Internet-Mediated businesses based on Transaction Cost Theory Approach.

The management approaches for businesses in the 21^st Century has transformed different industries on how they transact their business either with their consumers or with their supplierssome companies looking for ways in which they cut cost in order to maximize profitability. Many businesses thrive due to the measures the management or individuals set up in running the enterprise. It is also collective that many businesses have not been successful due to the management approaches used by the entrepreneurs. The transaction cost theory approach is among many ideas that have been enacted by business owners as a way of cutting cost on the transaction expenditures. Notably, countless businesses have other key areas where they cut cost for their business in order to maximize the profits.

Transaction Cost Theory.

             The transaction cost theory addresses specific key areas of economics where business can save their spending by using better approaches towards transaction cost. According to Buchanan (2001), for instance, he explains that doing business in an environment of voluntary exchange as the key pillar to economics (Buchanan, 2001, p. 29). In this case, this has opened a window for many businesses to develop ways of meeting their consumer needs and want amicably. Companies and other small-medium enterprises have adopted ways such online marketing, online bargaining, and other legal transactions online such as buying and selling. In respective to this, business have benefited either directly or indirectly by saving cost and, therefore, many businesses have been able to achieve their objectives.

Hardt (2006) noted that the transactional cost economics He accounts for a situation where people in this period held into money rather than assets that were of value making a costly exchange for the transaction (Hardt, 2005). The Transaction cost economics has gone through numerous modifications, which also gave the basis of the Transaction cost theory since 1945. Numerous refinements have also been made on the Transaction Cost Theory by different individuals and institutions.

According Boerner and Macher (2002), this concept has today been expanded to another discipline such marketing, law, sociology and organizations after they identified several articles on the Transaction Cost Theory (Boerner & Macher 2002). The theory identifies ways in which exchange through transaction can be made effective by adopting better methods such rational decisions to signify management efficiencies. It also gives the basis in which companies and other business can thrive by maintain improved relationship among businesses and their market.

Using this concept, institutions have improved on ways of cutting their costs as they transact business with their customers.

Emergence of Internet-Mediated Businesses and Advantages for such Businesses

For different reasons, many companies in recent years have adopted different strategies for communicating to their customers and in transacting their businesses. Based on the transaction cost theory, internet-mediated businesses continues to rely on the approach to enhance bargains, close sale, search and give information and observe contractual standards with their markets online.

In comparison to other businesses using other approaches, internet-mediated businesses continue to do better in profit maximization as there is reduced expenditures on exchange with the market especially on goods and services. Such companies have also adopted the internet to create relations with their markets through which they have realized increased repeat businesses.

The aspect of transaction frequency, asset specificity and uncertainty in the transaction cost theory facilitates many businesses that adopt this approach to minimize costs incurred in the exchange. For the internet-mediated businesses, durability of investment and the risk involved in the transaction with markets that are not much aware of the products may pose a threat to businesses, but by doing research online among the consumers businesses have successfully managed to adopt such ways to reduce cost.

Every exchange for business with their customers is tangled with a lot of uncertainties that can be costly for business especially on time and effort applied in closing a sale. Most of the internet-mediated businesses have countered this challenge as communication online with the customer has been of major transformations in cutting cost.

As individuals and companies business continue to long for more growth for their investment, systems such as web 2.0 technologies have been of significance for businesses especially in key different areas. For employees for instance within the business, they have received better training that enhance on cutting cost in comparison to untrained personnel creating more business opportunities to thrive.

prise 2.0 where, for instance, internet-mediated businesses have used social media and social networking to reach their markets. Through such technologies, companies have successfully benefited with customer royalty on their brands as improved relations is created online. According to (Lawrence, 2009) businesses have also benefited from the internet especially by reducing costs on information storage such as customer data and on better usage of time that as well reduces company expenditures (Lawrence 2009).

Conclusion

Different business uses special approaches in their management strategies within diverse areas of business activities. In comparison to businesses that continue to use traditional approaches in their management strategies, the internet-mediated business tend to thrive faster than those using traditional approaches.

References

Buchanan,?James?M.?2001. “Game Theory, Mathematics, and Economies.” Journal of

Economic Method- ology, 8(1): 27–32.

Boerner, C. S., & Macher, J. T. 2002. Transaction cost economics: An assessment of empirical research in the social sciences. Working paper, Haas School of Business, University of California, Berkeley.

Hardt, Lukasz. 2006. Transaction cost economics as a three dimensional externally driven

research program. Studia Ekonomiczne, 2006 (1-2): 7-31.

Lawrence J. E. (2009). The Internet and Small to Medium-sized Enterprises: Research

Notes.Information, Society and Justice, Vol 2 No. 2 ISSN 1756-1078: 221-235