Information Economy- Changing the Business Dynamics!

Published by MBA Skool Team, Published on November 23, 2012

Ever wondered why the prices of newspaper is so less. If you get into the details of the production/printing/distribution cost, the production cost per paper will be usually higher than what we pay for them presently. Such difference in the pricing is because of advertising columns present in every newspaper. The newspaper charges them for the space they provide for advertisement. The charging cost also varies depending upon the space allocation in range of pages. E.g. the front page always cost higher!!

Now, related to Consumer: The consumer is glad for the cost of the newspaper. But, the advertisement in the paper makes the consumer intend to buy those stuffs what’ve been advertised. Take a basic scenario of a Pepsi or a Coca-cola can. The cost of production is very low. It is around 2 Rs/bottle (200 ml). The selling price of the same is 10 Rs/bottle. The increased cost over here is because of the advertising & marketing cost of these products. They spent hugely on marketing to promote their business or one can say to sustain in the business.

Advertising works as it exploit the statistical patterns. People reading Business Today are likely to check for business related advertisements, and people who read Photography, are likely to look for adverts on gadgets or photography tips! Isn’t it what goes around comes around!! Finally, it’s the consumer who is paying the price for product marketing.

With the advent of new technologies, considerable amount of Research & Development work is being done across the globe. The cost incurred by the firms doing the same is tremendously higher. Technology is used in R&D’s to develop various other new unexploited technologies. The cost & time require to develop a new formula that has wide usage in manufacturing of medicines to certain type of ailments is immense. But, once the formula is being produced, it is easy to replicate by producing medicines as per the society demands. Similar is the case with any new development in the mobile technology. A huge cost is incurred to develop some high end gadgets. Every other day, competing firms are coming with new ideas and technology. Replicating or producing the gadget is cheap, but yes, R&D requires a huge cost. The society is going to pay for the value of the goods, for the information. Today, in this changing world dynamics, Information is going to play a vital role. Intellectual property constituting of individual thoughts, innovation, creativity forms the super set of Information. The world is experiencing a trend, a change, of swift shifting from Information age to Intellectual property age. In the upcoming generations, businesses will fight, strive or sustain keeping their Intellectual property in the infantry.

Pricing of your Information also plays a major role in sustaining into the business. They say, price your information as per Consumer value & not by Production cost. The mentioned statement is certainly true as it is the product value that creates the difference. Say for example, adding Energy Efficiency feature to any product will induce the feeling of protecting environment, thus accounting more value to the product. A hybrid car, conveying a greener & cleaner environment definitely has a greater value. Above all a product is more valued after its consumption. The services or the feature that the product has to offer come in direct contact with the consumer after its consumption & this is the point, where the consumer appraises the product & value it. Above is the reason, firms spend so much on branding & advertisement. Brands signify a status symbol, it reflects quality. Once the consumers have valued the product, the onus lies on the firm to promote the product & its value in the market. Advertisement helps in market penetration & thus bringing in more businesses for a firm.

Talking about technology, it’s a wrapping around the information. Information is delivered to the consumers by using technology as a packing material. A single copy of film could be of a very little value without distribution technology. Similarly, computer software is valuable only because hardware technology exists. It is the infrastructure that can increase value & reduce cost of the information. Development in technology has resulted in giving customers an easier, quicker & cheaper access to information & also has increased the ability to store, retrieve, sort, filter & distribute information, thus increasing the value of information. It is the technology that can develop certain ways to use & analyze the information it have. Dominos, for example, maintains its customer database. Information is available in the form of a particular customer way of ordering, his choice & so on. Every time when a customer rings in, he is greeted by his name & is presented with any new variety of products or offers, which suits the customer palate. Information is analyzed in an effective way, which helps in developing a loyal customer relationship.

Change management in today’s world plays an important role as ‘Change is the only thing which remains constant’. Effectively planning & handling the change process across the industry or firm, benefits in utilizing the features of new, upgraded or changed technology. Switching cost incurred during this process tends to shoot up resulting in increase of expenses & firms going out of budget. Implementing an ERP system is a valid example of change process. The firm is required to adapt to the new technology & its processes. It is not that the firm will reap the benefits of an ERP as soon as you implement, it is going to take a lot of patience & efforts to understand the technology & its implications on firm’s processes.

Today, when manager’s deals with the day to day business activities, they are actually playing with the information they possess & the necessary technology that shapes up the information into valuable commodity that can be marketed, thus inducing profits. It is the need of the hour to treat Information Economics as one of the most contributing assets for business development. Thus emphasize has been placed on managers to know what exactly are the features of information & technology as a separate entity or as a whole Information Economy!!

This article has been authored by Kunal Yadav from Symbiosis Institute of Operations Management.

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