Critically evaluate the relationship between a specific technological development and the business environment.
The advancements in technology has certainly aided international business. Unlike the industrial revolution which took around 100 years to trigger a massive effect on the society, the internet revolution has occurred more instantaneously. Technology has certainly played a very decisive role in boosting the economy through e-commerce. The term e-commerce as such was first used in 1994. Since then, we have seen an exponential increase in the growth of e-commerce. Recent advances in three technological areas namely computer technology, telecommunications technology and software and information technology are changing lives in ways we could not even imagine two decades ago. There were only some 4.5 million internet users in 1991, and estimates suggest that there will be as many as 300 million or more by the turn of the century (Bacchetta, 1998). Multinational companies like Amazon and eBay are leading the market, surpassing other competitors in their own field and also the physical retailers. This article aims at critically analysing the relationship between e-commerce and the business environment and vice-versa. The following paragraphs will portray a brief idea on what e-commerce is, its role in the modern electronic world and later on explain the different issues revolving around it.
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E-commerce can be defined as “technology mediated exchange between parties (individuals or organizations) as well as the electronically based intra- or interorganizational activities that facilitate such exchanges” (Rayport & Jaworski, 2001). Some of the businesses in which e-commerce plays an important role are online retail, online banking, stock exchange firms etc. This particular technological development has brought the world closer, thanks to the super innovation of internet. It has become a one stop market where the consumers can find anything that they wish for, without the need to be physically present there. The article will do a PESTLE analysis on e-commerce.
For any economy to flourish, there should be liberal and relaxed policies that are accepted by the government of the respective nations. The policies adopted by these bodies determine how well their trade and economy would be. “To promote an effective international economic system, we should also strive for creativity in governance. In the modern, wired world, government will become increasingly ineffective if it fails to keep up. This logic of governance should extend to the rules of our trading system. To enable businesses, economies, and societies to change to meet the challenges of new circumstances, our trading rules should be flexible enough to respect different national approaches while consistently challenging actions that discriminate against others and thwart openness with protectionist barriers.” (Speech, The United States, Europe, and the World Trading System, April 15, 2001). These policies may vary for different locations taking into account various factors like currency, political views and demographics.
The US government has played a very important role in stabilising the e-commerce industry. A report regarding the internet trade was released by the Clinton administration in July 1997. It was entitled “A Framework for Global Electronic Commerce “. The report suggested that the internet trade should be free of unnecessary government regulations and that its governance should be dealt with a global point of view. It also focused on some major issues like customs and taxation, e-payment systems, privacy, security, telecommunication infrastructure, content and technical standards. The report also emphasised on the private sector by recognizing the need for the structuring of a legal environment to ensure its participation. (Malawer, 2001)
Not only the US, but the EU has also been an active player in considering e-commerce. The European Union also released a report on the internet trade in 1998. It was entitled “The Need for Strengthened International Coordination” which states that “Ill adapted or fragmented regulations, however, will hinder the development of the online economy” (Malawer, 2001). This report, similar to that released by the US, also asserts the need for an international regulatory framework. The report also points out that issues concerning the internet have grown from the technical to commercial as well as to legal issues like taxation, copyright, authentication, encryption, data protection and consumer protection. (Malawer, 2001)
The trade of products through e-commerce have helped reduce the cost of transaction charges that are present in the supply chain, starting from production of goods or services to its delivery to customers. Its evidence is given in the “Economic and Social Impact of E-commerce: Preliminary Findings and Research Agenda” OECD (1999) which states that “Rapid technological progress in information and communication technologies (ICTs) along with their widespread diffusion have led to speculation about “frictionless” economies in which transaction costs are nearly zero” (OECD, 1999). Consumers can now avoid the physical strain to go from shop to shop looking for their desired products, which in turn saves a lot of money. Online retailers are now shipping their products for free. This improves the e-market business as more and more people will be tempted to do online purchases since it gives the customers a great relief in monetary terms. The retailers are also benefited by the innovation of electronic commerce. It has helped many small-scale businesses to sprout and make them self-established in the market.
Societal factors have a major share in the electronic world and will continue to reflect its profound influence in the foreseen future too. In this age of rapid advancements in technology, it is therefore important to note the various social processes that will have an influence on how the e-commerce grows and how it will affect the society as a whole. Two of such social factors are – firstly, access and its determinants and constraints and, secondly, confidence and trust. (OECD, 1999)
The impact of any idea on a society depends to a large extent on the demographics of the society. New and advanced technologies are more accepted by the youth rather than senior citizens. It is therefore very important to identify the people to which the ideas are introduced. People born between 1950s and 1980s are more accustomed to the traditional way of purchasing items from shops, especially in India. Not only do they shop but even bank transactions are done personally. The reasons for this primarily being, they are used to old ways and secondly, they see it as a chance to engage in a more active social life. Therefore, it is better to go with fresh and innovative ideas which would suck in maximum number of youths.
The rise of advanced technology has aided the growth of commerce, both physical and online. In case of retail shops, the implementation of new equipments like bar code scanner and self-payment systems have increased the easiness of shopping. In the online market, the growth of new technologies from the start of e-commerce have enabled the establishment of various businesses. Today starting a new business is as easy as breathing the click of a button is all we have to do. These technological advancements have been of great help to both the B2B (Business to Business) as well as B2C (Business to Consumer) classifications of e-commerce. The growth of e-commerce has forced technological advancements to further increase their capability. The better the technology used, the better the business will be. So, software developers are also in constant competition in bringing up the most modern technology.
To exploit the maximum of this electronic business world there should be some regulations that must be followed. But there are many regulatory issues that deter the success of these businesses. For example, there is no common law regarding international e-commerce for all the nations. This is asserted in the “E-commerce Legal Guide”. It states that “The legal and regulatory framework for global e-commerce is quickly being outpaced by market innovation, and many countries do not yet have a legal system for e-commerce in place. Further, while legal and regulatory frameworks for e-commerce are evolving at the national – and sometimes sub-national – levels, there is not a set of harmonized international rules, giving rise to questions around cross-border e-commerce” (New Markets Lab, 2018). This legal guide takes stock of global trends in e-commerce regulation and the existing legal practices in different parts of the world. Although there are many issues affecting e-commerce, there are particularly four regulatory issues that need to be focused on – electronic or online transactions, commonly known as e-payment and e-signature, data protection, cyber security and consumer protection. These factors affect every link of the e-commerce supply chain, from the organizational structure of a company pre-transaction like appointment a data protection officer to the completion of transaction to issues post-transaction like consumers’ right to withdraw from a transaction.
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One of the major regulatory issue mentioned earlier was e-payments. The service providers want guarantee that they will receive their payments on time. Since this is not a physical trade and the business happens across globally, both the consumer and the business should have a mutual trust. The issues concerning both the public and private sectors are prevention of fraud, an agreement with the banking requirements and a secure transaction of payment. Similar are the concerns with e-signature, its authenticity and the secure way to implement the contract between parties. E-commerce has led to the creation of an unprecedented amount of data. Data protection has always been one of the top priorities of any government owing to the concern about the national security and the consumers’ concern on their data protection. Cybersecurity, like data protection is also a major concern in the modern tech world. Cyber-attacks on computer networks are a threat both to the private and public sectors. Consumers may be troubled by the thought of securing their data, since consumer protection is very vital to the existence of any internet related business or transactions. (New Markets Lab, 2018)
The world is so concerned with other issues related to internet commerce that its environmental impact is the least of all issues talked about. There are a number of ways in which the businesses today are adapting to a greener side. Unlike old days where there would be a pile of files in the offices, the business nowadays is entirely paperless. It greatly reduces the need to cut down millions of trees, ultimately making the earth greener. E-signature is a great example on how the need for the official authentication on a piece of paper has been greatly reduced by the advancements in e-commerce. While we discuss the merits of this high tech, we must also shed a light on mere harm effects of e-commerce. The total electricity consumption for internet use in Germany is estimated to be about 1%. In the USA, a total of 3% of the overall energy consumed come from the usage of office equipments and internet infrastructure, as of 2001 (Fichter, 2001). Seventeen years from then on will definitely give us a higher percentage in the overall energy taken up internet. The rise of latest technology and the amount of time people spend on the internet today can be taken as the input for this high number.
In summary, the recent developments in the technological arena has taken us to a new era of fast-growing life. These advancements have paved the way for the development of many nations. The adaptation of modern technologies has led to the huge success of many business firms. Amazon, Alibaba, Netflix etc are a few examples of them. The introduction of internet is one of the greatest innovations of all time. The access to unlimited amount of information, the ability to do international trade from a small part of the globe is one of the few gifts that have been showered upon us by the internet. Of all, the rise of e-commerce has enabled the growth of private as well as public sectors in all nations. It has led to a great deal of satisfaction among both the business as well as the consumers. The various factors mentioned above like political, economic, social, technological, legal and environmental have serious effects on determining the growth or decline of a certain business. These factors must be dealt with at most care in-order to maintain the existing peaceful business and economy.
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- Bacchetta, M., 1998. Electronic commerce and the role of the WTO, Geneva: Econstor.
- Fichter, D. K., 2001. Environmental Effects of E-Business and Internet Economy. [Online]
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Available at: http://www.intgovforum.org/multilingual/sites/default/files/webform/e-commerce_legal_guide_draft_24_may_2018_nml.pdf
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Available at: https://www.oecd-ilibrary.org/docserver/236588526334.pdf?expires=1544037485&id=id&accname=guest&checksum=A49E7EA4D96759BD15E3F4673D4E28BB
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- Rayport, J. F. & Jaworski, B. R., 2001. Introduction to e-commerce. Second ed. s.l.:s.n.
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