Plus One Business Studies Notes Chapter 5 Emerging Modes of Business

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Kerala Plus One Business Studies Notes Chapter 5 Emerging Modes of Business


  • E-business – Meaning and scope of e-business – Differences between traditional and e-business – Benefits and Limitations of e-business
  • Online transactions – Steps -e-business risk – Resources required for e-buisness
  • Outsourcing – Meaning – features – Benefits and Concerns of outsourcing – Types of outsourcing services

Plus One Business Studies Notes Chapter 5 Emerging Modes of Business

e-Business (Electronic Business):
e-business may be defined as the conduct of industry, trade and commerce using the computer networks. Computer network means internet, e-business versus e-commerce e-business is a wider term which includes e-commerce and other electronically conducted business functions such as production, accounting, finance, personnel etc.

e-commerce covers a firms interactions with its customers and suppliers over the internet, e-business is, therefore, clearly much more than buying and selling over the internet, i.e., e-commerce.

Various constituents of e-business:
1. B2B Commerce:
It is that business activity in which two business units make electronic transaction.
Eg. making enquiries seeking or placing orders, communicating supply of goods, making payments, and so on.

2. B2C Commerce:
When the transaction is between business and consumers, it is called Business to Consumers. It enables a business firm to be in touch with its customers on round the clock basis. It involves consumers placing order on line, electronic payment etc.

3. Intra-B Commerce:
It means interaction and dealings among various departments and persons within the firm. For example, the marketing department may interact regularly with the production department and other departments that help in attaining efficient inventory handling, better cash management, timely and sufficient provision of customer services, and so on.

4. C2C Commerce:
Under it, both the parties involved in electronic transaction are customers. It is required for buying and selling of those goods for which there are no established markets. For example, selling used books and household equipments.

Benefits of e-Business:

  1. e-business is relatively easy to start and requires lower capital.
  2. Customers can buy goods at any time from any seller located in different parts of the world.
  3. Business transactions can .be made easily and speedily.
  4. It helps the business units to operate at the national as well as the global level.
  5. It helps to reduce clerical and paper work.
  6. It helps to eliminate middlemen.
  7. Any company can launch its new product in the market through the medium of E-Business.
  8. It improves the brand image of the company.

Limitations of e-Business:

  1. It lacks personal touch with customers, which makes it unsuitable for medical, legal services etc.
  2. The transaction can be finalised quickly, but physical delivery of goods often takes long time and be delayed.
  3. For successful implementation of e business, the parties to the transactions have to be familiar with computers.
  4. It leads to leakage of confidential information such as credit card details. Also there are problems of virus and hacking.
  5. It is difficult to establish identity of the parties .

Plus One Business Studies Notes Chapter 5 Emerging Modes of Business

Differences between Traditional business and e-business:

Traditional business e- business
Its formation is difficult Its formation is easy
Investment is very high Investment is low
Physical presence is required Physical presence is not required
Location is important Location is not important
Operating cost is high Operating cost is low
Contact with suppliers and customers is through intermediaries Direct contact with the suppliers and customers
Business process cycle is long Business process cycle is shorter
Inter personal touch is high Personal touch is less
Limited market coverage Access to the global market
Communication is in hierarchical order Communication is in non hierarchical order
Transaction risk is less Transaction risk is high

On line Transactions:
On line transaction means receiving information about goods, placing an order, receiving delivery and making payment through medium of internet.

Buying / Selling Process:
Plus One Business Studies Notes Chapter 5 Emerging Modes of Business 1

Steps involved in online purchase:
1. Register with the online vendor by filling-up a registration form.

2. Place the order for the items put by customer in his virtual shopping cart, an on-line record of what has been picked up while browsing the Online store.

3. Payment for the purchases through online shopping may be done in a number of ways: i.e Cash on delivery, cheque, net banking transfer, debit/credit card.

Net Banking Transfer:
Modem banks provide to their customers the facility of electronic transfer of funds over the net. In this case, the buyer may transferthe transaction amount to the account of the online vendor who may, then, proceed to arrange for the delivery of goods.

Debit card:
The holder of a debit card can buy goods from approved shops without paying cash against the balance in his bank account. Every purchase reduces bank balance. Debit card is issued to bank account holders only and against the amount deposited with the bank.

Credit cards:
A credit card is an instrument issued by a bank in the name of the customer providing credit up to a specified amount. The person holding a valid credit card uses it for purchasing goods from approved shops without paying cash. The payment is made by the bank to the sellers. The buyers have to pay for the purchase within the credit period.

Plus One Business Studies Notes Chapter 5 Emerging Modes of Business

Security and safety of e- Business:
There are three types Of possible risks as listed below:
(a) Transaction risks:

  1. 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”.
  2. Goods may be delivered at wrong address or wrong goods may be delivered which is referred as “Default on Delivery”.
  3. Seller may complaint that he didn’t receive payment while customer may claim that payment was over. This is referred as “Default

(b) Data storage and transmission risks:

  1. VIRUS (Vital Information & Resources Under Siege): Virus can disrupt functioning, damage the data and even may cause complete destruction of the system.
  2. Interception: Data maybe intercepted in the course of transmission

(c) Risks of threat to intellectual property and privacy:

  1. Once the information is made available over the internet, it moves out of the private domain. So important information may be copied by others.
  2. When data furnished goes in the hands of others they may start dumping with lot of advertising & promotional literature into our e-mail box.

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

  1. Computer system
  2. Internet connection and technically qualified work force
  3. A well developed web page
  4. Effective telecommunication system
  5. A good system for making payment using credit instruments.

Plus One Business Studies Notes Chapter 5 Emerging Modes of Business

Outsourcing or Business Process Outsourcing (BPO):
Outsourcing is a management strategy by which an organisation contracts out its major non-core functions to specialized service providers with a view to benefit from their expertise, efficiency and cost effectiveness, and allow managers to concentrate on their core activities.
Merits of outsourcing:

  1. It provides an opportunity to the organisation to concentrate on areas in which it has core competency or strength.
  2. It helps better utilisation of its resources as the management can focus its attention on selected activities and attain higher efficiency.
  3. It helps the organisation to get an expert and specialised service at competitive prices. It helps in improved service and reduction in costs.
  4. It facilitates inter-organisational knowledge sharing and collaborative learning.
  5. It enables expansion of business as resources saved from outsourcing can be used for expanding the production capacity and diversified products.

Limitations of outsourcing

  1. It reduces confidentiality as outsourcing involves sharing a lot of information with others.
  2. It may be opposed by labour unions who feel threatened by possible reduction in their employment.
  3. In the name of cost cutting, unlawful activities such as child labour, wage discrimination maybe encouraged in other countries.
  4. The organisation hiring others may face the problem of loss of managerial control because it is more difficult to manage outside service providers than managing one’s own employees.
  5. It causes unemployment in the home country.

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