Digital Economy & new IT

Question 1

What is the economic benefit of digital technology regarding data?

Answer 1

Reduces cost of storage, computation and transmission of data

Question 2

What is the digital economy?

Answer 2

An economy where most of economic activities such as production, distribution, consumption of goods and services are digitalised

Question 3

Give the 4 ways the digital economy can enhance firms’ performance.

Answer 3

• IT automates many steps in business processes that were formerly manual
• Enables decision-makers to make more informed decisions
• Creates new innovative business processes by utilising information more efficiently
• Transforms business processes and drives new business models

Question 4

Define digital goods and their production costs.

Answer 4

Goods that can be delivered over a digital network

High fixed costs to produce the first unit, and very low reproduction costs

Question 5

Explain why digital piracy can cause reduced revenue and innovation.

Answer 5

People are able to obtain content for free, decreasing revenue for producers and thus incentives to create and distribute such goods

Question 6

Explain why digital piracy can cause market distortion.

Answer 6

It is difficult for legitimate producers to compete with pirated goods offered for free, leading to a reduction in the quality of goods available.

Question 7

Name 5 strategies companies adopt to counter digital piracy.

Answer 7

• Education and Awareness
• Digital Rights Management
• Pricing Strategies
• Collaborations and Partnerships
• Improved User Experience

Question 8

Why does Nicholas Carr think that the strategic importance of IT in business has diminished?

Answer 8

IT has become more commonplace,
standardized, and cheaper

Question 9

Why does McKinsey think that businesses should focus on new IT over old IT?

Answer 9

Benefits from old IT have reached a point of diminishing returns; new IT can be a source of competitive differentiation and dramatic wealth creation

Question 10

What causes a lack of coordination within companies?

Answer 10

when objectives of different stages are conflicting or when information moving between stages is distorted

Question 11

Give 4 consequences for lack of coordination and performance.

Answer 11

• Increase in production cost
• Decrease in availability level of product
• Worsens relationships across supply chain
• Decreases profitability

Question 12

Give the 5 disadvantages of the Digital Economy.

Answer 12

• Increased Digital Divide → refers to the gap between those who use or have access to telecommunications and IT and those who do not
• Increased Cybercrime
• Bad ideas (fake news etc) get spread around
• More monopolistic players (eg Google)
• Additive in nature