Page 56 - Electronic Commerce

Introduction to Electronic Commerce

To see how electronic commerce can change the level and nature of transaction
31
costs, consider an employment transaction. The agreement to employ a person has high
transaction costs for the seller—the employee who sells his or her services. These
transaction costs include a commitment to forego other employment and career
development opportunities. Individuals make a high investment in learning and adapting
to the culture of their employers. If accepting the job involves a move, the employee can
incur very high costs, including actual costs of the move and related costs, such as the
loss of a spouse’s job. Much of the employee’s investment is specific to a particular job
and location; the employee cannot transfer the investment to a new job.
If a sufficient number of employees throughout the world can telecommute, then
many of these transaction costs could be reduced or eliminated. Instead of uprooting a
spouse and family to move, a worker could accept a new job by simply logging on to a
different company server.
Mobile technologies, which are becoming more prevalent in the third wave, can also
reduce transaction costs. For example, a construction supervisor could review
architectural drawings on her tablet device and place an immediate order for a building
component using the tablet.

Network Economic Structures
Some researchers argue that many companies and strategic business units operate today
in an economic structure that is neither a market nor a hierarchy. In this network
economic structure, companies coordinate their strategies, resources, and skill sets by
forming long-term, stable relationships with other companies and individuals based on
shared purposes. These relationships are often called strategic alliances or strategic
partnerships, and when they occur between or among companies operating on the
Internet, these relationships are also called virtual companies.
In some cases, these entities, called strategic partners, come together as a team for a
specific project or activity. The team dissolves when the project is complete; however, the
partners maintain contact with each other through the ensuing period of inactivity. When
the need for a similar project or activity arises, the same organizations and individuals
build teams from their combined resources. In other cases, the strategic partners form
many intercompany teams to undertake a variety of ongoing activities. Later in this book,
you will see many examples of strategic partners creating alliances of this sort on the
Web. In a hierarchically structured business environment, these types of strategic
alliances would not last very long because the larger strategic partners would buy out the
smaller partners and form a larger single company.
Network organizations are particularly well suited to technology industries that are
information intensive. In the sweater example, the knitters might organize into networks
of smaller organizations that specialize in certain styles or designs. Some of the
particularly skilled knitters might leave the sweater dealer to form their own company to
produce custom-knit sweaters. Some of the sweater dealer’s marketing employees might
form an independent firm that conducts market research on what the retail shops plan to
buy in the upcoming months. This firm could sell its research reports to both the sweater
dealer and the custom-knitting firm. As market conditions change, these smaller and more
nimble organizations could continually reinvent themselves and take advantage of new

Copyright 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.