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The Internet is the basic tool of the new economy. Firms can use it to reduce the costs associated with gathering and disseminating information, and also to aggregate buyers and sellers, thereby creating new, and improving existing, markets. As such, the Internet can enhance productivity, reduce costs, increase competition, and improve the functioning of price mechanisms. Managers are quickly reorganizing value chains to exploit these commercial advantages.
In the automobile industry, Goldman Sachs estimates that the full exploitation of the Internet could reduce production costs for the average $26,000 new vehicle by over $3,600, representing industry savings of nearly $62 billion per year. Furthermore, the estimated gains from business-to-consumer (B2C) e-commerce alternatives are also substantial: Goldman Sachs estimates e-tailing alternatives could generate savings of between $1,048 and $2,579 per vehicle, or between $18 and $44 billion annually.