In the early to mid-nineties, a major change began taking place in America’s economy. Technology and innovation became some of the leading factors of success for companies. Companies have been forced to change as the technology introduced around the world changes, and more importantly, they have had to be swift in adapting to change. This new age has commonly been classified as the “Information Age” or the “New Economy.”
Charles Darwin once said, “It is not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change.” This quote is not only true to mankind, but also to any firm that has inspirations of succeeding in this so-called New Economy.
“The term New Economy refers to a set of qualitative and quantitative changes that, in the last 15 years, have transformed the structure, functioning, and rules of the economy.” The New Economy is an economy with a great deal of emphasis placed on a person’s ability to create new ideas and adapt to changes in technology. It is an economy full of uncertainty and risk that has the potential of being very rewarding to a person or company that can most successfully accomplish the objective of innovation.
The New Economy has had a great impact on the way companies conduct business, and it will continue to impact businesses for the time to come. In the past, companies depended on marketing their product through various ads in magazines and television, and then going out on the road or via telephone to try and sell their product. With the New Economy, one of the leading ways to market or sell a product is over the Internet. Both Internet marketing and Internet sales will see a great increase over the next couple of years. The Internet, with its enormous potential to increase efficiency and raise productivity, is one of the most critical components of the New Economy.
E-commerce has already had, and will continue to have, a great impact on the way business is conducted in the New Economy. “The total U.S. Internet economy more than doubled between 1996 and 1997, from $15.5 billion to $38.8 billion.By 2001, the total U.S. Internet economy is projected to be over $350 billion. Business-to-business e-commerce is expected to account for the largest share, $186 billion. Consumer retail activity is expected to emerge more slowly, possibly totaling $18.4 billion in 2001.”
Fifteen years ago, it would have been difficult to fathom people buying and selling something as simple as books or movies over the Internet. However, in this New Economy you can buy or sell just about anything you want over the Internet. Most of today’s largest businesses have Internet sites that either sell or market their product worldwide. In fact, in 1997, 24 percent of U.S. businesses had access to the Internet. That number is projected to be 45 percent by the end of 2001. In the same period, the percentage of businesses with their own Web sites is projected to grow from 5 percent to 30 percent.”
The business models of most companies have to change with this new era in order for them to remain successful. The New Economy demands an increase in skilled, or educated, workers because of the technological advances. The educated workers must possess strong managerial skills and be creative in order to help the company become a leader in product innovation.
The advances in technology and the increase in competition have caused the business models to change and become more flexible. Since there has been and increase in competition, it is advantageous for companies to offer customized products to their customers. In order to customize the products, the company must be flexible and be able to adapt to all of the differences required by each customer.
Another part of the business model that has changed with this New Economy is the importance of exporting and importing. The New Economy has caused businesses to become more global in their operations, which in turn has lead to competition from all over the world. World exports increased from $1.3 trillion in 1970 to $4.3 trillion in 1995, in constant dollars. And globalization may be about to move up to a new level. “Jane Fraser and Jeremy Oppenheim, of the consulting firm McKinsey ; Company, have estimated that the value of the world economy that is “globally contestable,” which is to say open to global competitors in product, service, or asset ownership markets, will rise from about $4 trillion in 1995 (approximately a seventh of the world’s output) to more than $21 trillion by 2000 (about half of world output).” For the U.S., this means international trade and investment play a much greater role in our economic life than before. Twenty years ago, exports and imports made up 17% of our economy. Today, they account for 25%.
It is now a competitive requirement that businesses invest all over the globe to access markets, technology, and talent. The increase in foreign direct investment clearly shows the trend toward globalization. The expansion of trade means more competition, which increases the importance of innovation for the success of a company.
Another part of the business model that must change is the importance of customer service in a timely manner. Not necessarily answering one’s questions, but also responding to changes in the global market. An increase in competition has created an extra importance for companies to “own” their customers. In order for them to own the customers, the companies must be easily accessible for communication and purchasing as well as being efficient with business transactions.
I believe that in the New Economy, e-commerce will be one of the most important facets for a company’s success. They must be able to keep up with the ever-changing technology and be a leader in their industry. If a firm does not adapt to the changes required for it to remain competitive, then I feel that it will be engulfed in this current flurry of mergers and acquisitions.