NCERT Textbook - Emerging Modes of Business Commerce Notes | EduRev

Business Studies (BST) Class 11

Commerce : NCERT Textbook - Emerging Modes of Business Commerce Notes | EduRev

 Page 1


CHAPTER 5
EMERGING MODES OF BUSINESS
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.
© NCERT
not to be republished
Page 2


CHAPTER 5
EMERGING MODES OF BUSINESS
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.
© NCERT
not to be republished
111 EMERGING MODES OF BUSINESS
5.1 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 — 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) 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
developments, i.e., digitisation (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 or
value in the form of goods 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 some shopping,” Rita woke up Rekha, her friend from the home-
village 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.
© NCERT
not to be republished
Page 3


CHAPTER 5
EMERGING MODES OF BUSINESS
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.
© NCERT
not to be republished
111 EMERGING MODES OF BUSINESS
5.1 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 — 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) 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
developments, i.e., digitisation (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 or
value in the form of goods 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 some shopping,” Rita woke up Rekha, her friend from the home-
village 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.
© NCERT
not to be republished
112 BUSINESS STUDIES
5.2 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 the computer
networks. The network you are most
familiar with as a student or consumer
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 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.
5.2.1 Scope of e-Business
We have mentioned above that the
scope of e-business is quite vast.
Almost all types of business functions
such as production, finance, marketing
and personnel administration as well
Figure 5.1   Firm as a link between Network of Suppliers and Customers
B2B
transactions
B2C
Transactions
S
1
S
2
S
n
.
.
.
.
C
1
C
2
C
n
.
.
.
C2C
Suppliers
Customers
Firm
R & D
Production
Purchase
HR
Finance
Marketing
Intra-firm
B transactions
© NCERT
not to be republished
Page 4


CHAPTER 5
EMERGING MODES OF BUSINESS
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.
© NCERT
not to be republished
111 EMERGING MODES OF BUSINESS
5.1 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 — 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) 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
developments, i.e., digitisation (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 or
value in the form of goods 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 some shopping,” Rita woke up Rekha, her friend from the home-
village 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.
© NCERT
not to be republished
112 BUSINESS STUDIES
5.2 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 the computer
networks. The network you are most
familiar with as a student or consumer
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 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.
5.2.1 Scope of e-Business
We have mentioned above that the
scope of e-business is quite vast.
Almost all types of business functions
such as production, finance, marketing
and personnel administration as well
Figure 5.1   Firm as a link between Network of Suppliers and Customers
B2B
transactions
B2C
Transactions
S
1
S
2
S
n
.
.
.
.
C
1
C
2
C
n
.
.
.
C2C
Suppliers
Customers
Firm
R & D
Production
Purchase
HR
Finance
Marketing
Intra-firm
B transactions
© NCERT
not to be republished
113 EMERGING MODES OF BUSINESS
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.
Figure 5.1 summarises the network
of parties and interactions that
comprises e-business.
A brief discussion 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. 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. 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 making payments.
Likewise, a firm may strengthen and
improve its distribution system by
exercising a real time (as it happens)
control over its stock-in-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
when needed. Or else, a customer’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
transactions using Electronic Data
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
© NCERT
not to be republished
Page 5


CHAPTER 5
EMERGING MODES OF BUSINESS
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.
© NCERT
not to be republished
111 EMERGING MODES OF BUSINESS
5.1 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 — 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) 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
developments, i.e., digitisation (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 or
value in the form of goods 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 some shopping,” Rita woke up Rekha, her friend from the home-
village 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.
© NCERT
not to be republished
112 BUSINESS STUDIES
5.2 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 the computer
networks. The network you are most
familiar with as a student or consumer
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 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.
5.2.1 Scope of e-Business
We have mentioned above that the
scope of e-business is quite vast.
Almost all types of business functions
such as production, finance, marketing
and personnel administration as well
Figure 5.1   Firm as a link between Network of Suppliers and Customers
B2B
transactions
B2C
Transactions
S
1
S
2
S
n
.
.
.
.
C
1
C
2
C
n
.
.
.
C2C
Suppliers
Customers
Firm
R & D
Production
Purchase
HR
Finance
Marketing
Intra-firm
B transactions
© NCERT
not to be republished
113 EMERGING MODES OF BUSINESS
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.
Figure 5.1 summarises the network
of parties and interactions that
comprises e-business.
A brief discussion 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. 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. 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 making payments.
Likewise, a firm may strengthen and
improve its distribution system by
exercising a real time (as it happens)
control over its stock-in-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
when needed. Or else, a customer’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
transactions using Electronic Data
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
© NCERT
not to be republished
114 BUSINESS STUDIES
History of e-commerce
e-commerce began before personal computers were prevalent and has grown
into a multi-billion dollar industry, but where did it come from? By looking at the
evolution of e-commerce, it will be easier to judge its trends for the future.
Year Event
1984 EDI, or electronic data interchange, was standardised through
ASC X12.* This guaranteed that companies would be able to
complete transactions with one another reliably.
1992 ‘Compuserve’ offers online retail products to its customers. This
gives people the first chance to buy things off their computer.
1994 Netscape arrived. Providing users a simple browser** to surf the
internet and a safe online transaction technology called Secure
Sockets Layer.***
1995 Two of the biggest names in e-commerce are launched:
Amazon.com and e-Bay dot. com
1998 DSL, or Digital Subscriber Line, provides fast, always-on Internet
service to subscribers across California. This prompts people to
spend more time, and money, online.
1999 Retail spending over the Internet reaches $20 billion, according
to Business.com.
2000 The U.S government extended the moratorium on internet taxes
until at least 2005.
Source: Glossary of e-commerce Terms,
http://www.uta.edu/infosys/e_comm/terms/term_a.htm
* American Standard Code for Information Interchange (ASCII): A widely used and
internationally recognised coding system to represent characters in a standard way.
ASCII is commonly used for storage within computer systems, and for exchange between
them.
** Browser: The generic term for software programs that retrieve, display, and print
information on World Wide W eb.  The most popular browsers ar e Microsoft Internet Explor er ,
Netscape Navigator and Mosaic.  Mosaic was the first browser to introduce graphics.
Previously, users were only allowed to view the text of web pages.
*** Secure Socket Layer (SSL): SSL was designed by Netscape for use in electronic commerce
for transactions involving confidential information such as credit card numbers. Secure
Socket Layer uses a system of public and private key authentication combined with other
schemes to verify electronic signatures. The ability to conduct secure and confidential
transactions over the internet is critical to the success of electronic commerce. 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.
© NCERT
not to be republished
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