Electronic Commerce: Implications of the Internet for Business Practice and Strategy

By Kambil, Ajit | Business Economics, October 1995 | Go to article overview

Electronic Commerce: Implications of the Internet for Business Practice and Strategy


Kambil, Ajit, Business Economics


Advances in information technologies and electronics have resulted in two simultaneous shifts: a dramatic expansion of computing hardware and software capabilities and a dramatic fall in the unit cost of information technologies. These shifts have led to the widespread adoption of desktop computers and communications equipment, creating the building blocks of a global information infrastructure.

Today the Internet is the prototype of the global information infrastructure. This paper looks at the implications of the Internet and new low cost data communications infrastructures on business practice and strategy. Specifically these technologies impact four fundamental firm processes: innovation, production, exchange and service. This paper then considers the effects of ubiquitous and inexpensive communications on business practice and strategy, identifying suitable firm responses to take advantage of and respond to opportunities and threats presented by this new infostructure.

THE INTERNET AS A PROTOTYPE OF THE GLOBAL INFORMATION INFRASTRUCTURE

The Internet is a collection of computer networks that interconnect computers all over the world. Computers on the Internet are able to communicate with each other because they use the internet protocol (IP-see the glossary of technical terms) as a common method for routing and transferring messages across computers.

Users of computers on the Internet have access to a variety of electronic communication, information retrieval and interaction capabilities. The basic functions of the Internet include support for:

1. Electronic mail and news services to send or broadcast messages to other users,

2. File transfer to access and retrieve files from remote computers,

3. Telnet - the ability to use and connect to remote computers.

As hardware and software technologies advanced to client-server computing, new advanced functions have become available on the Internet. These include wide-area information services, which allow users to search for and retrieve text information distributed over multiple computer servers on the Internet, and the world wide web (WWW) services that allow users to navigate and browse multimedia documents on multiple servers using hypertext links. Of these new services, the WWW services are the most important and they operate in a true client-server model. On the user desktop, a client side browser software such as Mosaic and Netscape provides users with a graphical user interface. Using the browser, users interconnect to various servers on the Internet to access multimedia information, interact socially or undertake commercial transactions. The use of WWW is increasing rapidly due to its easy-to-use browser software, hypertext capabilities and access to multimedia information. It will soon surpass all other sources of traffic on the Internet. Emergent services on the Internet include videoconferencing, telephony and the distribution of audio.

Since 1993, the Internet has grown at an exponential rate. Surveys of the Internet show that the number of host computers connected to the Internet increased from 1.3 million to 6.6 million between January 1993 and July 1995. The Internet also reaches over 150 countries. The National Science Foundation planted the seeds for this rapid growth by subsidizing the Internet backbone networks and the use of the Internet in colleges and schools. However, the more recent dramatic growth in the use of the Internet is driven by customer demand for inexpensive communications, availability of interesting content, lowering of technology costs, and availability of useful software for Internet publishing such as the WWW servers and browsers.

The growth is also fueled by the decentralized nature of the Internet. No one firm owns or controls the Internet - all firms that are connected to the Internet pay for their own connections to the Internet and share in the capitalization and costs of providing backbone services. …

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