Chapter 5 Emerging Modes of Business NCERT SOLUTION CLASS 11TH Business Studies| EDUGROWN NOTES

Short Answer Type Question:

Q.1 State any three differences between e- business and traditional business.

ANSWER: The differences between e-business and traditional business are:

Basis of difference	Traditional business	e-Business
Ease in formation	The process of formation is complicated by the various requirements that must be completed.	It’s a lot easier to get started.
Internal communication	Communication is structured in a hierarchical manner (from top to bottom)	Follows a communication framework that isn’t hierarchical (no defined structure).
Start-up cost	High startup costs	Start-up costs are quite cheap (as physical facilities are not required).
Market access	The physical domain is the only domain that may be accessed.	Access is relatively broad and unrestricted.

Q.2. How does outsourcing represent a new mode of business?

ANSWER: Outsourcing has changed the way businesses were done traditionally, these are growing each day, and have a great future ahead as well. Outsourcing is an innovative concept which has raised the value of the businesses, facilitated more convenience, and added more efficiency in business activities such as procurement, production, marketing etc. This is why it is called an emerging mode of business.

The factors responsible for the growing importance of outsourcing are:

• Assist in making high-quality products more affordable 
• Facilitate innovation and technology development
• Accelerate the business process
• Assist in making high-quality products more affordable
  

Q.3 Describe briefly any two applications of e- business.

ANSWER: The two applications of e-business are:

A. B2B Commerce

• Because both parties involved in e-commerce transactions are businesses, the term B2B (business-to-business) was coined. 
• A business must engage with a number of other businesses in order to create utility or deliver value. These businesses may be suppliers or vendors of various inputs, or they may be part of the distribution channel through which a company distributes its items to clients.
• Example Turtle.com

B. B2C Commerce

• Business-to-customer (B2C) interactions involve business organizations on one hand and their customers on the other.
• It encompasses a wide range of internet marketing operations such as identifying activities, promoting them, and occasionally even delivering items.
• It enables a business to be in touch with its customers on round-the-clock basis which helps in knowing the customer satisfaction level.
• Few examples are Amazon, Walmart etc.
  

Q.4 What are the ethical concerns involved in outsourcing?

ANSWER: Outsourcing has also raised some ethical concerns. The major ethical issue are:

• Employment: Taking away employment opportunities from one’s own country, when the function is outsourced to a company from another country. 
• Child labour: Children and women are employed in factories as a result of outsourcing, and working conditions are unsanitary and even dangerous. Due to strict regulations against the employment of child labour in industrialised nations, the corporations are unable to do so.
• Discrimination: Similarly there exists wage-discrimination on the basis of sex of the worker. Workers are exploited by giving less than minimum wages and hence women are paid lower wages.
• Confidentiality: Confidentiality issues are there, as outsourcing necessitates the exchange of a great deal of critical information and knowledge. It can harm the interest of the party that outsources its processes and even has a risk of competitor firms getting information about that company.
  

Q.5 Describe briefly the data storage and transmission risks in e-business.

ANSWER: Data storage and transmission risks:

• Data in the systems and on the way is vulnerable to a variety of threats. 
• Important data may be stolen or altered for nefarious purposes or merely for fun/adventure 
• Antivirus softwares installed and updated on a regular basis prove useful in scanning files and discs, protecting data files, folders, and systems against virus attacks.
• Data could be intercepted during transmission. Cryptography can be used for this. It refers to the process of encrypting data and transforming it to cyphertext, an unreadable format. Only those with a secret key may decipher (or decrypt) the message into ‘plaintext.’
  

Q.6 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.

ANSWER: E-business and outsourcing have changed the way businesses were done traditionally, these are growing each day, and have a great future ahead as well. E-businesses and outsourcing are innovative concepts which have raised the value of the businesses, facilitated more convenience, and added more efficiency in business activities such as procurement, production, marketing etc. This is why they are called as emerging modes of businesses:

The factors responsible for the growing importance of outsourcing and e business:

• They assist in making high-quality products more affordable: The demand for high-quality, custom-made products has risen, and e-commerce and outsourcing are playing an increasingly important role in supplying consumers with what they want at a fair price. E-business and outsourcing assist in achieving the goal of excellence by enabling the manufacture and supply of high-quality products.
• Facilitate innovation and technology development: Every firm needs to innovate and develop new ideas and products in order to stay competitive. E-business and outsourcing have emerged as a boon for producers in this setting, as they allow for the ongoing development of company strategies and new technology.
• They accelerate the business process: As customer demands expand, it has become important to facilitate trade from anywhere and at any time. E-commerce and outsourcing help to speed up the purchasing and selling procedure around the clock.
• They lay the path for efficient after-sales support: It is critical for any firm to cater to its clients’ demands. Customers benefit from e-commerce and outsourcing because they can get rapid and effective post-sale services.
  

Q.7 Elaborate the steps involved in on-line trading.

ANSWER: The steps are:

Registration  ⇒ Placing an order ⇒ Payment mechanism

Step 1: Registration:  

• When you register with an online retailer, you create an ‘account’, by filling up the registration form.
• A “password” must be entered among the numerous details since the areas relating to an individual’s “account” and “shopping basket” are password protected.

Step 2: Placing an order: 

• You can add products to the shopping cart by dragging and dropping them.
• A shopping cart is an online record of what an individual has added to his cart while visiting an online store. 
• Once you’ve decided what you want to buy, you may ‘checkout.’

Step 3: Payment Mechanism:

Purchases through online shopping may be done in a number of ways.

• Cash-on-Delivery: Payment for things ordered online can be made in cash when the goods are delivered physically.
• Cheque: The online merchant may arrange for the customer’s cheque to be picked up. After realisation, product delivery may be attempted.
• Net-banking Transfer: Modern banks provide to their customers the facility of electronic transfer of funds over the Internet using Immediate Payment Service (IMPS), NEFT and RTGS.
• Credit or Debit Cards: The holders of credit cards can enjoy making purchases on credit. The amount owed by the cardholder to the online seller is assumed by the card issuing bank, which then transfers the transaction’s amount to the seller’s credit.
  A debit card permits the holder to make purchases up to the amount of money in the linked account. The moment a transaction is made, the amount due as payment is deducted electronically from the card.
• Digital Cash: This type of currency has no physical qualities, but it allows you to utilise real money in an electronic format, such as through e-wallets or PayTm.
  

Q.8 Evaluate the need for outsourcing and discuss its limitations.

ANSWER: Outsourcing is the process of contracting some business functions to external agencies. 

Need for outsourcing:

A. Delimiting the scope of business:

• Business firms are realising the usefulness of focusing on just a few areas where they have distinct capabilities or core competence, and contracting out the rest of the activities to their outsourcing partners.
• By restricting the scope of their business, they may concentrate their attention and resources on a few key tasks, improving efficiency and effectiveness.

B. Quest of excellence:

• In two ways, outsourcing allows the company to strive for excellence. One, due to their narrow focus, individuals excel in the activities that they can do best.
• They also succeed by increasing their capabilities by outsourcing out the remaining tasks to people who excel at them.

C. Cost reduction:

• Division of labour and specialisation improve quality while also lowering costs.
• This occurs when outsourcing partners benefit from economies of scale by providing the same service to multiple organisations.
• Cost reduction is also aided by differences in the prices of various production inputs across countries.

D. Growth through Alliance:

• To the extent one can avail of the services of the others, the investment requirements are reduced.
• As a result, a company can grow quickly because the same quantity of investible funds creates a big number of firms.
• Inter-organizational information sharing and collaborative learning are facilitated by outsourcing.

F. Economic development:

• Outsourcing, more offshore outsourcing stimulates entrepreneurship, employment and exports in the host counties (i.e., the countries from where outsourcing is done).
  

Limitations of Outsourcing Are:

A. Confidentiality

• Outsourcing necessitates the exchange of a great deal of critical information and knowledge.
• It can harm the interest of the party that outsources its processes and even has a risk of competitor firms getting information about that company.

B. Sweat shopping

• Outsourcing aims to reduce expenses by maximising the use of low-cost labour.
• So, the firms that go in for outsourcing look for the ‘doing’ skills rather than development of the ‘thinking’ skills.

C. Ethical concerns

• In order to cut the cost, the companies outsource the work to some other country where the work is done in an unethical way.
• For example work is accomplised by doing child labour.

D. Resentment in the home countries

• In the course of contracting out manufacturing, marketing, research and development or IT based services, what is ultimately contracted out is ’employment’ or jobs from one country to another.
• This may cause resentment back in the home country if the home country is suffering from the problem of unemployment.
  

Q.9 Discuss the salient aspects of B2C commerce.

ANSWER: The transactions under ‘B2C commerce’ are between a business firm and its customers.

The salient aspects of B2C commerce are:

• Includes: It includes promotion, product information, reviews about the product / services and delivery of the product at the doorstep.
• Cost of product: The cost of product and services is kept low through this method and the speed of transaction is also faster.
• Customisation: It has enabled businesses to produce products with customised characteristics to meet the needs of their customers. It also offers clients the ease of delivery and payment.
• Customer Feedback: The B2C e-commerce model allows a company to stay in contact with its consumers by conducting online demand surveys.
• Customer service: Customers can also utilise call centres set up by businesses to make toll-free calls to ask questions or file complaints 24 hours a day, 7 days a week, at no cost to them. B2C companies include Amazon, Walmart, and others.
  

Q.10 Discuss the limitations of electronic mode of doing business. Are these limitations severe enough to restrict its scope? Give reasons for your answer.

ANSWER: The various limitations of electronic mode of business are:

I. Lack of personal touch:

• Unlike traditional business, you cannot touch and feel the product. So it is difficult for the consumers to check the quality of the product, until the order has been delivered.
• Traditional businesses have contact with the salesperson in the traditional way, and there is a sense of humanity and trustworthiness as a result of this. It also fosters customer confidence. Such characteristics will always be absent from an e-business paradigm.

II. Delivery time:

• The delivery of the products takes time in e-business. This lag time often discourages customers.
• However, these days, e-businesses are trying to resolve such issues by promising very limited time. For exampleAmazon now guarantees delivery within one day.

III. Security issues:

• Many people are capable of conducting online business. Additionally, hackers have an easier time obtaining one’s financial information. It has a few concerns with security and integrity. This creates scepticism among potential clients.

IV. Technology capability and competency of e-business participants are required:

• E-business necessitates a high level of computer literacy among the parties involved. This obligation can also be blamed for the so-called digital divide.
• The term “digital divide” refers to the separation of society based on one’s familiarity or lack thereof with digital technologies.

V. Ethical fallouts:

• Companies utilise an ‘electronic eye’ to keep track of your computer files, email account, and internet visits, among other things, so as to gain knowledge about your interests, preferences etc. It’s unethical in a number of ways

Despite the limitations, the scope of e- business is quite vast which helps in overcoming the limitations. In India, nowadays many businesses are becoming aware of the advantage of e-business and are incorporating this into their strategies. Almost all types of  business functions such as production, finance and marketing as well as managerial activities like planning, organizing can be carried out over computer network. Various business and payments apps popularly used in E-business transactions. Hence, despite the limitations, the scope of e-business cannot be restricted

Long Answer Type Question:

Q.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.
Answer: E-business and outsourcing are referred to as emerging modes of business. Prefix ‘emerging’ puts emphasis on the fact that these businesses are in the process of development. These changes are happening here and now, and, that these changes are likely to continue. In fact, three changes are taking place most strongly:

• Digitizaton: The conversion of text, sound, images, video and other content into a series of ones and zeroes that can be transmitted electronically.
• Outsourcing: Contracting out non core activities to outside firms.
• Internationalisation and globalisation: More and more foreign companies are entering into India and sending Ashia and Indian companies becoming MNCs. Therefore, E-business and outsourcing referred to as the emerging modes of business.

Following factors are responsible for the growing importance of these trends:

• Improvement in Information Technology: With the improvement in information technology and emergence of internet the process of outsourcing and e-business is on an expansionary path.
• More and More Interactive Websites: Websites are becoming more and more interactive. It is removing the problem of ‘low touch’.
• Improvement in Communication Technology: Communication technology is continually evolving and increasing the speed and quality of communication through internet.
• Diffusion of E-Commerce in all nooks and corners of the country: In order to diffuse e-commerce in all nooks and corners, India has undertaken about 150 such projects. It is also growing importance of these trends.
•  Global Competitive Pressures for higher quality products: Due to adoption of new economic policy of 1991 in India, there has been an increase in competitive pressure from giant sized MNCs and global enterprises.
• Ever Demanding Consumers: There is increasing demands from consumers for high quality products at minimum cost. Therefore, e-business and outsourcing are being chosen as newer options. But e-business and outsourcing are not emerging out of compulsion but also out of choice because of its benefits to consumers as well as producers.

Q.2 Elaborate the steps involved in online trading.
Answer: Operationally, following steps are involved in online trading:

1. Registration: First step in online trading is registration with the online trader by filling up a registration form. With registration buyer has opened an account with online trader. A password is created for the account which protects account and shopping cart which can be misused otherwise.
2. Placing an Order: An account holder can drop the items in the shopping cart. Shopping cart is an online record of what a person has picked up while browsing the online store. Once being sure of what a person wants to buy, one can check out and choose his payment options.
3. Payment Mechanism: In online trading payment may be made in any of the following ways:
   • Cash On Delivery: Under this, the payment for goods ordered online may be made in cash at the time of physical delivery of the goods.
   •  Cheque: Another option is that the online vendor may arrange for the pickup of the cheque from the customer’s end. Upon realization, goods may be delivered.
   • Net Banking Transfer: These days banks provide facility to the customers for electronic transfer of funds using internet. Therefore, a buyer can also make use of net banking money transfer to pay for the goods ordered.
   • Credit or Debit Cards: These are also called plastic money. These cards are most popularly used in payment for online transactions. To accept credit card as an online payment type, the seller first needs a secure means of collecting credit card information from its customer. Payments through credit cards can be processed either manually, or through online authorization system like SSL Certificate.
   • Digital Cash: It is a kind of electronic currency which exists only in cyberspace. It has no real physical properties, but offers the ability to use real currency.in an electronic format. For this, the buyer has to deposit cash in bank account which issues equivalent digital cash to the person which can be used for online trading. It is more secure than credit or debit cards.

Q.3 Evaluate the need for outsourcing and discuss its limitations.
Answer: Outsourcing has emerged as a way of doing business due to global competitive pressures for higher quality products at lower costs, ever-demanding customers and emerging technologies. Need for outsourcing can be understood from the benefits which are given below:

• Focusing of Attention: Business firms are realizing the importance of focusing on core areas where they have distinct ability and core competence and contracting out the rest of the activities to their outsourcing partners. A business organization needs to decide its core areas and non-core areas. Once they outsource non-core areas, they can focus their attention on selected activities. It will increase efficiency and effectiveness.
• Quest for Excellence: Outsourcing enables the firms to attain excellence in two ways:
  (a) By focusing on activities selected, their excellence in those activities increases.
  (b) They excel by extending their capabilities through contracting out the remaining activities to them who excel in them.
• Cost Reduction: In the age of globalization, cost reduction is of vital importance to survive in the market. Division of labour not only enhances quality but also reduces cost. For example, India is preferred as an outsourcing destination because of cost factors.
• Growth through alliance: When some activities are outsourced then these alliance partners invest for the outsourced activities. Business can be expanded by same amount of investible funds as now these funds are to be invested in limited number of activities.
• Fillip to Economic Development: Outsourcing stimulates entrepreneurship, employment and exports in the host countries. For example, in India there has been remarkable growth in entrepreneurship, employment and exports that today India is an undisputed leader in software development and IT enable services.

But outsourcing is not an unmixed blessing. It has its own limitations. Some of which are discussed below:

• Confidentiality: When a business opts for outsourcing, it has to share a lot of vital information and knowledge. This information may be leaked by the outsourcing partner. It may be against the outsourcing firm. It is also possible that the outsourcing partner starts a business of same line after getting such information.
• Ethical Concerns: Many a time, outsourcing makes use of child labour and violates labour laws to reduce costs. They also discriminate in wages on the basis of sex.
•  Sweat Shopping: A firm which goes in for outsourcing actually transfers ‘doing’ skills rather than ‘thinking’ skills. Therefore, they do not create skilled manpower in developing countries but just take maximum benefit of low cost labour by transferring non intellectual tasks.
•  Resentment in their Home Countries: Outsourcing is being disliked by people in developed countries because the jobs which they could get are being transferred to developing countries through outsourcing. The problem is still more severe if there is problem of unemployment in home country of outsourcing firm.

Q.4 Discuss the salient aspects of B2C commerce.
Answer: In this, both the parties involved are business firms and therefore, it has been named as B2B i.e., business to business. Historically, the term e-commerce originally meant for facilitation of B2B transactions using Electronic Data Interchange (EDI) technology to send and receive commercial documents like purchase orders and invoices. Salient aspects of B2B Commerce:

1. Need: Creation of utility requires a business to contact with a number of other businesses which
   • May be suppliers
   • May act as channel of distribution.
   •  Different middlemen in different locations;
   •  Changing production as per specifications of the customer.
2. Benefits:
   • It strengthens and improves the distribution system of a firm. For example, each consignment of goods from a warehouse and the stock in hand can be monitored and replenishments and reinforcements can be set in motion as and when needed.
   • A customer’s specifications can be routed through the dealers to the factory so that there may be customized production.
   • B2B E-commerce expedites the movement of information and documents.
   • It also expedites money transfers.
3. Example: The manufacture of an automobile requires assembly of a large number of components which in turn are being manufactured elsewhere. To reduce dependence on a single vendor, the automobile factory cultivates more than one vendor for each of the components. A network of computers is used for placement of orders, controlling production and delivery of components and making payments.

Q.5 Discuss the limitations of electronic mode of doing business. Are these limitations severe enough to restrict its scope? Give reasons for your answer.
Answer: The limitations of electronic mode of doing business are given below:

• Low personal Touch: It lacks the warmth of interpersonal interactions. Therefore, such products which need personal touch like beauty products, garments, fashion accessories etc. can’t be traded through e-business.
• Mismatch between order giving/taking speed and order fulfillment speed: Sometimes websites take a long time to open which may frustrate the user. Even after giving or taking order, it takes enough time to give physical delivery of goods. It also plays on the patience of the customer.
• Knowledge of technology is must: For e-commerce both the parties need fairly high degree of familiarity with the world of computers. It divides the society into two parts i.e; one who are familiar with digital technology and other who are not.
• Increased risk due to parties being unknown to each other: When two parties are involved in e-business, they are unaware of personal identities of each other. They do not even know the locations of the parties involved. It makes e-business risky. There may also be problems of virus and hacking.
•  People Resistance: People are resistant to change their ways and adopt new technology. Change is perceived as a source of stress and insecurity by many.
•  Ethical Concerns: These days companies use an electronic eye to keep track of the websites being used by employees, computer files that they use, their e-mal accounts etc. It is not ethical.

But in spite of these limitations, e-business is the way. No, these limitations are not severe enough to restrict its scope.

• Improvement in Information Technology: With the improvement in information technology and emergence of internet the process of outsourcing and e-business is on an expansionary path. Anti virus and improved security measures are increasing to make e-business more secure and safer option.
• More and more Interactive Websites: Websites are becoming more and more interactive. It is removing the problem of ‘low personal touch’.
•  Improvement in Communication Technology: Communication technology is continually evolving and increasing the speed and quality of communication through internet so that customer does not get frustrated in processing the order.
• Diffusion of E-Commerce in all nooks and corners of the country: An order to diffuse e-commerce in all nooks and corners, India has undertaken about 150 such projects. It is increasing the number of people acquainted with digital technology. We can conclude that e-business will continue to stay and reshape the businesses, governance and economies.