The Environments of E Business

Summary

This lecture explores the environmental factors of e-business, highlighting the open system nature of organizations and their interaction with economic, social, and political environments. It delves into electronic markets and hierarchies, discussing the roles of ICT in shaping competitive and cooperative landscapes. The lecture also addresses the social implications of the Information Society, including digital divide and privacy concerns, and the political challenges posed by global e-commerce, such as legislation, contracts, intellectual property rights, and taxation in the digital age.

Takeaways

• 🌐 An e-business organization is considered an open system that interacts with its environment, taking resources and producing goods or services to supply back to its environment.
• 💼 The economic environment of e-business includes markets, economic actors, and electronic markets, with a focus on production, distribution, and the balance between production and transaction costs.
• 🏢 Markets are systems of competition, characterized by low production costs and high coordination costs, while hierarchies are systems of cooperation with high production costs and low coordination costs.
• 🛒 Electronic Markets (e-Markets) facilitate economic exchanges through ICT, enabling transactions between buyers and sellers and impacting the traditional supply chain through disintermediation and reintermediation.
• 🌐 The social environment of e-business encompasses the Information Society, digital divide, electronic delivery, privacy issues, and trust, reflecting the societal impact and challenges of ICT.
• 🌐 Globalization is a significant aspect of e-business, allowing companies to trade electronically with customers and suppliers worldwide, leading to increased competition and the need for regulatory compliance.
• 🏦 Interorganizational Information Systems (IOS) support cooperation and collaboration in electronic hierarchies, sharing costs and resources among member companies.
• 📊 Network externality or network effect is a key concept in e-business, where the value of a product or service increases with the number of consumers or users, particularly relevant in two-sided or multi-sided markets.
• 🏛️ The political environment of e-business is influenced by legislation, laws of business, and e-commerce, with challenges arising from the global nature of e-commerce and the need for new forms of legislation.
• 📜 Intellectual property rights and taxation are critical legal aspects affected by e-commerce, with the internet raising questions about the applicability of national laws and taxation in a global electronic marketplace.

Q & A

What is an open system in the context of e-business?

An open system in the context of e-business refers to a business organization that interacts with its surrounding environments, taking resources from it and supplying back products or services that the environment consumes.

What are the three major overlapping environmental systems for a business?

The three major overlapping environmental systems for a business are the economic system, the political system, and the social system.

How does ICT influence economic markets?

ICT influences economic markets by creating electronic markets and hierarchies, which are characterized by increased information flow and the ability to conduct transactions over the internet.

What are the two basic mechanisms for controlling the flow of goods and services in an economy?

The two basic mechanisms for controlling the flow of goods and services in an economy are markets and hierarchies. Markets coordinate through supply and demand, while hierarchies coordinate through higher-level management direction.

What is the difference between production cost and transaction cost in an economic system?

Production cost refers to the cost incurred from the physical or primary processes necessary to create and distribute goods or services. Transaction cost refers to the cost of providing a service or goods through the market rather than internally within the organization, including the cost of searching for suppliers, partners, or customers.

What is an electronic market (E-Market) and how does it function?

An electronic market (E-Market) is a market where economic exchanges are conducted using ICT. It enables the exchange of goods and services through electronic transactions between buyers and sellers, facilitating the flow of goods and services through internal supply chains, customers, and communities.

What is meant by disintermediation and reintermediation in electronic markets?

Disintermediation refers to the removal of intermediaries in the customer chain, allowing producers to sell directly to customers using the internet. Reintermediation is the emergence of electronic intermediaries that reinsert themselves between producers and consumers, helping both parties find each other in the vast online market.

What is network externality and how does it affect the utility of a product or service?

Network externality is the effect of additional consumers or users of a product or service on the utility or value of the same product or service for existing consumers or users. Positive externality increases utility with more users, while negative externality decreases it.

How does the concept of a two-sided or multi-sided market operate in e-business?

A two-sided or multi-sided market operates through an intermediary or platform that facilitates transactions between different types of customers or users. The platform's success is sensitive to the balance of pricing between the different sides, and strategies are designed to attract and retain participants from both sides.

What are the key elements that must be in place for successful electronic delivery of services?

For successful electronic delivery, stakeholders must be aware of the benefits, interested in using remote access mechanisms, have access to remote access devices, possess the necessary skills to use these mechanisms, and use them effectively on a regular basis.

What is the digital divide and how does it relate to social exclusion?

The digital divide refers to the unequal access to, use of, or impact of information and communication technologies (ICT) across different segments of society. It relates to social exclusion as certain social groups may be economically, socially, and politically excluded from effective communication and participation in the Information Society due to the costs of ICT equipment, low e-literacy, or government control over network infrastructure.

How does trust function in electronic transactions and what are the key factors that influence it?

Trust in electronic transactions is critical for economic exchanges between buyers and sellers. It is influenced by factors such as need, identification, competence, and evidence. Need is based on the mutual dependency of transaction parties, identification is based on shared values and similarities, competence is based on the ability to deliver a product or service, and evidence is based on having proof of trustworthiness.

What are the challenges that arise in the legal environment due to the global nature of e-business?

Challenges in the legal environment due to the global nature of e-business include the applicability of national laws to international transactions, the need for new legislation to cope with the practicalities of e-business, the enforcement of contracts formed electronically, and the protection of intellectual property rights in a digital context.