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The Internet technology has created an opportunity to increase the productivity of
traditional businesses as well as to start new highly productive businesses based on
novel business models. The labels, old economy and Internet economy, point to the
significant difference in productivity. The Internet economy revenue is growing twice
as fast as Internet economy employment. However, both types of economies are
expected to converge as traditional businesses rapidly adopt the Internet technology.
In entering the e-business world, a firm strategically positions itself to conduct its
activities differently from its competitors. E-business is about the radical redesign of
traditional value chains and the construction of new ones. E-business makes demand
driven production possible where customer orders serve as signals for production. By
integrating all members of the supply chain, the end demand can be immediately
communicated to all supply chain members. The computer manufacturer Dell is an
outstanding example. Also, major automotive manufacturers have launched initiatives
to build vehicles to meet individual customers’ specifications and deliver them in one
to two weeks.
Internet enabled traditional and the newly created dot-com businesses
engage in e-commerce. E-commerce is defined as the use of technology mediated
exchanges by business for the purposes of selling goods and services over the
Internet. E-Commerce is growing fast. The sales of global e-commerce grew from
millions in 1997 to billions in 1998 and to hundreds of billion in 2000 and are expected
to reach into trillions. E-commerce is categorized into Business-to-Business (B2B),
Business-to-Consumer (B2C), and Consumer-to-Business (C2B). The majority of
sales is in B2B and is projected to grow from 43 billions (1998) to 1.3 trillion (2003).
During the same period B2C is expected to grow from 7.8 billions to 108 billions.
B2C is growing much slower than B2B and is only 0.5% of the e-commerce business.
It is predicted that on-line purchases will increase from $20B in 1999 to $50B in 2002.
U.S. online sales for the month of August 2001 were running at 4 billion dollars per
month with 15 million households shopping online. There is about 25% year-on-year
increase in the volume of sales. Contributors to slower growth include high Internet
access costs, lack of PC at home, lack of customer trust, concern about privacy and
security, lack of government regulations. Surveys show that over 70% of consumers
do not trust the companies to preserve their privacy. Several studies have explored