmuth, J., Karrlein, W., Knop J (Hrsg.) 2001 /Strategien/ p. 172.

^[3] Baumann, M., Kistner, A. 2000 /e-Business/ p. 109.

^[4] Chen, St. 2001 /Strategic Management/ p. 7.

^[5] Fritz, W. 2000 /Internet-Marketing/ p. 13.

^[6] Definition by “whatis.com”, Chen, St. 2001 /Strategic Management/ p. 2

^[7] Chen, St. 2001 /Strategic Management/ pp. 4.

^[8] Corsten, H. 2003 /Electronic Business/ p. 28.

^[9] Baumann, M., Kistner, A. 2000 /e-Business / p. 406.

^[10] Böing, Ch. 2001 /Erfolgsfaktoren im B2C/ p. 332.

^[11] Böing, Ch. 2001 /Erfolgsfaktoren im B2C/ p. 1.

^[12] Schmidt, B. 2001 /Digitale Ökonomie/ p. 183.

^[13] Definition by the FNC (Federal Networking Council) of 24th Oct. 1995 .

^[14] Baumann, M., Kistner, A. 2000 /e-Business/ pp. 74.

^[15] Höller, J., Pils, M., Zlabinger, R. (Hrsg.) 1999 /Internet/ p. 3.

^[16] US- Project “Abilene”, described on: rcswww.urz.tu-dresden.de/~cotto/HTML-Seminar/Grundlagen/Internet.htm, 13.08.2003.