E-Business in the United States - Essay Example

In Drucker's account, technology and the invention of calculating machines, in particular the computer, are central to the progress of society through the three revolutions outlined above. Traditional factors of production - land, capital and labour - have become secondary to knowledge. As long as there is specialized knowledge these factors can be obtained. In this view, company transactions become weightless. For example, the value of Coca-cola is tied not to the value of production of a fizzy drink, but the power the brand exercises in the market place.

In the above mentioned context, it is reasonable to compare the building of the interstate highway system in the United States between 1956 and 1976 and the Internet as innovations. The interstate and Internet are both network innovations. The former transformed the economic geography of the United States, promoting lower transport costs, greater market access, outward mobility into the suburbs and the rise of the local shopping mall. While the Internet offers a wider selection and a greater ability to search, the delivery of goods is not immediate.

Consequently, Internet marketing may not be superior to the marketing of the conventional shopping malls. The Internet remains part of the long march of creating innovations, but like all technology it is the nature of human inventiveness that makes them beneficial. The period of building the interstate system coincides with an annual average 1.6 per cent growth in real earnings on the Standard & Poor's 500 index of the financial performance of the top 500 US companies. Despite the enormous impact of the interstate on the economic geography of the United States why were these earnings not higher The answer according to Schiller was that the interstate system was just another innovation along the path of inventiveness.

Similarly, evidence from McKinsey & Co., the international consultancy, shows that the impact of new technology, including the Internet, on productivity in the United States in the late 1990s was much less than was believed at the time (McKinsey 2001). The relationship between technological change, economic growth, increased productivity and profits is much more complex and indirect than the easy direct relationship suggested by some popular commentators. In the past decade the service sector has been in the forefront of investment in new technologies in the advanced economies.

But executives have been deluded: the payoffs have not been fully realized:The primary reason is that technology alone does not determine corporate performance and profitability. Employee skills and capabilities play a large role, as do the structure of day-to-day operations and the company's policies and procedures. In addition, the organisation must be flexible enough to respond to an increasingly dynamic environment. And products must meet customer requirements. (Hackett 1994:21) These observations act as a health warning to the business environment for e-Commerce.

This warning is not posted to suggest that Internet-based transactions will fail to deliver material benefits to producers and consumers alike. Rather, they act to signpost the difficulties associated with claims that we now live in a new business, economic and social order. This paper attempts to explain the context in which e-Commerce has developed and the difficulty faced by companies that believe the