Page 62 - Introduction to Business

36 PART 1 The Nature of Contemporary Business

Internet-worked technologies are spawning new business models that are radi-
cally changing the basic operating structure in firms that have served the market-
place well for decades. For example, you can purchase music, videos, books, and a
whole variety of things online from your home computer without having to visit a
retail store. A whole set of companies like Amazon.com and eBay have entered the
business scene to cater to such needs. The value of IT and the Internet lies in their
capacity to store, retrieve, analyze, and communicate information instantly, any-
where, at negligible cost. If IT and the Internet are to be placed in the same league as
previous technological revolutions (like the Industrial Revolution and the introduc-
tion of the railroad system in particular), three major questions must be addressed. 10
• How radically does the technology change day-to-day life?
• How much does it require businesses to reorganize their production processes
to become more consumer-friendly and efficient?
• What is the impact of the new technology on business across the whole econ-
omy, either by allowing existing products to be made more efficiently or by
creating entirely new products?
Around the globe, commercial enterprises are scrambling to avoid being left
behind in terms of efficiency as suppliers and customers latch on to Internet-related
ways of doing business. Today, by virtue of Internet-worked communications, the
transaction costs of many business activities (buying, selling, sourcing) are falling
close to zero as the reach and speed of communications technologies increase expo-
nentially and tools become more robust. E-commerce is only the tip of the iceberg
that is remaking the rules of business. Several key trends are emerging. 11
1. Companies are being transformed on a massive scale. Established businesses
are undergoing a radical overhaul in strategy, structure, and process to meet
the needs of the digital economy. For example, almost all automobile dealer-
ships in the United States have introduced Internet sales managers, whose role
is to quote a price up-front over the Internet to customers who are seeking to
buy specific automobiles and to have a no-hassle buying experience.
2. Customers are becoming smarter and more demanding. With the vast amount
of information readily available to them and with their improved ability to
share knowledge, consumers are empowered as never before. Consumers
expect—even demand—the customization of goods and services to meet their
individual needs, and they want it right away. Again, in the automobile indus-
try, several companies like Autobytel (www.autobytel.com) have evolved. One
could sit by a computer terminal and connect with Autobytel to research, buy,
or sell automobiles on the basis of customized specifications.
3. Business is becoming more nimble. More than ever before, agility and flexibil-
ity drive competitive advantage in business. Authoritarian management struc-
tures and bureaucratic decision-making processes—in large or small busi-
nesses—are all likely to suffer in the digital economy. For example, Dell
computer’s manufacturing philosophy is based on a system of flexible, cus-
tomized production, which enables Dell to dominate the PC market. Dell is
able to maintain very low inventories, offer attractive prices, and also adjust
production to changing consumer demand along and the constant introduc-
tion of new and powerful computer chips (and related components).
4. Knowledge is the key asset. The abundance of information and the speed of
communication imply that innovation based on this knowledge and speed will
be the key to business success. Because of its quality higher-education system,
India has an abundant supply of talented IT professionals who can provide
world-class IT services at competitive rates. Several Indian companies like

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