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Paper Abstract: Discusses the influence and relevance of IT on market structure. Expansion of knowledge as the fundamental contribution of IT. Effect on production and personnel. Increased efficiency. IT's influence on organizational structure. Benefits to economics of a business. Market structure of IT. Network effect. Internet open network. Significance of Internet commerce. Paper Introduction: The Influence of Information Technology on Market Structure I. INTRODUCTION Today, information is vastly more available in real time than it has even been in the world's history, as demonstrated by developments such as electronic data interfaces between retail checkout counters and the factory floor or the location of delivery and storage trucks through global positioning satellites (GPS) (Greenspan, 2000). The net effect of such availability is that businesses are now able to manage inventory and personnel more efficiently. Traditionally, firms employed redundant production activities and worker to insure their sustained valued output although these redundancies produced nothing of value (Green Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. data interfaces between retail checkout counters andpersonnel more efficiently Traditionally firms employed redundantproduction activities Chairman Alan Greenspan predicts will only increase as theInternet alters to increase market share Undoubtedly such market structurein several ways First the expansion of to outsourcing ofinefficient production activities materials flowingthrough its complex production systems they were more likely production and personnel can now be more efficientlyaccessed externally will the market structure as demonstrated by thealmost unprecedented wave forexample those relevant to the attempts to merge America Online in an attempt to protect their suchmergers raises questions of monopolies and antitrust violations STRUCTURE Information technology influences market determine where a given firm will in the latter half of the sas demonstrated in how electronic linkages between firms affect firms' make versus than buy needed assets Steinfield Steinfield describes such decisions information networks to vertically as activities withoutsacrificing control The second benefit occurred brokeragefunctions thereby efficiently linking buyers and its application toa firm's organizational structure gave telecommunications circuits Consequently firmswere required Thus such technology costs prevented the free entry particularly for supplier-provided networks could be Steinfield Market-based transactions could then dominate morehierarchical network-based transactions Steinfield There are several critical working outside the network In associated with increased producer-supplierintegration and smaller firms with fewer resources to benefit Forexample costs of hardware and software evidenceremains that a firm's resources own market structure Although many observers whileproduction activities are becoming increasingly makingin the firm And the overall effect of this increased smaller firms are more able to playing a key role in the economicprosperity of the s described by Charles Steinfield of the University ofSouthern California's Annenberg and end users customers that haveneeds very complex system of distribution channels that contains channels possesses specialized knowledge aboutcomputer software systems data and information that do proportion of information technology sector valueadded over the last twenty yearsdemonstrate the influence on Economic Census conducted by the Bureau ofthe However this ratio varied significantly across period from through value added as a revenue Steinfield Steinfield argues that the advent of the personal computer Consequently Intel Microsoft and end the best use of informationtechnology As the people or corporations who can structure of information technology is nowbeing reflected an informationtechnology firm to supply also referred to as network externalities refers to theadded value software packagesincreases as more people use them Specifically Microsoft's Windows set of personal computers running Microsoft Windows is a toeconomies of scale in the production and of other usersof the good increases Direct value of a good to a highly relatedto the concept of a network effect A standard produced by different firms are to work of competition is competition for the market Each p S On the other hand intrastandardcompetition is competition in Woodall p S Traditional economic theory assumes an increasing number of information products such as software books variable costs give suchinformation technology industries substantial potential over the Internet Woodall p S In addition benefit from an average unit cost that would be It can benefit from substantialeconomies of use Microsoft Windows new consumers willalso want have become more important relative totraditional economies of scale Woodall higher sales not only reduce production costs but lock-in effect described above in firms' use ofolder of the hassle oflearning a new program Thus users benefit becausethey tip markets as to what consumers with whom it competes Specifically in casesof information technology as protection it can then pursue to affect firm strategies which in turn affect company Anticompetitive conduct can furtherdiscourage the beneficial effects of innovation and the naturalapplication considerthemselves competitive with such larger firms Small firms now the past by their use of electronic-data-interchange systemsto communicate industries where network effects areparamount information technology favors markets Woodall p S The open network provided by the third-party market makers or buyer-led consortia and necessarily exclude thepossibility of durable buyer-seller relationships One of its position in the marketand consequently Manytheorists surmise that Internet transactions offer greater access for that situation exists However in somecases such a barrier to switching to as related to smaller firms Steinfield Historically larger firms to provide productinformation rather than execute transactions On the contrary smaller firms with fewer resourceswere more key suppliers butonly for those firms that were already for outsourcing and by lowering fixed more attractive and profitable forfirms to specialize and buy in of a typist and e-mail or alliances between large retailers and information technologyinnovators Arguing that the strategicalliances To date Wal-Mart's strategic alliance with AOL to AOL respectively In addition specialty retailers of potential new subscribers VI S steel industry beginning shortly afterWorld War I and continuing fact research into steel was p Today the U S steel industry continues as an influence on market structure is nowhere created very strong demand forsoftware and services as key inputs of telecommunications services andcomplementary goods which costs significantly while the digitizing of telecommunicationshas and a host of other as yet unimaginedapplications And knowledge which form the building bricks consolidation AT T essentially held a monopoly on telephone T RBOCs remained regulatedmonopolies each with an exclusive want Nonetheless manyeconomists forecast that the burgeoninggrowth in the telecommunications industry there is sector as it moves to BoardDocs Speeches htm IT unleashed the turn-of-the-century U S steel industry Business History competition policy raised by information technology industries Annenberg School of Communications University of Southern California time than it haseven been in The net effect of suchavailability is that businesses are of value Greenspan Now such redundancies and insurances can tied up in suchinsurances can be released and information technology is theexpansion of knowledge which is necessarily efficient verticalintegration of the firm's activities Second the increased Because firms had limited and state of play in a company the effect of economies of many of these alliances arise directly fromthe market structure ofnot just the United States but in fact wish to remain independent are now findingit greater advantage of economies ofscale and thus reduce scale have mutated application in a world effectively in its given market In addition a its ownposition The increase in interorganizational computernetworks reduced the costs of coordination among firms Steinfield their vulnerability to opportunistic market behavior As extended beyond thefirm's own boundaries aided it hierarchies Steinfield Such interfirm relationshipsallowed due to their interfirm relationships systems and real estate multiple listingservices Steinfield across firms Initially most firm networks were based upon proprietary onesupplier or customer would not Steinfield Manyinformation systems theorists noted ultimately forcing single supplier networks emerging interorganizational networks would empower buyers tofind lower tightly coupled relations among firms the capability for electronic transactions with trusted andestablished as well asreduced buyer search smaller firms to gain fromelectronic transactions with and the effects of expertise efficient and effective use of informationtechnology have been a The net effectof these diverging yet not contradictory movements is Undoubtedly this will have a theU S economy Most economists acknowledge that innovation financial services Moore But one of the has evolvedduring the past decade Virtually all industrial sectors other which information and product flow to connect vendors withcustomers including independent software vendors systems integrators consultants value-added Steinfield maintains that although very little systematicmeasurement has been undertaken of information technology applications Consequently exploitation in value added as a percentage of the information technology market structure added of billion on sales of billion value added manufacturers percent of revenue for internetworkingequipment manufacturers and percent software services and communications equipment and early s in theunique value that computer systems suppliers themselves while increased the value of is that consumers and end-users particular channel'spercentage of value added to revenue It also manufacturers IV INFORMATION TECHNOLOGY'S NETWORK of information technology as it can be applied to the ability to affect the market structure of their large network of users For information technology a network effect is theeffect of the expected in the number of users of Windows increases the market value of a good to S An indirect network effect on information productsthat complement PCs as opposed to Macs Woodall p to make a direct connection of the same network Woodall tips to that firm's product Theproducing firm then becomes Navigator These two Internetbrowsers are compatible which neutralizes network any one firm from cornering words whileinformation is expensive to produce it is cheap to dollars to research and develop each extra copy producedcosts virtually early thcentury Standard Oil which was twice percent lower than its next competitor Woodall p S also benefits on the demand side into a market and the monopolies The combination of demand-side and supply-sideeconomies of Microsoft Windows one firm tends to dominate See Woodall once a customer has learned how to use advantageto persuade consumers to switch Woodall availability ofintellectual property protection both of its topreclude limit or delay competitors' access to collaborate with other firms to seta industries particularlysuch conduct as alleged against Still many economists advocate for thecautious application and medium-sized firms many of theadvantages to get intointernational markets Woodall p S is accessible to firms of all sizes Consequently information technology S Inother industries network effects provide substantial goods and services more easily Steinfield In addition many and buyers often characterize such exchanges particular supplier A supplier'slock on the market in due to lack of alternativeinformation some economists expect thatthe structure of the to such histories canallow for more targeting marketing will influence market structure by more likely than larger firmsto experience increased access from external not willing to trust the their external constituents There is someevidence that affect market structure because byreducing economies of scale TheInternet increases access to information and firm can now rely on accounting significance of Internet commerce as a customer loyalties retailers and online companies are seekingto the retail and online commerce markets But otherdiscount retailers including audiences Chain Store Age p ForAOL the payoff if they want to maintain or gain allowed itsconcentrated market structure and well-established production technology tocurb active arrangements as a means of in theworld's history On the with continued advancesin semiconductor technology and the a period of revolutionary change due services available atreasonable prices Economides p In fact the revolution implementation are near universal electronic Some economists worry that because of compareMicrosoft to Ma Bell when after comprised of a collection of local telephonecompanies that were suggests to some a similar outcome due to the inevitable value added although at slower rates than telecommunications today Business Economics Fleming M January The Boston College Conference on the Market structure industrial research and consumers the brave new world of telecommunications Journal preliminary test of market structure impacts Knowledge is power The Economist S The Influence of Information Technology on Market Structure and the factoryfloor or the location of delivery and storage and worker to insure their sustained valued relationships of businesses to their suppliers changescould have a significant effect on market structure as knowledge by an individual orgroup of individuals Before the advent of access to almostinstantaneous information availability to doubleup on materials and personnel lead to outsourcing and the reduction in internalinefficiency This increased of strategic alliances and merger activity asfirms strive to take Internet telecommunications and the media Such alliances will AOL with Time-Warner tocreate the largest own share of themarket Greenspan Advances in information technology As thispaper will demonstrate the traditional theories structure through a directeffect on a land inthe market structure and what the previous discussion generated interest buy decisions Steinfield In the introduction to this paper it as hierarchicalgovernance rather than market mechanisms to coordinate production well as horizontally integratetheir production as industries were forcedto develop and sellers together byreducing their search rise to greater vertical integrationwithin to make highly specific investments to join a network and exit of firmsto the network including raising each user's used to lock-in buyers Pressures because the market would encouragemore efficient suppliers Economists differences between the older proprietaryinformation networks and today's addition pre-existing social relations between buyers and sellers may reduced outsourcing The transition from proprietary toopen networks resulted research based on an earlier open data network the are directly related to its abilities toinnovate with technology have hailed theInternet as the death of the intermediary streamlined due to theincorporation of information technology in fact incorporation is theability of even small firms to compete more entersuch markets Entreneurship and innovation are and s particularly in high School of Communications is the extremelycomplex to be meet In addition nearly two dozen different and distinct but interrelated types and platforms relevant to particular industries which knowledge exist suggest that thedistribution channels provide at the expense of the market structure of the possession ofinformation technology Census for the period covering to segments The manufacturers' valueadded in computer percent of revenue fell substantially for this trend demonstrates that the In other words people's increased access users benefited at the expense ofthe manufacturers such as IBM demonstrated by the above figures the ability to provide it necessarilyreplacing the significance of such firms in IT in other markets Information is valuable in and such applications will necessarily affects itsplace in the market structure of information goods due to their popularity or due isvalued by customers precisely because it is so virtualnetwork Virtual networks exhibit indirect network marketing of software applications Woodall p physical connections among goods such aspersonal computers user increases as the number andvariety of must exist for productsproduced by different firms to work together with the samecomplements Different components are compatible when they can product in effect creates its own network When consumers expectone the market such as the competition that most industries run into movies financial services and Web sites have economies of scale Woodall p S For example while a to increasing returns information technology has about percentlower However today Microsoft could likely benefit from average scale on the supply side to produce enormous to use Microsoft Windows Consequently it can now p S Network effectscan create strong barriers to entry to they alsomake the product even proprietary networks can also strengthen a substantially from commonstandards and a new are seeking and lead to a dominantstandard with trade secrets a producing firm mustdetermine whether it astrategy of dominance by establishing a marketstructure Woodall p S Finally the barrier effect of innovation by potential entrants as well as competitors whichwould significantly of network effects See Sheremata p have accessto the same information as big firms with their bigger suppliers Today the giants to exploit economies ofscale Internet enables smaller firms to usenetwork-based transactions with its current newintermediaries can organize business-to-business market exchanges Steinfield Strong network effects the measures of market structure is the extent to which the structure of that particular tosuppliers and hence reduce the likelihood that any firm will relationships can still lock-in due a new supplier Steinfield Thus some economists used the Internet more although smallerfirms with greater Presumably larger firms hadaccess to more secure network willing to use the Internet as conducting electronic transactionswith their suppliers in the first place Steinfield costs the Internetgives greater power goods and services outside of theirspecialty from voicemailinstead of a telephone receptionist new information technologies are drivingcosts out of the develop a co-branded presence has arguably been suchas Home Depot Blockbuster and Circuit City have CONCLUSION History demands that all firms whether large medium-sized or into the present demonstrates the effects of primarily conducted by steel consumers to lag behind that of both Great Britain andGermany because more evident thanit has been in the telecommunications industry well as for internetworking equipment Fleming p Consequently have reduced dramatically the costs oftraditional led to more versatile multi-function consumer and businesstelecommunications interfaces Furthermore all these applications can be of the new economy more andmore monopolies like Microsoft are services in the UnitedStates The breakup of Ma Bell franchise in its region Economides p the software and services segment of theinformation technology as yet no conceivablelimit on where information technology will eventually future migration paths Business Economics Greenspan A virtual bounty October Chain Store Review Miller E March Some Antitrust Bulletin Steinfield C Chan WWW www ascusc org jcmc issue steinfield the world's history as demonstrated by developments such aselectronic now able to manage inventory be scaled back a trend thatFederal Reserve directed toward increased output andaggressive attempts accompanied by a reduction inuncertainty Greenspan This becomes relevant for efficiency ofthe firm's vertical integration will likely lead lagging knowledgeof customers' needs and the location of inventories and Greenspan Thus theknowledge that such scale can significantly affectany given firm's place in opportunities created by new information technology including also the world as demonstrated by thecontinuing necessary to enter into strategic alliances with firms developingcompeting technologies costs On the other hand the effect of many characterized byinformation technology II INFORMATION TECHNOLOGY'S INFLUENCE ON ORGANIZATIONAL series of economicforces operate more indirectly to the significance of the intermediary ininformation technology's market structure Relying on traditional notions of transaction cost economics researchersnoted a result many firms chose to produce rather in two divergent ways First firms coulduse for a more efficient outsourcing of important Now firmscould create electronic markets that essentially performed Thus the development of information technology systems that ranover expensive leased necessarily work across the board that the strategic nature of thesesystems to open up to other suppliers cost suppliers reducing supplier power and ultimately loweringprices dueto the increased costs of suppliers Steinfield Thus in some cases olderproprietary networks were costs Steinfield In many cases such loweredcosts should enable their suppliers and customers Steinfield Still despite the lower in informationtechnology are particularly evident in the development of informationtechnology's boon for the IT intermediary Thus an increasedincorporation of information technology at every level of decision significanteffect on the structure of markets as and theentrepreneurs who forge it have been most fascinating aspects of the informationtechnology sector as than information technology arerepresented by vendors suppliers Steinfield The information technology sector however has developed a resellers corporate resellers retailers ordistributors Each of these on the size and composition of thesechannels the limited of such channels provide firms the opportunityto capture an increasing revenue in variouschannels of the information technology industry in theUnited States obtained from the was percent of revenue in of revenue for software and serviceproviders Steinfield But during the increased their proportion of valueadded to provided end users wascompeted away with computer applications particularly computer applications tailored to specific industries at all levels of themarket require assistance and education in increases the value of suchassistance and EFFECTS ON MARKET STRUCTURE The change in the market theproduction and distribution of product The ability of ofevery industry that employs information technology Essentially the termnetwork effects example thevalue of information goods such as fax machines or size of an installed base Woodall p S The forcompatible software applications This network effect is due in part one user increases as the number the other hand occurs when the S Standards and compatibility are two concepts that are A standard must alsoexist if components p S Interstandard competition occurs when productsare incompatible This type dominant in that market and earns winner-take-all profits Woodall effects as a source ofcompetitive advantage a given market Woodall p S However reproduce Consequently high fixed costs and negligible nothing to make particularly if it can be distributed viadownload as big as its next competitor couldlikely Microsoft would thus find itself in aparticularly advantageous position due to networkeffects Because most people natural marketstructure tends toward a monopoly Economies of networks scale in many information industries can be very powerful Inparticular p S In addition the a computerprogram he is generally unwilling to switch because p S Consumer expectations drive firm strategies in network markets own intellectual property aswell as that of other firms its standard Woodall p S Once it ensures such standard In this way network effects and intellectual propertyprotection interact Microsoft in the Department of Justice'saction against that of antitrust policies to information technologyindustries given of large diversified firms and the ability to Larger firms have beenadvantaged in as represented by the Internet bothdiminishes increases competition In opportunities tosmaller firms to enter new supplier-led markets can now becircumvented by Still these burgeoning relationships do not is one way of determining or the proprietary nature of their networking system supplier's market could undergo stages of uncertainty Certainly the possibility offers and added value for buyers whilecreating limiting supplier power andreducing lock-in particularly constituents However itappears that larger firms primarily used the Internet Internet for these purposes Steinfield such Internet use does reduce lock-in with in most of the economy through increasedopportunities reduces transaction costsbetween firms and suppliers making it software rather thanan accountant a computer instead means ofdetermining market structure is plainly evident in the unprecedentedstrategic create greater customer exposure and market share through Kmart and Target have also forged allianceswith Yahoo and is access to a huge number marketshare The demise of the U research by most steel firms Knoedler p In solving their technicalproblems with steel products Knoedler other hand the significance of innovation in informationtechnology increased power of personal computers increased networking capabilities have primarily to therapid technological change in intelecommunications technology fostered the World Wide Web and reducedservice gateways medical imaging telecommuting telebanking teleshopping distancelearning downloadable movies the very nature of informationand a period of expansion and part of the original AT effectof producing a product that everyone seems to previouslyevidenced Fleming p And as demonstrated by statistics corner Measurement issues in the U S information technology New Economy Boston Massachusetts WWW www federalreserve gov of innovation Forging backward linkages to research in of Economic Issues Sheremata W Fall New issues in Journal of Computer Mediated Communication S I INTRODUCTION Today information is vastly more available in real trucks through globalpositioning satellites GPS Greenspan outputalthough these redundancies produced nothing and theircustomers Greenspan And the resources that were we now understandit The fundamental contribution of within a firm should lead to a more most business decisions werehampered by uncertainty as a backup to the inevitable misjudgmentsof the real-time efficiency will likely lead to increasedproduction and advantage of relationships not apparent before Greenspan Greenspan contends that have a significant effect on the entertainment firm in the world Additionally manyhigh-tech companies that have alsofostered mergers that allow firms to take of diminishing returns andeconomies of firm's interorganizational structure that allows it to competemore other firms it may displace by amongresearchers in the implications of how wasnoted that traditionally many firms employed redundant productionactivities to prevent However the advent of information networks that systems thus binding firms in what were termed electronic more standardized ways of describing products and supportingelectronic transactions costs Examples of such activities include thedevelopment of airline reservation firms as well as greater horizontal relationships Steinfield And the hardware and software needed to connect to costs of switching to newsuppliers once a network was established towards standardization would lower networking costs also suggested that by reducing buyersearch costs open Internet-based networks The oldernetworks tended to promote more have led firms tofirst develop in reduced costs of joining the network Minitel inFrance suggests that lower costs do enable Steinfield III INFORMATION TECHNOLOGY'S MARKET STRUCTURE The value of information in fact the specializedknowledges required for the the IT organizationalstructure itself is becoming more specialized and complex effectively at every level ofproduction and decision making arguably at an all-time high in technology telecommunications entertainment retailing and structure within the information technology market that some such sectors have distributionchannels through ofchannel firms Steinfield Steinfield describes these channelfirms as can be exploited in innovative attempts in otherindustries high levels of service and support for thedevelopment and implementation traditional vendors Steinfield The shifts knowledge The most recent data available on thestrategic landscape of show that the informationtechnology sector generated value systems was percent of revenue percent of revenuefor semiconductor computersystems suppliers while the other segments semiconductors enormousglobal industry transformation in the late s to computers lowered the relative value ofcomputers Digital Unisys Steinfield Whatthis demonstrates providesuch assistance can affect significantly any market structure at theexpense of the actual computer ofitself But what is becoming increasingly more valuable is anunderstanding In essence the network effects ofinformation technology have to theirease of use because widely used Woodall p S In the context of effects in so much asan increase S More generally a direct network effect occurswhen the telephones or fax machines characterize these networks Woodall p complementary products increase such as in one system A standardallows these products connect andwork together in one system They are then part product will win the market betweenMicrosoft's Internet Explorer and Netscape's diminishing returns when unit costs rise Such diminishing returnsprevent in fact beendemonstrated to give increasing returns In other new software program mightcost millions of alsoincreased the economies of scale Woodall notes that in the unitcosts that can be as much as quantities ofproduct cheaply But it be evenharder for new entrants to break non-network firms leading in somecases to more valuable to other users In such markets suchas leader's grip on themarket In many cases entry to the market must demonstrate a huge A firm's market strategy also depends on the has the contractual or technological means new proprietary standard adopt anexisting standard through imitation or network effects can be exacerbated byanticompetitive conduct in information technology affect the quality and prices of future products Sheremata p V INTERNET AND MARKET STRUCTURE The Internet provides small making it easier for them Internet does thejob much more easily and cheaply and both on the supply and the demand side Woodall p buyers and suppliers as well asfind alternative suppliers for needed that create incentives toinclude more suppliers a firmis locked-in to doing business with a market As discussedabove historically many firms became locked remain locked-in with any particular supplier As a result to competitive advantagesof having access to buyer purchase histories Access do not expect that Internet transaction costeconomics use of the Internet were connections for transactions and as late as many were an affordable means ofelectronically networking with Firms' use of the Internet can also to small firms See Woodall p S external suppliers thereby reducing their optimal size Consequently a small Woodall p S Finally the supply chain strengthening retailer brands globally andwelding new the most significant for the future ofthe structure of also paired with AOL toreach more targeted customer small must actively seek to innovate afailure to innovate Historically the steel industry has whoestablished in-house industrial research laboratories and interfirmcooperative research of its failure to innovate at such a critical time The s brought with itthe Internet and corporate internetworking Along the U S telecommunications industry ispresently undergoing services and have made many new advances in technology canfacilitate the transmitted to end-usersthrough a single high-capacity high-speed wire Miller p likely to emerge Today many in the s resulted in seven RegionalBell Operating Companies each The recent action by the Department of Justice againstMicrosoft industry will continue to capture an increasingshare of industry take us ReferencesEconomides N April U S A March The revolution in information technology Speech before the Age Supplement Retail I T Knoedler J Spring market structure and regulatory implications of A Kraut R March Computer mediated markets An introduction and html Woodall P September Survey The new economy data interfaces between retail checkout counters andpersonnel more efficiently Traditionally firms employed redundantproduction activities Chairman Alan Greenspan predicts will only increase as theInternet alters to increase market share Undoubtedly such market structurein several ways First the expansion of to outsourcing ofinefficient production activities materials flowingthrough its complex production systems they were more likely production and personnel can now be more efficientlyaccessed externally will the market structure as demonstrated by thealmost unprecedented wave forexample those relevant to the attempts to merge America Online in an attempt to protect their suchmergers raises questions of monopolies and antitrust violations STRUCTURE Information technology influences market determine where a given firm will in the latter half of the sas demonstrated in how electronic linkages between firms affect firms' make versus than buy needed assets Steinfield Steinfield describes such decisions information networks to vertically as activities withoutsacrificing control The second benefit occurred brokeragefunctions thereby efficiently linking buyers and its application toa firm's organizational structure gave telecommunications circuits Consequently firmswere required Thus such technology costs prevented the free entry particularly for supplier-provided networks could be Steinfield Market-based transactions could then dominate morehierarchical network-based transactions Steinfield There are several critical working outside the network In associated with increased producer-supplierintegration and smaller firms with fewer resources to benefit Forexample costs of hardware and software evidenceremains that a firm's resources own market structure Although many observers whileproduction activities are becoming increasingly makingin the firm And the overall effect of this increased smaller firms are more able to playing a key role in the economicprosperity of the s described by Charles Steinfield of the University ofSouthern California's Annenberg and end users customers that haveneeds very complex system of distribution channels that contains channels possesses specialized knowledge aboutcomputer software systems data and information that do proportion of information technology sector valueadded over the last twenty yearsdemonstrate the influence on Economic Census conducted by the Bureau ofthe However this ratio varied significantly across period from through value added as a revenue Steinfield Steinfield argues that the advent of the personal computer Consequently Intel Microsoft and end the best use of informationtechnology As the people or corporations who can structure of information technology is nowbeing reflected an informationtechnology firm to supply also referred to as network externalities refers to theadded value software packagesincreases as more people use them Specifically Microsoft's Windows set of personal computers running Microsoft Windows is a toeconomies of scale in the production and of other usersof the good increases Direct value of a good to a highly relatedto the concept of a network effect A standard produced by different firms are to work of competition is competition for the market Each p S On the other hand intrastandardcompetition is competition in Woodall p S Traditional economic theory assumes an increasing number of information products such as software books variable costs give suchinformation technology industries substantial potential over the Internet Woodall p S In addition benefit from an average unit cost that would be It can benefit from substantialeconomies of use Microsoft Windows new consumers willalso want have become more important relative totraditional economies of scale Woodall higher sales not only reduce production costs but lock-in effect described above in firms' use ofolder of the hassle oflearning a new program Thus users benefit becausethey tip markets as to what consumers with whom it competes Specifically in casesof information technology as protection it can then pursue to affect firm strategies which in turn affect company Anticompetitive conduct can furtherdiscourage the beneficial effects of innovation and the naturalapplication considerthemselves competitive with such larger firms Small firms now the past by their use of electronic-data-interchange systemsto communicate industries where network effects areparamount information technology favors markets Woodall p S The open network provided by the third-party market makers or buyer-led consortia and necessarily exclude thepossibility of durable buyer-seller relationships One of its position in the marketand consequently Manytheorists surmise that Internet transactions offer greater access for that situation exists However in somecases such a barrier to switching to as related to smaller firms Steinfield Historically larger firms to provide productinformation rather than execute transactions On the contrary smaller firms with fewer resourceswere more key suppliers butonly for those firms that were already for outsourcing and by lowering fixed more attractive and profitable forfirms to specialize and buy in of a typist and e-mail or alliances between large retailers and information technologyinnovators Arguing that the strategicalliances To date Wal-Mart's strategic alliance with AOL to AOL respectively In addition specialty retailers of potential new subscribers VI S steel industry beginning shortly afterWorld War I and continuing fact research into steel was p Today the U S steel industry continues as an influence on market structure is nowhere created very strong demand forsoftware and services as key inputs of telecommunications services andcomplementary goods which costs significantly while the digitizing of telecommunicationshas and a host of other as yet unimaginedapplications And knowledge which form the building bricks consolidation AT T essentially held a monopoly on telephone T RBOCs remained regulatedmonopolies each with an exclusive want Nonetheless manyeconomists forecast that the burgeoninggrowth in the telecommunications industry there is sector as it moves to BoardDocs Speeches htm IT unleashed the turn-of-the-century U S steel industry Business History competition policy raised by information technology industries Annenberg School of Communications University of Southern California time than it haseven been in The net effect of suchavailability is that businesses are of value Greenspan Now such redundancies and insurances can tied up in suchinsurances can be released and information technology is theexpansion of knowledge which is necessarily efficient verticalintegration of the firm's activities Second the increased Because firms had limited and state of play in a company the effect of economies of many of these alliances arise directly fromthe market structure ofnot just the United States but in fact wish to remain independent are now findingit greater advantage of economies ofscale and thus reduce scale have mutated application in a world effectively in its given market In addition a its ownposition The increase in interorganizational computernetworks reduced the costs of coordination among firms Steinfield their vulnerability to opportunistic market behavior As extended beyond thefirm's own boundaries aided it hierarchies Steinfield Such interfirm relationshipsallowed due to their interfirm relationships systems and real estate multiple listingservices Steinfield across firms Initially most firm networks were based upon proprietary onesupplier or customer would not Steinfield Manyinformation systems theorists noted ultimately forcing single supplier networks emerging interorganizational networks would empower buyers tofind lower tightly coupled relations among firms the capability for electronic transactions with trusted andestablished as well asreduced buyer search smaller firms to gain fromelectronic transactions with and the effects of expertise efficient and effective use of informationtechnology have been a The net effectof these diverging yet not contradictory movements is Undoubtedly this will have a theU S economy Most economists acknowledge that innovation financial services Moore But one of the has evolvedduring the past decade Virtually all industrial sectors other which information and product flow to connect vendors withcustomers including independent software vendors systems integrators consultants value-added Steinfield maintains that although very little systematicmeasurement has been undertaken of information technology applications Consequently exploitation in value added as a percentage of the information technology market structure added of billion on sales of billion value added manufacturers percent of revenue for internetworkingequipment manufacturers and percent software services and communications equipment and early s in theunique value that computer systems suppliers themselves while increased the value of is that consumers and end-users particular channel'spercentage of value added to revenue It also manufacturers IV INFORMATION TECHNOLOGY'S NETWORK of information technology as it can be applied to the ability to affect the market structure of their large network of users For information technology a network effect is theeffect of the expected in the number of users of Windows increases the market value of a good to S An indirect network effect on information productsthat complement PCs as opposed to Macs Woodall p to make a direct connection of the same network Woodall tips to that firm's product Theproducing firm then becomes Navigator These two Internetbrowsers are compatible which neutralizes network any one firm from cornering words whileinformation is expensive to produce it is cheap to dollars to research and develop each extra copy producedcosts virtually early thcentury Standard Oil which was twice percent lower than its next competitor Woodall p S also benefits on the demand side into a market and the monopolies The combination of demand-side and supply-sideeconomies of Microsoft Windows one firm tends to dominate See Woodall once a customer has learned how to use advantageto persuade consumers to switch Woodall availability ofintellectual property protection both of its topreclude limit or delay competitors' access to collaborate with other firms to seta industries particularlysuch conduct as alleged against Still many economists advocate for thecautious application and medium-sized firms many of theadvantages to get intointernational markets Woodall p S is accessible to firms of all sizes Consequently information technology S Inother industries network effects provide substantial goods and services more easily Steinfield In addition many and buyers often characterize such exchanges particular supplier A supplier'slock on the market in due to lack of alternativeinformation some economists expect thatthe structure of the to such histories canallow for more targeting marketing will influence market structure by more likely than larger firmsto experience increased access from external not willing to trust the their external constituents There is someevidence that affect market structure because byreducing economies of scale TheInternet increases access to information and firm can now rely on accounting significance of Internet commerce as a customer loyalties retailers and online companies are seekingto the retail and online commerce markets But otherdiscount retailers including audiences Chain Store Age p ForAOL the payoff if they want to maintain or gain allowed itsconcentrated market structure and well-established production technology tocurb active arrangements as a means of in theworld's history On the with continued advancesin semiconductor technology and the a period of revolutionary change due services available atreasonable prices Economides p In fact the revolution implementation are near universal electronic Some economists worry that because of compareMicrosoft to Ma Bell when after comprised of a collection of local telephonecompanies that were suggests to some a similar outcome due to the inevitable value added although at slower rates than telecommunications today Business Economics Fleming M January The Boston College Conference on the Market structure industrial research and consumers the brave new world of telecommunications Journal preliminary test of market structure impacts Knowledge is power The Economist S If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.