Program:%20%20%20Business%20Studies

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• Program Business Studies
• Course Title Digitalisation and New Market
  Paradigms
• Course Code MAMA311
• Total Credits 1.5
• Total lecture Hours 7.5
• Course Lecturer Uwem Essia

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COURSE OVERVIEW AND OUTLINE

• Course Description
• The students are taught how digitalization is
  changing the way business is done.
• The new market possibilities created in the
  digital economy are explained.
• How the structure, conduct and performance of
  firms are affected by digitalization is
  discussed.
• The new microeconomics of competition explained.
• Imperatives of the new economy for corporate and
  macroeconomic policies are discussed.

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COURSE OVERVIEW AND OUTLINE

• Pedagogic Goal
• The students capacity to carry out marketing
  activities in the new markets is improved.
• Pedagogic Objectives
• The students understand how digitalization has
  changed the way business is done.
• The students understand how marketing is
  affected by the Internet.
• The student appreciates the implication of
  digitalization for macroeconomic policies and
  overall development programming.

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COURSE OVERVIEW AND OUTLINE

• Learning Objectives
• The students can differentiate the digital
  economy from the brick and mortar economy.
• The students can explain the paradigm shifts in
  marketing occasioned by digitalization.
• The student is able to link changes in the
  digital economy to macroeconomic and global
  development.

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COURSE OVERVIEW AND OUTLINE

• Learning Outcomes
• The students are able to function better in the
  digital economy.
• The students are able to undertake researches in
  digital marketing related areas in line with
  global best standards.
• Course Outline
• Content
• Section 1 From Industrial to Digital Economy
• 1.1. New basic conditions
• 1.2. The positive loop effect of knowledge
  creation
• 1.3. The knowledge worker
• 1.4. The Internet as a converging force
• 1.5. Layers of the Internet Economy

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COURSE OVERVIEW AND OUTLINE

• Session 2 Structure-Conduct-Performance
• 2.1 Performance in the Digital Economy
• 2.2. Production and allocation efficiency
• 2.3 Digital Market Structure
• 2.3.1. Redefining industries and competing groups
  
• 2.3.2. Barriers of entry to online trading
• 2.3.3. Drop-out rate of business startups
• 2.3.4. Frictions in the electronic and
  conventional
• 2.3.5. Transparency of virtual markets.
• 2.3.6. Economies of enterprise size in the
  Internet world
• 2.3.7. Market structures in virtual markets

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COURSE OVERVIEW AND OUTLINE

• 2.4. Conduct Of The Digital Economy
• 2.4.1. Competitive strategy in the digital
  economy
• 2.4.2. Money and payment
• 2.4.3. Innovation
• Session 3 Pricing Behavior
• Session 4 Behavior of Firms
• 4.1. Connectivity And Firm Behavior
• 4.2. Dis- and re-intermediation
• Session 5 Product Strategy and Advertising

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COURSE OVERVIEW AND OUTLINE

• Session 6 Other Firmlevel Characteristics
• 6.1. Company finance and the growth of firms
• 6.2. Legal tactics
• 6.3. Standards
• Session 7 Macroeconomics of Spillovers
• 7.1. Role of Government
• 7.2. Need for Supranational moderation
• Session 8 The Digital Economy and Economic
  Growth
• 8.1. Digital divide and the catch up
• 8.2. Skill requirements

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1 From Industrial to Digital Economy

• 1.1. New basic conditions
• Recent ICT explosion has moved world from the
  brick and mortar industrial age to the digital
  era.
• The Internet has changed the basic conditions
  significantly.
• It is still debated how productive the internet
  has really been the so-called productivity
  paradox.
• On the one hand, it is argued that ICT has
  positive impact on productivity,.
• On the other hand, the re-organization
  necessitated by ICT adoption creates a huge cost.

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1 From Industrial to Digital Economy ..1

• 1.1. New basic conditions
• Moreover, it takes many years for the payoffs
  from the IT revolution to manifest.
• But the Internet evolution has already created
  the information society.
• And theories of the old economy that are based on
  the traditional factors of production (land,
  capital, labor) need re-examination.
• Nowadays, intellectual, creative, and innovative
  capital (basically knowledge) drive development.
• The basis for comparative advantage has changed
  hence the paradigm shifts.

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1 From Industrial to Digital Economy ..2

• 1.2. The positive loop effect of knowledge
  creation
• The first type of knowledge dominating the
  digital society is imaginary or creative
  knowledge
• Presentation skills is an example of imaginary
  skills.
• Team building is an example of creative
  knowledge.
• The second type of knowledge is practical
  knowledge that is based on data and information.
• Mastery of algebra is practical knowledge once
  internalized the student can apply the new
  knowledge to physics, chemistry or economics.
• This is necessary where knowledge is needed to
  obtain and to use (adoption requirements)
  knowledge.

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1 From Industrial to Digital Economy ..3

• 1.2. The positive loop effect of knowledge
  creation
• The vast cyberspace warehouses data and its
  network effect increases interactive data
  exchange exponentially.
• This positive loop effect of knowledge creation
  is highly accelerated.
• Computers have increased the brain power of
  humankind magnificently.
• So too are interconnectivity of computers and
  people via the Internet.

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1 From Industrial to Digital Economy ..4

• 1.2. The positive loop effect of knowledge
  creation
• The generation, processing and distribution of
  knowledge and information drive productivity.
• All firms need ICT to be on the competitive
  technological frontier.
• Thanks to the Internet, Knowledge is almost
  non-rival and non-excludable
• Knowledge cannot be kept secret for any possible
  long period
• the new economy is characterized by
  uncontrollable spillovers and externalities
• It is now important that experts conceptualize
  how knowledge and information can best be
  modeled.

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1 From Industrial to Digital Economy ..5

• 1.3. The knowledge worker
• The knowledge society requires a knowledgeable
  worker with up-to-date competencies.
• Workers need to renew their skills through
  life-long learning and on-the-job-training.
• The Internet or virtual space is increasingly an
  important part of human life.
• It is also the dominant medium to create,
  transmit and share information and ideas.
• Nearly everyone is compelled to "think network",
  and live through the liberalized sea of
  information flow.

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1 From Industrial to Digital Economy ..6

• 1.3. The knowledge worker
• However, many fear that the cyberspace may
  someday collapse due to information overload.
• The volume and speed of flow of information has
  been very high.
• Many now focus just on synthesizing information
  already provided.
• Much less time is available for analyzing
  coherences and creating new information.

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1 From Industrial to Digital Economy ..7

• 1.4. The Internet as a converging force
• The Internet engulfs all aspects of economic,
  political, social-cultural and moral life.
• Knowledge is converging. It is now more difficult
  to separate professions and specialties.
• It not only loss of distance, but also loss of
  space. knowledge knows no territorial
  boundaries.
• Individuals, firms, and countries are now under
  immense pressure to be global players.
• Measures of performance for the industrial age
  have become ill equipped for the new economy.

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1 From Industrial to Digital Economy ..8

• 1.4. The Internet as a converging force
• This is particularly so because network or global
  effect are difficult to contextualize and
  measure.
• Network externalities exist because the utility
  from being connected increases when more persons
  are connected.
• Subscription to the network is more valuable as
  the network is oversubscribed.

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1 From Industrial to Digital Economy ..9

• 1.5. Layers of the Internet Economy
• The Internet economy can be divided into four
  layers, namely Infrastructure Layer, Application
  Layer, Intermediary Layer, and Commerce Layer
• Infrastructure Layer players in this layer
  provide the hard infrastructure e.g., backbone
  providers and Internet service providers, and
  manufacturers.
• Application Layer players in this layer build
  upon the infrastructure provided. They include,
  Internet consultants, and web/software
  developers, etc.
• Intermediary Layer players in this layer
  facilitate the meeting and interaction of buyers
  and sellers over the Internet. These include
  online travel agents and brokers, content
  aggregators, portals/content providers and online
  advertising,

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1 From Industrial to Digital Economy ..10

• 1.5. Layers of the Internet Economy
• Commerce Layer players in this layer sell
  products and services to consumers or businesses
  over the Internet. These include e-tailers,
  manufacturers selling online, airlines selling
  online tickets, and online entertainment and
  professional services.
• Note that many companies are players at multiple
  layers.
• For instance, Microsoft and IBM are important
  players at the Internet infrastructure,
  applications, and Internet commerce layers.

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Review Questions

• Explain how the IT revolution has created new
  basic conditions.
• Explain why imaginary skills, creative knowledge
  and practical knowledge are relevant in the
  digital economy.
• The internet has rendered the knowledge
  non-rival and non-excludable. Discuss.
• Do you agree with the view that the
  knowledgeable worker needs to renew skills
  through lifelong learning
• In what ways is the internet a converging force?

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Session 2 Structure-Conduct-Performance

• 2.1 Performance in the Digital Economy
• In the new economy, the frontiers for goods and
  services have melted down to digital- or non
  digital goods.
• Digital goods can bypass transportation costs,
  and quite often the wholesale and retail
  networks.
• They are non-rival, for example, most web users
  go online to get news and information, and every
  big newspaper or magazine, and TV stations have
  valid web addresses.
• Digitalized goods are pulled by the demand of the
  customer, and pushed by the supplier.
• Digital products have high fixed cost and low
  marginal cost
• For example, information is expensive to produce,
  but cheap to reproduce.

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2 Structure-Conduct-Performance ..1

• 2.1 Performance in the Digital Economy
• Digital goods are not generally governed by the
  conventional economic notions of scarcity and
  increasing marginal cost.
• The Internet is blurring traditional description
  of tradable and non-tradable goods.
• It is now possible to trade more goods and
  services.
• Any activity that can be conducted via a screen
  and telephone can be carried out anywhere in the
  world.
• Some goods, like food, may never become
  digitalized.
• Goods like software are very susceptible to
  digitalization and hardly get distributed
  physically anymore.

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2 Structure-conduct-performance ..2

• 2.2. Production and allocation efficiency
• Competitiveness of the virtual markets checks
  misallocation of resources.
• Interactivity of Internet has eased adjustment of
  prices.
• A modern capital market demonstrates how the new
  economy can be efficient.
• The digital economy aligns demand to supply more
  intimately.
• Markets and industries are getting destroyed and
  created at an unprecedented speed.

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2 Structure-Conduct-Performance .. 3

• 2.2. Production and allocation efficiency
• Today's businesses and consumers demand more
  customized set of products and services.
• Firms in the same industry compete and at the
  same time collaborate to develop knowledge.
• Digitalization encourages co-operational
  relationship of firms in a value chain.
• The new economy defines the basic assumptions and
  analytical tools.
• This has redefine what is meant by good
  performance.

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2 Structure-Conduct-Performance .. 4

• 2.3 Digital Market Structure
• The transition from brick and mortar to the
  digital economy raises a number of questions
• What is the structure of industries and competing
  groups?
• Has barrier to entry changed with online trading?
  
• How is the drop-out rate of startups in the
  emerging markets?
• Do electronic markets have less friction than
  conventional markets?
• How transparency are virtual markets'?
• Does the firm size matter in the virtual market?
• Does the textbook model of perfect competition
  apply in virtual markets?

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2 Structure-Conduct-Performance .. 5

• 2.3 Digital Market Structure
• 2.3.1. Redefining industries and competing groups
  
• Openness of the virtual markets to customers has
  accelerated competition.
• In considering economies of scale, the concern
  now is with scope instead of size.
• Firms reduce cost with multiple products instead
  of producing more of one product.
• The unit costs are lower when complementary
  products are produced by a single firm.
• The synergy created from complementarities are
  the 'cross product' and 'cross-learning
  effects'.
• In the old economy the focus of a firm was on
  maintaining and improving the actual business.

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2 Structure-Conduct-Performance .. 6

• 2.3 Digital Market Structure
• 2.3.1. Redefining industries and competing groups
  
• In the new economy the preoccupation is to
  continuously initiate new, innovating businesses.
• The old firm focused on maintaining and improving
  the actual business.
• But the new firm is to continuously initiating
  new, innovating, businesses.
• The new economy is dominated by unconditional
  consumer focus, and product individualization.
• This has redefined industries and competing
  groups.
• Measurement systems of the old economy are
  ill-equipped for the digital economy.

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2.3. Digital Market Structure

• 2.3.2. Barriers of entry to online trading
• The new economy has made entry and exit much
  easier.
• Since no firm is able to control the value chain,
  new firms are often set up virtually overnight.
• Outsourcing eases the entry of new business ideas
  into a market niche (of a value chain).
• New ideas and enterprises often do not need need
  to spend much on fixed cost spending.
• Marketing is eased by online ordering.
• The death of distance kills many market entry
  inhibitions of spatial economics.

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2.3. Digital Market Structure

• 2.3.2. Barriers of entry to online trading
• The worldwide-Web is cutting through many of the
  distribution and market barriers.
• Local firms are increasingly gaining access to
  foreign markets.
• This is extremely beneficial for small and
  medium-sized firms.
• Barriers of entry to global markets, especially
  in the supply chain, procurement and outsourcing
  have now almost vanished.

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2.3 Digital Market Structure ..2

• 2.3.2. Barriers of entry to online trading
• The internet cuts through distribution and market
  barriers that limits access to foreign markets.
• This is has been quite beneficial for small and
  medium-sized firms.
• However, the network effects and economies of
  scope favor the established firms.
• This has raised some entry barriers for the
  e-commerce newcomers.

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2.3 Digital Market Structure ..3

• 2.3.3. Drop-out rate of business startups
• While entry may be easy, growth and survival of
  businesses constitute the major challenge.
• Barriers to entry may be low, but the issues is
  whether it makes sense to enter in the first
  place.
• The key ingredient for success is creating the
  economies of reputation.
• Making a name is paramount in virtual markets.

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2.3 Digital Market Structure .. 4

• 2.3.4. Frictions in the electronic and
  conventional markets
• The network effect eases getting several items
  from a source, rather than from several sources.
• It is now easier for many firms to buy components
  of products instead of producing everything.
• Outsourcing is now commonplace in the digital
  economy.
• Increasingly, firms sell diversified but related
  products and services.

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2.3 Digital Market Structure .. 5

• 2.3.4. Frictions in the electronic and
  conventional markets
• For example, an online book retailer can as well
  sell air tickets.
• The driving force here is the economies of scope.
  
• A waste disposing firm can produce organic
  manures, and at the same time cultivate
  vegetables.
• Closeness to the consumers makes it easier to
  better decipher the demand
• It also helps to tailor production to the single
  customer.

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2.3 Digital Market Structure 6

• 2.3.5. Transparency of virtual markets.
• The e-economy can be called a nude economy due
  high transparency of the Internet.
• It is possible to search for any thing on the
  internet.
• The ease that can be gathered, analyzed and
  interpreted has simplified marketing research.
• The high level of mutual transparency makes it
  difficult for consumers to be deceived.
• Consumers easily identify how to make some gains,
  and producers know their customers quite well.

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2.3 Digital Market Structure ..7

• 2.3.6. Economies of enterprise size in the
  Internet world
• The vast opportunities to enter the value chain
  create key roles for the small innovating firms.
• Smaller firms can easily supply components for
  larger firms.
• But larger firms have goodwill and scope to
  diversify much faster than small firms.
• Consumers and down line firms prefer to buy
  variety of items from one source, rather than
  from several sources.

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2.3 Digital Market Structure ..8

• 2.3.7. Market structures in virtual markets
• Modern ICT enables the creation of a better and
  clearer view of the market.
• It may seem that the virtual market indeed
  approximates perfect competition in several ways.
• Buyers and sellers generally have access to the
  same kind of information
• Leading to high mutual knowledge between consumer
  and producer.
• This approximates the perfect availability of
  information assumed in perfect competition.

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2.4. Conduct Of The Digital Economy

• 2.4.1. Competitive strategy in the digital
  economy
• Generally, the e-economy tend to approximate the
  textbook model of perfect competition.
• But the threat of entry depends on the industry
  and on the final goal of the business.
• In reality it is much easier for a large firm to
  cross-enter a new market.
• For example, it is easier for a big car importer
  to also sell computers and its accessories.
• A car retailer can as well offer information
  processing tools.

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2.4 Conduct Of The Digital Economy ..1

• 2.4.1. Competitive strategy in the digital
  economy
• Economies of scope make big firms able to enter
  almost every market.
• The e-economy has weakened customer loyalty as it
  is very easy to switch to competitors.
• Price competition has become intensified, due to
  high level of transparence.
• Price discrimination becomes extremely difficult.
• Firms are compelled to satisfy the consumer by
  every means possible.

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2.4 Conduct Of The Digital Economy ..2

• 2.4.1. Competitive strategy in the digital
  economy
• Costumers trust has become increasingly
  difficult to get and retain.
• The firms need to do more quality inducing
  advertisement.
• Geographical factors are no longer the bases for
  competitive advantages.
• The consumer profits from sticking to one company
  that already knows him well.
• The high mutual knowledge between buyer and
  seller is the basis for costumer loyalty.

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2.4 Conduct Of The Digital Economy ..3

• 2.4.1. Competitive strategy in the digital
  economy
• Firms in an industry produce substitute products
  continually.
• Competition is excessive in the Information-based
  firms.
• It is also the case with the music industries,
  banking and other intermediary functions.
• Knowledge creation has improved performance
  significantly.
• Buyers compete by forcing down prices and
  bargaining for higher quality or more services.

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2.4 Conduct Of The Digital Economy ..4

• 2.4.1. Competitive strategy in the digital
  economy
• Some buyers also play competitors against each
  other as they seek more favorable prices.
• Consumer sovereignty has compelled firms to
  collaborate and compete at the same time.
• Suppliers are compelled to trust each other. But
  infomediaries are replacing traditional ties.
• Suppliers bargaining power is decreasing.
• The high transparency introduced by B2B practices
  is at the heart of network relationships.

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2.4 Conduct Of The Digital Economy ..5

• 2.4.2. Money and payment
• A sound Internet payment system requires
  security, reliability, scalability, anonymity,
  acceptability, customer base, flexibility,
  convertibility, efficiency, ease of integration
  with applications, and ease of use
• Security the infrastructure supporting
  electronic commerce must be usable and resistant
  to attack.
• Reliability the infrastructure must be highly
  available and should avoid any form of failure.
• Scalability The payment infrastructure must
  support multiple servers, distributed across the
  network.

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2.4 Conduct Of The Digital Economy ..6

• 2.4.2. Money and payment
• Anonymity the identity of the parties to the
  transaction should be protected. Tracking a
  transaction should be made highly expensive and
  difficult.
• Acceptability the e-payment instrument must be
  accepted widely and unrestricted by time and
  space.
• Customer base the customer base should be vast
  and well spread for wider acceptability.
• Flexibility the payment mechanism should support
  several payment methods and instruments that
  should be integrated into a common framework.

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2.4 Conduct Of The Digital Economy ..7

• 2.4.2. Money and payment
• Convertibility - it should be possible and easy
  to move funds from one instrument and currency to
  another.
• Efficiency the cost per transaction of using the
  infrastructure must be insignificant.
• Ease of integration the payment system should be
  pliable to upgrading and modifications.
• Ease of use most payments should occur
  automatically, and users should be able to
  monitor their spending without going out of their
  way to do so.

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2.4 Conduct Of The Digital Economy ..8

• 2.4.3. Innovation
• The traditional notion of innovation is linked to
  RD, pecuniary expenses, scientific or technical
  expertise and procurement of equipment.
• In the e-economy, innovation is linked to the
  conception and implementation of new ideas.
• The new ideas need the scale of big companies in
  order to get widely accepted.
• Inter-firm cooperation is important cooperation
  of firms with the academia is also needful.

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2.4 Conduct Of The Digital Economy ..9

• 2.4.3. Innovation
• Firms innovate faster when they can access and
  implement acquired knowledge rapidly.
• This calls for strong link between internal
  innovativeness and external innovations.
• Internal innovativeness eases adopting knowledge
  produced outside the firm.
• Generally, collaborating firms are more
  innovative than non-collaborating ones.
• Collaboration is as important for a big company,
  as it is for a small start-up.

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2.4 Conduct Of The Digital Economy ..10

• 2.4.3. Innovation
• External economies of scale are a basic driving
  force in the e-economy.
• Internet is the big equalizer, as all firms and
  individuals can work with same information.
• Constantly, collaborations unconsciously develops
  and extends the frontier of innovativeness.
• Everyone involuntarily swims through different
  waves of innovation at the same time.
• What distinguishes firms is the lead time of
  each player.

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2.4 Conduct Of The Digital Economy 11

• 2.4.3. Innovation
• It is not necessarily how good, but how fast
  a firm or consumer is.
• Reward in the e-market is driven by economies of
  time or first-mover-advantage.
• The cost of new technologies is reducing at a
  very fast rate
• For example, a laptop made in 2014 will cost far
  less than its 1975 model, and as well have much
  higher processing power.

49
Review Questions

• Digital goods are generally not governed by the
  conventional economic notions of scarcity.
  Discuss
• Explain the destructive creation powers of the
  internet economy.
• Explain how digitalization has changed the
  structure of the market economy.
• Explain the economies of goodwill and scope in
  the digital economy.
• Explain how the new economy has made corporation
  of enterprises with researchers and the academia
  very important.

50
Session 3 Pricing Behavior

• Prices in the e-markets are falling in the long
  run for the average consumer.
• But the cost of e-purchase should be higher that
  at a physical take-away store.
• Global openness and transparence of e-markets is
  making it more difficult to discriminate in
  prices.
• The different types of discrimination are as
  follows
• First-degree price discrimination also known as
  perfect price discrimination. The seller charges
  a different price for each unit of the good based
  on the costumers maximum willingness-to-pay for
  that unit.

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Session 3 Pricing Behavior 1

• Second-degree price discrimination also known as
  nonlinear pricing. Price differ depending on the
  number of units of the good bought, and not
  across costumers.
• Third-degree price discrimination different
  purchases are charged different prices. But each
  purchaser pays a constant amount for each unit of
  the good bought.
• The e-markets give buyers and sellers equal
  access to retailer information about prices.
• Success depends on how well either party is using
  the full potential of the Internet for his best
  benefit.
• Online auctions is common and Customer-to-Customer
  (C2C) sites have increased.

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Session 3 Pricing Behavior ..2

• The sites act like an intermediary, facilitating
  deals between parties.
• Many e-markets now approximate the stock market,
  with prices adjusting constantly.
• A dominant dynamic pricing model is known as
  demand-based pricing.
• This is based on the concept of volume discounts
  in the beginning.
• Shopping sites allow users to commit to buy a
  product if the price drops at least to a
  specified level within a time period, usually a
  few days.
• In what ways is the internet making price
  discrimination difficult.
• Do you agree that the internet has made many
  services and commodity markets to approximate the
  stock market with constan

53
Review Questions

• In what ways is the internet making price
  discrimination difficult.
• Do you agree that the internet has made many
  services and commodity markets to approximate the
  stock market with constan

54
Session 4 Behavior of Firms

• 4.1. Connectivity And Firm Behavior
• Inner-firm Management Interconnectivity has
  accelerated the speed of decision making.
• Requires Less Staff, Flat Hierarchies And More
  Democratic Leadership Models.
• ICT Has Multiplied The Teamwork Potential.
• Production Life Cycles Are Getting Shorter And
  Management Reactions Quicker.
• 10 Year Planning Is Increasingly Unrealizable.
• Long Term Thinking In Virtual Markets Means One
  Year.

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4 Behavior of Firms ..1

• 4.1. Connectivity and firm behavior
• Networking between firms in e-markets the
  parties are only one mouse click away.
• Virtual platforms where companies can offer their
  goods are created continually.
• Inability to make extra profits makes
  applicability of perfect competition possible.
• Equally, through company extranets and industry
  trading exchanges, firms are linked to their
  trading partners.

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4 Behavior of Firms ..2

• 4.1. Connectivity and firm behavior
• Increasingly also, more players along the value
  chain collaborate.
• This reduces inventory, increases sales and
  improved service levels.
• Trading partners and producers share their plans
  and deal with possible deviations.
• By working on issues before they occur, both
  partners have time to react.

57
4 Behavior of Firms 3

• 4.1. Connectivity and firm behavior
• Building brand awareness through advertising and
  marketing is critical for success.
• To support branding many firms develop exciting
  affiliate programs.
• For example, a website owner can partner with an
  affiliate program or producers.
• The web site owner is paid a commission for
  generating the sale.

58
4 Behavior of Firms ..4

• 4.2. Dis- and re-intermediation
• Many have argued that e-markets have reduced the
  importance of intermediation.
• The direct business model, link customers and
  suppliers via customized Intranet sites.
• Elimination of margins by the direct business
  models mean complete disintermediation.
• The more common disintermediation is due to
  elimination wholesale and retail sectors.

59
4 Behavior of Firms .. 5

• 4.2. Dis- and re-intermediation
• However, a theory of re-intermediation by means
  of infomediary has been developed.
• Informediaries in made possible by the fact that
  all parties search the internet.
• All parties rely on web-based intermediaries that
  maximize the value of their data.
• Review Questions
• In which ways has the internet promoted the role
  of infomediaries?
• The internet has weakened the roles of
  distributors and retailers. Discuss.

60
Session 5 Product Strategy and
Advertising

• Firms and individuals now desire customized set
  of products and services.
• Firms along the value chain often collaborate to
  make this possible.
• Software solutions facilitate the entire customer
  lifecycle
• from driving web traffic to the website,
• to capturing leads and guiding customers through
  their buying process,
• enabling online purchasing and payment,

61
5 Product Strategy and Advertising 1

• coordinating delivery
• and providing them with pre or post-sale customer
  service.
• The e-economy gives marketing more expansive
  role, beyond just selling.
• Customer Relationship Management (CRM) has become
  very essential.
• Pre- and post-sale services have far-reaching
  significance in virtual markets.
• In addition, managing supply and value chains
  have become very important.

62
5 Product Strategy and Advertising 2

• Typically a marketer now needs to understand
  supply chain planning system, procurement system,
  logistics system, and streamlined business
  production or automated supply-chain
  integration
• a supply chain planning system, a firm forecasts
  and plans how to match supply to demand on a
  real-time basis
• a procurement system, a firm shares information
  with the suppliers and service providers to
  ensure that it has the right supply of parts and
  components available
• a logistics system, a firm ensure its products
  are delivered to customers in the shortest
  possible time.

63
5 Product Strategy and Advertising
..3

• Streamlined business production, the Internet
  connects parties and facilitates information
  exchange.
• Demand and supply chains get integrated to
  deliver faster time-to-market for the companys
  products.
• The supply chain links the producers and all
  trading partners to customers via the internet.
• Collaboration across the extended network of
  trading partners ensures product delivery in the
  shortest time and at the lowest cost.
• Analysis-driven workflow can streamline business
  processes even further.

64
5 Product Strategy and Advertising
..4

• For example, analytic software can identify needs
  based on observed trends.
• Success with trading in the virtual market
  requires product promotion and advertising.
• The e-economy provides diversity of marketing
  models
• viral marketing, B2C marketing, affinity
  marketing, partner marketing, affiliate programs,
  B2B marketing, co-marketing, e-marketing,
  m-commerce marketing, etc.

65
5 Product Strategy and Advertising
..5

• Customer Relationship Management (CRM) the
  retailers interaction with the customer
  generates information about his preferences.
• The information is recorded and analyzed for the
  producer to meet customer wants.
• This process of capturing and analyzing is
  commonly known as CRM.
• CRM Solutions deliver a complete lifecycle view
  of customer interactions
• from creating targeted marketing campaigns,

66
5 Product Strategy and Advertising ..
6

• generating leads and forecasting the potential
  sales opportunities
• to managing customer relationships across
  multiple integrated channels
• the goal is complete personalization of the
  virtual store.
• This makes advertising more impactful and throws
  open opportunities for cross-selling.
• Cross-selling has less to do with the
  personalization of the product, but rather with
  the optimization of the offer.
• For example, shoppers who select televisions are
  likely to need video CD players.

67
Review Questions

• List and explain the essential components of
  supply and value chains.
• How has digitalization made managing supply and
  value chains important?
• Why is cross selling a growing feature of the new
  markets?

68
Session 6 Other Firmlevel
Characteristics

• 6.1. Company finance and the growth of firms
• Venture capital is now a major institutional and
  corporate investment good.
• Many large firms now have a venture capital firm
  serving as the general partner.
• Some firms setup their venture funds and give
  employees a chance to invest in startups.

69
6 Other Firmlevel Characteristics
..1

• 6.2. Legal tactics
• Internationally, the United Nations Commission on
  International Trade Law (UNCITRAL) has completed
  work on a model law that supports the commercial
  use of international contracts in electronic
  commerce.
• This model law establishes rules and norms that
  validate and recognize e-contracts.
• It sets default rules for contract formation and
  governance of e-contract performance.
• It defines the characteristics of a valid
  electronic writing and an original document.

70
6 Other Firmlevel Characteristics
..2

• The model law provides for the acceptability of
  electronic signatures for legal and commercial
  purposes.
• And supports the admission of computer evidence
  in courts and arbitration proceedings.
• But, governments generally face the challenge
  balancing between free information flow,
  protecting property rights, and ensuring consumer
  privacy.
• However, e-contracts can be concluded either
  directly through the Web, electronic mail or on
  EDI agreements.

71
6 Other Firmlevel Characteristics
..3

• The selected framework should provide security,
  privacy, property protection and a reasonable
  degree of standardization.
• Security - a secure and reliable Global
  Information Infrastructure (GII) is required.
  Four critical security assurances are required
• Authenticity of the communication,
• Integrity - proof that contents of the message
  have not been altered, either deliberately or
  accidentally
• Non-repudiation the receiver does not deny the
  transmission
• confidentiality evidence of nor disclosure to
  third parties.
• Privacy internet users would prefer that the
  internet has privacy.

72
6 Other Firmlevel Characteristics
..4

• Intellectual property - commerce on the Internet
  often involves the sale and licensing of
  intellectual property.
• 6.3. Standards
• Standards can allow products and services from
  different vendors to work together.
• Pre-mature standardization can lock in outdated
  techniques or lock out potential trading
  partners.
• Review Question
• Digitalization poses the challenge of balancing
  free information flow, protecting markets, and
  ensuring consumer privacy. Discuss.

73
Review Question

• 1. Digitalization poses the challenge of
  balancing free information flow, protecting
  markets, and ensuring consumer privacy. Discuss.

74
Session 7 Macroeconomics of
Spillovers

• 7.1. Role of Government
• Support private sector leadership the e-economy
  is better led by the private sector.
• Government should be proactive and supportive of
  positive change.
• Internet access, education, and support for
  youths in many ways are needful.
• Government should also ensure competitiveness of
  markets and development of new technologies.
• Government should also identify and address
  market failures.

75
Session 7 Macroeconomics of Spillovers
..1

• In doing so, government should act as maintainer
  and proactive promoter.
• Maintaining tasks of government
• Providing laws to ensure fare play and check
  exploitation.
• One way of achieving this is to check
  monopolization and restricted competition.
• The best known measure is antitrust legislation
  or competition policy.
• This aims primarily at preventing the formation
  of outright monopoly.

76
Session 7 Macroeconomics of Spillovers
..2

• The promoting task of the government
• This should involve
• developing e-infrastructure,
• erasing computer illiteracy in society,
• and investing extensively on information
  creation, communication, and interpretation.
• It equally calls for commitment to life-long
  learning and learning-by-doing.

77
Session 7 Macroeconomics of Spillovers
..3

• 7.2. Need for Supranational moderation
• The global character of the world-wide-web calls
  for supranational moderation.
• Traditionally there are several forums where
  government representatives meet.
• Further negotiations could build on the expertise
  accumulated in certain forums on particular
  issues.
• Since, the Internet is difficult to control by a
  single organization or government, NGOs may have
  some roles to play.

78
Session 7 Macroeconomics of Spillovers
..4

• Despite its overwhelming importance, ICT has been
  widely faulted on several grounds.
• It is argued that ICT has failed to generate
  broad-based multifactor productivity (MFP)
  improvement.
• The debate on the MFP incapacities of ICT is
  widely known as the productivity paradox.
• It was observed that productivity slowed down
  around 1973, just about the time computers became
  popular.

79
Session 7 Macroeconomics of Spillovers
..5

• Productivity has remained sluggish ever since.
• However, the creation of new knowledge in the
  e-economy is a crucial input factor.
• Knowledge creation is also an important cost
  saving innovation.
• The IT industry also has a major direct impact on
  growth and inflation.
• This kind of growth would fall under increase of
  stock capital ceteris paribus.
• Discuss the role of government in the new
  economy.
• While it is obvious that the e-economy has
  generated new knowledge at a faster rate, overall
  productivity of the global economy has been on
  the decline. Discuss this productivity paradox
  of the new markets.

80
Review Question

• Discuss the role of government in the new
  economy.
• The e-economy generates new knowledge at a faster
  rate, yet overall productivity of the global
  economy has been on the decline. Discuss this
  productivity paradox of the new markets.

81
Session 8 The Digital Economy and
Economic Growth

• The accelerated demand for IT products is the
  driving force in many economies since 1994.
• The e-economy also raises the quality of an
  economys workforce and increases income.
• All of this considered, ICT should lead to a
  permanent increase in productivity.
• 8.1. Digital divide and the catch up
• Death of distance" of the e-economy should bring
  our world closer.
• But its realization calls for broad
  accessibility.

82
8 The Digital Economy and Economic
Growth ..1

• Affordability of the e-infrastructure is required
  for effective participation in the e-economy.
• But the - digital divide - between those with
  access and those without is high.
• The digital divide is having tremendous effects
  nationally and globally.
• Innovations grow like mushrooms, popping up,
  almost overnight, unpredictably.
• This is because technical progress is driven by
  an unequally distributed creative destruction.

83
8 The Digital Economy and Economic Growth
..2

• This means that some people will benefit from the
  advances before others.
• Those who live around where the mushroom of
  innovation popped up benefit first.
• Access to telecom networks is critical for
  dissemination of innovations.
• OECD countries accounted for 69.2 of the 741
  million main telephone lines in 1996.
• Tele-densities ranged from 45- 65 per 100
  population in the developed countries.

84
8 The Digital Economy and Economic
Growth ..3

• The average was 5.2 in the major non-OECD
  economies, 4.5 in China, and 1.5 in India.
• More than half of the worlds population have
  never made a telephone call.
• Yet a city like New York has more telephones than
  all of rural Asia.
• And London has more Internet accounts than in all
  of Africa.
• LDCs pay on average three times more than rich
  country users to access the net.

85
8 The Digital Economy and Economic
Growth ..4

• An UNCTAD study notes that 20 access hours a
  month in 1999 cost 90 in Mexico or 15 of
  average income.
• Compared with only 25 in the US, a mere 1 of
  average income.
• In Africa, average access charges top 200 a
  month.
• Differences in hardware-distribution affect
  distribution of benefits from e-markets.
• Advanced economies will naturally gain more.

86
8 The Digital Economy and Economic
Growth ..4

• Poorer countries need to catch up with OECD
  countries where advances are made.
• Some people see the Internet as the Big Divider
  since it is not universally accessible.
• Inaccessibility make sit difficult to keep up
  with general development.
• Others claim the Internet to be the Big
  Equalizer.
• Generally, it is difficult to bring everybody up
  to the same level.

87
8 The Digital Economy and Economic
Growth ..5

• 8.2. Skill requirements
• Technological change promotes industry growth and
  demand for skilled workers.
• Future employment demands favor highly
  ICT-competent workers.
• ICT has been incorporated into nearly all jobs
  and professions.
• A high level of computer literacy is an essential
  component of every job.

88
8 The Digital Economy and Economic Growth
..6

• The preferred employee is a knowledgeable
  worker.
• Employers prefer employees who are abreast with
  current development and trends.
• Retraining of labor force will be an important
  task for employers in the coming years.
• Policies to cope with skill mismatches are
  already a concerns in many OECD countries.
• The death of distance is raised a pool of high
  mobile international workforce.

89
8 The Digital Economy and Economic
Growth ..7

• Some workers just need to work online from their
  homes.
• Overtime virtual offices situated in
  cyberspacewill become more common.
• Equally, working is increasingly linked to
  traveling and tourism.
• Many argue that the e-economy has not delivered a
  leisure society.
• It is claimed that those who have jobs today work
  harder and longer than before.

90
8 The Digital Economy and Economic
Growth ..8

• Virtual employments and multi-tasking have
  created challenges for the labour market.
• Components of an assignment can be done in
  several locations without workers having to
  physically relocate.
• This international division of labor has created
  challenges for immigration laws of states.
• Given the global scale and transparence of the
  e-economy, the reward for talented workers has
  increased.

91
8 The Digital Economy and Economic
Growth ..9

• The income of low skill workers have reduced
  leading in wage inequalities.
• Realities of the e-economy question the coherence
  of the industrial age.
• However coherent paradigms of the e-economy are
  yet to emerge, due perhaps to fluidity of the
  present age.
• Review Questions
• 1. How has the growing digital divide affected
  productivity of the global economy?

92
Suggested Materials

• Iwuagwu, Obi (2011). The Cluster Concept Will
  Nigerias New Industrial Development Strategy
  Jumpstart The Countrys Industrial Takeoff? Afro
  Asian Journal of Social Sciences 2(2-4) 1-24
• Hilbert, Martin R. (2001). From industrial to
  digital economics an introduction to the
  transition. A Publication of Restructuring and
  Competitiveness Network, Santiago, Chile,
• Barthwal, R. R. (2010) Industrial Economics An
  Introductory Textbook (3rd Ed) New Age
  International, India
• MIT (2003) Course 14.23 Government Regulation of
  Industry (Class 1) The Cambridge MIT Institute
  of Electricity Project
• Hinde, k. (2000). The Economics of European
  Industry Being Lecture Note for NIT EC455 Level
  3, Semester 2
• Symeonidis, G. (2011) Industrial Economics Being
  Lecture Notes EC3099, 2790099. University of
  London International Programme
• Lecture Notes on Industrial Organization and
  Competition Policy. Module 1 Basic Concepts in
  Microeconomics. Cost concepts. Http//http-server.
  carleton.ca/dmcfet/courses/lectures3.pdf
• Cabral, L. (2013) Introduction to Industrial
  Organization (2nd Ed.) Teaching Notes
• Marcos Anabela (undated) A New Marketing Paradigm
  in the Knowledge Economy