11th Class Business Studies Emerging Modes Of Business Emerging Modes Of Business (Notes)

Emerging Modes of Business

Facts that Matter  

• The world of business is changing and E-business and outsourcing are two most obvious expressions of this change.
• Two newer modes of business i.e; E - business and BPO are not new business, but simply the new ways of doing business.
• Interestingly, the two trends of E-business and BPO are continuing to evolve, and that is why these are referred to as "Emerging Modes of Business".  
• E-Business - Electronic Business means conducting industry, trade and business using computer network \[24\times 7\times 365\]days a year. Business (24 hrs. \[\times \] 7 days \[\times \] 365 days a year business), there by dismantling the time and space, location constraints of - its performance.
• E-commerce means buying and selling products and services over the internet. It makes use of E-mail, electronic fund transfer etc.

Scope of E-Business

• B2B Commerce: Business to Business-Both the parties are business firms, e.g. Manufacturer of an automobile requires assembly of a large number of components which are being manufactured by different firms; Maruti Udyog, Bajaj Auto etc., use B-2-B commerce.
• B2C Commerce: Business to customer-Transaction taking place between business and individual customers. It facilitates promotion of products online, e.g. music or film. Companies sell products and services on line to customer e.g. Amul.com sell Amul products online. It is fast and 24 hrs.
• Intra-B. Commerce: Parties involved are from within a given business firm. It makes it possible for the marketing department to interact constantly with the production department to get information about customer requirement.
• C2C Commerce: Consumer to consumer-Business originates from the consumer and the ultimate destination is also consumer. Its area of application is the formation of consumer forum, e.g. selling used books over the internet.

Difference between E-Business and Traditional Business

Benefits of E-Business

Ease of formation and lower investment requirements: It is relatively easy to start, no huge stock and capital is required.

Movement towards a paperless society: Using internet or mobile phones, thereby reducing dependency of people on paper.

Reduced costs: Reduced cost of advertising exchange of information and delivery.

Convenience: \[24\times 7\times 365\]anywhere, anytime, anything.

Speed: Internet allows any transaction alone at a click of mouse.

Global reach/access: Customers have complete freedom to choose products from almost any part of the world.

Customer convenience and satisfaction: Use of internet to buy goods, services and payment can also be made online.

Limitations of E - Business:

• Low personal touch: People want to test and feel products like garment, furniture, jewellery etc. which is not possible here.
• Increased risk due to anonymity and non traceability of parties: It becomes difficult to establish the identity of the parties.
• People resistance: E-business means new ways of doing things with new technology causes stress and a sense of. insecurity. So people resist of entry into E-business.
• Gap between order taking/giving and order fulfillment speed: Physical delivery takes some time due to technical reasons while websites takes long time to open.
• Need for technology capability and competence of parties to E-business: It requires computer knowledge and there is a shortage of skilled persons who can successfully handle E-commerce.
• Ethical fallouts: Companies use an 'electronic eye' to keep track of computer files used by their employees, their e-mail accounts etc. It is not ethical.

Outsourcing:

Meaning: Outsourcing means contracting out non core and routine activities to outside agencies with a view to benefiting from their experience, expertise and efficiency e.g. Reliance Industries Ltd. wants to advertise its VimaF brand of clothing. It may appoint 'X Advertising Co. to design, prepare and release advertisements on      its behalf.

Nature/Salient features of Outsourcing:

• Outsourcing involves contracting out:

e.g. activities like sanitation, (cleanliness) outside agencies on contractual basis.

• Generally non-core business activities are outsourced:

Ø  Financial Services: issue of shares / debentures etc.

Ø  Advertising Services: avail the services of expert in advertising related work.

Ø  Courier Services: with cheaper rates and safety.

Ø  Customer Support Service: After sale service i.e. handling diverse complaints from their customers.

• Processes may be outsourced to a captive unit or a third party :

There are three types of third party service providers.

Ø  Captive BPO unit: Provides service of a given kind to only one firm.

Ø  Horizontals: Service provided to a wide base of clients, cutting across industries.

Ø  Verticals: Specialise in one or two industries and scale up to doing a number of process from non-care of care.

Scope/Segments of Outsourcing:

• Contract manufacturing
• Contract research
• Contract sales information

Need for Outsourcing (Benefits)

• Focusing on core functions: By contracting out routine/non-care activities, a company can focus on more crucial matters.
• Quest for excellence/benefit of specialization: Outsourcing agency provides expertise of concerned function.
• Cost reduction: Specialists perform the job at lower price due to large scale services.
• Convenience and less investments: The firm need not to invest money in creating and maintaining system for routine and non-care activities.
• Economic growth and development: Due to Outsourcing every function is performed by the organization most competent to do it. Division of labour helps to maximize productivity and profits limitation of Outsourcing.

Limitations

• Ethical concern: Use of child labour in Outsourcing firm is unethical.
• Resentment in home countries: Contracting out jobs / employment may cause resentment in home countries.
• Confidentiality: Vital information / knowledge may pan to competitors via outsourcing firms.
• Sweat Shipping: Outsourcing firms try to get maximum benefits from low-cost manpower.

Words That Matter

• E - business: Electronic business, commonly referred to as 'e-business' or 'e-business' refers to conducting business activities over internet or any other computer network.
• Online transactions: Online transactions refer to transactions taking place between buyers and sellers through internet.
• Outsourcing: Outsourcing refers to contracting out some of its activities to a third party which were earlier performed by the organization.
• Business Process Outsourcing: Business process Outsourcing is a subset of outsourcing that involves the contracting of a specific business task, such as human resources and customer service, to a third-party service provider.
• Knowledge Process Outsourcing: Knowledge process outsourcing is a form of outsourcing that involves the contracting of knowledge intensive business processes that require specialized domain expertise to a third-part service provider.
• Smart - Cards: Smart card is a pocket-sized card that contains an embedded computer chip that stores and transacts data.
• ATM: ATM is a computerized machine that provides the customers of bank the facility of accessing their accounts with a magnetically encoded plastic card and a code number.
• Debit Card: Debit card allows its holder to make purchase through it to the extent amount lying in the corresponding account.
• Credit Card: It is a card which allows its holder to make purchase on credit. The seller receives payment from the card issuing bank who later receives payment from the customer.
• Digital Cash: It is a form of cash which exists only in cyberspace. It has no real physical properties but offers the ability to use real currency in an electronic format.
• Shopping Cart: Shopping cart is an online record of what a customer has selected while browsing the online store.
• Digital Divide: It is division of society on the basis of familiarity with digital technology and non familiarity with digital technology.
• American Standard Code for Information Interchange (ASCII): It is a widely used and internationally recognized coding system to represent characters in a standard way which is used for storage within computer systems and for exchange between them.
• Website: Website is the location of a firm on World Wide Web (www). Certainly, it is not a physical location but an online embodiment of all the contents that a firm may like to provide to others.
• URL: It stands for Uniform Resource Locator and refers to a world wide web address that specifies a specific site, page, graphic or document on the internet.
• Cookies: Cookies are very similar to the caller ID in telephones. It provides information on the consmer's name, address and previous purchase payment record etc.
• Paypal: It is a payment intermediary which receives money from the buyer and holds it until goods are shipped and accepted by the buyer.
• Virtual Private Network: It means that employees do not have to come to office. They can work from wherever they are at their own speed and convenience of time. Meetings. - are held using online conference via tele/video conferencing.
• Registration: It means opening an account on a website. It is password protected.
• VIRUS: It stands for Vital Information Under Siege. Actually, Virus is a program i.e., a series of commands which replicates itself on the other computer systems.
• Secure Socket Layer (SSL): It was designed by Netscape for use in electronic commerce for transactions involving confidential information like credit card numbers. SSL uses a system of public and private key authentication combined with schemes to verify electronic signatures. Public key is the password that the sender uses to encrypt the data and the private key is used by the receiver of a message to decrypt the data.
• Cryptography: It refers to the art of protecting information by transforming it (encrypting it) into an unreadable format called 'cyphertext'. Only those who possess a secret key can decrypt the message into plain text. It is like coding and decoding.
• Browser: It is a generic term for software programs which retrieve, display and print information on World Wide Web.