21st century is internet and information technology time where innovation is at the core of human activities. Information technology is taking effect on all dimensions of life. In the business industry, entrepreneurship has changed its course with e-commerce as the method of various transactions. This has helped to dispose the traditional means of transacting which was time consuming, tedious and localized. In addition, this results in profit making and globalization of markets with increased virtual commerce over the past physical commerce.
Business sector is also undergoing intensive competition with every company running after maximizing profits. This has led to increased innovation to gain competition advantage and lead the market. However, innovation leads to creative decision making which helps in economic growth. Innovation can only be successful through adoption and creative destruction helps to harness the innovation and creativity and promote economic growth even more. Introduction During the past decade, information technology has become core in the business sector with intensive use of the internet.
This has led to the expansion of electronic commerce, (e-commerce) in various business transactions as well as the exchange of information through the internet. A number of transactions are therefore taking place through the presence of internet related transactions. As a result, the business relationships have revolved from the traditional form of relationship to the electronic form of business transactions. This has led to different form of business models with reference to transaction methods for various services (Niles 2008).
Internet related commerce is however fast in transaction but the transactions are based on traditional methods models. The study illustrates the differences between e-commerce and traditional transactions with modern globalization. The paper covers transactions between various businesses as well as those of business with its end users. Transaction between businesses As Niles (2008) overstates, a business model is “a description of the relationship between a business and the markets. ” Various businesses conduct transactions quite often once a relationship with related consumers is established.
Electronic commerce between businesses has increased mainly in information technology industry. The following is the difference in transaction procedure between the traditional and 21st century business (Niles 2008). Traditionally, the steps for the purchase of a product between businesses involved this procedure. First, the business had had to make contacts through use of telephone of other communication procedure and a product catalog is sent to the buyer. The two parties had to meet and make required relationships where the seller would propose the total cost of the products.
After an agreement is reached, the proposal is forwarded to the approval by both executive level mangers and signing for transactions is completed (Niles 2008). The supply of service or goods is then done physically. For e-commerce, the process starts with the procurement office for purchasers by reviewing various catalogs over the internet. After choosing the goods required, an order form is sent through faxing or email and confirmed by the buyer. The transaction and necessary payments is done using Paypal or money transfer and the goods shipped. In this case, no physical contact is required.
The traditional form of process is time consuming and this reduces profits. In addition, e-commerce increases the marketing area where global marketing is taking place as opposed to traditional marketing (Wolcott 2008). Transaction between business and consumer Consumers usually purchase goods for individual use. These form transactions have also change from the traditional processes of transactions. Whereas the traditional form of consumer purchase involved the physical search of products in the catalog, e-commerce does not require the physical visit to the retail point (McCraw 2008).
The consumer use websites and purchase the products online. This also takes place in provision of various services including hotel and freight booking. In the process of purchasing a product traditionally, the consumer require intensive physical effort and waste of time especially when there is return of low quality products. This is, however, nullified in electronic shopping where websites is used in purchasing and the products delivered to the consumer thus increased customer satisfaction (Niles 2008). Innovation and global economy growth
Innovation is quite significant especially for organizations which are experiencing negative growth rates. As Schumpeter stated production, process and behavioral innovation become the ample way of reforming the affected organization. An evolutionary approach to economic change allows for improvements in some systems which are already in existence while a revolutionary approach involves a complete overhaul of failed systems (Wolcott 2008). Both approaches will encourage innovation and incremental growth leading to effective production, processing and human resources management which leads to economic growth.
The change model is one which includes phases for need analysis, planning for the changes, implementing them and thereafter integrating them into the organization. Innovation discards the existing old economic structure and employs new strategies a technique he termed as creative destruction (McCraw 2008). However, innovation is not consistent but works on an irregular trend. Competition is one of the factors influencing innovation hence business Schumpeter indicated the various a complex way by which business undergoes significant cycles.
However, this is full of uncertainties since no specific conclusion could be achieved due to irregularities of the waves. As a result, innovation is the driving force for capitalism (Wolcott 2008). For example, in the past, price indexes were evaluated using the fluctuations of the prices of raw materials making the product without respect to the value of the new product produced and customer satisfaction. This is very different from what is used today. With respect to the use of the internet, this led to reduction of commodity prices due to time saving and increased efficiency (Grand & MacLean 2008).
The benefit of consumers with the online marketing of products can be evaluated through the increase increased demand. This shows that above increased innovation, there is more customer satisfaction and reduced prices. As a result innovation has also led to production of new products as well as services in the market which results into economy growth (McCraw 2008). Creative destruction and economy growth Diamond (2008) states creative destruction as the practice of discarding existing processes and products and adopting more innovative ways.
At the individual level, creative destruction can be used to strengthen innovation and foster economy growth. The rate of innovation depends on the rate of creative destruction. This makes creative destruction as the key process to capitalism as it was evident in the twentieth century in America. However, as Diamond (2008) overstates, “small is better” form of destruction works best for long term sustainability. Through creative destruction, finances are drawn out from the failing innovations and utilized in innovations that are progressive.
This has been evidenced in various companies where company like Apple has surpassed others due to creative destruction (Diamond 2008). Creative destruction acts as the focal point for capitalism and economy. Companies have been losing ground with a fortnight due to lack proper utilization of information technology. Schumpeter clearly indicated the argument and his theory still applies where he studied competition with its relation to economy growth (Grand & MacLean 2008). Without destruction the generation is stagnant and the only competition is through technical advancement.
For example, in Manhattan creative destruction took place in the 20th century to create room for modernization. This led to increased capitalism economy and social advancement in the city and improved both the landscape as well as the thinking capacity of the residents. Creative possibilities and this process are widely used in various urban cities development. Creative destruction at the microeconomic level requires the replacement of existing processes. This is dependent on the managerial strategies and level of adoption of technology or else this may affect the macroeconomics negatively.
Economy growth is related to the employment rate resulting from supply and demand for labor. With adoption of new technologies, cyclical issues like unemployment are avoided. This will lead to creation both at the production of and application level. Research in the United States indicate that jobs in the application sector take about 50 percent of the growth in production owing that every year there is either employment creation or loss (Grand & MacLean 2008). References Niles, N. J. (2008). A New Definition of a Business Model: Journal of Business & Economics Research. Volume 6, Number 12. Lander University. USA Wolcott, R. C. , Sawhney, M. Arroniz, I. (2006).
The 12 different ways for companies to innovate: Journal on Organization Science Vol. 19, No. 1, January–February 2008, pp. 69– 89. ISSN 1047-7039 _eissn 1526-5455 _08 _1901 _0069 McCraw, K. T. (2008). Prophet of innovation: Joseph Schumpeter and Creative Destruction: Cambridge. Harvard University Press. Diamond Jr, M. A. (2008). Creative Destruction: The Essential Fact about Capitalism. George Mason University. Grand, S. , MacLean, D. (2003). Creative Destruction and Creative Action: Path Dependence and Path Creation in Innovation and Change. Institute of management, University of Glasgow.
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