The Internet is the driving force behind the emergence of new models for the internal organization of the enterprise (e-business) and the introduction of new commercial practices (e-commerce). And while many of these may still only be "working models", a number meet growing acceptance and are becoming the standard in their industry.

The importance of e-commerce for the long-term viability of an enterprise is encouraging change in hierarchical enterprise structures. Flatter and more collaborative organizational models are emerging in response to the demands of the new "digital marketplace" for flexible, decentralized, team-based operations. E-commerce also leads to the streamlining of production and marketing functions. It promotes greater inter-business and inter-industry collaboration and changes ways in which firms interact with their customers.

All this calls for management to reassess the organizational structure and the culture of the enterprise, and review the need for, and its approach to, training and re-training of personnel. Ultimately this could lead to the setting up of ‘virtual’ organizations that are no longer bound by the cultures and hierarchies operating in today's business.

The new digital economy is leading to a change in the very nature of competition¹. The old monopolies, propriety relationships and existing strategies could go extinct. Already the ‘middleman businesses’ are threatened and a shake-out is evident in services such as travel, retailing and finance.

All-in-one portals are the rage on the Internet. These are Web sites that offer a broad array of information and services, such as e-mail, forums, search engines², online shopping and, probably most importantly for the B2B supplier, Web-based virtual market places and exchanges. Seeking to supersede the original one-stop portals -- search engines such as Yahoo and Excite -- several Web-sites are competing to be ‘your-best-link’ to the Net. Even Netscape and Microsoft Explorer, the two main web browsers³, are in the game, providing information from data across the Web at their linked sites and offering services ranging from free e-mail to travel, to auctions to fashion.

In developing countries, too, several local portals have emerged. South America has examples such as Yupi, Rio-on-line, Star Media and The Caribbean Home Page -- all providing several services and links. Indonesia has Indobiz.com for business links, Nepal and Sri Lanka have government-run sites and India has several, such as Satyam-on-line, Infoline, Mall of India, etc.

One very successful example is Africa Online. It started in 1994 in Boston, USA, and Nairobi, Kenya, to provide expatriate Africans with news of home. Africa Online currently employs 250 people and has spread to several African countries. It receives 10 million hits per month, and has approximately 150,000 subscribers, mostly businesses. China-on-line has also been very successful.

The reason for the emergence of these new intermediaries, or ‘infomediaries’ as they are known, can be found in the need of businesses and consumers to avoid the information overflow that searching the Net produces as well as to transfer some of the perceived risk of involvement in e-commerce to these established sites⁴. Their arrival and firm establishment on the Internet in fact belies the earlier promise of e-commerce: reduction of dependence on the middleman or ‘disintermediation’⁵ (producers selling directly to buyers without intermediaries). In fact even the traditional go-betweens are responding to the challenge. Several are offering their services online, for example travel services and stock-traders.

In this new environment, existing market shares and trading pacts in domestic and international markets are threatened. Increasingly, new entrants are competing on the basis of new standards and new links. The secret to survival and success for the export-oriented enterprise is to be Web-enabled. Web-based alliances will play the key strategic role in the future. For B2B (business to business) this means becoming part of the new e-commerce supply chains. For B2C (business to consumer) this implies being online with consumers and part of the new emerging cyber-communities.

SMEs could have a distinct advantage here. Unencumbered by existing relationships and nimble in their response, they could well grab opportunities that the larger giants take time to respond to. Export strategy-makers have to ensure an environment for them to avail of such opportunities.

Enterprises entering the Internet arena are scrambling to find economic models that work. For example, free Web-based offerings and services supported by advertising have shifted some of the direct costs away from the consumer. In some countries the trend is even to offer free unlimited access to the Internet, though the cost of the telephone connection to the Internet may not be sustainable as a free option in several countries. Other options of Internet via cable TV or mobile phone are emerging but the question of absorbing the cost of the service will remain.

Today, advertising remains the major business model for B2C (business to consumer) e-commerce. This has led to almost a ‘mantra’ for success being to

• give away your product or service free on your Web site
• accumulate a huge following, and
• charge for placing advertisements on or near it.

A variation of the model is to give some of the services free to attract consumers to the site and then charge them for other services or information.

Web advertising is today popular and attracting much media attention. It is currently the only way for sites to generate a direct revenue stream (except for sites that support direct sales). This situation could change once micro-payments (pay-per-view at the page level) become standard and alternative revenue models come into play, such as the link commissions paid by Amazon.com for people directed to their site by other sites.

Several commentators, however, are of the opinion that the ad-supported model is not going to be sustainable. Because of the vast differences in popularity between sites, only the very top percentage (less than 1%) can obtain sufficient revenue from advertising.

Of course, the new type of business transaction 'created' by the Internet itself and now the most established is digital commerce. Here the good or service is distributed in digitized format. The most obvious examples are music, videos, software, and services such as stockbroking or financial or medical advice, that are transmitted to customers online via the Internet. This is a major growth area for export strategy-makers to promote.

Another new model is takes advantage of the Internet’s ability to aggregate thin demand. Examples are online auction houses (for commodities as well as specialized products) and dedicated retailing Web sites that cater to small-quantity buyers and collectors (e.g. buyers of handicrafts, arts and services that are unique and special).

Success in the digital economy can be very transitory. In the world of high-technology, there is always the possibility that some competitor may introduce a product or service that could destroy the market for the original success story. Until a few years ago, worries about such rapid obsolescence prevented most investors from acquiring new economy stocks. The situation dramatically changed a couple of years ago and suddenly the ‘hot.dot.coms’ (e-commerce start-ups) -- and really anybody who had anything to do with the new economy (information technology and telecom companies essentially) -- almost had money thrown at them. From venture capital⁶ to initial public offerings (IPOs), these companies could raise whatever capital they felt like. This has resulted in a unique model of business where profit margins and earnings today do not determine company value. It is rather based on the stock market’s assessment of future potential.

Many start-ups created on the basis of speculative returns are being propped up by large venture capital funds, themselves set up to ride the waves of the new economy. It has been described as the ‘casino game’ of venture capital: a bigger bid also means bigger risk. Recent dramatic fluctuations in stock markets and particularly the falling (or "correcting", as some say) NASDAQ exchange (the major stock index in the US for technology companies) show that the earlier cautious attitude may be returning. According to some commentators, several Internet firms would welcome a shakeout in the market. They believe that it would be better for e-commerce and the digital economy if only the better firms survive. This scenario is being played out in developing countries, too. Strategy-makers have to consider the question of norms and rules for venture capital (especially since much of it is provided by the public sector in these countries) as well as for the stock exchanges, while ensuring an environment conducive to the flow of venture capital to, and private investment in, e-commerce start-ups.

E-models for electronic commerce or emerging models may wither away more sooner than later as the Internet and e-business continue to evolve at a rapid and unforeseen manner. For firms and SMEs in developing and transition economies, the lessons can only be learnt hands-on and online. Unfortunately, however, in contrast with the past, the speed of business today does not give them the luxury of abundant time to acquire the new skills.

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