Tech History

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How does digital economy is different from material goods?

The digital economy is the economy where there is a full usage of the internet and where the global population has high access to the web. This makes the influence on the society and the world economy very high. The economy changed from being industrial into being technology oriented one since activities are conducted over machines and communication is conducted over the internet (Jung, & Stolterman, 2011).

Ultimately, the digital economy is very different from that one based on material goods in terms of product, distribution, and consumption. This is because the economy that is based on material goods is the one where the economic life does not involve the electronic media, but physical production, distribution, as well as consumption of the goods.

The digital economy has positive characteristics companies to the one based on the material goods. Different organizations in the digital economy are IT- based and production of goods is focused on digitizable products. There is also the easier distribution of products to various places at ease because the means of transport and communication is efficient. Consumers in the digital economy have easy access to the goods they are in need (Carrillo, 2010).

This makes consumption of a variety of products easier compared to the economy that is based on material goods. For example, access to products from foreign countries like clothing and electronics has become possible because the majority of organizations are running online shops. Customers can be able to view the products they want to have, place orders, make payments, and communicate on transportation of the products over the internet with the manufacturer (Carrillo, & Batra, 2012).

The distribution costs are very significantly reduced because shipping of products from one nation to another is easy. There is much engagement into flight movement where the majority of goods and passengers are transported via flight.

The digital economy on the other side has its own challenges. This is because much usage of the internet leads to cyber threats making computer systems to hang or lead to delays. This is not the case with the economy that is based on material goods because everything is done manually and there is a physical meeting of people, which is not affected by technological problems.

There are other issues associated with tax because the digital economy is full of payment of tax to meet the requirements. For instance, dealing with the customer online has to be accompanied with the taxation of the internet services unlike when engaging in a service-based economy where there is physical meeting with customers. The entire commerce is digital where goods are services are easily produced and distributed without any physical limitations (Mc Carroll, & Curran, 2013).

The major tax problem is profit shifting and base erosion because companies try to take advantages of the interaction gaps, thus reducing the taxable income. There is also increased competition since the majority of the organisations are rushing to get to the digital space, thus making the costs associated and requirements to be high and complicated.

In the marketplace, being among the top ten hitting companies does not matter. This is because the society is interested with the company, which is well presented and aiming at sustainable operations (Chao, Hong, Wei, & Xiang, 2010). The market is truly dominated by the big hit, but due to misuse of their positions, the majority of them end up falling.

What matters are the implications of the activities conducted in the organisations and their image in the eyes of the society? It is apparent that in the economy, being among the big hit might be just for a matter of time and then the particular organization might end up being a disappointment to the community. The economic realities are very essential in the market, but not the position of the company (Burk, & McGowan, 2011).

The network economy and relationships are affected by the ideas raised, but not the popularity. In addition, the big hits are highly affected by the economic crisis where they begin by being profitable and end up experiencing losses because of poor management. Being a big hit could matter if the ones in the list understand how to behave in the market and how to meet their goals, as well as offering customer satisfaction (Easterly, & Reshef, 2009).

In addition, a big hit could matter is the organization was intelligent enough to retain its position and to continue improving, but not enjoying the chance and exploiting others in the market. If being among the top ten could enhance transformation of the firm’s business, it would be better. The technology is influenced by many changes and this makes competition to be very high for organizations to retain their position as the big hits (Braun, & Latham, 2009).

The network effects are the network externalities of the influence that one consumer of a product has on the value of the product to other people. A product becomes valuable the moment majority of people make use of it, for example, the internet (Corrocher, & Zirulia, 2009). The value of the internet improved the moment many people started using it. This is because of the influence of the first user where other people desired to use it.

Network effects are desirable to the companies the moment they are drawing many customers towards their products. On the other hand, when the influence is negative, this discourages companies (Katona, Zubcsek, & Sarvary, 2011). To individuals and groups, the network effects are desirable the moment they lead to improvement of skills, but undesirable the moment people are made to rush into something and experience losses later. For instance, network effects associated with use of mobile phones is desirable to individuals because of the benefits associated with the mobile phones.

by companies though it is scarce and perishable (Huberman, 2013). Relying on people’s attention might be risky because it becomes very difficult to deal with. In addition, attention management is a challenge because human mentality keeps on changing without notice. On the other hand, attention has been a limiting factor in consumption of the required information (Crogan, & Kinsley, 2012).

References

Braun, M. R., & Latham, S. F. (2009). When the big “R” hits home: governance in family firms during economic recession. Journal of Strategy and Management, 2(2), 120-144.

Burk, B. A., & McGowan, D. (2011). Big but brittle: economic perspectives on the future of the law firm in the new economy. Colum. Bus. L. Rev., 1.

Carrillo, F. J., & Batra, S. (2012). Understanding and measurement: perspectives on the evolution of knowledge-based development. International Journal of Knowledge-Based Development, 3(1), 1-16.

Carrillo, J. (2010). Knowledge-based value generation. Knowledge-based development for cities and societies, 1-16.

Chao, D., Hong, A., Wei, H., & Xiang, W. (2010). Research on Pricing of Relationship Lending from Big Banks to Small Firms [J]. Economic Research Journal, 2, 008.

Corrocher, N., & Zirulia, L. (2009). Me and you and everyone we know: An empirical analysis of local network effects in mobile communications. Telecommunications Policy, 33(1), 68-79.

Crogan, P., & Kinsley, S. (2012). Paying attention: Toward a critique of the attention economy. Culture Machine, 13, 1-29.

Easterly, W., & Reshef, A. (2009). Big hits in manufacturing exports and development. NYU, manuscript, Oct.

Huberman, B. A. (2013). Social Computing and the Attention Economy. Journal of Statistical Physics, 151(1-2), 329-339.

Jung, H., & Stolterman, E. (2011). Material probe: exploring materiality of digital artifacts. In Proceedings of the fifth international conference on Tangible, embedded, and embodied interaction (pp. 153-156). ACM.

Katona, Z., Zubcsek, P. P., & Sarvary, M. (2011). Network effects and personal influences: The diffusion of an online social network. Journal of marketing research, 48(3), 425-443.

Mc Carroll, N., & Curran, K. (2013). Social networking in education. International Journal of Innovation in the Digital Economy,, 4(1), 1-15.