Advantages and Disadvantages of Internet in Business

50 years ago people started using the Internet in the world. With the development of internet, there arisen many accessories by the internet. The Taobao website is one of the commonly used websites in China, Which plays a leading role in Chinese e-commerce industry. People buy products online through Taobao. The Taobao Company made significant profits in recent years. In this report, it is going to display the advantages of using the Internet in Taobao’s business. in the first part. In this part, the report mention about the Taobao GDP contribution, new management mode build up and job opportunities provided. In the second part, the report illustrates that the disadvantage of using the Internet in Taobao’s business, in this part of view, the report points out the time-wasting, risk in internet shopping and negative impacts of business efficiency. This essay aims to analyze the advantages and the disadvantages of using the internet in Taobao’s business.

The advantages of using the internet in Taobao’s business

The first advantage is the GDP contribution by Taobao internet business. According to the online auction statistic from Chinese Network Information Center (CNNIC) in 2006, there were totally 12.27 million internet users in Beijing, Shanghai and Guangzhou which are the top three cities in China. The data which included 3.3 million people who experienced the internet online transactions. It shows that there are huge internet-shopper populations in China, especially for the economic-booming cities. Taobao plays a leading role in e-commerce industry and gain plenty of loyalty customers, most of willing to introduce Taobao to their friends who attempt to go shopping in the internet. Under the large user volume, Taobao gives the reason why it can create GDP increasing. According to the data from 2008 China Online Shopping Report, Taobao occupied 67% of Chinese C2C market in 2005. Furthermore, in 2007, it owned 70.4% of online customers. Taobao could have more than 10 million RMB businesses only in one month. Taobao could bring more than 1 billion RMB to Chinese GDP. As the income, expenditure and output influence the GDP increase, thus, with Taobao development, more GDP increase could be bring. Nowadays, Taobao became an essential part of Chinese GDP increase.

Taobao started Chinese internet shopping business model. Hoskins (2002) points out that the internet is absolutely cheaper than other traditional media. The internet market can cover the whole world customer. The internet business may generally replace the traditional businesses. Because Taobao belongs to e-commerce, the communication of the organization is not as same as those companies who operate in a specific space.

In order to make communication sufficiently under business operation, Taobao is forced on the three main areas of management. First, Taobao create an online communication tool which is called ‘Aliwangwang’ for Taobao’s buyers and sellers. According to Trites (2008), Aliwangwang, which is ranked as the most satisfied service of Taobao, because the third party is unnecessary for the communications between sellers and buyers? Second, Taobao designed a new feedback system. Li el at. (2007) display that the sellers will give the feedbacks within a period of 14 days, the sellers reputation will be influenced by buyers’ feedbacks. If a seller got 10% dissatisfied feedback, the system will shut down the booth in two months.

(Source: Research on Chinese C2C E-Business Institutional Trust Mechanism: Case Study on Taobao and Ebay.cn, 2007)

In the figure 1 which displays above, it is clearly shows that the feedback mechanism in Taobao. All sellers in Taobao have to be evaluated by this feedback data, if any sellers more than 30% negative total negative feedback data, it means they could lost the chance to do business in Taobao. Third, the design of Taobao’s website is attractive, the fashionable website design style always catch young people’s eyes, even a part of elder customers are willing to suffer Taobao because the website design style. Taobao divided products into different categories, such as men, women, baby, and electronic products. After click the guild link, the customer can find more details for the selling goods. It is easily and efficiently to find the products what they want.

According to China Economic Analysis (2002), China has 7% unemployment rate almost reached the national unemployment rate warming level. Taobao provided job opportunities to the unemployment population. According to Li el at (2009), Taobao provided more than 600 thousands job opportunities. Among 570 thousand people enjoyed the employment chances provided by Taobao. Many sellers in Taobao traded their business as their careers and many of them had better lives depends on Taobao business. Under the stiff competition, there are a large of unemployment people with business vision but cannot find a job in top business companies. They use Taobao to fulfill their dream, some of them have their own clothes manufacturing factory after they started business in Taobao. For example, in 2009, the unemployment in Jiangsu Province located in the south of China has serious unemployment rate which shows 3.09 %. The data from the local government shows that Taobao offered 5.7 million job opportunities directly and more than 10 million job opportunities indirectly. Such as the development of Delivery Company, the needs of delivery employee must be increase.(Pan, 2001)

The disadvantages of using the internet in Taobao’s business

Young people spend too much money on Taobao internet shopping. Because the selling prices in Taobao are cheaper than in the other places. According to Pan (2001), pricing has a significant influence for selling goods but with negative coefficient and absolute value. Because buyers cannot identify the goods visually, the high price goods are harder to sell. Beside, Majority of young people cannot afford the high price products which are sold in other shops. For this reason, they prefer to shop at Taobao. Moreover; many sellers on Taobao, who work as part-time, spend too much time on their business. When they concentrate on their Taobao business, their assignments form the company maybe delays.

It is difficult to avoid the risks for the seller and buyer on Taobao. Kiang el at. (2009) discovers that the buyers have to accept the high risks for purchasing online. For this reason, this leads to a significant obstacle in internet commercial business. Credit card fraud problems, is caused by people who make business on the internet, are continuously increasing. Only after information flow, capital flow and logistics finished backflow, the business deal could be regarded as a completed transaction (Zhang, 2008). For the sellers’ risk, they have to responsible for some missing goods, even though the delivery companies compensate 50% of goods price. For customers’ risk, it is hard to post customers some electronic devices. Meanwhile, this kind of products is easy to be broken down. If the customers discovered the damage of the products, after they receive broken goods, they could not return the goods to the seller.

The internet shopping makes the efficiency of Taobao decrease. According to Ray (2002), the organizational effectiveness has a significant influence on recruiting talented people and company development. According to Worthys’ (1962) organizational structure theory, there are two organization structural performances which are the flat organization structure and the tall organizational structure. Whatever the organization belongs to, the communication is always the important part of organizational development. Taobao’s employees are separated in the whole of the world. The communication between employee and superior is difficult that the other companies. Even though when some problems arise, the employees can use the internet to communicate with Taobao headquarters. Because of the long distant, plenty problems cannot be solved immediately. Taobao have no too much hierarchical management level, but personally, it belongs to tall organization structure because the communication hard to transmit to the top manager as fast as possible. For this reason, the organizational effectiveness could be influenced. The talented people could be affected by company’s performance. Taobao could loss the technical support from those talent people.

Conclusion

This essay analyzes the advantages and the disadvantages of using the internet in business. The essay uses Taobao e-commerce website as an example. Based on the data from eight resources, the essay divides the whole article into two parts, the advantages of using internet in business and disadvantage of using internet in business. To analysis the reason why Taobao could rapidly increase in resent year and gain more market share. For positive influences, the first the report shows that Taobao is devoted to increase the Chinese GDP under large internet user number, and then the report analyze the new management mode running and management in Taobao. The last, decrease the unemployment rate in China be point out in the essay and how Taobao plays a key role in this social problems. In negative aspect, many people spend too much time and money on online shopping, because the young people do not how to balance their finance. Besides, internet business brings more risks between sellers and buyers, the report introduce the risk could arise in which aspect. Furthermore, internet business could influence the effectiveness of Taobao, the report analysis the reasons and explain the relationship between the talent people and organization efficiency.