INTERNET

ECONOMY
MODEL BISNIS DIGITAL – PERTEMUAN 3
 THE INTERNET SHIFTS THE ECONOMY
• The Internet arrived at a particularly critical junction in economic history, for its exploitation is
closely intertwined with the powerful force of the globalization of finance, corporate
governance, and trade.

• The Internet technologies crashed on the shores of most countries about the same time,
challenging existing institutions and powerful interests, as their diffusion was coupled with
global ideas about venture capital financing, start-ups, and radical business models. The
Internet technology was global, but its economic and business development was molded in
the context of prevailing national institutions.
• The Internet economy is also known as the digital economy.
SO, WHAT IS IT? WHAT IS THE GOOD AND BAD SIDE OF IT?
 The Silicon Valley Model
Because of the particular role played by Silicon Valley in driving the
American Internet economy, the American national system is often called
the ‘‘Silicon Valley model.’’

This model, for us, consists of a few distinctive elements that might be
summarized as an embrace of the institutions that promote new firm
innovations. These institutions include:

1. Early venture capital financing

2. Equity markets for Initial Public Offers (IPOs) of recently founded firms
3. Fluid regional labor market for global talent
4. Fiscal policies that lower the costs of starting and operating a business
5. Proximity of university and research institutes within a region.
 Does the rapidity by which the Internet economy

DO WE REALLY
exploded, once and then again, in many countries
mean that borders are inconsequential? The simple
answer to these questions is that the Internet has

CAN APPLY THE

borders.

The Internet economy developed differently in each

INTERNET
country, reflecting different national systems of law
and regulation, business networks, competition, and
technological legacies. Each country ultimately faced

ECONOMY
the entrepreneurial challenge of developing the
competence needed to compete in this new space.

SYSTEM FROM
As we will see, the Internet evolved in other
countries by very different means and by different
paths of innovative exploration, and yet in deference

WHEREVER?
to other national experiences and the role played by
transnational actors.
More why?
The expectation of many is that the Internet, being built upon a global
technology, provides a business instantaneous access to customers
wherever they be. A few companies quickly internationalized. Retailers such
as Amazon also discovered that duty tax, shipping charges, and logistics
created losses large even by early Internet standards. In addition, laws
regarding payments, privacy, and content rendered global strategies far
more difficult than addressing national markets. Not surprisingly, these
factors often suggested that foreign entry proceed by partnering with local
players. Far from being global, then, the companies that ventured across
borders employed ‘‘multidomestic’’ strategies that took into account national
differences. Even domestically, relatively few businesses could avoid
transporting atoms, engaging in what became called ‘‘brick and mortar’’
strategies.
WHY IS THIS
A PROBLEM?

Business by the Internet, at first glance, appears to

be a bonus for the customer and a terror for the
seller. Because the Internet permits browsing and
easy verification of prices, the customer is potentially
far more informed when browsing in the virtual space
than in strolling in the shopping mall.
 The analysis of business models quickly pointed to two elements
that differentiate products and services

The first element is that the Internet transmits

information. The failure arises because buyers
and sellers cannot easily verify the information.
The buyer does not know if the information is true
or, in the case of a purchase of an item, whether
the product would be shipped and in what state it
will arrive. The seller does not know if the buyer
can pay or if the buyer will not resell the
information. An obvious way to solve such a
failure is to post a bond that is lost in the case of
default. An easy bond to establish is a credit rating
for customers, so that customers that do not pay
incur damaged credit. The seller can post a bond
by establishing a costly reputation that would be
damaged if bad information or goods were sold.
Thus, brand label recognition and reputation
are especially important for an e-business.
The second element is the exploitation of positive
network externalities: the value of the network
increases with the number of connected users.
The benefits of membership derived from network
externalities are more powerful in the presence of
the attributes of interconnection and
interoperability in a distributed environment.
In an odd way of art preceding reality, the concept
of a network externality predates the commercial
exploitation of the largest of all social networks,
the Internet. The Internet
evaporates the constraints of physical space and
local networks.
Then, some tech companies started to think new
way to overcome this and make virtual
communities.
 If one of the points of attraction of the Internet is the
convenience of shopping or accessing services
remotely, it is also true that variations in convenience
influence the choice of sites. Consumers are
surprisingly sensitive to the number of clicks needed
to access a page, especially at slow bandwidth
access. In other words, among consumer sites, Internet
strategies quickly lead to maturation of product
markets in which a few players dominate.
“THE TWELVE THEMES OF THE NEW ECONOMY”
“THE TWELVE THEMES OF THE NEW ECONOMY”
“THE TWELVE THEMES OF THE NEW ECONOMY”
“THE TWELVE THEMES OF THE NEW ECONOMY”
“THE TWELVE THEMES OF THE NEW ECONOMY”
So, how’s it in Indonesia?
THANK YOU!

Any Question?
 Assignment Time!
0 Make a group of max 4 persons and min 3
persons
1
0 Choose 4 companies who applied the new
economy themes in their business
2
Please identify at least 4 of the themes which applied within the company,
0 explain: Why you choose that company? What themes do they applied?
3 What could they do to expand their business? (you can access the book in GC
to gain more perspectives & understandings)

0 Do this assignment on PPT and submit it in PDF to the Google

4 classroom (Pertemuan ke-3 – Assignment)
0
Your DEADLINE will be on Sep, 29th 2022, 11.00 AM
5