The brick and mortar retailers appear to be loosing ground for even the commodity sales an area as the apparent last frontier (Grewal, Chakravarty, & Saini. 2010). The list of big brand store closing continues as on line retailers create a new planet for shoppers. Researchers looking to explain this new community has looked to germination of transaction cost analysis theory (Grewal, Chakravarty, & Saini. 2010). Cost analysis theory has been argued to be inconsistent by some who say organizations are not like assets that fail when the market crash. Furthermore such critics suggest organization act differently by being able to respond to shifts from market behavior (Grewal, Chakravarty, & Saini. 2010).
Others propose the Cost analysis theory has a bad reputation due to the lapse in literature review to compile additional empirical research adding the importance of governance (Grewal, Chakravarty, & Saini. 2010). The governance accounts for three major components to the theory (1) monitoring the participant, (2) building a sense of community, (3) self- participating in the electronic market (Grewal, Chakravarty, & Saini. 2010). The research has concluded monitoring the market is effective in predictable markets when demand uncertainty is high. Also establishing a community is beneficial when prices are fixed as opposed to variant. Thirdly self participation is rewarded when the owners are consistent and the market expects volatile prices (Grewal, Chakravarty, & Saini. 2010).
Reference
Grewal, R., Chakravarty, A., & Saini, A. (2010). Governance Mechanisms in Business-to-Business Electronic Markets. Journal Of Marketing, 74(4), 45-62. doi:10.1509/jmkg.74.4.45
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