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Digital Economy: Opportunities and Challenges

The economy of a country means a combination of all the activities like production, consumption, import-export of goods and services that lead to the progress of not only the country but also of its citizens as a whole.  The development of an economy depends upon an individual to a corporation to a big multi-national company to the government of that country. No economy is static; it keeps on evolving with the changes in culture, lifestyle, policies, and laws that are framed.

In the new world, it is not the big fish that misses the little one; it’s the fastest that eats the slowest. - -Klaus Schwab (Founder and Executive Chairman, World Economic Forum)

For this reason, no two economies in the world are the same, all try to adapt to the on-going changes, nationally as well as internationally. Being present in this global competitive scenario, all nations try to boost their respective economies to a level of success stage and beat the other one. This race has become more evident and substantial after the advent of various new technologies. Especially, with the growing importance of the digital era, countries have to become a part of it to sustain itself in the competition. It has become important for a Nation that wants to grow and adapt the essential features of this era to survive.

When a traditional economy transfers to a digital one, it may bring a lot of resistance and challenges but the digital economy also brings with it lot of opportunities and new aspects that leads not only to the revival of the set-backed economies but also enhances the structure of the evolved economies from better to best.

Today, the digital economy or the internet economy is influencing every social life. No one has been able to escape from its trap. And now, it has also entered into our economic activities. The term ‘Digital Economy’ was coined in Don Tapscott’s best-seller The Digital Economy: Promise and Peril in the Age of Networked Intelligence (1995). A widely accepted understanding of the digital economy is economic activities in and around the digital world.[1]

The start point of such digital activity is a business with an online internet connection among the people residing in various different countries across the world. Such an online connection helps in connecting businesses of different economies easily and efficiently. The industrial era has been succeeded by this new era where if companies do not possess the advanced technologies, then it will fail to take the seeds of success that this new era has sowed for it. Governments of all the countries formulate their agendas to become a part of this global platform where a representative can sit in his own country and corroborate, share, communicate, strategies or interact with another representative of the other country.

Trading has indeed become easy and viable. This convergence enables all types of information, be it data, audio, codes or even a video to be stored, processed and transmitted over networks to many destinations worldwide. The digital economy has helped to create an economic revolution, which was evidenced by unprecedented economic performance and the longest period of uninterrupted economic expansion in history from 1991 until 2007.[2] 

It helps a seller to find a buyer easily and vice versa. Now, neither a seller needs an infrastructure for selling his products nor a buyer needs to search for them by moving out of their houses. All can be done easily, just with a click.  For example, an owner of a small handloom cottage in India can sell his products in the markets of Australia and other countries directly. Knowledge and demand for the products readily come on the internet making trading communication available.

The biggest sources of opportunity are collaboration and partnership. And today, with digital communication, there is more of that everywhere. We need to expose ourselves to that as a matter of doing business. - Mark Parker ( President of Nike, Inc.)
 
This new world evidences rapid change that attracts laws for competition, new sorts of organization and vigorous challenges for management. The Digital Economy is an environment characterized by immediacy and urgency, globalization, liberalization and privatization, virtualization (audio and video), online common workplace, innovation, and convergence.

These kinds of digital economic values will change the fundamentals in the economy and also drastically transform the general notion of understanding economics and its elements including society. Before the advent of such technology, there was a lot of work that was done manually which made the task difficult and non-reliable. For example, when there was no Demat account for monitoring the shares, the managers would continuously intervene, paper-work would go lost, problems of reliability, people would get worn out and many other unseen problems would arise. But now with the evolution of technologies, all this work has been simplified. A mere task of plain sailing.

This system has helped various companies to perform better and on the other hand, has also helped the economy of the country to increment as it attracts investment, a healthy relationship is developed, all the information about the ongoing trade are visible on a common platform that is the internet which brings transparency and credibility. But if we see the other side of the coin it also brings some disadvantages like the strategies and policies of the company are disclosed to the global world because of which new methods and ideas that lead to progress do not remain to confide and even a small fall back is known in the market.  We are witnessing the emergence of the Digital Economy.

The digital economy moves the center of gravity of the investments in fixed assets to investments in human capital. Individual initiative, solidarity, cooperation and mutual trust in the workplace are key factors for success in the informational society. The Internet has indeed become a multi-billion dollar industry which is vital for infrastructure for a global economy. It reshapes the way people live by bringing a greater variety of goods and digital services often at lower prices, availability of improved data collection, channels, and social networks.

With respect to the firms, the transition to digital technologies forced them to rethink the business models that led them to constantly adapt variant innovative measures to just survive in a global market. The digital economy aims at putting the needs of consumers in the first and foremost list of its priorities as the needs of consumers have an interactive character, participatory, realization of the interface between offer and demand in the area of volume, structure, space and time more rigorously.

The new economy is providing after the principle of "the more people involved, the bigger the benefit for everyone involved". It was expected that by 2016, the digital economy would double, increasing from 2300 billion in 2010 to 4200 billion dollars.[1]

The digital revolution is far more significant than the invention of writing or even of printing.-Douglas Engelbart (American engineer)
 
An economy that strives to transform into a digital one already rises a notch higher than the other traditional economies as it acquires an edge to compete better and stronger in the same market. Digital Economy enables to reduce of the cost of transactions and also in return helps in innovation because now everything is online, costs like building infrastructure, maintaining it, re-building and other related costs get reduced.

Start-ups that lead to innovation are boosted at a very large scale where only a one-time initial investment is needed. This structure gives rise to the economy of scales that is extra revenue with little extra costs.

The companies receive a lot of information about their competitors and customers. For example, Google, Facebook, Whatsapp, Amazon stores massive information about their every customer which assists them to know about their buying habits, targeted advertising group, preferences, dislikes, advertising cost, stands in the market, etc. but on the other hand it also creates monopoly in the market which is not good for any economy, Monopolies like Google dominating as a search engine, Facebook as a social media and Amazon as e-commerce. This cripples downs the competition.

Digital Economy provides new tools for conducting physical businesses effortlessly through the internet. Physical marketing can be replaced with online to capture huge amount of customers as well as the right age group suitable for significant products. Cloud computing can be used to promote digital services as it is getting cheaper every year to run. Sellers can put on the online advertisement with minimal cost that can stay longer and attract attention.

With this long- term existence of advertisements, more goods can be traded and a more efficient market can be developed. Such longevity, connections, and valuable digital content stream long term revenue.

Therefore with a mix match of the situation in hand, people have to be cautious in using technology especially when it gets attached to an economy of a country because then it no longer only impacts an individual or a single country rather the world economy as a whole.

As long as we don’t back away from a problem with the fear of losing, and fight back with the knowledge of what went wrong, we will definitely win.- Ashok Kannan (Co-founder of Happy Hens)

End-Notes:
[1] Digital Economy. https://www.uniassignment.com/essay-samples/information-technology/digital-economy-the-societys-informational-economy-information-technology-essay.php accessed on 24th June 2018 19:21 pm IST.
[2] What is digital economy? https://www.indianeconomy.net/splclassroom/what-is-digital-economy/ 
[3]  Essays, UK. (November 2013). Information In The Digital Economy The Digital Information Technology Essay. Retrieved from https://www.ukessays.com/essays/information-technology/information-in-the-digital-economy-the-digital-information-technology-essay.php?vref=1 
[4] Digital Economy. https://www.uniassignment.com/essay-samples/information-technology/digital-economy-the-societys-informational-economy-information-technology-essay.php

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