Influence of network on traditional market structure
Source: Shangpin China |
Type: website encyclopedia |
Time: October 13, 2014
（1） The reduction of transaction cost under the network economy Nowadays, many people like to shop online, because for those office workers, they have no time to shop or are too lazy to go to the supermarket or shopping mall. Online shopping is just a good choice for them. Online shopping is based on Website Design Based on the transaction, the transaction cost theory believes that, because of the imperfection of the actual information, the conclusion of a transaction is not only supply and demand as people imagine. In a society where information is scarce, people have to pay such costs as searching, signing a contract to supervise and popularize transactions. This cost is called transaction cost. Transaction cost is the cost that people must pay to reach a transaction, which constitutes a waste of social resources. In modern economic activities, a large part of the total cost is used for the creation, storage and dissemination of imitation information. For example, buyers have to find the goods they need through traditional methods such as telephone inquiry, reading newspapers and periodicals, and running around comparison. This kind of search is costly and the scope of search is narrow. With the Internet and e-commerce, buyers can easily find the goods they need through computer networks. From the perspective of producers, it is not the most difficult to produce a new product. The most difficult thing is how to make consumers know the existence of new products and understand the benefits of new products. In addition, producers also need to spend a lot of effort to collect consumer preferences in order to produce goods that meet the needs of the market. All these constitute a part of the transaction cost in economics, which is a cost for buyers and sellers to use the market for transactions. The existence of a large number of transaction costs hinders the smooth progress of market transactions and limits the scope of transactions. Since transaction costs originate from imperfect information, the occurrence of such costs can be reduced by changing the imperfect interest rate. The Internet just provides such a technology. On the Internet, the rapidity and universality of information transmission greatly reduce people's search costs and expand the scope of people's search. At the same time, manufacturers can learn consumers' preference information from the Internet in a timely and convenient manner, thus greatly reducing transaction costs.
（2） Network changes the industrial structure through its impact on transaction costs
The role of the network is not only that it can improve business efficiency by reducing transaction costs, but also that it can change the industrial structure through its impact on transaction costs. The network revolution has not only brought about a sharp reduction in transaction costs between enterprises and between enterprises and customers, but also brought about changes in the industrial structure that should attract economists' attention. Coase once explained the boundary between the enterprise and the market in terms of transaction costs. He believed that it was precisely because of the high transaction costs in the market. In order to save transaction costs in the market, the upstream and downstream enterprises in the production chain would reduce transaction costs in the market through "vertical merger". The application of the Internet can greatly reduce the "transaction costs" of market transactions. A direct result of the reduction of transaction costs is that enterprises do not need to carry out vertical consolidation, but more vertical division of labor. Therefore, enterprises will become more specialized. An enterprise will focus on developing advantageous products, and for non core products and services, enterprises will obtain from other enterprises through the market. Therefore, a prominent feature of enterprise management in the network economy is that it is more and more likely to be specialized, rather than "big and all inclusive" or "small and all inclusive". The highly specialized production means that enterprises can operate and survive even on a relatively small scale. For example, in the automotive industry under the network economy, the original large-scale automobile manufacturers do not need to produce various parts of their own cars, but highly specialized small enterprises specialize in producing a certain kind of automobile components. Due to the highly specialized division of labor, compared with the traditional automobile industry, which has a high degree of investment in people (such as high investment in capital and R&D in the early stage), the barriers to entry of such enterprises will also become very low, which means that such enterprises will not survive in this production field. Therefore, the oligopoly structure of the automobile industry under the traditional economy may be broken and replaced by a more competitive market structure. The transformation from monopoly market structure to competitive market structure caused by the specialization of enterprises in the network economy is one of the main changes of the traditional industrial market structure in the network economy.
（3） The network brings about changes in the industrial structure through its impact on the internal structure and scale of enterprises
In the discussion of scale economy under the network economy in the previous chapter, we know that the "agency cost" within the enterprise greatly limits the expansion of the enterprise scale. However, the use of enterprise internal network system and the transformation of enterprise management mode from traditional hierarchical to flat will make the scale of enterprises no longer subject to the constraints of traditional enterprise agency costs. The law of diminishing returns to scale of traditional enterprises will be broken, and enterprises can continue to expand their scale and still enjoy the benefits of increasing returns to scale. For example, under the traditional economy, the scale of a manufacturer's products can be supplied to a certain province. Under the network economy, its scale can be expanded to supply the demand of products from the whole region to the whole country. That is, within the scope of the market, the average cost of the enterprise will continue to decline due to the increasing returns to scale.
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