EC rockzz: An example of an E-Commerce failure and its causes.

Introduction of Dot-Com

The dot-com era was a period of time between 1995 and 2001. During this period, many companies that were related to the Internet sector saw rapid increased in their stocks prices. Many companies were born into a booming market offering numerous services to customers because they were driven with speculations and only emphasizing in the stock prices. The dot-com had such a fast start due to venturing of capitalists who saw many opportunities to make quick money and decided to open Internet companies to rival the current companies in the market. The business model for most these companies was “get big fast”, in order to use this business model lots of cash was needed to keep these companies at float. By doing this most of these companies appeared to be rich on paper and many entrepreneurs were becoming rich by creating and then selling their companies, to later invest in new companies. This in effect caused to over evaluate companies far beyond from what they were actually worth (Dot-com bubble).

Causes of Dot-Com Failure

The dot-com failure was mainly caused by over evaluated companies that were worth much less than their actual price. A great demand in the stock market for these Internet companies, cause theirs stocks to grow rapidly and uncontrollably. Another important factor was the fact the most of these companies has the same business plan, which was to gain control of the each sector in a monopoly.

Another factor is that company spending went to enormous scales; with business policies like “Get large or get lost” and “growth over profits” most companies were just looking into getting as big as possible as fast as possible. Most of the capital was spent in advertisement, equipment and resources that helped these companies gain a larger customer base faster. It was just a matter of time until the bubble would burst, during 1999 and 2001 the Federal Reserve increased the tax rates six times and the uncontrolled economy was starting to lose its speed, this was the beginning of the dot-com failure. Another big factor that contributed for the rapid decline of these companies, was the business expending related for Y2K preparations, after the New Year came in with no incident, many companies were left with lots of equipment they had no use for (Dot-com bubble).

Popular Companies that failed