Throughout history, technological developments have acted as a catalyst to bring about economic changes. The beginning of the new economy’ is one such example. Beginning in the 1990s, this economy has endured and continues to impact the lives of people the world over. Moreover, the transition from the old to the new economy has mandated the need for a different skill set among job seekers to make them more suitable to the requirements of the new time. Hence, to succeed in the ever-changing new economy it is important to understand it and its accruing implications on the social and economic life of people.
‘New economy is a term used to refer to high-growth industries that procure and use advanced technologies. It is understood as the convergence of manufacturing, services, and technologies that lead to highly productive and adaptable industries. The new economy was the consequence of a transition that began in the Western countries, particularly in the US, from a manufacturing-based economy to a service-based. Particularly, information technologies, the Internet, high-tech companies, in the backdrop of globalization are responsible for crafting this entirely new type of economy. However, the new economy is not static and stands for an ever-evolving and growing economy that has redeveloped from time to time.
According to Harvard Business Review, the key dynamic of the “real” new economy is the “virtuous cycle of competition, innovation, and productivity growth.”The new economy appeared in the late 1990s, with the initiation of the tech boom. Yet, the tech boom was not responsible to sustain it, after the tech bubble burst, the new economy was still able to survive through reinvention. For instance, firms like Google, Amazon, and Facebook were able to sustain, even after the Information-technology (IT) bubble burst. Moreover, the ‘new’ economy has developed many subsectors, including the sharing economy, the streaming economy, cloud computing, big data, and artificial intelligence. Hence, Information-technology is important, but not theonly industry influencing the growth of individual companies in the new economy.
According to international business experts, the new economy has certain features or characteristics, which have implications for the operating firms. Firstly, there are different ways in which firms can increase production in a new economy. For instance, a company could outsource production or take advantage of the manifold international opportunities and engagement accessible. Secondly, in a new economy, new markets can also be created smoothly. Opportunities are not limited to big companies in this economy, but small and medium firms can also do well as there is a more level playing field and democratization. Besides, networks are important in the new economy. To progress and gain more advantage peripheral networks are important along with immediate networks. Thirdly, culture in the new economy keeps evolving. Firms change their way of doing business easily and frequently and are not bound by a specific philosophy. Lastly, regionalism is also given importance like globalization. This realisation came with time, however, firms have now understood that regional networks and connections are also useful and should not be undermined in the time of globalisation. These features make the companies in the new economy much more adaptable and output-oriented.
To gain a thorough understanding of the new economy it is important to compare it with the old economy. While in the old economy, manufacturing companies played an important role, in the new economy they have been replaced by service and commodity-oriented firms. Unlike manufacturing companies, these firms are not capital intensive. While the former relied heavily on inputs like land and equipment, industries in the new economy rely on advanced technology to increase production. Consequently, the cost of production is also lowered.
What is the difference between old economy and new economy? Industries in the new economy are less labor-intensive and more innovation-driven with a perceptible reliance on the IT sector. For instance, in the 1980s there was no high-tech company among the top five companies in the world—oil and car companies then ruled the economy. However, since the 2000s the top companies are technology companies likeApple, Google and Microsoft.Globalization has enabledinformation as well as technology to spread world-over, in the process making communication easier and international exchanges possible. Gathering information has also become simpler for companies in the new economy. Consequently, the transition of firms from local to global has become easier. The networks and resources have spread throughout the world benefiting from tax havens and cheap labour. However, this has made the industries in the new economy more susceptible to the ripple effect in case of economic depression in any part of the world.
The skills required for the labour force in the old and new economies are also different. The new economy gives more importance to the talent of employees than the old one, which often required staff to operate machinery or carry out other routine jobs without much room for creation and learning. Qualities like new ideas and entrepreneurial attitude are often appreciated in candidates in the new economy, and the old economy culture of passing knowledge from older staff to new without much room for innovation is gradually becoming redundant.
It cannot be denied that industries, as well as employees in the new economy, face much more competition than their older counterparts. They also often have to deal with unfamiliar situations and challenges that were previously unheard of. However, while it makes companies in a new economy vulnerable, it also opens new opportunities for firms and employees alike, which they can gain from by improving and adapting.
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