Information Technology: Impact on the Economy

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  1. 0:05 E-Commerce
  2. 0:50 Redefining Organizational Boundaries
  3. 2:17 Marketing and Privacy
  4. 3:50 Globalization
  5. 5:20 Job Redesign and Security
  6. 6:28 Lesson Summary
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Taught by

Jill Heaney

Jill has taught college-level business and IT. She has a Doctorate in Business Administration and an M.S. in Information Technology & Leadership.

Information technology has impacted the economy in a number of ways. The most noticeable changes involve e-commerce, marketing tactics, facilitation of globalization, job insecurity, and job design. This lesson will explore a variety of concepts pertaining to the changing economy, including downsizing, outsourcing, the use of cookies, the benefits and costs of globalization, and the impact of e-commerce.


The last decade has seen incredible changes to the economy due to the World Wide Web. Entrepreneurs have harnessed technology and changed the way we conduct and transact business. Fortunes have been made and lost. Some experienced huge success and became dot-com millionaires or billionaires overnight, while others became dot-bomb failures.

Meet Harry. He's one of the dot-com millionaires. He's experienced success and helped forge a new economy. Electronic commerce, or e-commerce, enabled by information technology, has fueled many changes and created a new economy. E-commerce is the buying and selling of products over the Internet.

Redefining Organizational Boundaries

E-commerce eliminates barriers such as time, geography, language, currency, and culture. Harry was able to rejuvenate his struggling hardware business by opening an online storefront on the Internet. He can now compete with larger rivals like Home Depot and Lowe's. He has also gained access to millions of consumers across the globe he otherwise would not have been able to reach.

Information technology has redefined organizational boundaries. No longer are businesses confined to brick and mortar stores. Transactions such as payments can be conducted over the Internet. Relationships with customers, suppliers, and partners can be strengthened and streamlined. Inventory can be kept electronically. Purchase orders can easily be exchanged among different companies electronically.

Consider the increasing popularity of Cyber Monday. Cyber Monday is the term used to describe the Monday after Thanksgiving, in which companies offer great deals to persuade consumers to purchase products. It is the official kick-off to the holiday shopping season. It is growing in popularity and is in strong competition with Black Friday, the day after Thanksgiving, which is often cited as the biggest shopping day of the year in the United States. Harry sees a 15% increase in sales on Cyber Monday, when he offers his lowest prices and best deals of the season.

Marketing and Privacy

With e-commerce, sales and advertising can be customized to the individual consumer, and websites can easily monitor consumer behavior without knowledge or consent. Harry can track his customers' movements with the use of cookies. Cookies are small data files that are written and stored on the user's hard drive by a website when that user visits the site with a browser. The cookies provide Harry with information on pages visited, items examined, and dates of visits. This information is stored in the cookie and sent back to the company. Based on the information Harry receives, he can customize his marketing to fit the needs of each individual customer. This information allows Harry's Hardware to target customers based on preferences and increase sales.

Companies like Harry's Hardware gather customer information for targeted marketing and advertising. It is much more effective to send a user an advertisement specific to their likes rather than just a general advertisement. The ability to predict consumer preferences and behavior is greatly increased using this method. The concern that arises is privacy. Information privacy is the right to determine when and to what extent information about oneself can be communicated to others. Information technology has created a more open society where privacy grows scarcer with the development of each new technological innovation. Some are concerned about the data collected and how it will be used.


Globalization is the increasing movement of goods, services, and capital across national borders. Global commerce has transformed the world's economy. In fact, one fourth of all goods and services produced worldwide are sold to other nations.

The acceleration of globalization has been driven by several factors, one of which is technological innovation. Software, hardware, Internet, fiber optic cables, and much more have made it easier and faster for companies to communicate with employees, partners, and suppliers from all over the globe in real time. Technology has improved transportation, making it faster and cheaper to move goods from one place to another. Globalization transfers technology. This means the best and newest innovations spread quickly and become accessible to people all over the globe. Globalization tends to reduce prices for consumers. Costs are kept down by moving operations abroad, where it may be cheaper to hire labor or conduct business.

By moving his business online, Harry can now participate in global trade. He can sell to customers from around the world. This gives Harry access to a much larger customer base and more opportunity for sales.

Globalization may come with some costs. One common cost is outsourcing of jobs to foreign workers. Outsourcing is taking a workplace activity once performed inside the organization and moving it outside of the organization.

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