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    Chapter 5 Module

    Uploaded by

    Jane Gonzaga

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    © All Rights Reserved
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    Chapter 5 Module

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    Jane Gonzaga
    56 views8 pages

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    © © All Rights Reserved

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    56 views8 pages

    Chapter 5 Module

    Uploaded by

    Jane Gonzaga

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 8

    CHAPTER 5

    IMPACT OF E-COMMERCE

    Objectives:
    Enumerate that E-Commerce changes the economic world significantly.
    Describe and explain that ICT can have a lot of consequences in the area of ethics and morale.

    ETHICS, MORALE & TECHNOLOGY


    Ethics (sometimes known as moral philosophy) is a branch of
    philosophy that involves systematizing, defending and recommending
    concepts of right and wrong conduct, often addressing disputes of moral
    diversity. Philosophical ethics investigates what is the best way for humans
    to live, and what kinds of actions are right or wrong in particular
    circumstances.

    1
    Morality (from the Latin moralitas “manner, character, proper
    behaviour”) is the differentiation of intentions, decisions, and actions
    between those that are “good” (or right) and those that are “bad” (or
    wrong). Morality can be a body of standards or principles derived from a
    code of conduct from a particular philosophy, religion, culture, etc., or it
    can be derived from a standard that a person believes should be
    universal.

    ETHICAL ASPECTS OF ICT

    INFORMATION RIGHTS & INFORMATION DUTIES


    Privacy protection must have a high priority in E-Commerce. The
    bases are the human rights and constitutions of states. For example we
    will find Article 10 clause 1 in the German constitution: “Privacy of
    correspondence, posts and telecommunication is invulnerable.”

    PROPRIETARY RIGHTS AND DUTIES


    The German constitution says in article 14 clause 2: “Ownership
    obligates. Its application has to serve the public welfare.” What does this
    mean for intellectual properties? Which obligations does the owner have?
    And how can he protect his information assets? This is a very important
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    issue for everybody of us, because the major security concerns in the
    Internet are global bank theft, data theft and social network data
    breaches.

    OVERALL IMPACTS OF E-COMMERCE


    1. MACROECONOMIC IMPACTS
    Digitalization has increased productivity and caused economic
    growth. E-Commerce affects economies by increasing productivity
    (through additional capital formation) and may spur innovations
    in processes that will further increase productivity over the long
    term. Investments in ICT have clearly increased economic growth in
    many developed countries.
    2. MICROECONOMIC IMPACTS
    E-Commerce may increase economies of scale in industries where
    fixed costs are unchanged, but variable costs are reduced. Thus
    minimum efficient scale increases and the threat of entry falls. E-
    Commerce may, at the same time, decrease economies of scale
    in industries where E-Commerce reduces fixed costs. Thus
    minimum efficient scale decreases and the threat of entry rises. E-
    Commerce may increase economies of scope and aggregation,
    particularly in information goods. The threat of entry decreases
    because rivals must enter with a bundle of goods.

    SPECIFIC IMPACTS OF E-COMMERCE


    1. ATOMIZATION
    The units, which make sense economically, become smaller – due
    to the increasing data processing capabilities.
    2. COMMODITIZATION
    Commoditization is well known but is accelerated through the

    3
    Web. Coverage and transparency in the market increase.
    However, atomization and strong competition may lead to
    individualized and personalized products, which are aggregated
    from commodity goods and services.

    3. CONFIDENCE
    Business partners are anonymous and do not know each other.
    They have to carry on efforts to build trust. This must be done on
    the background of the high speed of E-Commerce.
    4. COST STRUCTURES
    If a “digital” infrastructure is up and running marginal costs become
    very low. The production of a software package is a very good
    example of this effect. Access costs, transaction costs and switching
    costs are reduced dramatically (see electronic catalogues).
    5. DISINTERMEDIATION/RE-INTERMEDIATION
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    In the digital economy value chains become shorter. This is already
    known in traditional businesses, but radicalness and speed of
    change have increased. See the disappearance of intermediary
    trade/wholesale trade and retail sale. Suppliers sell directly to the
    consumer. For digital goods the physical manufacturing is
    transferred to the consumer: I print my books at home.

    6. ECONOMY OF ATTENTION
    Providers of a specific service can often be found in direct
    neighbourhood (see car dealers, farmer’s market), because here it
    is easier for them to get the attention of potential customers. But if
    the market size increases every participant has to increase his
    marketing and advertising efforts to be noticed by potential
    customers. However, activities to get attention from potential
    customers will show an effect only if there are potential customers
    on the marketplace.
    7. EMPLOYMENT
    If the customer uses his free money to buy additional goods or
    services then he generates an additional demand. As long as this
    additional demand leads to a need of human workload the freed
    manpower can be allocated in new jobs. But… E-Commerce speeds
    up the price decrease. How long does it take until the free
    workload is allocated in new jobs?
    8. EXTERNALITIES
    Let us start with a definition: Externalities are side effects of
    business transactions from which the parties involved in the
    transaction do not suffer but also do not have an advantage.
    However, third parties may suffer or benefit from those side
    effects.

    5
    9. GLOBALIZATION
    Technical standardization (see TCP/IP, HTTP, SMTP, HTML, XML)
    creates a global platform, which allows the cooperation of an infinite
    number of partners all over the world. Global coverage leads to
    global markets. Suppliers can and must produce in lowest cost
    locations. Jobs are transferred to low cost areas.
    10. INFORMATION DENSITY
    Data can be exchanged electronically. Media breaches can be
    eliminated. This leads to an information flood. Thus efforts to find
    the relevant information may increase or must be compensated by
    intelligent search agents. Information and knowledge management
    becomes more and more important.
    11. INTELLECTUAL PROPERTIES

    Intellectual properties are traditionally protected by patents,


    copyright and trade marks; this includes the economic application.
    There are ambivalent effects of the Web: Coverage and distribution
    speed increase, but digitalized results can be copied and
    manipulated arbitrarily.
    12. LEVELLING EFFECTS
    We have similar and cost efficient, sometimes even free, access
    6
    to the electronic market(s) for all participants. Also small
    organizations have access to services (e.g. software), which outside
    the Web only big organizations were able to afford.
    13. ENCOURAGEMENT OF INTERNATIONAL COOPERATION
    The significance of company size changes. We see advantages for
    very big and very small firms, probably disadvantages for medium-
    sized businesses. Consequently the company sizes are changing.
    There is a clear trend to very big and very small companies. Will this
    be the death of the medium-sized business?
    14. PRICING
    Digital markets increase transparency: Who offers what at which
    price? Suppliers and customers have ideally the same degree of
    information (symmetric). Arbitrage profits go down, perfect
    competition balance seem possible.
    15. TRANSPARENCY AND COMPETITION
    Coverage and speed of the Internet lead to better comparability of
    offers, harder competition and price pressure among suppliers and
    thus to lower costs on the customer side (which would be an
    advantage for the customers, if the personal income would not be
    reduced…). Transparency leads to price and profit reductions on the
    supplier side. Inflation is slowed down.
    16. VOLATILITY

    Hollywood economics - Digital goods must be completely ready


    when they enter the markets (see movies) and convince the
    7
    customers. A supplier must be able to fund 3 to 4 flops with a
    blockbuster.
    Temporary monopolies - profit in E-Commerce will actually be
    possible in a monopoly situation (The winner takes it all) because
    of extreme competition and price pressure.

    For further discussion please refer to the link provided: Impact of E-Commerce
    https://www.youtube.com/watch?v=dcHnuUc4u94
    For further discussion please refer to the link provided : Commoditization
    https://www.youtube.com/watch?v=3TI0rYnkulc
    For further discussion please refer to the link provided: Ethical Aspects of ICT
    https://www.youtube.com/watch?v=tdg_cCVsNp0

    Reference Books:
    Introduction to E-Commerce
    (Combining Business and Information Technology)
    By: Martin Kutz, 1st Edition 2016

    Internet Marketing
    (2011, The Internet Marketing Academy and Ventus Publishing ApS)

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