Early online businesses had to raise large amounts of money to ...

[bobthebuilder]

Early online businesses had to raise large amounts of money to launch their operations. Today, much less money is required. In a paragraph or two, explain why this change has occurred.

Question 2

Write a paragraph in which you explain the concept of opportunity cost, including at least one example of such a cost.

[emilymalinowski12]

Answer to Question 1

Although the total dollar amounts required to create and operate a Web site have varied over the years (and across specific types of businesses), the relative proportion of startup costs has remained surprisingly stable. About 10 percent of the cost is for computer hardware, another 10 percent is for software, and about 80 percent of the cost is for labor (including both internal labor and the cost of outside consultants). The annual cost of operating an online business Web site generally ranges between 50 and 200 percent of the initial cost of the site.
Note, however, that many industry observers have noted that costs are generally heading downward.
Startup firms increasingly find they can get their operations launched for dollar amounts that are in the low end of the range in each category. Lower costs for broadband access and computer hardware play a major role, but the most significant trend is that the cost of developing and maintaining software to run an online business (a cost that includes a substantial labor component) is decreasing.

Answer to Question 2

For many companies, one of the largest and most significant costs associated with electronic commerce initiatives is the opportunity lost by not undertaking such an initiative. The foregone benefits that a company could have obtained from an electronic commerce initiative that they chose not to pursue are costs. Managers and accountants use the term opportunity cost to describe such lost benefits from an action not taken.
Opportunity costs of not undertaking an online business initiative could include the value of customers never obtained, sales not made, suppliers not identified, or cost reductions not achieved in the companys supply chain.