Posted: July 19th, 2023

E-Commerce and Globalization Research Paper

E-Commerce and Globalization

E-Commerce at Amazon.com

There are a myriad of advantages and disadvantages of selling books and good over the internet. Some advantages to selling goods over the internet are the sheer amount of people that the internet has the ability to reach. Malls, boutiques, among other merchant stores are sometimes in centralized locations do not have the ability to reach some suburban and rural populations; thus, having an internet store does arm merchants with the ability to sell their product to the masses. Furthermore, selling books and other goods over the internet is also more cost-effective as processing orders requires a distribution center instead of having stores all over the country which require staffing and rent, among other overhead costs. Though, with all advantages come some disadvantages including some issues for the consumer. Consumers are unable to touch or see the good or product in its physical capacity which causes some disconnect for the consumers and it may lead to potential dissatisfaction with the product upon receipt.

In the age of the iPod, BlackBerry’s, and other technologies that have enabled people to get information at the tips of their fingertips, Amazon has done an excellent job of changing with the marketplace. As things like books and movies are able to be downloaded almost instantly from the Internet, the demand to purchase a hardcover book or a DVD has decreased. Jeff Bezos’s, CEO of Amazon, developed “the Kindle, an electronic reader that some analysts have called the next iPod” (Machan, 2008). The business model of buying books from the site has definitely changed in light of the fact that books can be downloaded and by developing a product where books can be instantly downloaded via the website, puts Amazon in as a front runner in the technology evolution. By constantly being on par with the changes, it allows Amazon to maintain its niche as a “go-to” website to download books and movies via their own product. In light of books of being instantly downloaded, Amazon has changed its business and adapted to the constantly evolving technological and social dynamic that has been created.

The ever changing social and cultural dynamic, e-commerce is embedding itself in the fabric of society. It was reported by the New York Times, that the social networking site “Facebook has long promoted the value of such social ads, saying that word of mouth from friends is more valuable for users and marketers alike than generic marketing messages” and that “e-commerce sites are increasingly benefiting from tying their services into the Facebook platform” (Helft, 2011). Via Facebook, the strengths of e-commerce can be measured and the benefits are noticed. The retail clothing line, American Eagle, reported that “users referred by Facebook spent 57% more than average on the site” when online shopping (Helft, 2011). E-commerce is the way of shopping in future generations and by supplementing stores with an online component, it allows a greater population to reach the same product.

¶ … bottom line is that globalization is the new economic reality for the 21st century. Manufacturers and service providers are not necessarily chasing the lowest cost labor hour, as they are more interested in chasing talent and skill sets not easily recruited in their regions of the world. While the low-cost, commodity-like products get the most attention and anger from unions and organized labor, the majority of money being spent in this area has to do with very complex, difficult projects. Consider for example the value chain of the global auto industry, and how the Japanese have consistently led the market with new product innovation including hybrid engines like those found in the Toyota Prius, or the continual innovation in safety engineering in German auto manufacturers (Sturgeon, Van Biesebroeck, Gereffi, 2008). There are knowledge centers emerging globally, and they vary by industry. These knowledge centers are very attractive to companies needing expertise, and it is much more efficient to hire talent in these locations than attempt to recruit or develop it inside a company (Sturgeon, Van Biesebroeck, Gereffi, 2008). So while many unions and organized labor groups cry foul over outsourcing, in reality, this trend is protecting more jobs by giving companies a chance to compete globally by being smarter about how the built and market products.

Outsourcing Is More than Cost Reduction

Value chains in businesses thrive on new intelligence and knowledge, and being able to quickly change direction based on them (Sturgeon, Van Biesebroeck, Gereffi, 2008). That is the catalyst of the greatest percentage of outsourcing today. True outsourcing is taking the most challenging problems and seeking to gain insights and intelligence from expertise in various knowledge centers of the world. There are companies who also chase the lowest labor hour get on a treadmill that is very tough to stop. Once a business model is based purely on price it is either through exceptional innovation and a steady flood of new products, or a continual cost reduction strategy that they survive (Sturgeon, Van Biesebroeck, Gereffi, 2008). Outsourcing drops the costs of common goods, many of them commoditized and sold on price in mass merchandisers including Wal-Mart, K-Mart and Costco. The price points of these products enable cash-strapped families who are working to survive this recession a chance to make ends meet. Yet this is just a small percentage of overall outsourcing, as billions of dollars are spent on gaining insights and intelligence from knowledge centers globally for competitive advantage (Sturgeon, Van Biesebroeck, Gereffi, 2008).

The uncomfortable truth too is that the U.S. is also benefiting greatly from other countries coming to this nation to outsource their manufacturing here. In my state, California, the leading exports are civilian aircraft, which are 4.4% of all state exports (U.S. Census Bureau, 2010), electronic integrated circuits, which are 2% and parts & accessories for data processing equipment (1.9%). Asian nations who need aircraft expertise “outsource” their projects to California because our state has the world leaders in this industry, from Boeing and Lockheed Martin to Northrop-Grumman and Teradyne. As this example illustrates, outsourcing is more about going after expertise needed, less about costs. Is California the global low-cost leader in civilian aircraft? Most likely not. But do the aircraft designed, built and serviced here last for decades in service? Most definitely, one just has to look at the record for the Northrop jets now in service across the armed forces of the world. It call comes down to going after knowledge first and seeking competitive advantage through more efficiency as a result.

References

Sturgeon, Van Biesebroeck,, & Gereffi, . (2008). Value chains, networks and clusters: reframing the global automotive industry. Journal of Economic Geography: Global Production Networks: Debates and Challenges, 8(3), 297-321.

U.S. Census Bureau, Foreign Trade. (2010). Total U.S. exports (origin of movement) via California top 25 6-digit hs commodities based on 2009 dollar value (U.S. Census Bureau Analysis). Washington, D.C.: Government Printing Office . Retrieved from http://www.census.gov/foreign-trade/statistics/state/data/ca.html

Helft, Miguel. (2011, April 6). Facebook promotes social e-commerce. Retrieved from http://bits.blogs.nytimes.com/2011/04/06/facebook-touts-social-e-commerce/

Machan, Dyan. (2008, November 28). Jeff bezos on the future of amazon.com. Smart Money, Retrieved from http://www.smartmoney.com/invest/stocks/jeff-bezos-on-the-future-of-amazon-com/

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