Transaction Costs and Online Operations Essay Example

Transaction costs refer to the expenditures incurred during the buying or selling of goods and services, which encompass the efforts involved in bringing the item to market. There are four main strategies for reducing a company's transaction costs. The initial approach entails operating within the organization's boundaries and efficiently controlling expenses. The second method emphasizes optimizing the utilization of internal resources to enable direct sales of products and services, eliminating intermediaries, ultimately resulting in cost reduction and profit enhancement.

Companies can negotiate a simplified payment mode to reduce paperwork. Additionally, businesses can establish clear requisitioning systems for users to indicate their needs. Digital communication through media and the Internet decreases transaction costs. However, online shopping now dominates most markets due to the increasing prevalence of e-commerce.

Online shopping greatly redu