Consumers and the Growth of the New Digital Economy - Research Paper Example

Consumers and the Growth of the New Digital Economy Introduction The 1990s came with the increased usage of computers and other devices that promoted communication between different people around the world[Sch10]. The use of computers also increased significantly in various business entities. Businesses needed to use computers to enhance their management of information and the presentation of data and information for various purposes. This essay will examine the fundamental question of what the new digital economy is and what keeps it thriving in the present dispensation. This fundamental research question will form the basis and impetus for the entire discussion of this essay in order to describe the main elements and fundamental aspects of the new digital economy. Afterwards, the paper will examine the fundamental reasons and motivations for the growth and expansion of the new digital economy. To this end, the following research objectives will be explored: 1. A critical review of the concept of the new digital economy and its components; 2. An evaluation of the main profit-orientations that fuels the growth of the digital economy; 3. An assessment of consumers’ utilisation of aspects of the digital economy. 4. The utilisation of elements of the digital economy for the running of businesses and corporate entities This paper asserts that the digital economy exists because it creates an enhanced system of disseminating information which promotes efficiency, effectiveness and cheaper methods of doing things. Thus the paper will examine the inherent elements of the digital economy that enables this to happen and how it enables various stakeholders in society to improve their lives and circumstances in their everyday lives. To this end, the paper examines the main reasons why the digital economy and its components are popular with various people and ordinary members of the society. This will involve a critical view of what consumers do in order to utilise the digital economy and how the wider society benefits from this. There will also be an assessment and evaluation of the positive attitudes and processes in the society that fuels the growth and expansion of the digital economy in our age and time. Section 1: Literature Review This section will try to establish and define the core and fundamental aspects and elements of the digital economy. The literature review will utilise various secondary sources about groundbreaking definitions and theories that provide a conceptualisation of the digital economy. Due to the nature of the new digital economy, it is something that forms a fundamental part of our lives. In other words, it is an unconscious evolution of human interactions from the traditional system to a system in which communication is carried out through various automated and digital ways and means. Therefore, this section will seek to explore fitting definitions and descriptions that have been placed upon the concept of “digital economy”. “The digital economy involves conducting economic activities electronically, based on the electronic processing, storage and communication information, including activities that provide the enabling physical infrastructure and software.”[Sin12]. This implies that the new digital economy is fundamentally concerned with the evolution of a new electronic regime that enables communication to be done through various electronic platforms and systems. This includes the use of software and hardware (physical infrastructure). The digital economy emerged through the presentation of computer networks and the increase in the number of people working in the information technology systems[Sch10]. This implies that it grew as a means through which different stakeholders and people could be brought together by strong infrastructure and other systems that were ran by experts in an ever-expanding industry. This expansion is obviously due to the increases in demand for information technology and systems[Joh11]. The digital economy has also created a unique and distinct sub-economy that is kept alive by the continued use of information technology and information system[Joh11]. This is due to the commercial exchanges that are conducted over various software applications that utilises information and communication technology (ICT). This has created a kind of digital market and a digital process through which different parties can interact and carry out their activities. The new digital economy is fundamentally made up of five components: 1. Knowledge based 2. Weightless 3. Networked 4. Digitalisation 5. Information based[Keh13] This implies that the digital economy is meant to be steeped in the distribution and proliferation of knowledge. This is done in a way where knowledge is done through the use of electronic media that are presented without the use of papers and other bulky materials. This is done through a system of networked information systems in which data and information is shared and distributed throughout various processes and systems within a given network. This is done through the use of programmed information-based systems that uses various mathematical and programming methods that enables data to be encoded for onward transmission through electronic and digital systems. Therefore the digital economy actively refers to the process and the system through which people in a given nation or country can communicate and interact through the use of sophisticated and advanced processes that are digital. This will be done through the presentation of various methods and media through which people can interact and communicate through an enhanced communication process. This is fundamentally done through a hardware which is fundamentally made up of a physical electronic system that has tangible features and components[Pea13]. This is complemented by a software which is rather the intangible features of a digitalised system which involves the programs and instructions that are used for the operation of the device or hardware[Pea13]. From the point of view of Barton and Hall, the new digital economy is the presentation of a platform and system through which the different economic activities of a given nation is presented to ensure that commercial transactions can be conducted[Bar12]. This implies that there is a system and method through which the new digital economy is to be referred and identified in such a way and manner that will enable people to conduct various transactions and processes to ensure that commercial transactions can be carried out. This is because the new digital economy is about a method and system through which online systems and processes can be used as outlets through which sales and other transactions can be carried out. Therefore, the digital economy involves the work and role of the new digital economy involves the presentation of traditional offerings which are modified and digitalised[NgI12]. Ng goes on to state and identify that the growing digitalization of the world has created the foundation for the creation of a significant market that has been the main reason for the growth of the new digital economy. This is because a lot of people are now using digital channels and systems, thus the digital economy keeps growing and thriving in order to meet the need and expectations of people who desire to exchange information and ideas. Illing and Peitz on the other hand present a different argument about the new digital economy. They argue that the new digital economy refers to a new system of modifying things like music, books and sports in such a way that they can be sold and enjoyed through various digitalised systems and processes[Ill13]. This facade of defining the digital economy is done through the presentation of a narrow view which is much more specific than the broad definition presented by other thinkers who present the digital economy just as a system through which people buy and sell over electronic systems. On the other hand though, Illing and Peitz argue that the new digital economy has caused the modification and significant changes in various industries and sectors. This is because most businesses have a duty to ensure that their organisations remain more productive and worthwhile. This means that they will have to find innovative and enhanced methods and processes of presenting their offerings in order to ensure that they remain in business. Thus, the digital economy has developed as a result of the changes in product offerings and consumer demands and expectations. “The digital economy includes goods and services whose development, production and sale and production is critically dependent upon digital technologies.” [Bor10]. The components of the digital economy include: 1. Highly digitalised goods and services; 2. Mixed digital goods and services; 3. IT-intensive services and goods production; 4. Parts of the IT industry that supports the identification and pointers above[Bor10] Globalisation, knowledge of IT, economic dynamism and innovation forms the foundation of the digital economy[Mal10]. The ability to attain a global reach and to get customers and users from different parts of the world indicates that there is the chance for businesses to examine and grow different aspects and elements of the market for a given product or a given organisation. The knowledge of IT in the local economy and the possibility for innovation and other forms of dynamism play a role in the state of the digital economy of a given area. The literature review indicates that there is a broad sense and a narrow view of the digital economy. The broad sense involves viewing the digital economy as a system and a process through which transactions are generally done in the wider sense. In the narrow and more specific sense, it is apparent that the new digital economy is about the digitalisation of products and making the products available to various consumers either in an electronic format or selling it through the electronic media. The main gap in the research is that the digital economy might be consumer driven or profitability driven. However, this varies according to the motivation of the different consumers and other stakeholders in a given economy and a given nation. Section 2: Consumers and the Growth of the New Digital Economy Consumers are the motivated for using the new digital economy in various ways and in various manners. This is because consumers continuously seek better and improved methods and processes for gaining products and consuming the product. The process and the products that is offered to various consumers are presented and identified in a way and manner in which consumers will prefer and clearly, this has helped in shaping the new digital economy. Consumer decisions are mainly based on the needs and expectations that they have and habits they have built[Ill13]. This is because consumer sovereignty allows consumers to deal with things and processes. This will enable consumers to choose and decide on what must be done. This implies that the needs and expectations of consumers fuel their decisions and choice about what to buy at given points and situations. Therefore consumer demands are fuelled by various needs and expectations that consumers, hence, where demand tilts towards digitalized processes and digitalized methods and systems, businesses have no choice but to adapt in order to meet these needs and expectations[Bor10]. Marketing logic is such that a marketer and a marketing entity has the role of ensuring that the firm’s products and offerings are in line with the dominant needs and expectations of consumers. An empirical study indicates that marketing is aligned to the consciousness and the expectations of society within which a firm seeks to sell and operate its business[McD02]. This logic is steeped in the premise that market share and market growth are the fundamental elements and aspects of marketing hence there is the need for firms and businesses to be sensitive to customer satisfaction. This is because what is going to promote and enhance the needs and satisfaction of consumers must be at the heart of marketing[McD02]. Therefore, it is normal and imperative for the presentation of services and processes that modify and enhance the promotion of products and services for consumers based on the contemporary needs. Eshun identifies that business strategy and business marketing is not one that happens without evolution. This is because business strategy evolves through various stages and processes that enable the business to align its marketing and business strategy with the needs of consumers and their expectations and in cases where businesses fail to innovate and meet the desires and expectations of consumers, other smaller consumers enter the market[Esh09]. Eshun identifies that there is a trend of “new entrepreneurial economy” and this is because small producers and small service providers have been proliferated due to consumer needs and consumer expectations which is digitalised and easily accessible to different small scale producers around the world who have access to simple and easier methods of setting up businesses. This is due to the fact that the trends in consumer behaviour are fast changing because consumers have sophisticated needs and expectations. Examining the fundamental aspects of Philip Kotler’s 4Ps, it is apparent that this core theory of marketing is steeped in consumer needs and consumer expectations. This is credited to the fact that consumer needs and expectations form the main aspects of targeting and they shape the ways and manner in which products are presented to consumers. The consumers of the 21st Century prefer elements and aspects of products that are convenient and fit their specific needs and expectations. Convenience and easy methods of doing things is a major element and aspect of consumer needs and consumer expectations because consumers are highly focused on getting products that can be easily used in a way and manner in which the consumers want it[Hol11]. Consumers are seeking convenient and better processes that can be used to purchase and utilise products. Hence, the need for convenient methods and consumption streams has contributed to the new digital economy. Also, growing individualism has led to a trend towards mass customisation[Tya10]. This is because mass customisation is the main way through which consumers’ methods and consumers’ requirements will be met through the presentation of consumer needs through various systems and processes. However, presenting mass customisation demands means of examining the markets and comparing prices. Therefore, the new digital economy provides a high quality and an extremely useful tool for ensuring that consumers can analyse the markets and find mass customisation methods and processes in order to provide important services and processes. Due to the demands and the expectations of consumers towards better products and more convenient and easy-to-use products through electronic media and systems causes the markets to tilt towards a new digital economy. Today, the nature of aggregate consumer behaviour and expectations is more of a relationship based marketing system as opposed to transactional marketing systems for businesses[Gly11]. This therefore implies that the markets have to evolve and change towards to needs and expectations of consumers and their expectations. In today’s world therefore, it is imperative for businesses to change and tilt towards the wishes and needs of consumers. And due to the need for convenience and mass customisation needs and expectations of consumers, the new digital economy has grown because it provides an avenue and system through which consumers can get convenient and customised products. This is an affordable and cheap system through which corporate entities can meet the needs and expectations of consumers. These needs are such that the consumers can also find better offerings from a global method and also source for better and cheaper products and services. Section 3: Profitability and the Digital Economy A company can be seen as a huge entity that is constantly changing because of the need to increase sales and attain high levels of profitability[Edg11]. This is because customers are mainly looking for products and they are willing to pay an amount of money for a product that brings the best kind of results or satisfaction that they need. Hence, the growth of the demand for products sold through the digital economy implies that in order to attain high levels of profitability, they will have to vary their services from selling mainstream products in order to sell to the digital and electronic products that consumers want. This is steeped in the argument that most businesses seek survival and growth as a primary essence[Afu14]. Profitability is strongly linked and connected with innovation and improvement in order to meet the needs of parties on the market[Don10]. Profits are made through the alignment of the firm’s activities to the needs and expectations of people in a given market. Therefore, there is the need for businesses to play into the digital economy if the needs and expectations of consumers are strongly steeped in acquiring goods and services from the digital economy. The conventional method of running a business in the 21st Century is to blend a static strategy with an emergent strategy[Keh13]. This is because every firm will need to get a fundamental or base strategy that is defined by the management and the top level directors of the entity. However, in reality, no firm can survive or grow without varying its strategy and system to meet the needs and expectations of members of the society[Keh13]. Due to this, businesses end up setting up systems that are emergent and this is done through the use of a proactive system or method of examining the needs and expectations of consumers and modifying their ways and strategies to meet consumer needs and expectations in order to attain the highest levels of profitability possible. The main means of maintaining an emergent strategy is to use a proactive marketing research and market analysis tools and systems[Wel12]. Thus, most firms analyse and evaluate the markets and consumer expectations and needs. This culminates in the identification of methods and processes of dealing with the fast changing consumer needs and expectations which is fast becoming based on digital products and places are being eliminated and replaced by the use of digital systems and digital products. Innovation and the sale of innovative products and services is a means through which firms get a competitive advantage and improved profitability and results[Haf10]. This implies that the digital economy becomes a preferred choice and an improvement process of carrying out business and doing things because people prefer products and processes that are within the digital economy. Therefore firms will have to pursue systematic innovation because it is an improved method of getting consumers what they want and also finding systems and processes that are better and more improved to help consumers to purchasing needs and expectations. Improved method and incremental approaches of enhancing the systems and services of companies will provide better methods of doing things[Joh11]. Therefore, there is the need for the presentation of better commercial methods and commercial processes in order to attract consumers and also identify better processes and systems of carrying out affairs in organisations. It can therefore be said that the digital economy is an important and popular method and popular method of attaining products and services. This means that in order to get more services and products, there is the need for businesses to provide better products and services that are preferred by consumers. The product choices of consumers are mainly of the nature and the status of products that are mainly digital and are of the status of adapted products and services. Due to this, businesses have a motivated to identify products and services that are digitalized and adapted from the normal and mainstream processes and systems. This implies that there is the need for businesses to find new products and new services that are of a status or standard that meets the convenience and the mass production systems and mass production expectations of consumers on the market at any point in time. Section 4: Corporate Governance and the Digital Economy As identified above, a business seeks survival and growth. This implies that businesses will have to find ways of making profits in order to pay for their bills and their needs. The people charged with this in organisations are person who occupy corporate governance roles in the organisation like senior management and directors. The action of senior managers and directors in the 21st Century influences and is influenced by the digital economy[Don10]. This is because corporate governance is about carrying out business in a way and manner that enables a firm to attain the best results and this is done through the use of various systems that aids the digital environment. Businesses have to do things in a way and manner that enables them to attain optimal and best results in whatever they handle. Therefore, a business is constantly evaluating elements and aspects of the markets in order to come up with a solution on how to carry out their activities. One of the main tasks and requirements of persons conducting corporate governance is to carry out enterprise risk management[Dun08]. The enterprise risk management of most businesses is responsive and it is modified in relation to what exists on the markets and the demands of stakeholders[Dun08]. Thus, most businesses focus on finding methods of eliminating risks in the digital economy since more and more people are increasingly moving from traditional markets to these digital markets. The main areas that enterprise risk management focuses on includes areas of the digital economy like e-commerce risks because it is an important outlet and system through which most firms of today operate and carry out their activities[Sal12]. Thus, the focus of most firms are gradually shifting to these aspects of risks that come with the digital the systems and processes. Such systems and activities ensure that a firm is mainly sensitive to the needs of the digital economy and risks in those areas are ameliorated whilst the opportunities are explored. Therefore for example, a bank that provides over-the-counter services begins to provide some kind of digital services and this provides convenient and bespoke services to a large number of consumers in a very limited system or framework. However, with time, as more and more consumers begin to use online banking and mobile phone banking, the bank will expand its e-banking services and target more and more consumers through internet banking. In future, they might choose to migrate all their consumers to a digital portal and this will inevitably lead to the closure of some manual aspects of the bank and there will be an expansion of digital activities in the bank. As this grows and expands to other sectors and other units of the banking sector, the entire banking industry grows and becomes increasingly digitalised. Also, the Internet, which happens to be the biggest network in the world continues to grow and more people spend more of their time doing things over the Internet[Kho09]. This means that most firms’ directors and top managers will be expected to expand onto the Internet in order to capture a share of the Internet market which is growing and continues to grow. Also, with the entire society going digital around the world, more and more businesses are becoming inclined to use digital methods and digital products to gain compatibility with dominant stakeholders in their industries[Sha12]. There is the need for firms to find proactive systems and processes to improve their services and cut down costs at the same time. Hence, there is a general tendency and bias for firms using electronic and digitalised systems and processes in order to find better methods and approaches for dealing with issues and matters[Car13]. This enables firms to get better results. However, in doing this and in pursuing this path, a firm unconsciously becomes a part of the new digital economy and they become internally digitalised in preparation for adding up externally, to the digital economy[Mal10]. Typically, a business finds ways of setting up internal structures that provides the highest levels of information about affairs internally and externally and this is done in order to aid decision-making[Wel12]. Thus, it is natural and almost certain for information systems to promote information sharing and information gathering. This automatically turns a firm into one that will also want to use elements of the digital economy because this becomes an inherent and preferred method through which a firm can sell and market their products and services. Also, since most decisions by the persons charged with corporate governance is often based on the economic reality and the integration of external stakeholder needs, most businesses get systems and processes through which the commercial needs and expectations of external stakeholders are taken critically and integrated into their processing[Tur10]. And statistics show that a third of the world’s transactions are done through digitalised processes and this means that the digital economy is worth $60 trillion, hence it is only natural for business leaders to look towards investing in the digital markets rather than traditional markets since this digital market is growing significantly[Wae12]. Conclusion The research identifies that there are two main facades within which the concept of the new digital economy can be viewed. One facade defines the new digital economy as the movement of business activities to electronic and digital platforms. This means businesses are becoming more prone to providing services through electronic systems. A second definition, which is a more specific or narrow views the new digital economy as the products and services that are either sold or consumed in the digital form. This involves the examination of the evolution of traditional products and services into automated or digital products offerings. The fundamental hypothesis of the paper which asserts that the digital economy exists because it promotes efficiency, effectiveness and cheaper methods of producing and consuming things is justified to a large extent in the study. This is because the paper identifies that most consumers want convenient and customised products and services. Hence, they tend to go for digitalised products which are much more efficient and effective in meeting this end. In relation to businesses, the evolution of businesses to the digital economy is mainly as a response to the needs of consumers. In order to ensure profitability, businesses have to satisfy needs of consumers and the digital economy provides the main method and needs of consumers. This causes businesses to invest in more electronic and digital-friendly products and services. This causes businesses to seek digital products, digital payment methods, digital processes and sell through digital spaces like the Internet and other networks. This has caused businesses to also change their internal structures to be better producers of these services. In essence, businesses and corporate governance systems are adapted to provide better services in the new digital economy. This is induced by the digital economy and this in turn induces the digital economy. 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