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Essay: Affect of rapid growth of Internet on development of businesses around the world

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  • Affect of rapid growth of Internet on development of businesses around the world
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To what extent has the rapid growth of the internet affected the development of businesses and companies around the world?

The internet has been a massive help for businesses to develop, it allows companies to operate fluently and efficiently, simplifying tasks that would usually be hard, and it has been proved to be effective. According to Blue Corona Marketing Solutions, as of May 2018, 96% of small and midsized businesses (SMB’s) have utilized the internet for marketing and 90% of those marketers have reported an increase in exposure and customers (Betsy McLeod, 2018). However, despite the internet having many benefits, there are also many issues which could threaten the development of businesses. This report aims to investigate the extent that the internet has affected the development of businesses. These issues will be looked at from global, national, and local perspectives looking at examples from The United States, as well as Amazon and Facebook’s global impact, and their personal effect on me.

Issues

Companies face many challenges online. However, after extensive research, I have selected issues that I feel are currently relevant and have the largest effect on the development of businesses and companies. As a result, I will specifically discuss the issues of data breaches, and businesses struggling due to large online competition.

Data Breaches

According to Tech Target, a data breach is defined as a confirmed incident in which sensitive protected data is accessed in an unauthorized manner and is usually used for fraudulent means (Margaret Rouse, 2017). Human error is a large reason data breaches occur, according to the online safety blog Gemalto, errors such as accidentally revealing passwords, falling for scams and so on has increased the number of data breaches by 580% from 2016 into 2017. Although information technology company IBM released a report stating that the figure was actually 2.6 billion records, a Gemalto spokesperson said that IBM’s statistics had likely included figures from a large data breach on Yahoo which was actually revealed in 2016 but only made an impact in the following year (Gemalto, 2018).
Another reason for data breaches is structural vulnerabilities in a companies’ cybersecurity. Over time methods of data breaches have been compiled into records called Common Vulnerabilities and Exposures (CVEs). However, these flaws are often not dealt with which can lead to severe damage. For example, in the United States of America, telecommunications company Verizon suffered a data breach in 2015. An incident report had been released stating that “99.9% of the exploited vulnerabilities had been compromised more than a year after the associated CVE was published” (Phil Muncaster, 2018).

However, Verizon themselves claim that only 85% of the vulnerabilities were exploited. Despite this dispute, the data still suggests that although the vulnerabilities had been discovered, no action was taken. I believe that the issue of CVEs is the most significant cause because if companies do not deal with the clearly highlighted flaws first, then it’s much harder to protect companies from data breaches. As a result of fixing the issues on the CVEs, human error may decrease as well as there are fewer vulnerabilities in their security.
One of the most damaging consequences of a data breach is the fines companies have to pay. Based on a Compensation Survey that PayScale conducted in 2010, small businesses made an annual income of $75,076 to $105,757, according to Worldpay, the average cost of a data breach with small businesses in North America is $117,000 which is more than their annual income making it very hard for these businesses to recover and potentially capable of putting them out of business (WHOAH.com, 2018). Worldpay is a global payment processing company that deals with both large and small businesses so the statistics provided by them seem to be reliable.

However, one of the costliest effects of a data breach is a damaged reputation. A global example of this is the 2018 data breach on Facebook. According to Facebook themselves, 50 million accounts had been affected by a data breach worldwide. This figure has been confirmed over multiple sources such as Reuters and The New York Times. Many users were outraged and the company faced a $13 billion loss just a day after the breach took place due to people questioning the security of their personal information on the platform (KJ Henderson, 2017). Personally, I have many family members that use Facebook, and they have always had private accounts to keep their information secure, however a data breach like this did also put their accounts at risk which is concerning because if sensitive data about them is disclosed it can easily be used against them and have devastating effects.

I feel that the damage to the reputation of a company is the most significant consequence, this is because the amount of money a company loses due to a damaged reputation is usually far greater than the legal fines they are made to pay. In addition to this, the effects of the damaged reputation will last longer and affect a company’s income in the future.

To prevent data breaches, companies like Facebook have started implementing physical security in their offices. According to the analytics and security firm CSO, the Chief Global Security Officer Nick Lovrien has implemented canine units and physical guards within their offices in order to protect their hardware. In addition to this, due to the number of guests Facebook have coming in and out of their offices, they have created an open office concept where no one has any individual room. This allows for closer monitoring of the area and therefore increases security (Perez, Whittaker, Perez, & Whittaker, 2018). This can be confirmed by numerous job offers for physical security on Facebooks’ and other job offering websites. Although this method does not eliminate the entire possibility of a data breach it helps reduce the frequency of data breaches due to human error such as leaking files or revealing passwords as they closely monitoring.

Companies are also implementing improved cybersecurity, for example, Whatsapp introduced End-to-end encryption in 2016, a system that would ensure that only you and the person you were talking to could see any messages, or any other form of media without any third party (even Whatsapp themselves) viewing them. Although users are still susceptible to data breaches, ever since the encryption system was put into place there have been no reports of any large-scale data breaches (WhatsApp, N/A).

In conclusion, the effects of a data breach can be devastating when a lack of online security is put into place, it is one of the biggest ways the internet has impacted companies.

Competition

The internet has allowed many businesses and companies to grow at rapid rates in order to expand themselves and increase their presence either locally, nationally or globally. However, despite many companies being able to benefit from the internet, others can experience negative effects, more specifically fiercer competition.

One of the causes for this is the growing popularity of online shopping. An example of this can be seen by the dominance of the online store Amazon in recent years. Amazon sells such a diverse range of items on the internet that they are able to sell their products for much lower prices. As a result, more people prefer to shop on Amazon than physical stores due to its cheaper prices and overall convenience. I personally find online shopping much more convenient, the products I buy are often cheaper than the stores around me. Also, I can do it almost anywhere by interacting with almost any electronic device allowing purchases to be carried out with less effort.
The second cause is due to the withdrawal of net neutrality laws. In the United States, net neutrality laws are rules set in place on the internet that allows users across different internet service to have access to the same content. However, in 2017 it was announced by the Federal Communications Commission (FCC) that these laws would no longer be used (Kastrenakes, 2017).

I believe that the growth of online shopping is a more significant cause as it affects both large and small businesses forcing them to go online in order to stay competitive whereas net neutrality only had significant effects small businesses, therefore, making online shopping a larger factor in the struggle for companies to stay competitive.

Consequently, many physical businesses struggle to maintain steady sales and shut down, putting people out of jobs. According to business insider, as of 2017, more than 6,400 stores have been forced to shut down worldwide (Green, 2018). CNBC states the number is actually 6,985 stores, this data was collected from a firm called FGRT (Thomas, 2017). This data is more reliable as it was recorded up until December whereas the previous figured were collected only till September meaning FGRT’s figures are a better representative of the number of stores that shut down that year.

Another consequence is that without the net neutrality laws, internet service providers could legally discriminate against rival companies and disrupt certain services that are not in favour of their company. This meant that companies now would have to pay more money in order to maintain a presence online, and if they didn’t, they would lose customers at much higher rates.

I believe that the shutting down of stores has a much more significant effect as online shopping can force stores to close down all over the world due to its global impact whereas net neutrality laws being withdrawn by the FCC only affects companies within the United States therefore only having a national impact.

One of the ways to prevent a store from shutting down is by going online as well, the world is rapidly becoming digital so it’s a matter of joining the trend or getting left behind. Using tools such as social media to market businesses can help improve the number of customers a store gets, in addition to this displaying your products online can increase the chances of gaining more customers. Although going online can be expensive for larger companies, smaller companies can avoid this by using existing platforms such as eBay and Carousel that allow people to sell items online, eBay as of 2018 has around 175 million users (Smith, 2019).

The issue of net neutrality is fairly recent with an immediate solution unclear, however, the current obdurate course of action taken by 200 companies involved sending letters to the FCC to show concern in an attempt to get the laws put back in place, as of now there are no significant results. However, if more and more companies express concerns towards the FCC it is possible for the laws to be brought back (Rosenworcel, 2017).

In conclusion, the internet has increased the competition between businesses making it a matter of whether a company is going to join the crowd and go online, or get left behind.

Conclusion

Based off of the research I have done throughout this investigation, my personal perspective has changed. My initial perspective was that the internet helped all companies develop at fast rates with minimal issues to slow that down. However, after my research, I discovered that there are significant issues that can drastically slow down, halt or even reverse the development of a company. Whether it’s through data breaches with companies such as Facebook losing almost $13 billion as a result or companies completely shutting down due to the rise of larger online stores such as Amazon, these issues are much more significant than I initially thought. Which is why now I believe that due to the internet being a relatively new tool, companies need to evaluate the threats it poses in order to minimize the disadvantages and fully take advantage of the many benefits and opportunities the internet offers in order for a company to develop to a far extent.

24.2.2019

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