The role of Ecommerce in Globalization

• 14 Jun, 2021
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                                    The role of Ecommerce in Globalization

Globalization can be defined as any economic transaction in which the buyer and seller meet via the electronic media of the Internet, form a contractual agreement regarding the pricing and delivery of specific goods and services, and complete the transaction by receiving payments and the goods and services as agreed, whereas E-Commerce refers to a wide range of online business transactions.

The economic structures of nations are expected to change because of globalization and e-commerce. This is because these two factors have a significant impact on the predicted high economic structure. E-commerce not only lowers communication prices, but it also gives you more options when it comes to where you want to do stuff.

E-commerce has solved the issue of time and space in the transition from the old to the modern economy, which has resulted in lower production costs. As a result, e-commerce has emerged as a vital component of the modern economy. While electronic communication technologies have been in use since the early 1980s, they have only been widely used for trade since the second half of the 1990s. Since it is still relatively fresh, it has been viewed in a variety of ways by various agencies, organizations, and individuals.

E-commerce is the sharing of data to make funding and payments easier. E-commerce refers to the online exchange of goods and services between four distinct parties. This can occur between businesses and customers, between businesses and businesses, within corporations, and between consumers and consumers. Any commercial activity that takes place directly between a company, its partners, or its customers using a combination of computing and communications technologies is referred to as e-commerce. It considers sales, marketing, communications, customer support, and workflow.

In terms of the globalization problem, the arguments presented above raise the question of whether globalization aids e-commerce or e-commerce hastens the process of globalization. User observation has shown that the internet is mostly used for exchanging information with consumers and suppliers, and e-commerce has a direct and significant impact on globalization. Similarly, the literature on the subject indicates that businesses mostly use the internet for buying rather than sales. The main explanation for this is that companies face numerous complicated procedures when making global transactions, and buying from foreign countries necessitates communication with suppliers who are located far away, so electronic purchases via the internet provide numerously economic benefits to businesses.

Physical places, manual procedures, and other expediting functions are replaced by e-business practices, which benefit globalization.

Also, e-commerce activities minimize coordination costs, which may lower the costs of dealing with international branches that are also needed due to the nature of the product or service, legislation, or cultural issues.

The globalization mechanism, on the other hand, has a significant impact on e-commerce diffusion. For a variety of factors, highly multinational companies are more likely to use e-commerce extensively. Some of these factors are:

·         Firms facing international competition are under more pressure to embrace innovations like e-commerce that enable them to preserve or increase market share while still operating more efficiently.

·         Companies doing business outside of their home country could be more likely to use information technology to will transaction costs.

·         Through using rich knowledge flows to simplify and speed up the processes of physical products in the supply chain, using the Internet for transactions and collaboration will save time and money on the distribution of goods.

·         Trading partners are pressuring companies that buy and sell on foreign markets to use e-commerce to increase communication with other members of the value chain. This is particularly true in global production networks dominated by multinational corporations, which may enable partners to use e-commerce to conduct business with the multinational corporations.

Meanwhile, a keen look will let us see that e-commerce benefits globalization in certain ways:

·         Economic Structure

E-commerce not only lowers communication prices, but it also gives you more options when it comes to where you want to do stuff. According to various studies, internet technology has increased foreign exchange. International trade has grown over time, with one theory pointing to the use of innovations like e-Commerce as a contributing factor. Globalization benefits from e-commerce in two ways:

i. E-commerce and procedures are directly substituted for physical locations, manual processes, or other expediting features.

ii. E-Commerce lowers coordination costs, which may lower the costs of dealing with international subsidiaries that are also needed due to the nature of the product or service, regulations, or cultural differences.

·         Firm performance

Since they can use experience and expertise gained through their global operations to enhance business processes and more efficiently deploy eCommerce technology, global companies can have a greater impact on results. Global companies are now well-positioned to profit from e-Commerce because they can achieve economies of scale and scope across the globe.

Since highly global companies will use e-commerce more extensively, and more extensive the use will result in better efficiency, globalization can have an indirect impact on performance through e-Commerce adoption.

As a result, e-commerce adoption act as a buffer between firm success and the impact of globalization.

Also, it is more likely for highly global firms to use e-Commerce more extensively than less global firms for some reasons.

i. Firms facing international competition are under more pressure to embrace innovations like e-Commerce that enable them to preserve or increase market share while still operating more efficiently.

ii. Companies doing business outside their home country may be more likely to use information technology to reduce transaction costs (such as information gathering, negotiation, and performance monitoring). In the case of Internet-based eCommerce, we would expect this to be accurate. Through using rich knowledge flows to simplify and streamline the flows of physical products in the supply chain, using the Internet for transactions and collaboration will save time and money on the distribution of goods.

iii. Trading partners are pressuring companies that buy and sell in foreign markets to use eCommerce to strengthen communication with other members of the supply chain. This is particularly true in global production networks dominated by multinational companies, which might require partners to embrace e-commerce in order to do business with them.

These suggests that e-commerce is a key factor in globalization, and in fact, it is better to describe the relationship between the two as a mutual one.