Digital economy refers to an economy that is based on digital technologies. It is also known as the internet economy, the new economy, or web economy.
The digital economy refers to a broad range of economic activities that use digitized information and knowledge as key factors of production, The internet, cloud computing, big data, and other new digital technologies are used to collect, store, analyze, and share information digitally and transform social interactions.
The digitization of the economy creates benefits and efficiencies as digital technologies drive innovation and fuel job opportunities and economic growth.
It is an umbrella term used to describe a market that focuses on digital technologies. It refers to the full range of our economic, social and cultural activities supported by the Internet end related information and communications technologies. These typically involve the trade of information goods or services through electronic commerce.
In a digital economy, all the activities like shopping, research, product promotion, information exchange, job seeking, medical support, advertising etc., are based on Internet and telecommunication infrastructure.
The digital economy involves conducting economic activities electronically, based on the electronic processing, storage, and communication of information including activities that provide the enabling physical infrastructure and software, i.e., ICT.
There are three main components of the digital economy:
- The e-business infrastructure (hardware, software, telecom, networks, human capital, etc.),
- E-business (how business is conducted, any process that an organization conducts over computer-mediated networks),
- E-commerce ( transfer of goods, for example when a book is sold online).
Digital economic activity results from billions of online connections among people, businesses, devices, data, and processes. The backbone of the digital economy is thus hyper-connectivity which creates interconnectedness of people, organisations, and machines based on the Internet, mobile technology and the Internet of Things.
The internet of things, which is known as the infrastructure of the information society connects physical devices, smart devices, buildings, and other items embedded with electronics, software, sensors etc. to engage in the exchange of data.
It is increasingly influencing our social and economy activities and even the way we live. The internet and and its accessory activities including Information and Communication Technologies have given birth to new products, services, jobs, enterprises and even markets. World’s largest firms such as Facebook and Amazon are from the digital world.
Several new inventions such as artificial intelligence, machine to machine communication, sensor technology, robotics, big data, cloud computing, 3D printing etc., indicate that the role of digital technologies in economic activities is going to rise. Thus, it can be said that the digital economy plays an important role in terms of its output, job creation, enterprise creation etc.
In a digital economy, information is stored ,process and exchanged in digital formats. It makes use of electronic technologies to do the following:
- Facilitate digital business
- Transact businesses
- Interact with each other for information
- Communicate with each other for information
- Collaborate with each other for information
- Store, process and transmit information
- Search, process and transmit information
- Search information
- Provide infrastructure over which people organisations interact and collaborate
- Overcome the time barriers, cost barriers geographical barriers
Characteristics of Digital Economy
Following are the characteristics of a digital economy:
- Efficient
- Digitization
- Based on Internet
- Connected
- Shared
- Personalised
- Direct
- Economic Impact
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Efficient
The digitization of the economy creates benefit efficiencies as digital technologies drive innovation and fuel job opportunities and economic growth. It enhances the productivity, enlarges the market reach and reduces the operational costs.
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Digitization
It is an economy that is based on digital technologies including digital communication networks, computers, software and other related information technologies.
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Based on Internet
In a digital economy, all the activities like shopping, research, product promotion, information exchange, job seeking, medical support, advertising etc., are based on Internet and telecommunication infrastructure.
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Connected
Its links the assets, suppliers, workers and stakeholders by wireless communications and allows people to make data-driven decisions, thereby improving safety, efficiency, and visibility across the enterprise.
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Shared
The digital economy operates on sharing. Companies will buy only what is needed and pay as they go. Purchasing what is needed lowers inventory costs, while buying usage as a service allows companies to pay only for the time used and value received.
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Personalised
Another characteristic of the digital economy is customer personalisation. Personalisation means customers get tailored products and experiences from their favourite brands when and where they want them.
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Direct
It is also allows companies to eliminate the middleman, unneccessary intermediaries or channels and creates a direct relationship between the buyer and seller.
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Economic Impact
It is an economy in which technological infrastructure has a major economic impact across a broad range of sectors- financial, political, cultural and social.
Also Read:-
What do you mean by e-commerce?
What are the functions of e-commerce?
Advantages and Disadvantages of E-commerce