Strategy for Information Markets
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This is a textbook for an upper-level business economics course focusing on the economics of information goods and markets facilitated by information technology, particularly the internet.
[edit] Introduction
[edit] Background
This likely should be material at the end, rather than the beginning, but we can see. I'm putting the self-assessment quiz here. Other similar material which isn't strictly part of the course, but is important background
[edit] Intellectual Property
- Copyrights, patents, and trademarks
[edit] Network Effects
Network effects, also known as network externalities, arise when one market participant affects others without pay. Within information networks, larger networks are more attractive to users (and producers) because they can reach more people. For example, social networking sites like Myspace, Facebook, and the newly celebrated Twitter have become increasingly popular because more and more people have joined them. This boom in popularity has also sparked the interest of many advertising companies who want to promote a company, product, person, or band.
[edit] Classroom Experiments for Two Bandwagons
[edit] Demand Structure with Network Effects
[edit] Positive & Negative Feedback
[edit] Virtual and Real Networks
Real networks are networks that are tangible structures where there are physical connections bringing together each player within the network. For example, trains are real networks because steel and wood are needed to make the tracks which work as the concrete links between the different areas of the network. Users must physically use these tracks to stay connected within the network. In contrast, a virtual network is defined by having a structure that is more of a commonality (typically associated with computers). These networks do not need essential hardware that physically makes the path of each connection. For example, the popular website known as Facebook is a virtual network because there is no need for tracks, cords, or cables to be apart of the network.
[edit] Network Structure
When can the structure of the network(s) be completely abstracted, and when is it important to think about who's connected to whom?
In any organization which focuses on information distribution, they set up their network which will be fully capable of processing, exchanging, and distributing the information required for the tasks at hand. The different types of network forms can be looked upon as network patterns which occur and repeat in multiple settings. There are many different approaches an organization can take when developing the structure of their network. They can aim towards creating a network in which their product will provide better performance in comparison to a competing network. However, a network can also focus more towards compatibility in the hopes that users will rely more on this in comparison to a better performing product without compatibility. Their is also the option of whether an organization wishes to have their network open to users or controlled to limit the use by others. An organization that uses the openness strategy is critical when they are not strong enough to dictate technology standards on their own. This is also the case that occurs naturally when multiple products must work together and establish coordination in compatibility. Only organizations with a strong hold upon the market can exercise a strategy of control over their network. In these situations organizations are able to unilaterally control product standards and interfaces. One good example would be that of Microsoft and AT&T in the later years. Organizations must consider who's connected to whom in their networks when they implement network structures such as these. When considering an abstract network structure, you are usualy dealing with the customers and clients involved within a network and why they are there. To analyze this, their are multiple factors which must be taken into account. First, and most obvious factor would be that of network effects within a network structure. This relates to the influence of the structure of
connection patterns of the potential clients already existing customers, those of whom are already satisfied. Second, take into account the influence of already existing clients on those would be potential clients looking to join the network and why. Depending on the availability of certain data and legal constraints, a network promoter can use some of these variables to identify potential marketing targets in order to influence the adoption process within a network and consider whom will join. --Alexc152 (talk) 03:40, 12 November 2009 (UTC)
[edit] Two-sided Platform
[edit] Dynamic Competition
[edit] Individual Lock-in
Individual Lock-in is a situation that is realized when the consumer's individual switching costs are high enough to discourage switch in consumption. That is, when it is significantly costly for a consumer to change vendors, that consumer is 'locked-in' to his or he original choice of consumption.
Hypothetical Example of Individual Lock-in:
John Consumer currently has a 2-year mobile phone contract with T-Mobile. John is dissatisfied with his current phone service. His text message plan results in increased monthly charges, and he frequently encounters limited signal dead-zones. John would like to change to a more reliable and text message friendly mobile carrier like Verizon, but it would cost him $150 to terminate his current contract with T-mobile. The cost to break his contract is John's switching cost. Because this high switching cost is not worth improved service to John, he faces Individual Lock-in.
note: Switching costs do not have to be great to create a Lock-in situation. Rather they need only be significant enough to prevent consumers from migrating to another vendor. Also, many switching costs are not directly monetary, but rather stem from the inconvenience of finding another suitable vendor. These are costs are sometimes called 'Search Costs.'
Consumers in information economies are especially vulnerable to Lock-in. This due to the nature of information goods and services. Information goods typically have high switching costs because of two factors:
1.)Time Investment Many information goods, such as Microsoft Excel, or Adobe PhotoShop require a significant investment of a consumer's time to learn to use effectively. This non-monetary investment on learning represents a large switching cost to consumers and tends to naturally lock consumers in. Furthermore, even information goods without high learning curves can require a significant time investment for the consumer to receive optimal utility. For example, it often takes new Facebook users months to build a substantial network of on-line 'friends.' This time investment discourages consumers from switching to competing social networks like Myspace or Friendster.
2.)Low economic Durability/Lasting resale value Stemming from the unrecoverable time investment of information goods, most information goods have a low economic durability. That is, a consumer often cannot recoup his or her investment through arbitrage. Many information goods are provided at no cost to the consumer. Downloaded MP3 files cannot be resold to other consumers, and the time invested into learning to use a certain system or network cannot be recovered by resale.
Even goods that would have had a resale potential in the past are becoming precluded from resale. As more and more content moves away from tangible tape/cartridge/CD/DVD distribution, information goods lose resale potential. Take, for instance, a video game purchased and downloaded through the on-line gaming network, STEAM. This consumer good cannot be resold to recoup value. It cannot be traded for another game. The cost to switch to another game is the cost to buy a new game.
While Lock-in is harmful to the consumer, it is greatly beneficial for vendors. Lock-in ensure continued revenue and discourages consumers from patronizing competitors. So while lock-in is the natural result of significantly high consumer switching costs, savvy vendors tend to cultivate lock-in situations by artificially increasing switching costs.
Common ways that Vendors raise switching costs to create artificial lock-in:
-Contracts: Contracts are direct, formal, legal means for creating switching costs. They impose monetary penalties for changing vendors. A good current example is AT&T's contract with Apple. Apple is locked into a contract that makes AT&T the exclusive wireless carrier for all iPhones in North America. If Apple were to switch to another wireless vendor, they would incur stiff legal penalties and likely monetary fines. Consider that iPhone’s market share grew 136 percent in France when Apple switched to multicarrier agreements.[1] Thus far, the contract obligations have posed a sufficient switching cost to prevent Apple from pursuing multicarrier agreements in the United Sates. The benefit to the vendor, AT&T is clear. "AT&T added 875,000 new postpaid subscribers in the first quarter of 2009 and saw 1.6 million iPhone activations. A whopping 73 percent of total net new subscribers came to AT&T by way of Apple’s iPhone." [2]
-Two-Part Tariff pricing: Two-part tariffs set a base cost for consumers then provide the good or service at a per unit price. It is the base cost of the product that raises the consumer's switching cost. Examples of this include "membership discount retailers" such as shopping clubs that charge an annual fee for admission to the point of sale and also charge for your purchases ,amusement parks where there are admission fees and also per-ride fees, cover charge for bars combined with per drink fees, personal seat licenses in professional sports, in which fans of a team pay an up-front lump sum fee for the right to purchase tickets at face value. [3]
-Brand Loyalty Programs: Examples include family-plan mobile phone discounts and Southwest Airlines' Rapid Rewards Program effectively decrease the value of switching vendors. This adds to switching costs and thus increases the potential for lock-in.
-Gift Cards: These create Lock-in by allowing the consumer to spend their 'money' only on the vendor's goods. The switching cost involved with gift cards is the money that is forfeited by not using the gift card.
[edit] Systemic lock-in
Systemic Lock-in tends to arise naturally in markets, like Individual Lock-in. Unlike Individual Lock-in, Systemic Lock-in is not the result of effectively high consumer switching costs. Rather, Systemic Lock-in is the market situation in which it is unprofitable for one consumer or firm to switch products unless all(or most) other firms also adopt the same product. Even though switching would benefit all firms, the benefit depends on all firms switching. Thus, Systemic Lock-in is the result of consumers' collective inability to coordinate switching vendors.
note:The concept of Systemic Lock-in is quite similar to the Nash Equilibrium of the Stag Hunt Coordination Game.[4] Neither party can count on the other's help in hunting a stag, so each party opts to hunt a hare alone.
Although Individual lock-in may be more prevalent and often purposeful than Systemic lock-in, Systemic Lock-in is a perhaps a more common aspect of modern information economies which mostly exist online. The usefulness of an online site or network to an individual consumer is based largely on the number of other consumers that utilize the network.
Example in an Information Economy:
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- Soon to be an coordination game diagram and explanation based on an online network.(such as facebook, monster, ebay, amazon, craigslist etc. probably twitter and why it took 4 years to finally catch on.)
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Information Networks with Systemic Lock-in:
-Social Networking Sites- Myspace, Facebook, Live Journal
-Auction and Classified Sites- Ebay, Amazon
-Job Sites- Monster, The Ladders
-Communication Services- Twitter, Skype
Filesharing Networks- -Bittorrent, Kazaa, MegaVideo
-General User-uploaded content Networks- Wikipedia, EHow, Youtube
[edit] First-mover advantage
There can be different things which are called first-mover advantage. It's important to be able to recognize which kind is being talked about. Sometimes, "first-mover advantage" really means "last mover disadvantage", which implies different strategies.
In conventional Economies, the First-Mover Advantage tends to reward the first supplier to bring a new good or service to market. There are actually a variety of advantages in being a 'first-mover.'
- First movers can preempt production critical resources. i.e. Apple purchasing the majority of the world's flash RAM supply for the production of i Pods.
- First movers can easily establish lasting brand recognition, to the point that the brand is synonymous with the good. i.e. "You owe me a coke.", "Let's jump in the jacuzzi." "Take an Aspirin."
- First movers can expect to recoup sunk costs. Later entrants to the market, may not expect to recoup these costs as competition decreases profit margin.
-First movers learn lessons about producing their good or service long before their competitors, and are usually able to decrease production costs.
Besides the advantages of being the first to enter a market, there is one distinct disadvantage. It is usually costly to create a new market for something. If the first mover fails to capitalize off of the First Mover Advantage, then the competitors that follow can learn from the First Mover's mistakes and avoid some of the pitfalls and sunk costs of entering the market earlier, sometimes beating out the First mover. This is widely known as the 'bleeding edge' or 'free rider effect'.
In an Information Market, the First Mover Advantage is much often larger than in a conventional market. This is because network effects can make such markets 'tippy', meaning that whichever firm has an early advantage is likely to beat out all competitors. Conversely, in Information markets, the First Mover Advantage can be more treacherous. Due to the nature of Information goods, suppliers have very high Fixed costs and minimal variable production costs. If a second mover or 'free rider' is able to forgo the high sunk costs of entering the market by emulating the First Mover, then the second firm is left with only minimal variable production costs--a significant advantage. In situations like this, 'the second mouse gets the cheese.'
[edit] Compatibility and Standards
[edit] Cost Structure
- Low (sometimes nearly zero) marginal cost.
- Frequently high fixed costs, that may in fact turn into sunk costs.
- Supply-side economies of scale, due to above
- Learning-by-doing
[edit] e-Commerce
I think it's likely this will turn into several chapters.
[edit] Online business methods
- Some of the topics for Online Business Methods could include: B2B (Business-to-business) and B2C (business-to-consumer) e-Commerce.
According to research done by B Mahadevan in his article "Business Models for Internet based E-Commerce An Anatomy" he classifies the internet economy into three primary sectors: portals, market makers, and product/service providers.[1] Here is an excerpt from the article:
"A portal (POR)engages primarily in building a community of consumers of information about products and services. Increasingly, portals emerge as the focal points for influencing the channel traffic into web sites managed by Product/Service providers and other intermediaries. They primarily play the role of funneling customer attention or "eyeballs" into these web sites in a targeted fashion. Companies such as AOL and Yahoo largely cater to the Business to Customer (B2C) segment. However, it is not uncommon to find portals in the Business to Business (B2B) segment also.Ariba.com and MarketSite.net (promoted by Commerce One) are portals serving B2B segment. Market Maker (MMK) is another emerging structure in the Internet market space. A market maker plays a similar role of a portal in building a community of customers and/or a community of suppliers of products and services. However, it differs from portals in several ways. Firstly, market makers invariably participate in a variety of ways to facilitate the business transaction that takes place between the buyer and the supplier. Consequently, often a market maker is expected to have a high degree of domain knowledge. For instance, a portal such as Yahoo can funnel the traffic of prospective computer and software buyers into web sites that provide services related to selling these. However, a market maker such as Beyond.com require a higher domain knowledge related to buying and selling of computer and software products to add value to the business. Lastly, unlike a portal, a market maker endeavors to provide value to suppliers and customers through a system of implicit or explicit guarantee of security and trust in the business transaction. Auction sites such as e-bay are the early market makers in the B2C segment. On the other hand a large number of market makers are evolving in the B2B segment. Some examples include Chemdex (Chemicals), HoustonStreet.com (Electricity), FastParts (Electronic components), BizBuyer.com (small business products) and Arbinet (Telecommunication minutes and bandwidth). B2B segment has several characteristics that promote a bigger role for market makers. These include huge financial transactions, greater scope for reducing product search costs and transaction costs. Since B2B e-commerce application is poised for a spectacular growth, the role of market makers will be increasingly felt. There will be wide scope for catering to either a vertical or a horizontal market hub. The predominant forms the market makers take in B2B segment include organizing auctions and reverse auctions, setting up exchanges and product and service catalogue aggregation. The third market structure will comprise the product/service providers (PSP) dealing directly with their customers when it ultimately comes to the business transaction. The suppliers will conduct their business with their partners directly over the net. This will call for extensive customization of their information system and business processes to accommodate customer requirements on line. Notable examples in this category of market structure include companies such as Amazon.com and Landsend.com in the B2C segment and companies such as Cisco and Dell Computers in the B2Bsegment."
B Mahadevan. "Business Models for Internet based E-Commerce An Anatomy". California Management Review. Summer 2000. Vol 4, No. 4.
Although I will not be including this excerpt for this WikiBook, I will use his article and analysis of e commerce as a resource for our research.
Also included in Mahadevan article were the categories of revenue streams.
In the discussion of revenue streams, Mahadevan notes that E. Schlachter identified five possible revenue streams for a web site. The five revenue streams consisted of subscriptions, shopping mall operations, advertising, computer services and ancillary business. However, C.S. Fedwa added timed usage and sponsorship and public support as possible revenue streams in addition to the five mentioned by Schlachter.
Based on a qualitative analysis of the Internet based models pertaining to grocery and delivery of customer packages, J. Parkinson stressed the role of business affinities such as logistic providers in creating the value proposition. These models were too narrow in their scope and do not cover the gamut of alternatives employed by today's Internet-based businesses. Perhaps a better description of the business model was provided by P. Timmers. Timmers identified eleven business models that currently exist and classified them on the basis of degree of innovation and functional integration required. The business models describe a particular unique aspect of doing business over the net and ignore other aspects. A good theory should ensure that the factors considered as part of the explanation of the phenomena of interest should possess comprehensiveness and parsimony. Previous attempts to define business models for Internet based business do not satisfy these requirements. For instance, the example of Amazon.com for building a virtual community does not bring out another unique feature, viz., disintermediation of supply chain.
We argue that a business model is a unique blend of three streams that are critical to the business. These include the value stream for the business partners and the buyers, the revenue stream and the logistical stream. Value stream identifies the value proposition for the buyers, sellers and the market makers and portals in an Internet context. The revenue stream is a plan for assuring revenue generation for the business and the logistical stream addresses various issues related to the design of the supply chain for the business. The long-term viability of a business largely stems from the robustness of the value stream. Furthermore, the value stream in turn influences the revenue stream and choices with respect to the logistical stream.
B Mahadevan. "Business Models for Internet based E-Commerce An Anatomy". California Management Review. Summer 2000. Vol 4, No. 4.
Like Tthomas2, I do not plan on using this exact excerpt for the WikiBook. However, I will be using information and analysis obtained from this article along with reports from P. Timmers, E. Schlachter, and J. Parkinson as resources.
[edit] E-Commerce Streams
In order to conduct successful e-commerce, a company needs to focus on three main factors of business. These factors are usually referred to as “streams”. The three main streams of successful e-commerce are “value stream”, “revenue stream”, and “logistical stream”. Although each of these streams deals with a different aspect of business, all three are vital to the success of a company – internet based or not.
The first stream a company needs to focus on is the value stream. A value stream consists of all the steps in a process that a customer is willing to pay in order to bring a product or service from the supplier to its final destination. Often time companies will use “value stream mapping” to identify all of the processes and timelines it will take to get the product from them to their customer. This can consist of the factors for obtaining raw materials, taking those raw materials and creating the product, shipping the product to the supplier/warehouse/distribution center, and getting that product to the customer. Often times, companies need to begin tracking all the way back at the initial manufacturer, especially for custom made products. Thus, the value stream mapping can become very large and complex.
While value streams may seem costly, the robustness of the value stream is valuable to the long term viability of the company and can benefit both the customer and the supplier. As a result of value mapping, the customer can experience reduced search and transaction costs. The search costs are pretty self explanatory from the example above (all of the products available at one location on the website) while the reduced transaction costs are result of going directly to the company in addition the transportation contract that most websites have in place with a delivery company. Suppliers see the benefit by attracting more customers, as well as lower promotion costs that result from a reduced marketing cost to launch new products.
The next stream a company needs to look into is the revenue stream. A revenue stream is how money comes to a company. These can be characterized by their volatility, predictability, risk and return. There are many examples of revenue streams. Amy Shuen does a good job of describing the types of revenue streams in her book “Web 2.0: A Strategy Guide”. Shuen goes on to identify six types of revenue streams including subscription, advertisement, transaction fees, volume and unit selling, syndication and franchise, along with sponsorship and co-marketing.
Revenue streams can be seen in e-commerce in each of the types that Shuen describes in her book. Subscriptions are common for internet based sites. Espn.com charges members to become “insiders” while you can’t buy anything off eBay without having a member account. Advertising on webpages is very common. Many sites such as facebook and even search engines like google charge companies to advertise on their pages. Syndication and franchising are forms of revenue because a website will begin to charge to release their information on other sites. You can see examples of this from the Associated Press being leaked to many news sites such as CNN and Bloomberg.
The final example of a stream being used in e-commerce is the logistic stream. The logistical stream accounts for anything involved in the “supply-chain management” portion of e-commerce. This involves purchasing the raw materials as well as anything involving transportation of the product or service to the customer.
Examples of how logistic stream would be used in e-commerce can be identified with many of the purchasing websites we view online. Take www.nike.com for instance. At nike.com, a customer can purchase all of the company’s products online and submit an order with a delivery address. The company (Nike, in this case) then receives the customer’s order and begins tracking down all of the products ordered. The company will search all of their factories and warehouses for the product and allocate all of the items to a common location. From there, the items are bundled and packaged together and are prepped for shipping. The company then has to provide for the order to be shipped from the common location to the final delivery address where it will end up in the hands of the customer who placed the order.
An aspect of the logistic stream is “disintermediation”. This is the biggest benefit of e-commerce. Disintermediation is essentially “cutting out the middle man”. As stated earlier, there are a lot of locations a product can end up before going to the customer. By using disintermediation, a company is able to leave out links in the supply chain such as distributors, wholesalers, brokers and agents. This has been seen in quite a few e-commerce markets such as computer software, travel agencies, book/music stores, as well as stock purchasing. Attempts in disintermediation have been made in the supermarket industry (Safeway has attempted to take grocery shopping online, so far to little avail), pet care, and even alcohol sales, and real estate. Most of these endeavors have failed (or are failing) while others are still being fine tuned to perfect the e-commerce side of the industry.
[edit] Value Creation
In this section we will explore how value is created for e businesses and some of the factors that affect valuation. The value creation potential of e-businesses largely depends on three categories: efficiency, complementarities, and customer retention.
E business significantly reduces many of the costs associated with traditional offline business. The creation of electronic marketplaces, increased access to information, improved communication, and reduced overhead costs all lead to improved transaction cost efficiency. Value can be created when transaction costs are reduced and made more efficient. Some important parts of cost reduction that are enabled by using the internet are:
- improved access to more information,
- lower search costs, consolidation of resources, and
- ?
In business strategic relationships are an explicit asset to the firm. It can be said that by utilizing web based technologies can create strategic resources for e businesses. Strategic resources are defined as resources that have increased value to a firm compared to the next best alternative. They can come in the form of network resources or resources that are unique to the firm.
[edit] Efficiency
New transaction mechanisms in the markets are based on lower transaction costs and improved market efficiencies. These increases in efficiency can affect delivery times between manufacturers, sellers, and consumers. Using the internet to take advantage of increased economies of scale can help companies determine more cost effective make vs. buy decisions.
[edit] Complementaries
Horizontal integration of products, services and information based on complementary components leads to increased convenience and lower transaction costs for the customers. An example of value creation in offering complementary services in e business is when customers are given the possibility of browsing through product catalogs online, with the option to buy offline. Another complementary function of web based businesses is to create a new consumer base online that had not been available previously.
[edit] Customer Retention
Communication in electronic networks creates opportunities for new types of interactions and relationships for manufacturers, sellers, and consumers. It has been claimed that due to lower search costs on the internet, customers will shop more for the best buy. Therefore, one potential downside is that it may difficult to build long-term customer relationships. However, the internet offers other opportunities for relationship building that include personalized web sites, customized products based on customer profiles, proactive customer support through all phases of the product life cycle, and through branding and trust building.
An interesting observation that Norwegian economists Christensen and Methlie make is that those enterprises that report that e-business has led to reductions in lead times, number of intermediaries, erroneous or returned goods, and/or costs, also report some increase in sales revenues, as well as reduction in number of employees. Profitability, however, is generally unchanged in these firms. It is important to acknowledge that their research was conducted in early 2003, which makes it possible for new developments in technology and trends in e commerce to develop that may challenge the validity of that observation for e businesses in 2009.
[edit] EBay
Ebay is a very popular online auction website in today’s largely capitalist society.
It is also very practical and convenient because most money transactions go through Paypal; an e-commerce business partner adjoined with Ebay, allowing payments and money transfers to be made through the internet. Paypal can be linked with checking accounts, debt cards, and credit cards; the process is secure. One can always a dispute his or her case when there is a mis-transaction or online fraud. Paypal can solve problems as a neutral mediator.
Also, some sellers in Ebay provide a ‘Buy It Now’ or ‘Make an Offer’ option, which means that one can always compare a certain price of a good with its given retail price. For instance, one of popular retail shoe stores, FOOT LOCKER, has large selection of shoes. One can find an exact same pair of shoes on Ebay with a cheaper price and no sales taxes. In Ebay, one does not have to pay taxes unless he or she is in the same state with a given seller. In addition, one can make an offer to a given seller whether or not the seller can lower the price that he or she, the buyer, desires to pay for. The price can reach equilibrium when buyers and sellers can reach an agreement in price.
A major competitor of Ebay would be Craigslist; it provides local classifieds for pre-owned or used products. Craigslist can be a very resourceful place for overweight and or over-sized goods. For example, if one is trying to purchase a television set on Ebay, he or she may end up paying a large cost for just shipping itself. In addition, there may be damage to be television during the shipping, which may not be liable by the seller, unless insurance is bought by the seller. Perhaps the best thing about Craigslist is that one can actually check the functionality and condition at his or her discretion. Therefore, one can say that Craigslist is a great competitor and substitute for Ebay.
[edit] User-generated Content
[edit] Online Stock Trading Sites
Online stock trading sites have experienced a steady increase in use and popularity due to simplicity. People are able to trade their stocks and make their own transactions on the computer, rather than having to call their broker and pay high commissions, which tend to be lower through online investment sites due to the intense competition. Information for such online brokerages is easily accessible for everyone. It is important for investors to take time in deciding which site (of the many) works best for their style of trading because profiting from online trades can be a slow process.
The internet offers a wide variety of online stock trading sites. With such a large range of options, users are able to find what works best for their style of trading and personal interests. Some of the most used and well known stock trading sites online include: Charles Schwab, E*trade, Fidelity, Firstrade, Muriel Siebert, OptionsXpress, Scottrade, TD Ameritrade, TradeKing, Vanguard, WallStreet*E, Wells Fargo, as well as other helpful and resourceful sites.
[edit] Information Goods & Revenue Strategies
It cost money to provide information services or goods. In most cases though, many of these services are provided free to online users. This presents a difficult challenge to information goods providers to individuals who want to enter the market. How to make money? In this chapter we will examin revenue strategies for information goods providers.
[edit] Collaborative Filtering
[edit] Network Neutrality
[edit] Globalization
[edit] Censorship in Asia
Information censorship in Asia, especially in China, has been a growing concern both inside the country and to foreign governments and human rights organizations. As Asian economies become increasingly more important and influential in international trade, many are viewing media and internet censorship in these countries as a potential problem and barrier to free trade. The Council for Foreign Relations argues that China and many of the other Asian countries who participate in strict censorship are simply using information censorship as a means to maintain power. As China’s economy and the economies of many other Asian countries, such as India (another emerging leader in the global economy), grow larger, it is apparent that there is pressure on their governments to loosen the barriers they place on their media and other information outlets.
China’s obvious influence over the region and their emergence as a leader in the global economy makes it a particularly interesting and important country focus on. Certainly most of the work that has been done on censorship in the region has focused on China. Their strict policies, their current standing in the global economy, as well as it being a good model for how other governments in the region conduct themselves regarding information censorship are certainly reason enough for placing a majority of the attention of this inquiry to China.
Toward the end of the technology boom, Amnesty International, a human rights organization involved greatly in researching this particular subject, cited may companies as participating in knowingly providing China technology which they knew would be used to restrict information through many outlets. This accusation was made in a report published in November of 2002. Although many companies denied that they actually “knew” about how the technology would be used, the accusation sparked further investigations into the level of censorship in China and how exactly they were acquiring and using technology to restrict information.
China repeatedly denies that it censors information to the degree many claim, and that denies Amnesty International’s claim that it imprisons violators of media or internet censorship laws, though Amnesty International refutes this. There is strong evidence, however, to suggest that China has used tools to censor information and media. One example of this is the Golden Shield Project, nicknamed “The Great Firewall of China.” China openly admits the ongoing existence of this project, which happens to block IP addresses at internet gateways, making it impossible for one to access the site. The project also states that China surveys information on the internet to ensure it is suitable for content.
More will be added on ongoing regulations and debate in China as well as those in India.
[edit] Gathering Market Information
In this chapter we will go through gathering customer information from the perspective of a retail business. We will show why it is beneficial to the growth of your company to collect consumer data by yourself as well as researching any available data so that you can make the best decisions. There will be comparisons of the many ways to go about collecting data, as well as how to do it. Than most importantly we will discuss the many options you have in utilizing that data, whether it be discounting certain items together, or sending coupons to a specific set of people.
[edit] Why collect data?
There are many positive things retailers can do with a massive database that would help the business as well as the consumer. If they see that people who buy cookies usually buy milk as well than one thing they might want to do is arrange them in the store so that if you go to get cookies you pass the milk section. This helps the business sell more as well as suggest to the consumer something they may want but did not think of. In classical economics when we consider what will affect the quantity demanded of a product the only factor we consider is the price. However when we realistically look at the retail industry of a supermarket we know this is not true. There are many other factors that influence consumers purchasing behaviors such as product placement, display size, appearance of label, and many others.
Product appearance is more specifically aimed at which item will sell, not if it will sell. For instance if your going to buy frozen vegetables you might be more inclined to buy the one that is wrapped in a green wrapper than a brown wrapper because it gives you the idea that it is healthier since green is associated with healthiness. This however can affect the supermarket since many times the supermarket offers there own generic brand of many items, and if they can realize that the product appearance can be improved than there item will have a considerable advantage in appearance and price. There are so many variables when it comes to how consumers behavior will respond to different things. How can we tell if a consumer will be less likely to buy fruit if there's only a few there opposed to the entire display being full. The only way to make an educated decision on something with so many variables is to physically test it over and over and see what works the best. There is a need to collect data on this so that we can understand what works best and what needs to be done, but that leaves us with other questions. What is the best way to collect this data and turn it into information, how can we know that the data we collect will translate into results that work.
[edit] How do we physically collect the data?
If the retail industry you are assessing is a supermarket there are a few different ways we can collect data. Manual counting and a computer generated system don’t compare closely in ease of use and price to use. A manual count of everything that happens would be extremely time consuming and would be completely inefficient. Because of the advances in the technological world there is a way to compile this data automatically every time something is rang into the register. After you compile the data there are many different ways to compile it.
You can compile data specifically for each consumer by using a membership system that you must sign up for. An alternative option would be to employ an open membership policy, in this system you would compile data that spoke to the supermarket as a whole. We will go into the different ways you might want to sort the data later.
Consider fictional consumers Nancy and Sally, Nancy has no preference to which supermarket she goes to and usually bounces around to many different ones. Sally on the other hand always goes to the same supermarket because it is so close to her house and she has always been satisfied with it. Nancy at some point might sign up for a membership to one of the supermarkets but she is unlikely to do so because she has no habit of going to the same one. Nancy however is very likely to be a member of her supermarket because she always goes to the same one and she would be foolish to not take part in the discounts offered for being a member. This example shows that regardless of what system you use its not going to be the best for everyone. One important aspect of understanding how you would like to collect data is to first collect data of which type of customers you have more of, Nancy or Sally. Are the consumers dominantly one time shoppers or loyal customers. If you can understand the type of business you are getting than you have a better chance to use a system that will be effective for you.
[edit] Which way of collection is right for you?
To understand which data collection method you want to implicate you need to understand which type of information you want to receive. If you collect your data on a customer basis instead of an overall database for your store you will get data that can be used to give personal rebates and coupons to boost sales. When you analyze what your company needs, you can than decide which way is the best for you. There are a few guidelines that would benefit you to follow when deciding how to go about collecting and analyzing your data.
[edit] Pre-data collection steps
1. Clearly define the goals and objectives of the data collection so that you know your purpose for the study, this is one of the most important aspects of the research. Even if you do everything else right without having the correct aim for implementation of your data could make it entirely useless.
2. Clearly define the data collection plan such as when to record the price of a product bought, or how to quantify location of a product.
3. Ensure data collection repeatability, reproducibility, and accuracy so that the data can be reliable.
[edit] What do we do with our database?
Sometimes when we have a large data set we simply use algorithms to find patterns that we can use to our advantage in a few different ways. Other applications of this information would be utilizing not just what is bought, but the behavior of the consumer. A great example of this would be to look at some airline companies, they change the price of the same exact ticket depending on how you search for the flight. They did a lot of studies that showed people who search for flight based solely on date and price don’t care about amenities such as paying for food. A smart utilization of this information was to charge you to book your bags. People don’t realize to factor in that cost when comparing flights so you end up paying that airline the same amount of money as the other one without realizing it. Amazon and a lot of other online retailers show another example of behavioral analysis when you search for an item, down below it they have a few options of other things you might like. This way when you are shopping for something you are more likely to buy another product because they know that they usually go together. So how can we get from our database to the utilization of our information? With a process called Data Mining.
[edit] Data Mining
Data mining is the process of extracting patterns from data. As more data are gathered, data mining is becoming an increasingly important tool to transform these data into information. While data mining can be used to uncover patterns in data samples, it is important to be aware that the samples of data may produce results that are not always accurate. You need to make sure you have a large enough sample size before deciding to make decisions based on the information you have received. Likewise you must realize that there are patterns that may not appear in your data set even if they do exist, just because a pattern does not show up does not mean its not there. To start “mining” your data you must first go through your data set and ensure that there are no inconsistencies. Eliminate mistakes from your data set to reduce the possibility of coming to wrong conclusions...... I plan on now going into the benefits of data mining, the the range of ways to use the information, and a little bit into the privacy issues regarding customer information used in these data sets since that is somewhat of a popular issue since the companies have been selling the data they have compiled to companies who have nothing to do with the market their in...
[edit] References
- ↑ Mahadevan, B (2000). "Business Models for Internet based E-Commerce An Anatomy". California management review 42: pp. 55-69. Retrieved on October 8, 2009.
