CBSE Class 11 Business Studies Emerging Modes Of Business Notes

Emerging Modes of Business

Meaning

In this age of internet, the world commerce has gradually started linking with it, this has brought a new concept of commerce called e-commerce/e-business. Now we are capable of reaching the users of Internet all over the world simply by opening a shop on the Internet. The Internet users can order for the goods, receive their delivery and make their payment while sitting at their home on the Internet.

Yes we are discussing about online booking. …. Now let us think of…..how it will be…..if we are able to get our needs delivered at our doorstep.

· Concept Mapping

- e – Business

- e – Business vs. e – Commerce

- Scope of e – Business

- Online Transactions

- e – Business Risks

- Resources required for successful e – Business implementation

- Outsourcing – Meaning

- Features of Outsourcing

- Scope of Outsourcing

- Need for Outsourcing

- Concerns over Outsourcing

· Basic & Key Concepts Explanation Key Terms

e – Business

e – Business refers to the process of performing Business activities electronically through the means of internet.

Virus

Virus stands for Vital Information & Resources Under Siege

e – Trading

e – Trading involves securities trading, i.e. online buying & selling of shares and other financial instruments.

Digital Cash

Digital Cash refers to electronic cash instead of actual money which exists only in cyberspace (also known as cyber currency)

Sweat Shopping 

Firms that outsource seek to reduce their costs and get maximum benefit from the low –cost manpower. This is known as “Sweat Shopping”.

e – Commerce

e – Commerce refers to a firm’s interactions with its customers and suppliers over internet.

Secure Sockets Layer (SSL)

It is the technology used in encrypting and securing vital user information such as Credit/Debit card details etc. hich are used in online transactions.

e – Procurement

It involves internet based – sales between business firms forming digital marketplaces facilitating online trading between multiple buyers and sellers.

Business Process Outsourcing (BPO)

The process of contracting out non-core business activities to 3rd parties in order to reduce costs and time involved.

Online Trading The act of selling and buying anything online.

Horizontals
The 3rd parties which undertake outsourcing contracts from many firms and doing a wide variety of jobs and processes are known as “Horizontals”.

Verticals
The 3rd parties which undertake outsourcing contracts from other firms but are specialized to do only certain specific non-core to core activities.

B2B Commerce
Refers to electronically conducted business transactions between business to business.

B2C Commerce
Refers to electronically conducted Business transactions to Customers.

Intra-B Commerce
Refers to electronically conducted business transactions within a given business firm.

C2C Commerce
Refers to electronically conducted Business transactions between Consumer to Consumer.

• e – Business vs. Traditional Business

• e – Business
  e – Business refers to all business transactions and functions conducted electronically.

• e – Business vs. e – Commerce
e – Business is more inclusive term than e – Commerce while e – Commerce refers to a firm’s interactions with its customers and its supplier over the internet. e – Business, apart from e – Commerce includes all other electronically conducted business activities such as inventory management, production, product development, accounting, finance, etc.,

• Scope of e – Business

The scope of e – Business is quite vast, it includes the following :-

1. B2B Commerce :- Refers to electronically conducted business transactions between business to business.

2. B2C Commerce :- Refers to electronically conducted Business transactions to Customers.

3. Intra-B Commerce:- Refers to electronically conducted business transactions within a given business firm.

4. C2C Commerce :- Refers to electronically conducted Business transactions between Consumer to Consumer.

• Benefits of e – Business

1. Easy to form
Very easy to start e – business because host of procedures required for traditional business are not required for e – Business

2. Requires Less Investment
Both big and small business gets the benefits of internet equally. Thus even one start of small business with less investment can derive the benefit of e – Business.

3. Convenience
Internet offers the convenience of 24 hours X 7 days a week with a less investment – i.e. one can access anything, anywhere, any time.

4. Speed
Any business transaction can be made simply at the click of the mouse button, for e.g. Electronic Funds Transfer takes place at the speed of light

5. Global reach/access
In e – Business both businessmen and consumers have no national boundaries because internet is without such boundaries. In absence of such internet, globalization may be restricted in scope and speed.

6. Movement towards paperless society
Cutting thousands and thousands of trees to make paper adversely affects the environment but internet has considerably reduced the dependence on paper.

1. Low Personal Touch
Interpersonal touch between businessmen and the consumer is very important. e
– Business may be high tech but the lacking interpersonal interaction is truly one of its shortcomings.

2. Delayed Delivery
Sometimes order may be placed at once through internet but delivery may be delayed, which may disturb the customers.

3. Need for technological capability and competence of parties
If any one party – either buyer or seller is not familiar with digital technology, e – Business becomes difficult.

4. Risk of Non-Traceability of parties
Cyber personalities participate in e – Business, when any one is in remote area – Traceability may be one the biggest problem.

5. People’s Resistance
In general, people resist changes and halt will be more if any organization prefers to go fully online.

6. Ethical Fallout
In e – Business, unless until you have high degree of protection, any one can keep an electronic eye on your transaction, even intrude into your privacy – which is ethically incorrect.

• Despite limitations, e – Commerce is the way
Yes, it is absolutely true, because when you wish to buy something especially from other countries or from distant seller, problems faced by you in traditional business is more than e – Commerce – thinking in terms of travelling – carrying money – time required – speed involved – mode of payment etc. 
Therefore, despite limitations e – Commerce is the way.

• Online Transactions
Involves three stages:-

1. Pre-Purchase/ Sale Stage – Including advertising and information seeking.

2. Purchase / Sale Stage – Comprising of price negotiation, closing deal & payment.

3. Delivery Stage – Involves physical delivery of goods.

The first two steps – involves only interaction and thus can be effectively done online.

• Steps involved in online purchase

1. Registration
Register yourself with online vendor by filling up registration form – i.e. now you have an account with the online vendor and you receive your account’s password and an online shopping cart.

2. Placing an Order
You can pick and drop the items of your choice in the online ‘shopping cart’ (Just an online record) – choose check out and payment option.

3. Payment Options

a. Cash on Delivery(COD)
Pay cash at the time of physical delivery of goods

b. Cheque
Vendor arranges the pick up of the buyer’s cheque(s) – Upon realization the delivery is made
c. Net-Banking Transfer 
Electronic transfer of funds from the buyer to the seller, after which the eller makes the delivery

d. Credit/Debit Cards
These are also called ‘Plastic Money’, the buyer enters the respective card’s details and the transaction is made. Credit cards allow the buyer to make purchases on credit, whereas Debit cards make use of the buyer’s existing money.

e. Digital Cash

This form of currency exists only in cyberspace. The buyer deposits money into the Digital Cash account and this money are utilized for making purchases online.

• e – Business Risks

There are three types of possible risks as listed below:

1. Transactions Risks
• Seller may deny that customer ever placed the order or the customer may deny that he ever placed the order. It is called “Default on Order taking/Giving”.
• Goods may be delivered at wrong address or wrong goods may be delivered which is referred as “Default on Delivery”.
• Seller may claim/complain that he didn’t receive payment while customer may claim that payment was over. This is referred as “Default on Payment”.

2. Data Storage and Transmission Risk
• VIRUS – Virus can create annoyance, disrupt functioning, damage target data even may cause complete destruction of the system.

• Interception – Data maybe intercepted in the course of transmission by others.
If it goes in the wrong hands it may be detrimental to the business.

3. Threat to intellectual property & Privacy
• Once the information is made available over the internet, it moves out of the private domain. So any secret formulae or research findings, improved/ new method of production and other such intellectual properties may be stolen by others.
• When data furnished goes in the hands of others they may start dumping with lot of advertising & promotional literature into our e-mail box.

• Outsourcing

Features of Outsourcing

1. Outsourcing involves contracting out
Non – Core activities such as maintaining cleanliness, gardening, housekeeping etc. maybe contracted out to the outside agencies so that the business can concentrate on core activities.

2. Generally non-core business activities are outsourced
For some organizations, non-core activities may be their core activities e.g.
House Keeping for hotel business, so every organization used to identify its own non – core activities and outsource them.

3. Processes may be outsourced to a captive unit or 3rd Party
Multinational Companies (MNCs) normally outsource different processes such as recruitment, selection, training, pay roll, customer support etc. to business units created especially for this purpose and ensure efficiency.
· Scope of Outsourcing
Outsourcing comprises four key segments:
• Contract Manufacturing
• Contract Sales
• Contract Research
• Informatics

The following diagram shows the scope of outsourcing in each segment 

Need for Outsourcing
Outsourcing is being resorted to not out of compulsion but also out of choice. The major reasons of outsourcing are as follows:

1. Focusing of attention
By contracting out some of the non – core activities, the business may have sufficient time to focus its attention on core-activities.

2. Quest for excellence
Outsourcing does not mean contracting out some of our work to any outsider but it means contracting out to a specialist who can perform the contracted work in an excellent way.

3. Cost Reduction
Due to global competition, not only a firm needs to ensure global quality but also global competitive pricing. For this the company needs to reduce its cost of operation by contracting out the work to specialists who are cost-efficient.

4. Growth through alliance
A business may have a ownership stake in the other business to whom it is interested to contract out its own work. By doing so not only the profit of the outsourcing business goes up but it can have a share in the profit of the contracted business, as it is a stakeholder in that.

5. Fillip to economic development
Outsourcing stimulates entrepreneurship, employment & exports thus it helps the economy to develop. For example, as far as global outsourcing in softwaredevelopment and IT enabled services are concerned, India has 60% of the global outsourcing share.

• Concerns over Outsourcing
Outsourcing has its own benefits and has to stay globally but it has its own limitations as discussed below:

1. Confidentiality
Outsourcing depends on sharing a lot of vital information and knowledge. If the outsourcing partner passes it on to competitors it can harm the business to a greater extent. Not only that even the outsourcing partner may start a
competent business.

2. Sweat Shopping
As the firms that outsource seek to lower their costs, they try to get the maximum from the low-cost manpower of the host countries, this may result in sweat shopping and the firm that goes in for outsourcing may look for ‘doing’ skill rather than development of ‘thinking’ skill.

3. Ethical Concerns
In the name of cost cutting, unlawful activities such as child labour, wage discrimination maybe encouraged in other countries.

4. Resistance in home countries
Contracting out ultimately result in contracting out of employments; this may create resistance in the home countries. Particularly if the home country is suffering from problem of unemployment.

Scope of e-Business

It can be understood by the view point of the parties involved and making

transactions :

1. B2B Commerce : It is that business activity in which two firms or two business units make electronic transaction. For example- one can be a producer firm and other a supplier firm.

2. B2C Commerce - Business to customer In this one party is a firm and other party is a customer. On one hard a customer can seek information through Internet about products, place orders, get some items and make payments and on the other hand the firm can make a survey any time to know who is buying, and can also know the satisfaction level of customers. In modern times, call centres can provide these informations.

3. Intra-B Commerce Within business Commerce - Under it, the parties involved in the electronic transaction are the two departments of same business. For Example through internet it is possible for the marketing department to interact constantly with the production department and get the customised goods made as per the requirement of customers.

4. C2C Commerce - Customer to Customer Commerce - Under it, both the parties involved in electronic transaction are customers. It is required for the buying and selling of those goods for which there are no established markets. For example-selling old car through internet.

 Benefits of e-Business 

The major benefits of e-Business are as follows:

1. World wide reach- Internet gives businessmen an extended market. New customers come in contact with them. This results in increase in sales.

2. Elimination of Middlement - Ever since the e-Business came into existence, the wholesalers and retailers have started disappearing. Now, most of the producers have started having direct contact with customers. As a result the consumer get goods on less price.

3. Easy Distribution Process - Many types of information and servicer can be received on computer through e-business. This has simplified the system of distribution and has also made it less costly.

4. Lower Investment required - In this, you don t require any big showroom or huge investment. All you need is computer and Internet.

5. Easy to launch new products - Any company can launch its new product in the market through the medium of E-Business. A complete information about the product is made available on Internet. In this way, the consumer and other businessmen get information about the new product while sitting at home.

Resources Required for Successful e-Business Implementation The resources required for the e-Business are :

1. Computer system - The presence of computer system is the first requirement of e-Business. The computer can be linked with Internet by just pressing its keys.

2. Internet connection - Internet connection is very essential and now a days we can get this facility by sitting at home.

3. Preparing the web-Page- web page has the greatest importance in the use of e-Business. It is also known as Home Page. Any product that is to be shown on Internet is displayed on web page.

4. Effective telecommunication system- e-business requires on effective telecommunication system in the form of telephone lines etc.

On Line Transactions

On line transaction means receiving information about goods, placing an order, receiving delivery and making payment through medium of internet. Under this system, the sale purchase of every type of thing, information and service is  

Payment Mechanism
Payment for the purchases through online shopping may be done in following ways :

1. Cash on delivery (CoD) - Cash payment can be made at the time of physical delivery of goods.

2. Net-banking transfer - The customer can make electronic transfer of funds (EFT) to account of online vendor over the internet.

3. Credit or Debit cards - The customer can make payment for online transaction through debit or credit card by giving the number and name of bank of card.

Security and Safety of e-Transactions
The following methods can be used to ensure security and safety of online transactions.

1. Confirming the details before the delivery of goods - The customer is required to furnish the details such as credit card no., card issuer and card validity online.

2. Anti Virus Programmes - Installing and timely updating anti virus programmes provides protection to data files, folders and system from virus attacks.

3. Cyber crime cells - Govt. may set up special crime cells to look into the cases of hacking and take necessary action against the hackers.

Outsourcing or Business Process Outsourcing (BPO)
Many activities have to be performed for the sucessful conduct of business like productions, buying, selling, advertising etc. When the scale of business is small, the businessman used to perform these activities easily. However, with the enlargement of scale of business, this job has become tedious. Therefore, in order to overcome the difficulties connected with the performance of many activities and to get the benefit of specialisation, these services are now obtained from outside the organisation. This is called outsourcing of services or BPO

Need for BPO
BPO is essential for following reasons :

1. Obtaining Good Quality services - If a compnay attempts to perform all the activities itself, there is every possibility of quality of services being affected adversely. In order to avoid this difficulty, the need for obtaining services from outside is felt.

2. Avoiding Fixed Investment in Services - If a company attempts to get these services from within the organisation itself, it has to establish different departments for this purpose which involves huge investment. Therefore it appears justified to get these services from outside the organisation at a little cost.

3. Smooth running of business - outsourcing of services is needed in order to run the business smoothly. The attention of businessman gets distracted from various small things and will be focused on the main activity.

Scope of BPO
In modern business many outside services are used. Out of these services, the following are the important ones :

1. Financial Services - These services means those outside services which help the company in some way or other in the management of finance.

2. Advertising services - Advertisement is very necessary for increasing sales. If this service is obtained from outside agency, it will cost less and the quality of advertisement will also be good.

3. Courier services - These services means delivering goods, documents, parcels from company to customers and vice-versa.

4. Customer support service - These services means delivering goods to customers and to give after sale services also. Generally, the manufacturers of TV, Fridge, AC etc. use these services.

KPO (Knowledge Process Outsourcing)
KPO refers to obtaining high end knowledge from outside the organisation in order to run the business sucessfully and in cost effective manner. Unlike conventional BPO where the focus is on process expertise, in KPO the focus is on knowledge expertise.

Need of KPO
In today s competitive environment focus is to concentrate on core specialisation areas and outsources the rest of activities. Many companies have come to realise that by outsourcing the non-core activities, not only costs are minimised and efficiency improved but the total business improves because the focus shifts to key growth areas of business.

Scope of KPO
1. It is the upward shift of BPO
2. It focuses on knowledge expertise instead of process expertise
3. It provides all non-core activities.
4. It has no pre-determined process to reach a conclusion.
5. It offers an alternative career path for the educated.

Questions
1. What is electronic business?
2. What is KPO?
3. What is EFT?
4. Explain briefly the need of outsourcing services.
5. Write about advertising services and courier services.
6. Name the essential resources required for e-business.
7. Define online transaction

• Gist of the Lesson:
Traditional way of conducting business activities is very slow, unsafe and costly, require more investment, require physical presence of parties involved and going global is tough.
Emerging modes of business, e – Business is faster, safer and economical, requires lesser investment & doesn’t require physical presence of parties involved and facilitates going global.
Thus every business is switching over to electronic mode.
e – Business has its own risks too like transaction risks (delivery to wrong address, place), data storage and transmission risk and threat to intellectual property and privacy.
In spite of various risks e- commerce is the way because going global is a must for survival and only e – business can help us to do so.
Outsourcing refers to contracting out non-core activities, it helps the firm to focus its attention onto core activities, cost reduction & fulfill their quest for excellence.
Outsourcing has its limitations too such as lack of confidentiality, sweat shopping, ethical concerns, resistance from home countries because it may aggravate unemployment.

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