Business in the Digital Economy: How Does it Function?

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Digital Economy

The digital economy refers to the complex whole of all combinations of public relations that have emerged through electronic exchanges and helped optimize and improve production, manufacturing, distribution, and consumption to increase the region’s economic development. This article may give you a brief idea regarding the relationship between the digital economy and business.

Business in the Digital Space

Traditional business involves brick and mortar stores wherein there is direct tangible interaction between the seller and the customer. The influx of ICT in the realm of business has genuinely transformed the sector. There are new opportunities and value chains that traditional companies can never afford! Before the digitalization of the economy, businesses had to deal with the cost of infrastructure, staff employment, and investments in stocks’ maintenance. Small businesses had little to no scope for expansion. However, the influence of technology has changed things completely. 

All business ventures have adopted ICT to increase productivity, sales, and market reach and reduce any extra operational costs. The simultaneous increase in technological performance and decline in technical costs lead to various changes in both the public and the private sector alike. Production processes are now globally dispersed so that specific regions can account for specific advantages. This is known as the cross-border relocation of production sites. New products and services are also emerging. Moreover, the method of sale of these products and services has also transformed! 

For instance, my grandmother exclaims how she walked numerous miles to get a loaf of bread from the nearest market. I can order a loaf of bread with just a click of the finger while sitting at home! Even the payment mechanisms in business have evolved through digital currencies. Businesses are increasingly building their models based on available technological capabilities to increase flexibility and transcend conventional marketing boundaries by extending to the global markets. The apparent mode of advertising has also shifted. Through online advertising, businesses can segment their target audiences with more precision. Online advertising also allows them to monitor the performance of the ads, which is not possible through conventional advertisement means. ICT is now the general-purpose technology utilized in all business models. For example, businesses now put customers in the center of their business strategy because customers are linked with technological implements. Customer experience has gained significance, as there is now a hyper-focus on customer satisfaction. All of these changes have taken place after the liberalization of trade policies and the subsequent globalization of business across the world. 

Scope of Change – Digital Economy and Business in the Future

Nearly every economist agrees that the digital economy’s influence on business will only increase in the coming years because technology is speedily gaining precedence in the production and distribution process. 

Certain expected changes in the functioning of business enterprises are:

  • Complete robotization of the labor force and sharp falls in production costs, because there is no intermediary labor force employed in the production process that would require daily wages. 
  • The complete collapse of traditional market players in response to the rising competitive advantage of digital businesses. All those businesses that fail the process of digital transformation will lose their competitive edge and slowly disappear.
  • Creation of a new and innovative standardized business model with no role of middlemen 
  • Redistribution of global prosperity owing to the shift in the advancement of digital technologies across the globe. This will also lead to a change in the poverty and social capability disparity. 
  • Greater development of cloud computing includes configurable online services available for computing, storage purposes, and data management. 
  • Chances of ‘leapfrogging’ in under-developed countries because of technological revolutions. For instance, a poor country having no telephone services can be seen directly jumping to the establishment of mobile networks because it is at par with the technologically advanced industrialized countries of the west. 

Many more changes are yet to arrive in the business and marketing scene. At the same time, many changes are expected in the technological realm as well! The ICT world is continually evolving, and newer methodologies of applied science are emerging daily. Hence, there is a vast scope for the development of businesses in the digital economy even now. 


Business enterprises have successfully established their domain through significant investment in research and development of the digital economy’s opportunities. The fast-paced digitalization of businesses has allowed businesses to bring innovative ideas into action and continuously evolve and evaluate business models to leverage their current position and steer towards growth and development in the global market. Furthermore, there is also a strong realization that further change and development opportunities also exist within the business and marketing sphere. 


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Zimmermann, H. D. (2000). Understanding the digital economy: Challenges for new business models. Zimmermann, Hans-Dieter,” Understanding the Digital Economy: Challengers for New Business Models”(2000). AMCIS 2000 Proceedings. Paper402.

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