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This chapter discusses the meaning, scope, benefits, limitations, and operational aspects of emerging modes of business, focusing on e-business and Business Process Outsourcing (BPO). It covers digitisation of business processes, online transactions, security concerns, and resource requirements for e-business. These notes summarise key concepts from Chapter 5 of the NCERT textbook Business Studies for effective revision. You can also download the free PDF for quick reference.
Contents
- 1 Introduction
- 2 E-Business
- 3 Scope of e-Business
- 4 E-Business versus Traditional Business
- 5 Benefits of E-Business
- 6 Limitations of e-Business
- 7 Online Transactions
- 8 Security and Safety of e-Transactions: e-Business Risks
- 9 Resources Required for Successful e-business Implementation
- 10 Important Definitions in NCERT Notes Class 11 Business Studies Chapter 5: Emerging Modes of Business
- 11 FAQs
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Introduction
The way business is done has undergone fundamental changes during the last decade or so. The manner of conducting business is referred to as the ‘mode of business,’ and the prefix ‘emerging’ underlines the fact that these changes are happening here and now, and that these trends are likely to continue. In fact, if one were to list the three strongest trends that are shaping business, these would be:
(i) Digitisation: It is the conversion of text, sound, images, video, and other content into a series of ones and zeroes that can be transmitted electronically.
(ii) outsourcing, and (iii) internationalisation and globalisation.
In this chapter, we will be familiarising you with the first two developments, i.e., digitisation (a term from electronics) of business, also referred to as electronic business (e-business), and Business Process Outsourcing (BPO). The newer modes of business are not new businesses. These are, rather simply, the new ways of doing business attributable to a number of factors.
Business as an activity is aimed at creating utilities or value in the form of goods and services, which the household and industrial buyers purchase to meet their needs and wants. Business firms have to strengthen their capabilities of creating utilities and delivering value to successfully meet the competitive pressures and ever-growing demands of consumers for better quality, lower prices, speedier deliveries and better customer care. Besides, the quest for benefitting from emerging technologies means that business as an activity keeps evolving.
- Examples: Digitisation, outsourcing, internationalisation and globalisation as the strongest trends shaping business.
- Newer modes: New ways of doing existing business to improve processes and meet competition.
E-Business
If the term business is taken to mean a wide range of activities comprising industry, trade and commerce, e-business may be defined as the conduct of industry, trade and commerce using computer networks. The network you are most familiar with as a student or consumer is the internet. Whereas the internet is a public thoroughway, firms use more private, and, hence, more secure networks for more effective and efficient management of their internal functions.
e-business versus e-commerce: Though many times, the terms e-business and e-commerce are used interchangeably, more precise definitions would distinguish between the two. Just as the term ‘business’ is a broader term than ‘commerce’, e-business is a more elaborate term and comprises various business transactions and functions conducted electronically, including the more popular gamut of transactions called ‘e-commerce.’ E-commerce covers a firm’s interactions with its customers and suppliers over the internet. e-business includes not only e-commerce, but also other electronically conducted business functions such as production, inventory management, product development, accounting and finance and human resource management. e-business is, therefore, clearly much more than buying and selling over the Internet, i.e., e-commerce.
- E-business: Conduct of industry, trade and commerce using computer networks (internet or private networks).
- E-commerce: Firm’s interactions with customers and suppliers over the internet (part of e-business).
- E-business scope: Includes production, finance, marketing, personnel administration, planning, organising, and controlling over computer networks.
Scope of e-Business
Almost all types of business functions, such as production, finance, marketing and personnel administration, as well as managerial activities like planning, organising and controlling, can be carried out over computer networks. The other way of looking at the scope of e-business is to examine it in terms of people or parties involved in electronic transactions. Viewed from this perspective, a firm’s electronic transactions and networks can be visualised as extending into three directions, viz., (i) B2B, which is a firm’s interactions with other businesses, (ii) B2C, i.e., a firm’s interactions with its customers and (iii) intra-B or a firm’s internal processes.
(i) B2B Commerce: Here, both the parties involved in e-commerce transactions are business firms, and, hence, the name B2B, i.e., business-to-business. 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. For example, the manufacture of an automobile requires assembly of a large number of components, which in turn are being manufactured elsewhere, within the vicinity of the automobile factory or even overseas.
Use of e-commerce expedites the movement of information and documents, and of late, money transfers as well. Historically, the term e-commerce originally meant facilitation of B2B transactions using Electronic Data Interchange (EDI) technology to send and receive commercial documents like purchase orders or invoices.
- B2B: Business-to-business; interactions with suppliers, vendors, distributors; placing orders, monitoring production/delivery, and payments via computer networks.
- Example: Automobile factory sourcing components from multiple vendors, with real-time stock control.
(ii) B2C Commerce: As the name implies, B2C (business-to-customers) transactions have business firms at one end and their 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 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 (e.g., music or films) that are carried out online.
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 who is buying what and what the customer satisfaction level is.
- B2C: Business-to-customers; includes identifying activities, promotion, delivery online; lower cost, high speed, 24×7 contact, customisation, online surveys.
- C2B: Customers initiate, shopping-at-will, toll-free call centres for queries/complaints (may be outsourced).
- Example: ATM for quick money withdrawal; online delivery of music/films.
(iii) Intra-B Commerce: Here, parties involved in the electronic transactions are from within a given business firm, hence, the name intra-B commerce. As noted earlier, too, one critical difference between e-commerce and e-business is that e-commerce comprises a business firm’s interaction with its suppliers, distributors/other business firms (hence, the name B2B) and customers (B2C) over the internet.
While e-business is a much wider term, and also includes the use of the intranet for managing interactions and dealings among various departments and persons within a firm. It is largely due to the use of intra-B commerce that today it has become possible for firms to go into flexible manufacturing.
- Intra-B: Internal processes within a firm using intranet; flexible manufacturing, inventory/cash management, HR management, e-learning, VPN for remote work.
- Example: Marketing-production interaction for customised products; tele/video conferencing.
(iv) C2C Commerce: Here, the business originates from the consumer and the ultimate destination is also consumers, thus the name C2C commerce. This type of commerce is best suited for dealing in goods for which there is no established market mechanism, for example, selling used books or clothes either on a cash or barter basis. The vast space of the internet allows people to globally search for potential buyers.
Another technology that has emerged to support C2C activities is that of the payment intermediary. PayPal is a good example of this kind. Instead of purchasing items directly from an unknown, untrusted seller, the buyer can send the money to PayPal.
- C2C: Consumer-to-consumer; for goods with no established market (used books/clothes); global search, security via rating (eBay), payment intermediary (PayPal), consumer forums.
Also Read: NCERT Class 8 History Chapter 1 How, When, and Where Notes (Free PDF)
E-Business versus Traditional Business
A comparative assessment of the features of traditional and e-business points towards the distinct benefits and limitations of e-business.
| Aspect | Traditional Business | e-Business |
| Ease of formation | Host of procedural requirements | Relatively easy to start, lower investment |
| Physical presence | Required | Not required |
| Operating cost | High | Low |
| Business interface | Face-to-face | Computer Networks |
| Business process | Sequential | Parallel/simultaneous |
| Communication | Postal, telephone | Instantaneous (click of the mouse) |
| Delivery of products | Physical delivery | Online (for digital products) |
| Global reach | Limited | Without boundaries |
Benefits of E-Business
Here are the benefits of e-business listed below:
(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 and 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.
(iii) Speed: As already noted, much of the buying or selling involves the 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 software, movies, music, e-books and journals that can even be delivered online.
(iv) Global reach/access: The Internet is truly without boundaries. On the one hand, it allows the seller access to the global market; on the other hand, it affords the buyer the 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.
Limitations of e-Business
Apart from benefits, e-business has its own flaws as well. Look at the limitations of e-business in this section.
(i) Low personal touch: High-tech it may be, e WWF e-business, however, lacks the 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 wear on the patience of the customers.
(iii) Need for technology capability and competence of parties to e-business: Apart from the traditional 3Rs (Reading, Writing, and Arithmetic), 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 the digital divide.
(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 even know the location from where the parties may be operating.
(v) People’s 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: Companies use an ‘electronic eye’ to keep track of the computer files you use, your e-mail account, the websites you visit, etc.
Online Transactions
Operationally, one may visualise three stages involved in online transactions. Firstly, the pre-purchase/sale stage includes advertising and information-seeking; secondly, the purchase/ sale stage comprises steps such as price negotiation, closing of purchase/ sales deal and payment; and thirdly, the delivery stage. Except for the stage relating to delivery, all other stages involve the flow of information.
(i) Registration: Before online shopping, one has to register with the online vendor by filling out 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.
(ii) Placing an order: You can pick and drop the items in the shopping cart. A shopping cart is an online record of what you have picked up while browsing the online store. 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:
- Cash-on-Delivery (CoD): Payment for the goods ordered online may be made in cash at the time of physical delivery of goods.
- Cheque: 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.
- Net-banking Transfer: Electronic transfer of funds over the Internet using Immediate Payment Services (IMPS), NEFT and RTGS.
- Credit or Debit Cards: A Credit card allows purchase on credit; a debit card deducts from the account balance. About 95 per cent of online consumer transactions are executed with a credit card.
- Digital Cash: Electronic currency in cyberspace; a bank issues software to draw from an account for web purchases.
Security and Safety of e-Transactions: e-Business Risks
Online transactions are prone to a number of risks. Risk refers to the probability of any mishappening that can result in financial, reputational or psychological losses to the parties involved in a transaction. Here are the potential risks associated with e-transactions:
(i) Transaction risks:
- Default on order taking/giving: Seller denies order placement or customer denies placing order.
- Default on delivery: No delivery, wrong address, wrong goods.
- Default on payment: Seller does not receive payment, though the customer claims payment was made.
(ii) Data storage and transmission risks: Vital information may be stolen or modified. Virus: Vital Information Under Siege replicates on systems. Anti-virus programmes provide protection. Data interception in transmission; use cryptography (encrypt to ciphertext, decrypt with secret key).
(iii) Risks of threat to intellectual property and privacy: Information over the internet moves out of the private domain; difficult to protect from copying. Data from transactions is used for junk mail.
Resources Required for Successful e-business Implementation
Setting up any business requires money, men and machines (hardware). For e-business, you require additional resources for developing, operating, maintaining and enhancing a website where ‘site’ means location and ‘web’ means World Wide Web (www). Simply speaking, a website is a firm’s location on the World Wide Web. Obviously, a website is not a physical location. Rather, it is an online embodiment of all the content that a firm may like to provide to others.
Important Definitions in NCERT Notes Class 11 Business Studies Chapter 5: Emerging Modes of Business
This section lists key terms for clarity and revision:
- e-Business: The conduct of industry, trade and commerce using the computer networks.
- e-Commerce: A firm’s interactions with its customers and suppliers over the internet.
- B2B Commerce: Both parties in transactions are business firms.
- B2C Commerce: Business firms at one end and customers at the other.
- Intra-B Commerce: Electronic transactions within a business firm using an intranet.
- C2C Commerce: Business originates from a consumer, and the destination is also a consumer.
- Digital Divide: Division of society on the basis of familiarity and non-familiarity with digital technology.
- Cryptography: The Art of protecting information by transforming it into an unreadable format (ciphertext).
- Website: A firm’s location on the World Wide Web; the online embodiment of content provided to others.
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FAQs
e-Business is conducting industry, trade, and commerce using computer networks like the Internet.
E-Commerce is only the buying and selling with customers and suppliers over the internet, while e-business includes all internal functions like production and HR, too.
The four types are B2B (business-to-business), B2C (business-to-customers), Intra-B (within the firm), and C2C (consumer-to-consumer).
It is easy to start with low investment and offers 24×7×365 convenience.
Default on payment, where the seller does not receive money even if the customer claims to have paid.
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