11.10 Discussion

E-business has offered a number of very interesting challenges not the least of which has been to understand the various economy justifications that may be used to direct these business enterprises towards profitability. In this chapter seven classic business models have been discussed in which a variety of direct and indirect approaches to the realization of profit have been described. These business models seem to be too conservative for those who are of the view that there is somewhere a new economic logic that can be applied to e-business. Costello (2000) provides a clear example of this type of thinking when he points out that:

Three laws of economics are driving rapid growth in business-to-business e-commerce. These are Metcalf's law of network utility, ^[21] Coarse's ( 1937) law of transaction costs ^[22] and the law of Socio-Technological Distribution. ^[23]

However, it is not at all certain that these are actual laws of economy nor is it clear how they may be used to understand business investment and to help organizations achieve an appropriate level of profitability.

It was probably the concept of the learning curve costing that started the idea that new economic logic, which was not based on immediate profit, could be used rationally in business. The basic idea of learning curve costing was that the cost of manufacturing and distribution in the early years of a product are higher than those a few years later. So if the product is sold at a...