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Unique Properties of the Internet (Cost Minimization (Search Costs: cost…
Unique Properties of the Internet
Asynchronous Nature
Internet based communication can take place 24 hours a day, 7 days a week, 365 days a year
Instantaneous Communication
Orders can be processed speedily & queries dealt with immediately
Mobile commerce, consumers expect what they want, when they want it & where they are at the moment
Companies can communicate internally & externally in minutes
Businesses benefit by taking advantage of peoples location
E-commerce businesses must understand that net-savvy customers are demanding in terms of response time & this property of the internet works well for companies that use speed as the cornerstone of their competitive advantage
Cost-Structure od info goods
Info goods encompass any products that can be transformed into digital code
Example: Books, Music & Films
Goods have unique properties that affect their distribution & profit potential
The production of these goods is characterized by very high fixed costs & low marginal costs
Deal with the exchange of info goods
Cost Based Pricing is cost + mark up
Price them in terms of customers value
Network effects/Network Externalities
Adopt a standard to which all users adhere
Metcalfes Law: value of a network increases by the square number of people in a network
States that the network becomes more valuable if more people use it
Cost Minimization
Search Costs: cost of searching for buyers & sellers
Contracting Costs: cost of setting up & carrying out the contract
Transaction costs:
Monitoring Costs: cost of ensuring obligations between buyers & sellers
Digital goods can be downloaded from a website, eliminating storage & transport costs
Adaption Costs: costs of making changes during the life of the contract
EDI: Electronic Data Interchange, can reduce order processing & paperwork costs
Internet has the ability to reduce some transaction costs