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PUC 1ST YEAR, BUSINESS STUDIES NOTES, 5. EMERGING MODES OF BUSINESS, Introduction: The manner of conducting business is referred to as the “mode of, business”. The way the business is done has undergone fundamental changes, during the last decade or so. In fact, the three strongest trends that are shaping, business these days are:1. Digitisation of business (or electronic business or e-business), 2. Business process outsourcing (BPO), 3. Internationalisation and Globalisation, Digitization or E-Business: E-business is defined as the conduct of industry, trade and commerce using the computer networks. E-business means Electronic, business., E-business or digitisation involves the conversion of text, sound, images,, video and other content into a series of ones and zeros that can be transmitted, electronically. Internet is the network that is most familiar to students or, consumers., E-commerce: e-commerce covers a firm’s interactions with its customers and, the suppliers over the internet., Or, Buying and selling of goods and services over the internet is called, “ecommerce”., Scope of E-business: The scope of e-business is quite vast. Almost all types of, business functions such as production, finance, marketing and personnel, administration as well managerial activities like planning, organising and, controlling can be carried out over computer network., In terms of people or parties involved, e-business extends into 4 directions,, viz;, 1. B2B (Business-to-Business): Here, both the parties involved in ecommerce transactions are business firms. Creation of utilities or, delivering value requires a business to interact with a number of other, business firms which may be suppliers or vendors of diverse inputs; or else, they may be a part of the channel through which a firm distributes its, products to the consumers., 1|Page

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A network of computers is used for placing orders, monitoring, production and delivery of components and making payments., , B2B (Business to Business), 2. B2C (Business-to-customers): It involves transactions between business, firm and its customers. Online shopping, online delivery etc. are examples, of B2C business., 3. Intra-B: Here, parties involved in the electronic transactions are from, within a given business firm. It involves transactions between the various, departments of an organisation. Employees can work from their home., Meetings can be held online via Video conferencing., For Example: online interaction between marketing manager and, production manager., [[, , 4. C2C (Consumer-to-Consumer): Here, the business originates from the, consumer and the ultimate destination is also consumers. This type of, commerce is best suited for dealing in goods for which there is no, established market mechanism., Example: selling used books or clothes either on cash or barter basis., , C2C (Consumer to Consumer), 2|Page

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Difference between Traditional and E-business:, Basis of distinction, Ease of formation, Physical presence, , Traditional business, difficult, required, , e-business, Simple, Not required, , Locational requirements, , Near the source of raw, material or the market for the, products, , None, , Cost of setting up, , High, , Low as no requirement of physical, facilities, , Operating cost, , High due to fixed charges, associated with investment in, procurement and storage,, production, marketing and, distribution facilities, , Low as a result of reliance on, network of relationships rather than, ownership of resources., , Nature of contact with the, suppliers and the customers, , Indirect through, intermediaries, , Direct, , Nature of internal, communication, , Hierarchical from top level, management to middle level, management to lower level, management to operatives, , Non- Hierarchical, allowing direct, vertical, horizontal and diagonal, communication, , Response time for meeting, customers/ internal, requirements, , Long, , Instantaneous / Instant, , Shape of the organisational, structure, , Vertical / tall due to hierarchy, or chain of command, , Horizontal / flat due to directness, of command and communication, , Business processes and length, of the cycle, , Long Sequential procedure,, purchase-productionmarketing sales, , Shorter simultaneous different, process, , Opportunity for interpersonal, touch, , Much more, , Less, , Opportunity for physical presampling of the products, , Much more, , Less, , Ease of going global, , Less, , Much more, , Government patronage, , Shrinking, , Much, as IT sector is among the, topmost priorities of the, government, , Nature of human capital, , Semi-skilled and even, unskilled manpower needed, , Technically and professionally, qualifies personnel needed, , Transaction risk, , Low due to arm’s length, transactions and face-to-face, contact, , High due to the distance and, anonymity of the parties, , 3|Page

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Benefits of e-Business:, 1. Ease of formation and lower investment requirements: e-business is, relatively easy to start. E-business enables a business to do fabulous, business with minimum investment., 2. Convenience: Internet offers the convenience of 24 hours × 7days a week, × 365 days year business. It offers the advantage of accessing anything,, anywhere and anytime., 3. Speed: e-business enables quick delivery of goods. Example: digital, products such as e-books, software’s, movies etc., can even be delivered, online. Electronic funds transfer technology of e-commerce has speeded, up funds transfer., 4. Global reach/access: Internet is truly without boundaries. One the one, hand, it allows the seller an access to the global market. On the other hand,, it gives an opportunity to the buyer a freedom to choose products from, almost any part of the world., 5. Movement towards a Paperless society: Use of internet has considerably, reduces dependence on paperwork., Limitations of e-business:, 1. Low personal touch: It is lacking in those products which need more, personal touch as garments., 2. Incongruence between order taking / giving: Order for the purchase of, goods can be places at the click of a mouse, but the physical delivery of the, product takes time. This delay in delivery of goods may frustrate the, customer., 3. Need for technology capability and competence of parties to ebusiness: e-Business requires a fairly high degree of familiarity of the, parties with the world of computers. Therefore, those who are not familiar, with computers, cannot make use of e-business., 4. Increased risk due to anonymity and non-traceability of parties:, Difficult to establish/ check identity and location, someone else may, transact in your name risk of leakage of confidential information such as, credit card details. Also, there are problems of Virus and hacking., 5. People Resistance: The process of adjustment to new technology and new, way of doing things causes stress and a sense of insecurity., 4|Page

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6. Ethical fallouts: Now-a-days, companies follow even unethical methods, and use an ‘electronic eye’ to keep track of the computer files of their, employees, their e-mail account and the websites visited by them., Finally, to conclude, despite limitations, e-commerce is gaining, importance as most of the limitations of e-business are in the process of being, overcome., Online Transactions: One may visualise three stages involved in online, transactions:, 1. The pre-purchase/sale stage including advertising and information- seeking., 2. The purchase/sale stage involving price negotiation, closing of purchase/sale, deal and payment., 3. The delivery stage., Process of online Transaction:, a) Registration: Before online shopping, one has to register with the online, vendor by filling-up a registration form. On Registration, ‘account number’, is given to the registered person., b) Placing an order: After registration, the buyer will browse the online store, and pick the items in the shopping cart. Thus, the shopping cart contains, an order for the purchase of goods., c) Payment Mechanism: Payment for the purchases through online, shopping may be done in a number of ways:, ➢ 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., ➢ Cheque: Alternatively, the online vendor may arrange for the, pickup of the cheque from the customer’s end., ➢ Net-Banking Transfer: Modern banks provide to their customers, the facility of electronic transfer of funds over the net., ➢ Credit or Debit Cards (plastic money): They are the most widely, used medium for online transactions. In fact, about 95% of online, consumer transactions are executed with credit card. The amount, due from the card holder to the seller is transferred electronically by, the bank to the sellers account., , 5|Page

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➢ Digital Cash: This is a form of electronic currency. This facility is, given by the bank to its customer when he deposits sufficient amount, of cash. This digital cash can be used to make purchases over the, web., Security and Safety of e-Transactions: e-Business Risks, Online transactions, are exposed to a number of risks. Risks in the case of, online transactions are:, 1. Transaction risks: Online transactions are vulnerable to te following types of, transaction risks:, ❖, , ❖, , ❖, , Seller denies that the customer ever placed the order or the, customer denies that he ever placed the order. This may be, referred to as ‘default on order taking/giving’., The intended delivery does not take place, goods are delivered at, wrong address, or goods other than ordered may be delivered., This may be regarded as ‘default on delivery’., Seller does not get the payment for the goods supplied whereas, the customer claims that the payment was made. This may be, referred to as ‘default on payment’., , 2. Data storage and transmission risks: Information is power indeed, if the, power goes into the wrong hands. Data stored in the systems and en-route is, exposed to a number of risks ‘VIRUS’ (Vital Information Resource Under, Siege)., 3. Risk of threat to intellectual property and privacy: Internet is an open space., Once the information is available over the internet, it moves out of the private, domain. It then becomes difficult to protect it from being copied., Cookies: Cookies are very similar to the caller ID in telephones that provide, telemarketers with such relevant information as: the consumer’s name, address, and previous purchase payment record., Cryptography: It refers to the art of protecting information by transforming, (encrypting) it into an unreadable format called ‘cypher text’., SSL: Secure Sockets Layer., , 6|Page

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Resources Required For Successful E-Business Implementation:, The resources required for the e-business are:, ➢, ➢, ➢, ➢, , Men, money and machines (Hardware), Website, Internet, Computer system, , Outsourcing: Outsourcing refers to a long-term contracting out the non-core, (secondary or incidental activity) and even some of the core (Central or basic, activity) activities to captive or third party specialists with a view to benefitting, from their experience, expertise, efficiency and even investment., In short, Outsourcing means obtaining specialised services from specialist, people outside the organisation on a regular basis., Features:, 1. Outsourcing involves contracting out: Outsourcing involves contracting, out certain activities like canteen, sanitation and housekeeping by, companies to outside agencies on a contractual basis., For example: most companies have so far appointed their own sanitation, staff for maintaining neatness, cleanliness and overall housekeeping of, their premises. Company engages in outside agencies to perform these, activities for their organisations on a contractual basis., 2. Generally non-core business activities are outsourced: Generally most, of the companies outsource the non-core or secondary business activities., For Example: Sanitation and housekeeping functions, running a canteen, are considered as non-core activities by companies and are usually, outsourced., 3. Processes may be outsourced to a captive unit or a third party:, , 7|Page

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The most important reason underlying the use of outsourcing is to, benefit from the expertise and experience of others. Firms have started, increasingly outsourcing one or more of their processes which can be more, efficiently and effectively carried out by others., Note: Captive unit: a service provider set up for providing services of a, given kind to only one firm., Scope of Outsourcing:, 1., 2., 3., 4., , Contract manufacturing, Contract research, Contract sales, Informatics, , Outsourcing is associated with IT enabled services or Business Process, Outsourcing (BPO). It also covers ‘call centres’ providing customer, oriented voice based services., Services provided by call centres:, 1. Customer oriented voice based services, 2. Customer Care: handling of in-bound and outbound traffic. i.e., handling of, customer queries and grievances, payment follow up and telemarketing., Need/Benefits/Reasons for Outsourcing:, 1. Focusing of attention: Outsourcing has enabled the business firms to, focus their attention and resources on select activities for better efficiency, and effectiveness., 2. Quest for excellence: Outsourcing enables the firms to pursue excellence, in two ways:, • They excel themselves in the activities that they can do the best by, virtue of limited focus., • They excel by contracting out the remaining activities to other, experts., 3. Cost Reduction: Division of labour and specialisation, besides improving, quality, reduces cost. Tis happens due to the economies of large scale, accruing to the outsourcing partners as they deliver the same service to a, number of organisations at lower cost., , 8|Page

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4. Growth through alliance: Outsourcing enables growth through alliance., Apart from financial returns, outsourcing facilitates inter organizational, knowledge sharing., 5. Fillip to economic development: Outsourcing promoted entrepreneurship, employment and exports in the host countries and thereby supports, economic development., Concerns over outsourcing:, 1. Confidentiality: Outsourcing depends on sharing a lot of vital information, and knowledge. If the outsourcing partner does not preserve the, confidentiality and passes it on to competitors, it can harm the interest of, the party that outsources its processes., 2. Sweat-shopping: As the firms that outsource seek to lower their costs, they, try to get maximum benefit from the low-cost manpower of the host, countries., 3. Ethical concerns: In order to cut costs, outsources manufacturing to a, developing country where they use child labour/women in the factories, is, unethical., 4. Resentment in the home countries: Contracting out or outsourcing may, cause resentment in the home country when it leads to aggravate, unemployment problem., *************, , 9|Page