Digital Economy is referred to as the new economy. That is, an economy in which digital computing technologies are used in economic activities. The term “digital economy” was mentioned first in Japan by a professor and Research economist in the midst of Japan’s recession of the 1990s.
However, according to Thomas Mesenbourg, the three main component of the digital concept are as follows; E-business infrastructure, E business and E-commerce.
In this new economy, digital networking and communication infrastructure offers a global platform over which people and organizations devise strategies, communicate, interact, collaborate and search for info. To understand more on about DE read to the end.
What is digital economy ?DE is refer to an economy that is centered on digital computing technologies. It can also be seen as an act of conducting business through markets based on the internet and the world wide web. It’s also refer to as the Internet economy, web economy or new economy. DE is intertwined with the traditional economy, making a clear delineation harder. It’s underpinned by the spread of information and communication technologies across all business platforms to enhance its productivity.
Characteristics Of Digital Economy
Here are the characteristics and features of DE:
Mobility of intangibles:
The investment in and development of intangibles like software is a core contributor to value creation and economic growth for companies in the digital economy. As at early 2000, lots of companies have began to substantially Increase the number of capital advocated to intangibles such as branding, design instead of in hardware.
Mobility Of Business Functions:
ICT Information and communication technologies have significantly reduced the cost associated with the organization and coordination of complex activities over for a long period of time. Thus, long businesses are increasingly able to manage their global operations on an integrated basis from a central location that may be removed geographically from the locations in which the operations are carried out and locations which suppliers or customers are.
Reliance On Data:
Digital economy relies on personal data collection. According to a data protection directive, Data is any information relating to a natural person who can be identified by reference to his identification number or to info which is specific to him. This regulation raised in response to the needs l to integrate the European market.
It’s also based on network effect. This happens when the value of a product or service to the user Increases exponentially with the number of other users that makes use of the same product or service.
Tendency To Oligopoly and monopoly formation:
Digital platforms like Google, Apple, Amazon and Facebook can be considered as first movers large companies that introduce a service or product on am immature market, thereby allowing such company to establish strong brand recognition and service loyalty.
The notion of multi-sided Market was developed based on the fact that platforms are two sided. It lets you explain why these platform can propose freely their content, with customers on one sided and the software developers or advertisers on other.
Digital Economy Examples
- It fueled and generates numerous numbers of data
- It allows firms to do their business differently as more efficiently and cost effectively. These effects are gave rise to the whole new market structures that remove, that remove transaction costs in trad market. The perfect example of this, is the emergence of digital platforms like Amazon, Airbnb and Uber. These firms works together in a virtual world.
Digital Economy Challenges And Opportunities
Digital economy comes with several opportunities and at same time faces challenges and rules of the game in the global market. It brings a new set of benefits, which can make it possible to reduce the differences that exist between rich and poor nations.
However, developing countries have the opportunity to transform its economy and to contribute to the development of the digital economy. Though these economies are characterized by high added value, faced with several obstacles, many developing can not properly respond to the demands of the digital economy.
Some of the challenges developing countries face are, inadequate access to the latest technology, low computer literacy as well as numerous cultural and socio-economic factors and sophisticated telecommunications infrastructure.