Internet Economy Strategies

A creative approach to the development and implementation of e-commerce projects creates tremendous opportunities to restructure the value chain and strengthen the competitiveness of the company. It is already clear that the Internet economy is fraught with new opportunities and dangers that require the study of new strategic decisions, which in turn means the need to develop new highly effective strategies.

The Internet is a single electronic network consisting of many servers and high-speed computers, digital PBXs, routers, telecommunications equipment, communication lines and personal computers. The basis of the Internet is telecommunication lines (fiber-optic and telephone with high bandwidth), connecting countries and continents and providing data transmission in digital form.

According to studies, at the end of 2000 there were 325 million regular Internet users in the world: about 150 million in North America, 100 million in Europe, 58 million in the Asia-Pacific region, 11 million in Latin America and over 7 million in the rest of the world. (Based on BusinessWeek, October 7, 2001, p. 77.) More and more companies and industries are involved in the production and support of the Internet infrastructure and the value chain of the Internet economy. The offer in the Internet-economy is formed, in particular, by such companies:

Manufacturers of specialized equipment and components. CiscoSystems (the world leader in the production of switching devices and routers); Lucent Technologies, Motorola, Broadcom, Texas Instruments, PMC Sierra and 3Com; Communication service providers engaged in the creation and commissioning of telecommunications networks to provide Internet infrastructure and services. These are companies responsible for the installation and maintenance of equipment for the functioning of the Internet – local telephone companies, cable companies, wireless communication providers. The largest companies working in this area are WorldCom, AT&T, Qwest Communications, Deutsche Telekom, British Telecom, Vodaphone AirTouch, BellAtlantic, SBC Communications and Global Crossing; Suppliers of computer equipment and components. These are companies that produce computer equipment, workstations, servers and peripheral equipment, as well as internal devices. This group of companies includes Intel, Sun Microsystems, Seagate Technology, IBM, Iomega, Fujitsu, NEC, Matsushita/Panasonic, Acer, Philips Electronics, Toshiba, Gateway and Hewlett-Packard; Developers of specialized software. These companies develop software for commercial operations, including encryption programs, order processing and payment acceptance programs, electronic trolleys, browsers, banner advertising and Web page development programs, as well as programs for PCs, modems, wireless devices, workstations, local area networks, etc. DoubleClick provides a special program for collecting demographic data of Web users, analyzing the information obtained on the basis of specified criteria and displaying advertising on users’ screens based on their individual characteristics. DoubleClick programs also collect information for customers about the frequency of access to banner ads and the characteristics of users who are interested in it. IClickCharge, a division of CMGI, develops software for electronic payments. The young but ambitious company Blaxxun specializes in the development of software for three-dimensional design of Web-sites, which is very interesting to retailers. Another start-up company, Engage Technologies, offered programs for tracking traffic on the Web and creating profiles of a standard user; Based on this information, companies are improving their e-marketing strategies. Major software developers also include Microsoft, IBM, SAP, Commerce One, Seibel Systems, Ariba, Oracle, Inktomi, Baan, Sun Microsystems, Macromedia and Novell; E-commerce businesses. This category includes, firstly, companies trading in the B2B market: Cisco, Intel and Dell Computer have transferred almost all operations with corporate clients to the Internet, and General Electric conducts all operations with suppliers via the Internet; secondly, companies operating at the B2C level: for example,, eBay,,,,, and Charles Schwab; Third, the Internet entertainment business is Disney, Nintendo, Electronic Arts, and Sony; Fourth, the companies are content providers: America Online, Yahoo,, The Motley Fool and iVillage.

Many companies work in several of these areas. The holding company CMGI, which is also engaged in venture enterprises, owns stakes in 52 Internet companies, of which nine content providers, 12 software and other e-commerce companies, 12 electronic retail companies own all or part of it. Japanese venture capital firm Softbank has invested in more than 100 high-tech enterprises specializing in software for e-commerce, Web-publications, e-retail, electronic brokerage services, Web-portals, ancillary services in e-commerce, for content providers. Softbank owns stakes in Yahoo!, E*Trade, E-Loan, Critical Path, and some other companies in the United States, although the main operations of the company are concentrated in the market of Japan, some regions of Asia and Europe.

The spread of e-commerce requires the development of new business models and strategies. However, first it is necessary to analyze how the development of the Internet by corporate and individual users affects the situation in industries and changes the boundaries between them. Here are the most notable signs of this influence:

The Internet draws all companies into global competition, regardless of their location; Competition in the industry is sharply increasing due to the development of e-commerce by traditional companies and due to the emergence of new Internet companies operating only on the Web; Entry barriers in e-commerce are relatively low; Electronic buyers are more demanding on price, because they can immediately compare goods, prices, delivery times of competing companies; The Internet allows you to choose suppliers in any country of the world and establish close mutually beneficial cooperation with them to increase efficiency and reduce costs; The rapid development of the Internet and computer technologies does not allow us to unequivocally predict the consequences; The Internet accelerates the spread of new technologies and ideas; Electronic technologies require companies to act faster – “in the Internet mode” or “at the speed of the Internet”; E-technologies open up new opportunities for restructuring the industry and corporate value chain; The Internet serves as a cheap channel for serving consumers. Under Internet-projects it is relatively easy to get investments; Electronic technology constantly requires a valuable resource – human talent, both in the form of technical knowledge and experience, and in the form of managerial know-how.

The active use of electronic technologies causes profound changes in the competitive situation: competition is intensifying, entry barriers are increasing, the very traditional concept of the industry is being transformed, the importance of geographical boundaries is decreasing. All this upsets the balance of competitive forces both between sellers and suppliers, and between sellers and buyers, which leads to the emergence of new diverse forms of cooperation. However, due to the high rate of technological change, its consequences are not always predictable. The market is changing very quickly, forcing companies to react quickly as well.