NCERT Textbook - Emerging Modes of Business | Business Studies (BST) Class 11 - Commerce PDF Download

 Page 1


Chapter 5
Em Erging m od Es of Busin Ess LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
state the meaning of e-business;
•	
explain the process of online buying and selling as a part of  
e-business;
•	
distinguish e-business from traditional business;
•	
state 	benefits 	of 	switching 	 over	to 	electronic	 mode;
•	
explain 	requirements	for 	a	firm’s 	initiation	into	e-business;
•	
identify major security concerns of electronic mode of doing business;
•	
discuss the need for business process outsourcing; and
•	
appreciate the scope of business process outsourcing.
Chapter 5.indd   113 9/2/2022   2:12:15 PM
2024-25
Page 2


Chapter 5
Em Erging m od Es of Busin Ess LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
state the meaning of e-business;
•	
explain the process of online buying and selling as a part of  
e-business;
•	
distinguish e-business from traditional business;
•	
state 	benefits 	of 	switching 	 over	to 	electronic	 mode;
•	
explain 	requirements	for 	a	firm’s 	initiation	into	e-business;
•	
identify major security concerns of electronic mode of doing business;
•	
discuss the need for business process outsourcing; and
•	
appreciate the scope of business process outsourcing.
Chapter 5.indd   113 9/2/2022   2:12:15 PM
2024-25
114 BUSINESS  STUDIES
5.1 i ntroduction 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, 	 i f 	 one 	 w ere 	 to 	 l ist 	 the 
three strongest trends that are 
s ha pi ng 	 	 busi ne s s , 	 t hes e 	 w o ul d 	 be: 
( i ) 	 di gi t i s at i on 	 — 	 t he 	 c onve r s i on 	 of	
text,	 sound, 	 images,	 video,	 and	 other	
content into a series of ones and zeroes 
that can be transmitted electronically, 
(ii) outsourcing, and, (iii) inter-
nationalisation and globalisation. You 
will	 read 	 about	 international 	 business 	
in	 Chapter 	 11.	 In	 this 	 chapter, 	 we 	 will	
be	 familiarising 	 you	 with 	 the 	 first 	 two	
devel opment s, 	 i . e., 	 di gi ti sat i on 	 ( a 	 term 	
from electronics) of business — also 
referred to as electronic business 
(e-business), and Business Process 
Outsourcing 	 (BPO). 	 	 Before	 we	 do 	 so,	
a brief discussion about the factors 
responsible for these 	 two	 new	 modes	
of	 business 	 would 	be	in	 order.	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The	 newer	 modes	 of	 business	 are	
not 	 new 	 business. 	 These 	 are 	 rather	
simply 	 the 	 new 	 ways 	 of 	 doing 	 business	
attributable to a number of factors. 
You 	 are 	 aware 	 that 	 business 	 as 	 an	
activity	 is	 aimed 	 at 	 creating	 utilities 	
o r 	 v a l ue 	 i n 	 t he 	 f o r m 	 o f 	 g o ods 	 and	
services 	 which 	 the 	 household 	 and	
industrial buyers purchase for meeting 
their	 needs	 and 	 wants.	 In	 an 	 effort 	 to 	
improve 	 the 	 business 	 processes 	 — 	 be 	 it	
purchase and production, marketing, 
finance 	 or	 human	 resources 	 business	
managers and business thinkers 
keep	 evolving	 newer 	 and	 better	 ways 	
of	 doing 	 things. 	 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. 
“ Let 	 us 	 do 	 som e 	 shoppi ng, ” 	 Ri t a 	 w oke 	 up 	 Rekha, 	 her 	 f r i e nd 	 f r om 	 t he 	 hom e - vi l l age	
who 	 had 	 come 	 to 	 Delhi 	 during 	 the 	 vacations. 	 “At 	 this 	 hour 	 well 	 past 	 midnight,”	
said 	 Rekha 	 rubbing 	 her 	 eyes, 	 “Who 	 would 	 be 	 sitting 	 with 	 his 	 shop 	 open 	 for	
you?” 	“Oh! 	Perhaps 	I 	could 	not 	convey 	it 	properly. 	We 	are 	not 	going 	anywhere!	
I 	 am 	 talking 	 about 	 online 	 shopping 	 over 	 the 	 internet!” 	 told 	 Rita. 	 “Oh 	 yes! 	 I 	 have	
heard 	 of 	 online 	 shopping, 	 but 	 have 	 never 	 done 	 any,” 	 Rekha 	 said, 	 “What 	 would	
they 	 be 	 selling 	 over 	 the 	 internet, 	 how 	 will 	 they 	 deliver, 	 What 	 about 	 payment…	
and 	 why 	 is 	 it 	 that 	 internet 	 has 	 not 	 yet 	 become 	 as 	 popular 	 in 	 the 	 villages? 	 As	
Rekha 	 was 	 grappling 	 with 	 these 	 questions, 	 Rita 	 had 	 already 	 logged 	 on 	 to 	 one	
of 	 India’s 	 largest 	 online 	 shopping 	 mall.
Chapter 5.indd   114 9/2/2022   2:12:15 PM
2024-25
Page 3


Chapter 5
Em Erging m od Es of Busin Ess LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
state the meaning of e-business;
•	
explain the process of online buying and selling as a part of  
e-business;
•	
distinguish e-business from traditional business;
•	
state 	benefits 	of 	switching 	 over	to 	electronic	 mode;
•	
explain 	requirements	for 	a	firm’s 	initiation	into	e-business;
•	
identify major security concerns of electronic mode of doing business;
•	
discuss the need for business process outsourcing; and
•	
appreciate the scope of business process outsourcing.
Chapter 5.indd   113 9/2/2022   2:12:15 PM
2024-25
114 BUSINESS  STUDIES
5.1 i ntroduction 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, 	 i f 	 one 	 w ere 	 to 	 l ist 	 the 
three strongest trends that are 
s ha pi ng 	 	 busi ne s s , 	 t hes e 	 w o ul d 	 be: 
( i ) 	 di gi t i s at i on 	 — 	 t he 	 c onve r s i on 	 of	
text,	 sound, 	 images,	 video,	 and	 other	
content into a series of ones and zeroes 
that can be transmitted electronically, 
(ii) outsourcing, and, (iii) inter-
nationalisation and globalisation. You 
will	 read 	 about	 international 	 business 	
in	 Chapter 	 11.	 In	 this 	 chapter, 	 we 	 will	
be	 familiarising 	 you	 with 	 the 	 first 	 two	
devel opment s, 	 i . e., 	 di gi ti sat i on 	 ( a 	 term 	
from electronics) of business — also 
referred to as electronic business 
(e-business), and Business Process 
Outsourcing 	 (BPO). 	 	 Before	 we	 do 	 so,	
a brief discussion about the factors 
responsible for these 	 two	 new	 modes	
of	 business 	 would 	be	in	 order.	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The	 newer	 modes	 of	 business	 are	
not 	 new 	 business. 	 These 	 are 	 rather	
simply 	 the 	 new 	 ways 	 of 	 doing 	 business	
attributable to a number of factors. 
You 	 are 	 aware 	 that 	 business 	 as 	 an	
activity	 is	 aimed 	 at 	 creating	 utilities 	
o r 	 v a l ue 	 i n 	 t he 	 f o r m 	 o f 	 g o ods 	 and	
services 	 which 	 the 	 household 	 and	
industrial buyers purchase for meeting 
their	 needs	 and 	 wants.	 In	 an 	 effort 	 to 	
improve 	 the 	 business 	 processes 	 — 	 be 	 it	
purchase and production, marketing, 
finance 	 or	 human	 resources 	 business	
managers and business thinkers 
keep	 evolving	 newer 	 and	 better	 ways 	
of	 doing 	 things. 	 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. 
“ Let 	 us 	 do 	 som e 	 shoppi ng, ” 	 Ri t a 	 w oke 	 up 	 Rekha, 	 her 	 f r i e nd 	 f r om 	 t he 	 hom e - vi l l age	
who 	 had 	 come 	 to 	 Delhi 	 during 	 the 	 vacations. 	 “At 	 this 	 hour 	 well 	 past 	 midnight,”	
said 	 Rekha 	 rubbing 	 her 	 eyes, 	 “Who 	 would 	 be 	 sitting 	 with 	 his 	 shop 	 open 	 for	
you?” 	“Oh! 	Perhaps 	I 	could 	not 	convey 	it 	properly. 	We 	are 	not 	going 	anywhere!	
I 	 am 	 talking 	 about 	 online 	 shopping 	 over 	 the 	 internet!” 	 told 	 Rita. 	 “Oh 	 yes! 	 I 	 have	
heard 	 of 	 online 	 shopping, 	 but 	 have 	 never 	 done 	 any,” 	 Rekha 	 said, 	 “What 	 would	
they 	 be 	 selling 	 over 	 the 	 internet, 	 how 	 will 	 they 	 deliver, 	 What 	 about 	 payment…	
and 	 why 	 is 	 it 	 that 	 internet 	 has 	 not 	 yet 	 become 	 as 	 popular 	 in 	 the 	 villages? 	 As	
Rekha 	 was 	 grappling 	 with 	 these 	 questions, 	 Rita 	 had 	 already 	 logged 	 on 	 to 	 one	
of 	 India’s 	 largest 	 online 	 shopping 	 mall.
Chapter 5.indd   114 9/2/2022   2:12:15 PM
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115 EMERGING MODES OF BUSINESS
5.2 e-Busin Ess 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 the computer 
networks. 	 The	 network 	 you 	 are	 most 	
f am i l i ar 	 w i t h 	 as 	 a 	 st udent 	 or 	 consum e r	
is the internet. Whereas internet 
is 	 a 	 public 	 thorough 	 way, 	 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 a times, the terms 
e-business and e-commerce are used 
interchangeably, yet 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 	 compri ses 	 vari ous 	 busi ness	
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, 
in ven tory 	 man agemen t, 	 p rod u ct	
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.
5.2.1 Scope of e-Business
W e 	 have 	 ment i oned 	 above 	 t hat 	 t he	
scope 	 of 	 e- busi ness 	 i s 	 qui t e 	 vast.	
Almost all types of business functions  
such 	 as 	 production, 	 finance, 	 marketing	
and	 personnel	 administration 	 as 	 well 	
Figure 5.1 Business to Business e-Commerce
Chapter 5.indd   115 9/2/2022   2:12:15 PM
2024-25
Page 4


Chapter 5
Em Erging m od Es of Busin Ess LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
state the meaning of e-business;
•	
explain the process of online buying and selling as a part of  
e-business;
•	
distinguish e-business from traditional business;
•	
state 	benefits 	of 	switching 	 over	to 	electronic	 mode;
•	
explain 	requirements	for 	a	firm’s 	initiation	into	e-business;
•	
identify major security concerns of electronic mode of doing business;
•	
discuss the need for business process outsourcing; and
•	
appreciate the scope of business process outsourcing.
Chapter 5.indd   113 9/2/2022   2:12:15 PM
2024-25
114 BUSINESS  STUDIES
5.1 i ntroduction 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, 	 i f 	 one 	 w ere 	 to 	 l ist 	 the 
three strongest trends that are 
s ha pi ng 	 	 busi ne s s , 	 t hes e 	 w o ul d 	 be: 
( i ) 	 di gi t i s at i on 	 — 	 t he 	 c onve r s i on 	 of	
text,	 sound, 	 images,	 video,	 and	 other	
content into a series of ones and zeroes 
that can be transmitted electronically, 
(ii) outsourcing, and, (iii) inter-
nationalisation and globalisation. You 
will	 read 	 about	 international 	 business 	
in	 Chapter 	 11.	 In	 this 	 chapter, 	 we 	 will	
be	 familiarising 	 you	 with 	 the 	 first 	 two	
devel opment s, 	 i . e., 	 di gi ti sat i on 	 ( a 	 term 	
from electronics) of business — also 
referred to as electronic business 
(e-business), and Business Process 
Outsourcing 	 (BPO). 	 	 Before	 we	 do 	 so,	
a brief discussion about the factors 
responsible for these 	 two	 new	 modes	
of	 business 	 would 	be	in	 order.	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The	 newer	 modes	 of	 business	 are	
not 	 new 	 business. 	 These 	 are 	 rather	
simply 	 the 	 new 	 ways 	 of 	 doing 	 business	
attributable to a number of factors. 
You 	 are 	 aware 	 that 	 business 	 as 	 an	
activity	 is	 aimed 	 at 	 creating	 utilities 	
o r 	 v a l ue 	 i n 	 t he 	 f o r m 	 o f 	 g o ods 	 and	
services 	 which 	 the 	 household 	 and	
industrial buyers purchase for meeting 
their	 needs	 and 	 wants.	 In	 an 	 effort 	 to 	
improve 	 the 	 business 	 processes 	 — 	 be 	 it	
purchase and production, marketing, 
finance 	 or	 human	 resources 	 business	
managers and business thinkers 
keep	 evolving	 newer 	 and	 better	 ways 	
of	 doing 	 things. 	 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. 
“ Let 	 us 	 do 	 som e 	 shoppi ng, ” 	 Ri t a 	 w oke 	 up 	 Rekha, 	 her 	 f r i e nd 	 f r om 	 t he 	 hom e - vi l l age	
who 	 had 	 come 	 to 	 Delhi 	 during 	 the 	 vacations. 	 “At 	 this 	 hour 	 well 	 past 	 midnight,”	
said 	 Rekha 	 rubbing 	 her 	 eyes, 	 “Who 	 would 	 be 	 sitting 	 with 	 his 	 shop 	 open 	 for	
you?” 	“Oh! 	Perhaps 	I 	could 	not 	convey 	it 	properly. 	We 	are 	not 	going 	anywhere!	
I 	 am 	 talking 	 about 	 online 	 shopping 	 over 	 the 	 internet!” 	 told 	 Rita. 	 “Oh 	 yes! 	 I 	 have	
heard 	 of 	 online 	 shopping, 	 but 	 have 	 never 	 done 	 any,” 	 Rekha 	 said, 	 “What 	 would	
they 	 be 	 selling 	 over 	 the 	 internet, 	 how 	 will 	 they 	 deliver, 	 What 	 about 	 payment…	
and 	 why 	 is 	 it 	 that 	 internet 	 has 	 not 	 yet 	 become 	 as 	 popular 	 in 	 the 	 villages? 	 As	
Rekha 	 was 	 grappling 	 with 	 these 	 questions, 	 Rita 	 had 	 already 	 logged 	 on 	 to 	 one	
of 	 India’s 	 largest 	 online 	 shopping 	 mall.
Chapter 5.indd   114 9/2/2022   2:12:15 PM
2024-25
115 EMERGING MODES OF BUSINESS
5.2 e-Busin Ess 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 the computer 
networks. 	 The	 network 	 you 	 are	 most 	
f am i l i ar 	 w i t h 	 as 	 a 	 st udent 	 or 	 consum e r	
is the internet. Whereas internet 
is 	 a 	 public 	 thorough 	 way, 	 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 a times, the terms 
e-business and e-commerce are used 
interchangeably, yet 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 	 compri ses 	 vari ous 	 busi ness	
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, 
in ven tory 	 man agemen t, 	 p rod u ct	
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.
5.2.1 Scope of e-Business
W e 	 have 	 ment i oned 	 above 	 t hat 	 t he	
scope 	 of 	 e- busi ness 	 i s 	 qui t e 	 vast.	
Almost all types of business functions  
such 	 as 	 production, 	 finance, 	 marketing	
and	 personnel	 administration 	 as 	 well 	
Figure 5.1 Business to Business e-Commerce
Chapter 5.indd   115 9/2/2022   2:12:15 PM
2024-25
116 BUSINESS  STUDIES
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	
directi ons 	 vi z., 	 ( i ) 	 B 2B 	 w hi ch 	 i s 	 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.
A 	 brief 	 di scussi on 	 of 	 various	
constituents of e-business and inter- 
and intra-transactions among them is 
given 	 as 	 below:
(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 (see Figure 5.1). Creation 
of 	 u tilities 	 or 	 delivering 	 va l u e	
requi res 	 a 	 busi ness 	 t o 	 i nteract 	 w i t h	
a number of other business firms 
w hich 	 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 	 bein g	
manufactured 	 elsewhere 	 —	 within	 the	
vicinity 	 of 	 the 	 automobile 	 factory 	 or	
even	 overseas. 	 To	 reduce 	 dependence	
on a single supplier, the automobile 
factory 	 has 	 to	 cultivate	 more 	 than	 one	
vendor 	 for 	 each 	 of 	 the 	 components.	
A 	 network 	 of 	 computers 	 is 	 used 	 for	
placing orders, monitoring production 
and 	 delivery 	 of 	 components, 	 and	
maki ng 	 payments. 	 Likewise, 	 a 	 firm 	 may	
strengthen 	 and 	 improve 	 its 	 distribution	
system by exercising a real time (as it 
happens ) 	 cont r ol 	 ove r 	 i t s 	 st o ck- i n-
transit	 as	 well	 as 	 that	 with 	 different 	
middlemen in different locations. 
For example, each consignment of 
goods 	 from 	 a 	 warehouse 	 and 	 the	
stock-at-hand can be monitored and 
replenishments and reinforcements 
can be set in motion as and 
w hen 	 needed. 	 O r 	 el se, 	 a 	 cust omer’s	
specifications 	 may	 be	 routed 	 through	
the dealers to the factory and fed 
into the manufacturing system 
for customised production. Use of 
e-commerce 	 expedites 	 the 	 movement 	 of	
the information and documents; and of 
late, 	 money 	 transfers 	 as 	 well.
Historically, the term e-commerce 
originally 	 meant 	 facilitation 	 of 	 B2B	
t r ansact i ons 	 usi ng 	 E l e c t r o n i c 	 D a t a	
Interchange	 (EDI)	 technology 	 to	 send	
and 	 receive 	 commercial 	 documents	
like	 purchase	orders	or	invoices.  
(ii)  B2C Commerce: As the name 
implies, 	 B2C	 (business-to-customers) 	
transactions 	 have 	 business 	 firms 	 at	
one end and its 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, 
Chapter 5.indd   116 9/2/2022   2:12:15 PM
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Page 5


Chapter 5
Em Erging m od Es of Busin Ess LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
state the meaning of e-business;
•	
explain the process of online buying and selling as a part of  
e-business;
•	
distinguish e-business from traditional business;
•	
state 	benefits 	of 	switching 	 over	to 	electronic	 mode;
•	
explain 	requirements	for 	a	firm’s 	initiation	into	e-business;
•	
identify major security concerns of electronic mode of doing business;
•	
discuss the need for business process outsourcing; and
•	
appreciate the scope of business process outsourcing.
Chapter 5.indd   113 9/2/2022   2:12:15 PM
2024-25
114 BUSINESS  STUDIES
5.1 i ntroduction 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, 	 i f 	 one 	 w ere 	 to 	 l ist 	 the 
three strongest trends that are 
s ha pi ng 	 	 busi ne s s , 	 t hes e 	 w o ul d 	 be: 
( i ) 	 di gi t i s at i on 	 — 	 t he 	 c onve r s i on 	 of	
text,	 sound, 	 images,	 video,	 and	 other	
content into a series of ones and zeroes 
that can be transmitted electronically, 
(ii) outsourcing, and, (iii) inter-
nationalisation and globalisation. You 
will	 read 	 about	 international 	 business 	
in	 Chapter 	 11.	 In	 this 	 chapter, 	 we 	 will	
be	 familiarising 	 you	 with 	 the 	 first 	 two	
devel opment s, 	 i . e., 	 di gi ti sat i on 	 ( a 	 term 	
from electronics) of business — also 
referred to as electronic business 
(e-business), and Business Process 
Outsourcing 	 (BPO). 	 	 Before	 we	 do 	 so,	
a brief discussion about the factors 
responsible for these 	 two	 new	 modes	
of	 business 	 would 	be	in	 order.	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The	 newer	 modes	 of	 business	 are	
not 	 new 	 business. 	 These 	 are 	 rather	
simply 	 the 	 new 	 ways 	 of 	 doing 	 business	
attributable to a number of factors. 
You 	 are 	 aware 	 that 	 business 	 as 	 an	
activity	 is	 aimed 	 at 	 creating	 utilities 	
o r 	 v a l ue 	 i n 	 t he 	 f o r m 	 o f 	 g o ods 	 and	
services 	 which 	 the 	 household 	 and	
industrial buyers purchase for meeting 
their	 needs	 and 	 wants.	 In	 an 	 effort 	 to 	
improve 	 the 	 business 	 processes 	 — 	 be 	 it	
purchase and production, marketing, 
finance 	 or	 human	 resources 	 business	
managers and business thinkers 
keep	 evolving	 newer 	 and	 better	 ways 	
of	 doing 	 things. 	 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. 
“ Let 	 us 	 do 	 som e 	 shoppi ng, ” 	 Ri t a 	 w oke 	 up 	 Rekha, 	 her 	 f r i e nd 	 f r om 	 t he 	 hom e - vi l l age	
who 	 had 	 come 	 to 	 Delhi 	 during 	 the 	 vacations. 	 “At 	 this 	 hour 	 well 	 past 	 midnight,”	
said 	 Rekha 	 rubbing 	 her 	 eyes, 	 “Who 	 would 	 be 	 sitting 	 with 	 his 	 shop 	 open 	 for	
you?” 	“Oh! 	Perhaps 	I 	could 	not 	convey 	it 	properly. 	We 	are 	not 	going 	anywhere!	
I 	 am 	 talking 	 about 	 online 	 shopping 	 over 	 the 	 internet!” 	 told 	 Rita. 	 “Oh 	 yes! 	 I 	 have	
heard 	 of 	 online 	 shopping, 	 but 	 have 	 never 	 done 	 any,” 	 Rekha 	 said, 	 “What 	 would	
they 	 be 	 selling 	 over 	 the 	 internet, 	 how 	 will 	 they 	 deliver, 	 What 	 about 	 payment…	
and 	 why 	 is 	 it 	 that 	 internet 	 has 	 not 	 yet 	 become 	 as 	 popular 	 in 	 the 	 villages? 	 As	
Rekha 	 was 	 grappling 	 with 	 these 	 questions, 	 Rita 	 had 	 already 	 logged 	 on 	 to 	 one	
of 	 India’s 	 largest 	 online 	 shopping 	 mall.
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115 EMERGING MODES OF BUSINESS
5.2 e-Busin Ess 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 the computer 
networks. 	 The	 network 	 you 	 are	 most 	
f am i l i ar 	 w i t h 	 as 	 a 	 st udent 	 or 	 consum e r	
is the internet. Whereas internet 
is 	 a 	 public 	 thorough 	 way, 	 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 a times, the terms 
e-business and e-commerce are used 
interchangeably, yet 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 	 compri ses 	 vari ous 	 busi ness	
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, 
in ven tory 	 man agemen t, 	 p rod u ct	
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.
5.2.1 Scope of e-Business
W e 	 have 	 ment i oned 	 above 	 t hat 	 t he	
scope 	 of 	 e- busi ness 	 i s 	 qui t e 	 vast.	
Almost all types of business functions  
such 	 as 	 production, 	 finance, 	 marketing	
and	 personnel	 administration 	 as 	 well 	
Figure 5.1 Business to Business e-Commerce
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116 BUSINESS  STUDIES
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	
directi ons 	 vi z., 	 ( i ) 	 B 2B 	 w hi ch 	 i s 	 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.
A 	 brief 	 di scussi on 	 of 	 various	
constituents of e-business and inter- 
and intra-transactions among them is 
given 	 as 	 below:
(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 (see Figure 5.1). Creation 
of 	 u tilities 	 or 	 delivering 	 va l u e	
requi res 	 a 	 busi ness 	 t o 	 i nteract 	 w i t h	
a number of other business firms 
w hich 	 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 	 bein g	
manufactured 	 elsewhere 	 —	 within	 the	
vicinity 	 of 	 the 	 automobile 	 factory 	 or	
even	 overseas. 	 To	 reduce 	 dependence	
on a single supplier, the automobile 
factory 	 has 	 to	 cultivate	 more 	 than	 one	
vendor 	 for 	 each 	 of 	 the 	 components.	
A 	 network 	 of 	 computers 	 is 	 used 	 for	
placing orders, monitoring production 
and 	 delivery 	 of 	 components, 	 and	
maki ng 	 payments. 	 Likewise, 	 a 	 firm 	 may	
strengthen 	 and 	 improve 	 its 	 distribution	
system by exercising a real time (as it 
happens ) 	 cont r ol 	 ove r 	 i t s 	 st o ck- i n-
transit	 as	 well	 as 	 that	 with 	 different 	
middlemen in different locations. 
For example, each consignment of 
goods 	 from 	 a 	 warehouse 	 and 	 the	
stock-at-hand can be monitored and 
replenishments and reinforcements 
can be set in motion as and 
w hen 	 needed. 	 O r 	 el se, 	 a 	 cust omer’s	
specifications 	 may	 be	 routed 	 through	
the dealers to the factory and fed 
into the manufacturing system 
for customised production. Use of 
e-commerce 	 expedites 	 the 	 movement 	 of	
the information and documents; and of 
late, 	 money 	 transfers 	 as 	 well.
Historically, the term e-commerce 
originally 	 meant 	 facilitation 	 of 	 B2B	
t r ansact i ons 	 usi ng 	 E l e c t r o n i c 	 D a t a	
Interchange	 (EDI)	 technology 	 to	 send	
and 	 receive 	 commercial 	 documents	
like	 purchase	orders	or	invoices.  
(ii)  B2C Commerce: As the name 
implies, 	 B2C	 (business-to-customers) 	
transactions 	 have 	 business 	 firms 	 at	
one end and its 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, 
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117 EMERGING MODES OF BUSINESS
therefore, entails 	 a 	 wide 	 gamut 	 of	
marketing activities 	 such 	 as 	 identifying	
activities,	 promoti on 	 and 	 sometimes	
even	 delivery 	 of 	 products 	 (e.g.,	 music	
or	 films) 	 that	 are	 carried	 out	 online.	
e-Commerce permits conduct of these 
activities 	 at 	 a 	 much 	 lower 	 cost 	 but 	 high	
speed. For example, ATM speeds up 
withdrawal 	 of	 money.
Customers these days are 
bec om i ng 	 ver y 	 choosy 	 and 	 desi r e	
individual 	 attention 	 to 	 be 	 given 	 to	
them. Not only do they require the 
product features to be tailor-made to 
suit their requirements, but also the 
convenience	 of 	 delivery 	 and 	 payment	
at their pleasure. With the onset of 
e-commerce, all this has become a 
reality. 
Further, 	 B2C 	 variant 	 of 	 e-commerce	
enables	 a	 business	 to	 be	 in	 touch 	 with	
its customers on round-the-clock 
basis. Companies can conduct online 
surveys 	 to 	 ascertain 	 as 	 to 	 w ho 	 i s 
buying	 what 	 and	 what	 the	 customer 	
satisfaction 	 level 	is.	
Benefits of e-Commerce
 1. Business Organisation:
 (i) Expands the marketplace to national and international markets,
        (ii)  Gradual decline in the cost of operations,
	 (iii)	 	 Facilitates 	 ‘pull’	supply 	chain	 management,
	 (iv)	 Competitive 	advantage	 over	competitors,
	 (v)	 	Proper	 time 	management 	and	support 	business 	processes,	and
	 		(vi)	 Small	 firms 	co-exist	with	big 	firms 	(win-win).
	 2.	 Benefits 	to 	Consumers	 and 	Society
     (i) Flexibility,
	 			(ii)	 Competitive 	 price/discounts/waive	offs,
   (iii) More options and choices and Customised products,
	 		(iv)	 Quick	and 	Timely	delivery	 (digitised	products),
	 			(v)	 Employment 	potential,
	 		(vi)	 Facilitate	e-Auctions 	 and 	 e-Tenders,
	 	(vii)	 Interaction 	with	 consumers,
	 (viii)	 Wider 	 outreach.
ATM speeds up Withdrawal of Money
e-Commerce	 greatly	 facilitat es 	 and 	 speeds	 up 	 the 	 entire 	 B2C	 process. 	 	 Withdrawal 	
of	 one’s 	 own	 money	 from	 banks	 was,	 for	 example,	 a 	 tedious	 process	 in	 the	 past.	
One	 had	 to	 go 	 through	 a	 series 	 of	 procedural 	 formalities	 before	 he 	 or	 she	 was 	 able	
to get the payment. After the introduction of ATMs, all that is fast becoming  a 
history 	 now.	 The	 first 	 thing	 that	 occurs 	 is	 that	 the 	 customer	 is	 able	 to	 withdraw 	
his money, and the rest of the back-end processes take place later.
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