One of the major concerns of the economics is the efficiency in resource allocation. Vilfredo Pareto came up with one of the most popular definitions of efficiency, applied in the business environment until today. The author of the Pareto Principle suggests that at some point it becomes impossible to improve the activities of one economic player, without negatively affecting the position of other actors in the market. In other words, the win of one firm will inevitably mean the loss of the other (Laudon and Traver, 2011). Pareto principles often relate to the production process, where it is impossible to increase the output or consumption of one good or service without the decrease in production or consumption of the other. This relationship, according to Pareto, is explained by the fact that the economic is a closed environment, where each change in activities of its players affects the setting of the environment itself. The reality shows that one of the most appropriate environments to analyze the Pareto principle is the perfect competition. Combe (2012) describes the perfect competition as the market, where none of the individual players can influence the environment, and only the forces of supply and demand influence the price and output.
With the above in mind, it is possible to argue that e-business environment is one, which can be considered the closest to the perfect competition. This market is characterized by the ease of access due to low entry barriers and a large number of players. Information abundance and easy access to the cost-effective operations allows companies enter the market fast and with very low initial investment. Taking into consideration that the products in the e-commerce environment are similar, the primary source of competition is the price. With that in mind, the customer switching costs determine the bargaining power of the market players. Any change in demand and price of the products can have significant influence on the companies in the e-business sector.
Cloud computing is a model of network, where the applications and programs run in the connected server, rather than local computing devices, such as a computer or smartphone. One can argue that the use of the cloud computing to a right extent can bring significant commercial and financial benefits to the companies in the e-business sector. There are numerous benefits as well as some drawbacks to using cloud computing, which are widely discussed in the e-business environment. First of all, cloud computing is significantly more cost efficient than traditional desktop software, which is costly to maintain and update. Such elements as licensing user fees are significantly cheaper for the cloud computing and, thus, reduce overall costs of e-business. Secondly, backup functions and recovery as well as data storage are much more effective, due to almost unlimited capacity and easier access to data storage in the cloud. Finally, e-business requires much more mobility and flexibility than the traditional physical setting. The access to information, therefore, for the e-businesses is critical (Manzoor, 2010). Cloud computing can offer information outreach from anywhere and, thus, can benefit the management of the companies, as well as the clients.
The downsides of the cloud computing in the e-business include several aspects. First of all, security and safety of the operations is arguably, is much more complex due to wide access and low barriers, as the information of the company is given to a third-party server provider. Secondly, such issues as a technical aspect, when the access to the server fails can become a serious issue for e-businesses, working with cloud computing (Reynold, 2004). Finally, cloud computing is, arguably, more vulnerable to hack attacks and, thus, increases the risks of information and privacy for the organizations, working in the cloud environment.
Laudon K. C., and Traver C.G. (2011). E-Commerce: Business, Technology, Society. London, UK: Pearsons Education. Print.
Reynolds J. (2004). The Complete E-commerce Book: Design, Build and Maintain a Successful Web-based Business. London, UK: taylor & Francis Publishing. Print.
Manzoor A. (2010). E-commerce. Saarbrucken, GE: Lambert Academic Publishing. Print.
Combe C. (2012). Introduction to E-business. Management and Strategy. 2nd Edition. Oxford, UK: Elsevier Publishing. Print.