Topic: Individual assignment

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Dr Joseph H. Kim School of Management

RMIT University

BUSM 3886

Week 10 Business and government

in the global information economy

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Today’s lecture

• Development of global information economy

• Key drivers of global information economy

• Role of government in the global information economy

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Global information economy: The new world of big data

• “Humans now create in two days the same amount of data that it took from the dawn of civilization until 2003 to create” (Eric Schmidt, Executive Chairman of Google)

• The World of ‘Big Data’: “the infinite sea of facts, products, books, maps, conversations, references, opinions, trends, videos, advertisements, surveys -- all of the sense and nonsense that is literally at your fingertips, 24/7, everyday from now on” (USA Today)

• Challenges for government?

Industrial society

Information society

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Development of global information economy

Late 2000s:

sharing economy firms utilising

underused assets on P2P platform

Early to mid- 2000s:

social media firms enabling users to communicate and

share content

1990s:

led by e-commerce companies

creating “digital marketplace”

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Digital technologies and changes to the economy

• Product mix: existing products are replaced by new products • Value chain in production: increased outsourcing &

“servicification” of manufacturing • Players in the market: existing firms displaced by new entrants

and others evolve to take advantage of opportunities - The rise of “hub firms”: Digital superpower firms that use

their existing network-based assets to enter into another industry and “re-architect” its competitive structure

(For further information on the hub firms read https://hbr.org/2017/09/managing- our-hub-economy)

• Demand for labour: automation replaces some jobs and reduces the need for others, new jobs emerge, and the skills needed change

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Source: Veugelers (2013), p. 27.

GIE and evolution of value chain in production

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E-commerce

• The exchange of goods and services across an interactive digital network

- A computer-mediated and virtual market with a digital means of exchange - Overcoming the problems of distance and costs

• Altering the industry dynamics? • Growing power of consumers • Collection and use of personal information a serious invasion of privacy

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E-commerce & industry dynamics

Porter’s Five Forces

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Social media

• Representing cutting edge of business communication based on technology

• On the positive side, social media provide cyber meeting space for people wanting to network

• Challenge of social media: promoting freedom within an ethical context of responsibility

- Social media often places more emphasis on instantaneous rather than accurate information resulting in controversies such as Facebook’s privacy & fake news and Twitter’s free speech dilemma - More information is good, but only if it promotes truth telling

• As the pace of technological advancement is too fast, and legal mechanism cannot keep up (reaction rather than proaction)

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Sharing economy

• Bringing together owners of assets with those who want to use them using digital platforms

E.g. vehicles, machinery, tools, clothes, houses • Enable an increase in the use of under-utilised assets,

improving the overall efficiency of the economy • Undermining the traditional markets, particularly those where

firms relied on restrictions to market entry • In some cases, the new sharing economy platforms are also

used by existing businesses (e.g. taxi drivers using Uber, B&B listing on AirBnB)

• New entrants may face less regulations than incumbents

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Uber and regulatory challenges

• Uber’s service in a regulatory gray area initially in most cities • Governments at first resisting Uber in support of the domestic taxi industry • Uber’s strategy: generating support fast enough before the incumbent

operators try to shut them down - typically ignored regulatory issues in order to buy time and prove its

business model to customers and legislators - once sufficient support is created, tried to change the laws

Take-away points?

• Laws and regulations are the product of competition between interests • Regulators are not “anti-innovation”, but “pro-interests” • Innovative start-ups need to build political strength • Political strength will determine legislative / regulatory outcomes

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Role of government in GIE

• Enabler of new technology development • Regulator of the frameworks • Mitigator of risks