Study the evolution of electronic commerce and stages of development

The Second Wave of Electronic Commerce - Economists Chris Freeman and Francisco Louçã describe four waves that occurred in the Industrial Revolution in their book As Time Goes By. Many researchers predict that electronic commerce and the information revolution brought about by the Internet will go through similar waves. Those researchers agree that the second wave of electronic commerce has begun.

This section outlines the defining characteristics of the first wave of electronic commerce and describes how the second wave is different.

The first wave of electronic commerce was predominantly a U.S. phenomenon. Web pages were primarily in English, particularly on commerce sites.The second wave is characterized by its international scope, with sellers doing business in many countries and in many languages

The problems of language translation and handling currency conversion will need to be solved to allow efficient conduct of business in the second wave.  In the first wave, easy access to start-up capital led to an overemphasis on creating new large enterprises to exploit electronic commerce opportunities. 

Investors were excited about electronic commerce and wanted to participate, no matter how much it cost or how bad the underlying ideas were.  In the second wave, established companies are using their own internal funds to finance gradual expansion of electronic commerce opportunities.

These measured and carefully considered investments are helping electronic commerce grow more steadily, though more slowly. The Internet technologies used in the first wave, especially in B2C commerce, were slow and inexpensive. 

Most consumers connected to the Internet using dial-up modems. The increase in broadband connections in homes is a key element in the B2C component of the second wave. In 2004, the number of U.S. homes with broadband connections began to increase rapidly.

Most industry estimates showed that about 12 percent of U.S. homes had broadband connections in early 2004. By late 2005, those estimates were ranging between 25 and 30 percent. 

Many experts believe that increased use of home Internet connections to transfer large audio and video files prompted the surge in broadband connections.

Although these connections are more expensive, they are more than 10 times faster than dial-up.  This increased speed not only makes Internet use more efficient, it can alter the way people use the Web. 

In the first wave, Internet technologies were integrated into B2B transactions and internal business processes by using bar codes and scanners to track parts, assemblies, inventories, and production status. These tracking technologies were not well integrated.

Also, companies sent transaction information to each other using a patchwork of communication methods, including fax, e-mail, and EDI. In the second wave, radio-frequency identification (RFID) devices and smart cards are being combined with biometric technologies, such as fingerprint readers and retina scanners, to control more items and people in a wider variety of situations. 

These technologies are increasingly integrated with each other and with communication systems that allow companies to communicate with each other and share transaction, inventory level, and customer demand information effectively.

The use of electronic mail (or e-mail) in the first wave was as a tool for relatively unstructured communication.  In the second wave, sellers are using e-mail as an integral part of their marketing and customer contact strategies.  

Online advertising was the main revenue source of many failed dot-com businesses in the first wave.

After a two-year dip in online advertising activity and revenues, companies are beginning the second wave with a renewed interest in making the Internet work as an effective advertising medium.

Some categories of online advertising, such as employment services (job wanted ads) are growing rapidly and are replacing traditional advertising outlets.  

The sale of digital products was fraught with difficulties during the first wave of electronic commerce.  The music recording industry was unable (or, some would say, unwilling) to devise a way to distribute digital music on the Web.

This created an environment in which digital piracy-the theft of musical artists' intellectual property-became rampant.

The promise of electronic books was also unfulfilled.  The second wave offers the promise of legal distribution of music, video, and other digital products on the Web.  Apple Computer's iTunes site was one of the first second wave attempts at digital product distribution.

In the first wave of electronic commerce, many companies and investors believed that being the first Web site to offer a particular type of product or service would give them an opportunity to be successful.  This strategy is called the first-mover advantage.

As business researchers studied companies who had tried to gain a first-mover advantage,they learned that being first did not always lead to success.  

First movers that were successful tended to be large companies that had an established reputation (Or brand) and that also had marketing, distribution, and production expertise.

First movers that were smaller or that lacked the expertise in these areas tended to be unsuccessful.  Also, first movers that entered highly volatile markets or in industries with high rates of technological change often did not do well. 

In the second wave, fewer business rely on a first-mover advantage when they take their businesses online. This list is not complete because every day brings new technologies and combinations of existing technologies that make additional second wave opportunities possible.

Source : ELECTRONIC COMMERCE

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