Virtual Markets
Before you read
Discuss these questions.
1. How have new communication technologies ,especially the Internet, expanded the traditional marketplace?
2. What is the impact of the marketspace on business strategy, particularly on the interaction with customers?
TEXT B
From the Athenian agora to the mall of America, the places where buyers and sellers negotiate their transactions have for thousands of years been just that: places. But over the past two centuries, and especially since the advent of the Internet and the World Wide Web, technology has given rise to an alternative to the marketplace: the virtual marketspace.
More and more transactions that once took place only in the marketplace now occur in the marketspace, largely free from the bonds of space and time. As a result, there are exponentially greater opportunities—and expectations—for deeper, more frequent interactions between companies and customers. With the growth of a service-based economy in which products are increasingly commoditised and differentiation ever harder to achieve, successfully managing company-to-customer interactions is not just advisable—it's critical. Indeed, there is a dialectic between the rise of the marketspace and the growth of the service-based economy: each feeds, and feeds off, the other and they must be considered together.
Thus, the marketspace presents both challenges and opportunities. Companies that either underestimate or overestimate its significance stand to suffer. Those who have underestimated have not realised that the Internet is overhyped; nothing much has changed. Others do not know that all the old rules of business are obsolete. On the other hand, firms that understand that the marketspace demands creative new strategies, yet relentlessly test those strategies against fundamental principles of service management, are likely to prosper. Even in the technology-enabled, marketspace, using service to manage relationships with customers will only become a greater virtue.
From Marketplace to Marketspace
A marketplace consists of three basic components:
sellers, offering something of value (goods, services or information)
buyers, offering something of value in return (cash or any of the above)
a physical location (store, exchange) where the two come together
In the marketspace, buyers, sellers, and the value they exchange remain the same, but the time and space constraints disappear. In the marketspace, their transactions take place virtually any time, anywhere, thanks to a variety of technology-mediated interfaces (not just the Web) such as the telephone, wireless device, and personal computer. If a transaction takes place and you cannot say with confidence where it occurred, it happened in the marketspace.
One could say that the marketspace was born more than 150 years ago, the first time that a lone Morse code operator telegraphed an order to a supplier. Succeeding generations of communications technology - telephone, fax, pager, mobile phone, even fast-food drive-through microphone-expanded the universe of transactions that could take place outside of the marketplace.
The marketspace as we know it today is chiefly enabled by the kind of 'screen-to-face' interactions offered by the Internet in general and the Web in particular. It should be noted, however, that the first (and still one of the most successful) screen-to-face technology predates the Web by more than a decade in the form of the humble ATM. In ‘spitting out cash' at more and more sites around the world, the automated teller machine performed first, on a widespread basis, what many marketspace interfaces are doing today: it represented a substitute of capital for labour, thus threatening to make bank tellers an endangered species.
Banks originally positioned ATMs as a service channel for their least profitable customers, assuming that account holders with substantial means would continue to talk with live tellers. They soon discovered, however, that customers of all stripes enjoyed banking at the machines—and the number of machines, networks linking them and services they provided mushroomed. The result of retail banking's shift from marketplace to marketspace was nothing less than a transformation of the entire industry's competitive dynamics. As the ATM became the dominant interface between customer and company, consumer loyalty to individual bank brands eroded. The network trumped the brand as the locus of both customer relationships and economic value, which is why we are more interested in spotting Link or Visa on the side of an ATM than a placard for our particular bank.
By the early 1990s, even before the emergence of the Web, virtual channels were beginning to transform businesses and industries and create significant new sources of value. This is why, in 1992, Harvard Business School professor John Sviokla convinced that the old paradigms for teaching the first-year marketing course were increasingly outmoded and hatched a new term (and a new course) to describe the brave new business world: marketspace.
Since that day, bubble economies and Wall Street manias have come and gone. But today, no doubt , the marketspace is a very real and powerful phenomenon—one that is here to stay.
Reading Tasks
A. Understanding main points.
Read text A and answer these questions.
1.Which of these statements gives the best summary of the ideas in text A?
a) The marketspace is exerting a profound impact on business strategy.
b) Today, the traditional marketplace has a virtual counterpart : a marketspace.
d) With the advent of new communication technologies, most notably the Internet, the traditional marketplace has expanded into a new, virtual sphere of management and commerce : the marketspace.
2. What exactly is meant by the term “marketspace”?
a) telephone , wireless device and personal computer ;
b) the WEB ;
c) a variety of technology-mediated interfaces.
B. Understanding details.
Mark these statements T (true) or F (false) according to the information in the text. Find the part of the text that gives the correct information.
1. The rise and growth of the marketspace was fed off by the growth of industries.
2. Successful company-to-customer interactions is the requirement of a service- based economy because of the product commoditisation.
3. The basic components of the marketspace are goods and services , cash or any other form of return and a physical location.
4. Another name for a marketspace is a technological interface.
5. Screen-to-face technology is regarded as a predecessor of the WEB.
6. In many cases, marketspace interfaces represent a substitute of capital for labour.
7. According to the text , ATMs were positioned and have become the service tool for the least profitable customers.
8. Marketspace is taught as the introduction to marketing in HBS.
C .Understanding expressions in the context.
1. ‘bonds of space and time’
a) limitations set by a marketplace ;
b) on- line transactions ;
2.’each feeds and feeds off the other’
a) augment each other;
b) correspond to each other ;
3. ‘the Internet is overhyped’
a) the role of the Internet is underestimated;
b) the role of the Internet is exaggerated;
4. ‘the old rules of business are obsolete’
a) the rules are still feasible;
b) the rules are no longer working;
5. ‘threatening to make bank tellers an endangered species’
a) to make bank tellers of little use;
b) to make bank tellers more legally responsible;
6. ‘consumer loyalty to individual bank brand eroded’
a) consumer loyalty was gradually destroyed;
b) consumer loyalty was sharply destroyed;
7. ‘bubble economies and Wall Street manias ‘
a) high volumes trade in equities with intrinsic value;
b) trade in products or assets with inflated value;
8. ‘to hatch a new term’
a) to introduce a new term;
b) to deny a new term;
D. How the text is organized.
These sentences summarise the main idea of each paragraph. Match each sentence to the correct paragraph.
a) The marketspace eliminates time and space limitations .
b) A new era in the sources of value.
c) The first marketspace was telegraph.
d) Three basic components of the marketplace.
e) The appearance of the virtual marketspace.
f) The growth of the service-based economy gives the rise of the marketspace.
g) The ATM becomes the dominant interface between a customer and a company.
h) The challengies and opportunities of the marketspace.
i) Marketspace interfaces substitute capital for labour.
j) Financial markets will not be dominating in future.