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NCERT Class 11 Business Studies Chapter 5 Emerging Modes of Business
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Emerging Modes of Business
Chapter: 5
| PART – Ⅰ |
| EXERCISES |
Short Answer Questions:
1. State any three differences between e-business and traditional business.
Ans: The three differences between e-business and traditional business are:
| Basis of distinction | Traditional business | E- Business |
| Ease of formation | Difficult | Simple |
| Physical presence | Required | Not required |
| Locational requirements | Proximity to the source of raw materials or the market for the products | None |
2. Describe briefly any two applications of e-business.
Ans: The two applications of e- business are:
(i) E-Procurement: It involves internet-based sales transactions between business firms, including both, “reverse auctions” that facilitate online trade between a single business purchaser and many sellers, and, digital marketplaces that facilitate online trading between multiple buyers and sellers.
(ii) E-Bidding/e-Auction: Most shopping sites have ‘Quote your price’ where by you can bid for the goods and services. It also includes e-tendering whereby one may submit tender quotations online.
3. Describe briefly the data storage and transmission risks in e-business.
Ans: Data storage and transmission risks: Information is power indeed. But think for a moment if the power goes into the wrong hands. Data stored in the systems and en-route is exposed to a number of risks. Vital information may be stolen or modified to pursue some selfish motives or simply for fun/adventure. Actually, a virus is a program which replicates itself on other computer systems. Installing and timely updating anti-virus programmes and scanning the files and disks with them provides protection to your data files, folders and systems from virus attacks. Data may be intercepted in the course of transmission. For this, one may use cryptography. It refers to the art of protecting information by transforming it into an unreadable format called ‘ciphertext’. Only those who possess a secret key can decipher the message into ‘plaintext’.
Long Answer Questions:
1. Why are e-business and outsourcing referred to as the emerging modes of business? Discuss the factors responsible for the growing importance of these trends.
Ans: The world of business is changing. e-business and outsourcing are the two most obvious expressions of this change. The trigger for the change owes its origin to both internal and external forces. Internally, it is the business firm’s own quest for improvement and efficiency that has propelled it into e-business and outsourcing. Externally, the ever mounting competitive pressures and ever demanding customers have been the force behind the change.
Electronic mode of doing business, or e-business as it is referred to, presents the firm with promising opportunities for anything, anywhere and anytime to its customers, thereby, dismantling the time and space/locational constraints on its performance. Though e-business is high-tech, it suffers from the limitation of being low in personal touch. The customers as a result do not get attended to on an interpersonal basis. Besides, there are concerns over security of e-transactions and privacy of those who transact business over the internet. The benefits of e-commerce also seem to have accrued unevenly across countries and across regions within a country.
Benefits of E-Business:
(i) Ease of formation and lower investment requirements: Unlike a host of procedural requirements for setting up an industry, e-business is relatively easy to start. The benefits of internet technology accrue to big or small businesses alike.
(ii) Convenience: The Internet offers the convenience of ‘24 hours × 7 days a week × 365 days’ a year business that allows Rita and Rekha to go shopping well after midnight. Such flexibility is available even to the organisational personnel whereby they can do work from wherever they are, and whenever they may want to do it.
(iii) Speed: As already noted, much of the buying or selling involves exchange of information that the Internet allows at the click of a mouse. This benefit becomes all the more attractive in the case of information-intensive products such as softwares, movies, music, e-books and journals that can even be delivered online.
(iv) Global reach/access: Internet is truly without boundaries. On the one hand, it allows the seller an access to the global market; on the other hand, it affords to the buyer a freedom to choose products from almost any part of the world.
(v) Movement towards a paperless society: Use of the Internet has considerably reduced dependence on paperwork and the attendant ‘red tape.’ Even the government departments and regulatory authorities are increasingly moving in this direction whereby they allow electronic filing of returns and reports.
2. Elaborate the steps involved in on-line trading.
Ans: The steps involved in online trading are:
(i) Registration: Before online shopping, one has to register with the online vendor by filling-up a registration form. Registration means that you have an ‘account’ with the online vendor. Among various details that need to be filled in is a ‘password’ as the sections relating to your ‘account’, and ‘shopping cart’ are password protected. Otherwise, anyone can login using your name and shop in your name. This can put you in trouble.
(ii) Placing an order: You can pick and drop the items in the shopping cart. Shopping cart is an online record of what you have picked up while browsing the online store. Just as in a physical store you can put in and take items out of your cart, likewise, you can do so even while shopping online. After being sure of what you want to buy, you can ‘checkout’ and choose your payment options.
(iii) Payment mechanism: Payment for the purchases through online shopping may be done in a number of ways:
(a) Cash-on Delivery (CoD): As is clear from the name, payment for the goods ordered online may be made in cash at the time of physical delivery of goods.
(b) Cheque: Alternatively, the online vendor may arrange for the pickup of the cheque from the customer’s end. Upon realisation, the delivery of goods may be made.
(c) Net-banking Transfer: Modern banks provide to their customers the facility of electronic transfer of funds over the Internet using Immediate Payment Services (IMPS), NEFT and RTGS. In this case, therefore, the buyer may transfer the amount for the agreed price of the transaction to the account of the online vendor who may, then, proceed to arrange for the delivery of goods.
(d) Credit or Debit Cards: Popularly referred to as ‘plastic money ‘,these cards are the most widely used medium for online transactions. In fact, about 95 per cent of online consumer transactions are executed with a credit card. Credit card allows its holder to make purchases on credit. The amount due from the card holder to the online seller is assumed by the card issuing bank, who later transfers the amount involved in the transaction to the credit of the seller.
(e) Digital Cash: This is a form of electronic currency that exists only in cyberspace. This type of currency has no real physical properties, but offers the ability to use real currency in an electronic format. First you need to pay to a bank an amount equivalent to the digital cash that you want to get issued in your favour.
3. Elaborate the steps involved in on-line trading. Evaluate the need for outsourcing and discuss its limitations.
Ans: The steps involved in online trading are:
(i) Registration: Before online shopping, one has to register with the online vendor by filling-up a registration form. Registration means that you have an ‘account’ with the online vendor. Among various details that need to be filled in is a ‘password’ as the sections relating to your ‘account’, and ‘shopping cart’ are password protected. Otherwise, anyone can login using your name and shop in your name. This can put you in trouble.
(ii) Placing an order: You can pick and drop the items in the shopping cart. Shopping cart is an online record of what you have picked up while browsing the online store. Just as in a physical store you can put in and take items out of your cart, likewise, you can do so even while shopping online. After being sure of what you want to buy, you can ‘checkout’ and choose your payment options.
(iii) Payment mechanism: Payment for the purchases through online shopping may be done in a number of ways:
(a) Cash-on Delivery (CoD): As is clear from the name, payment for the goods ordered online may be made in cash at the time of physical delivery of goods.
(b) Cheque: Alternatively, the online vendor may arrange for the pickup of the cheque from the customer’s end. Upon realisation, the delivery of goods may be made.
(c) Net-banking Transfer: Modern banks provide to their customers the facility of electronic transfer of funds over the Internet using Immediate Payment Services (IMPS), NEFT and RTGS. In this case, therefore, the buyer may transfer the amount for the agreed price of the transaction to the account of the online vendor who may, then, proceed to arrange for the delivery of goods.
(d) Credit or Debit Cards: Popularly referred to as ‘plastic money ‘,these cards are the most widely used medium for online transactions. In fact, about 95 per cent of online consumer transactions are executed with a credit card. Credit card allows its holder to make purchases on credit. The amount due from the card holder to the online seller is assumed by the card issuing bank, who later transfers the amount involved in the transaction to the credit of the seller.
(e) Digital Cash: This is a form of electronic currency that exists only in cyberspace. This type of currency has no real physical properties, but offers the ability to use real currency in an electronic format. First you need to pay to a bank an amount equivalent to the digital cash that you want to get issued in your favour.
The need for outsourcing are:
(i) Cost Reduction: Since the outsourcing company invariably is responsible for managing their teams, and they already have the necessary facilities in place.Outsourcing takes these financial pressures away from businesses, allowing them to avoid many administrative burdens.
(ii) Focus on Core Competencies: Core competencies are the defining characteristics that make a business or an individual stand out from the competition.Outsourcing IT support allows businesses to redirect their internal resources toward innovation and core business functions.
(iii) Access to Expertise and Technology: The process of outsourcing involves identifying the need for outsourcing, selecting a vendor, and managing the outsourcing relationship.Outsourcing can provide access to a pool of experts with specialised skills and knowledge in areas like cybersecurity, software development, network management, and data analytics.
(iv) Increased Flexibility and Scalability: When it comes to outsourcing, scalability and flexibility go hand in hand. By outsourcing certain functions or tasks to external service providers, businesses can tap into additional resources and expertise, enabling them to scale their operations or adapt to changing business needs more efficiently.
(v) Enhanced Risk Management: Outsourced risk management services involve hiring a professional business process outsourcing company to assess, monitor and manage various risks companies face.
Limitations for outsourcing:
(i) Loss of Control: By outsourcing activities, your business loses control of how that activity is carried out and may not be in accordance with your own business ethos and way of doing things.
(ii) Quality Concerns: The major ethical issue is taking away employment opportunities from one’s own country. Instead of creating employment and wealth in the origin country it gets outsourced to another country.
(iii) Security Risks: Security risks are a major concern when outsourcing, as they can lead to financial losses, legal liabilities, and competitive disadvantages. Further, outsourcing a function requires that a certain amount of process control be yielded to the vendor.
(iv) Cultural and Language Barriers: Cultural and language barriers are a significant limitation of outsourcing because they can make it difficult to communicate and build relationships with companies or individuals in other countries.
(v) Hidden Costs: Prioritising lowest cost over best fit focusing solely on the bottom line can backfire, leading to communication issues, cultural mismatches, and other problems that end up costing you more in the long run.
4. Discuss the salient aspects of B2C commerce.
Ans: As the name implies, B2C (business-to-customers) transactions have business firms at one end and its customers on the – other end. Although, what comes to one’s mind instantaneously is online shopping, it must be appreciated – that ‘selling’ is the outcome of the marketing process. And, marketing e begins well before a product is offered for sale and continues even after the – product has been sold. B2C commerce, therefore, entails a wide gamut of marketing activities such as identifying activities, promotion and sometimes even delivery of products that are carried out online. e-Commerce permits conduct of these activities at a much lower cost but high speed. For example, ATMs speed up withdrawal of money.
Customers these days are becoming very choosy and desire individual attention to be given to them. Not only do they require the product features to be tailor-made to suit their requirements, but also the convenience of delivery and payment at their pleasure. With the onset of e-commerce, all this has become a reality. Further, the B2C variant of e-commerce enables a business to be in touch with its customers on a round-the-clock basis. Companies can conduct online surveys to ascertain as to who is buying what and what the customer – satisfaction level is.
The opinion that B2C is a one-way traffic, i.e., from business-to-customers. But do remember that its corollary, C2B commerce is very much a reality which provides the consumers with the freedom of shopping-at-will. Customers can also make use of call centres set up by companies to make toll free calls to make queries and lodge complaints round the clock at no extra cost to them. The beauty of the process is that one need not set up these call centres or help lines; they may be outsourced. We shall discuss this aspect later in the section devoted to Business Process Outsourcing (BPO).
5. Discuss the limitations of electronic mode of doing business. Are these limitations severe enough to restrict its scope? Give reasons for your answer.
Ans: Doing business in the electronic mode suffers from certain limitations.
It is advisable to be aware of these limitations as well.
(i) Low personal touch: High-tech it may be, e-business, however, lacks warmth of interpersonal interactions. To this extent, it is a relatively less suitable mode of business in respect of product categories requiring high personal touch such as garments, toiletries, etc.
(ii) Incongruence between order taking/giving and order fulfilment speed: Information can flow at the click of a mouse, but the physical delivery of the product takes time. This incongruence may play on the patience of the customers. At times, due to technical reasons, websites take unusually long time to open. This may further frustrate the user.
(iii) Need for technology capability and competence of parties to e-business: Apart from the traditional 3R’s, e-business requires a fairly high degree of familiarity of the parties with the world of computers. And, this requirement is responsible for what is known as digital divide, that is the division of society on the basis of familiarity and unfamiliarity with digital technology.
(iv) Increased risk due to anonymity and non-traceability of parties: Internet transactions occur between cyber personalities. As such, it becomes difficult to establish the identity of the parties. Moreover, one does not know even the location from where the parties may be operating. It is riskier, therefore, transacting through the internet. e-business is riskier also in the sense that there are additional hazards of impersonation and leakage of confidential information such as credit card details.
(v) People resistance: The process of adjustment to new technology and new ways of doing things causes stress and a sense of insecurity. As a result, people may resist an organisation’s plans of entry into e-business. –
(vi) Ethical fallouts: Nowadays, companies use an electronic eye to keep track of the computer files you use, your email – account, the websites you visit etc.
Despite limitations, e-commerce is the way:
It may be pointed out that most of the limitations of e-business discussed above are in the process of being overcome. Websites are becoming more and more interactive to overcome the problem of low touch.’ Communication technology is continually evolving to increase the speed and quality of communication through the internet. Efforts are on to overcome the digital divide, for example, by resorting to such strategies as setting up of community telecentres in villages and rural areas in India with the involvement of government agencies, NGOs and international institutions. In order to diffuse e-commerce in all nooks and corners, India has undertaken about 150 such projects. In view of the above discussion, it is clear that e-business is here to stay and is poised to reshape the businesses, governance and the economies. It is, therefore, appropriate that we familiarise ourselves with how e-business is conducted.
