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Internet a frictionless market-know the unknowns.
By Robin Trehan, B.A, MIB, MBA electronic business.
Thursday, 16th November 2006
 
We all have a desire to find answers to unknown questions - Sometimes we also know there are a known unknown; that is to say we know there are some things we do not know and we try to find knows. Among one of these questions is internet a frictionless market is known unknowns.

Let us try to find a known answer for it. We know that fierce price competition, dwindling product differentiation, and vanishing brand royalty are the hallmark for the perfect market or creating a frictionless market. A market where we know that a producer of an article sells it for more than it cost him to make but the customer buys it only because its worth more to him than he pays for it, and that's his profit.

Internet creates all four conditions that are requisites for a perfect competition, and therefore creating a frictionless market. These conditions are

  • Perfect information: negligible search costs
  • No barriers to entry
  • No price discrimination
  • No product differentiationIs it also true an internet business model is like a milk stool. It has three legs. The suppliers, the buyers, and the speed provided by supply chain management. If any of the legs gets too long or too short, then the stool falls over. Here the supply chain management is of great importance as it brings cost effectiveness, efficiency and personalization of product and services.

    Yes, there are also unknown unknowns - the ones we don't know we don't know and answers to those unknowns will come as internet business keep on maturing. The learning cure has just started and as we will climb on it we will have more knows to unknowns.

    Robin C. Trehan is an industry consultant in the field of mergers and acquisitions. He can be reached at robin@tafunds.com
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