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

Short Answer Questions

Q1: State any three differences between e-business and traditional business.
Ans: The differences between traditional business and e-business are presented in the table below.

Q2: Describe briefly any two applications of e-business.
Ans: The following are the two applications of e-business.
(a) e-procurement: It refers to the procurement of the supplies through online trading between sellers and buyers. It involves reverse auctions, facilitating trade between multiple sellers and single purchaser along with digital market places that facilitate trade between multiple buyers and single seller.
(b) e-delivery: As the name suggests, this includes electronic transfer of computer software, games or movies directly to the computer system of the customer. The payment for such services is usually made through the internet.

Q3: Describe briefly the data storage and transmission risks in e-business.
Ans: (a) Data storage risk: Data stored in a system is subject to various kinds of risks, especially during business transactions. If data get into the wrong hands, they may be used by individuals to fulfill their own purposes. In addition, because of malicious and pirated computer software, the data stored may get corrupted by virus attacks.
(b) Transaction risk: Online transactions are highly prone to the following risks.

• Default on order taking or giving: Such a situation arises when either the seller denies that the buyer has placed an order, or the buyer denies that he or she has placed an order.
• Default on delivery: This refers to the situation where the wrong goods are delivered at the right place, or the right goods are delivered at the wrong place, or the goods are not delivered.
• Default on payment: This refers to the situation in which the seller does not receive payment, while the buyer claims that he or she has made payment.

Long Answer Questions

Q1: 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.
Ans: Numerous factors, such as rapid globalisation and continuous innovations of products, have triggered a sea change in the modes of business. E-business and outsourcing are two emerging ways of doing business. E-business refers to the trading done online, through computer systems. It enables consumers and sellers to trade goods round the clock, saving time, cost and effort. Outsourcing refers to the process of contracting out non-core business activities to external agencies. It enables companies to focus on important activities such as research and development for the innovation of sophisticated products. The following are the factors that are responsible for the growing importance of e-business and outsourcing.

• They speed up the business process: The demands of consumers are growing, and it has become necessary to facilitate trade from anywhere and also round the clock. E-business and outsourcing help speed up the process of buying and selling around the clock.
• They facilitate innovation and technology development: To sustain in the market, every business needs to innovate and develop new ideas and products. In this scenario, e-business and outsourcing have emerged as a boon for producers as they facilitate continuous development of business strategies and new technologies.
• They help make available quality products at lower costs: The demand for high quality and customized products has increased, and e-business and outsourcing play a major role in providing consumers with the required products at a reasonable cost. By facilitating the production and supply of quality products, e-business and outsourcing help attain the objective of excellence.
• They pave the way for effective post-sale services: It is important for any business to cater to the needs of its customers. E-business and outsourcing play an important role here by providing quick and effective post-sale services to customers.

Q2: Elaborate the steps involved in on-line trading.
Ans: Online trading enables its customers to trade from anywhere. The following are the various steps involved in online trading.

• Registration: To begin with, an indenting buyer needs to find an appropriate and reliable shopping website to buy the desired product or products. Once the buyer finds the website, he or she needs to register his or her name by opening a shopping account with the website. For doing so, the buyer is required to key in details such as his or her name, address, unique user name and secret password.
• Placing an order: After opening an account, the buyer can start browsing through the products listed, go through other customers’ reviews and compare products. The buyer may select various items according to his or her preferences and put them in a ‘cart’. The buyer can place an order and proceed towards the payment window.
• Payment mechanism: In this step, the buyer chooses a preferred mode of payment. The following are the different payment modes that are generally available to a trading website user.
  (i) Cash on delivery (CoD): Here, payment is made in cash at the time of delivery of a product.
  (ii) Cheque: The user makes payment through cheque, and when the cheque is realised, the goods selected are delivered by the seller.
  (iii) Net banking: The user makes an electronic payment to the bank account of the online vendor through the Internet.
  (iv) Credit or debit card: The user can also use a credit or debit card (also known as plastic money) to make an online payment. The payment so made is linked to the bank account of the user.
  (v) Digital cash or e-cash: This type of currency has no physical existence. It is a system of purchasing cash in relatively small amounts and storing it in the computer system. The consumer can spend the cash when making electronic purchases over the Internet.

Q3: Evaluate the need for outsourcing and discuss and its limitations.
Ans: Outsourcing refers to the process of contracting out less important (i.e., non-core) business activities to other agencies, while retaining the more important areas.
Advantages of Outsourcing:
The following are the advantages of outsourcing.

• Focus on core activities: Outsourcing allows a business enterprise to focus on the activities that are more important to it. This helps it to come up with more sophisticated and superior products, which builds goodwill for it in the market.
• Specialisation: The external agencies to which tasks are contracted out are highly specialised in their areas of activity and have expertise in performing the assigned tasks. This contributes to the overall efficiency and excellence of the company which is outsourcing work.
• Cost savings: The larger the company, the higher are its constraints in minimising the cost of its back-office operations. In view of this, outsourcing enables companies, especially large-scale organisations, to perform these operations at reasonable costs (compared with the costs that they would have incurred by performing the operations themselves). Thus, outsourcing is regarded as cost efficient.

Limitations of Outsourcing:
The following are the limitations of outsourcing.

• Confidentiality: Outsourcing involves sharing vital information and technological knowledge with the firms to which tasks are outsourced. As a result, there is always a risk that these firms might share vital information with the business rivals of the companies which have outsourced tasks to them. This lack of confidentiality can pose a serious threat to companies which rely on outsourcing.
• Quality concerns: Once the contract is given and the rates are fixed, it may happen that the firm to which tasks have been outsourced starts using cheap and inferior inputs in order to reduce their own costs and increase their profits. This adversely affects the quality of products and services of the companies outsourcing tasks.
• Resentment in home country: Global enterprises outsource their activities to firms located in countries where labour costs are much less. However, if the home countries of these enterprises are facing unemployment, then this may lead to resentment and disturbances.

Q4: Discuss the salient aspects of B2C commerce.
Ans: The following are the various salient aspects of business-to-consumer (B2C) commerce.

• Wide coverage: The term ‘B2C commerce’ refers to the transactions between a business firm and its customers; B2C e-commerce enables businesspersons to extend their trade to a large number of consumers by providing them online global access to their products. It can be said that B2C e-commerce has shrunk the world, and that international boundaries do not play any role.
• Effective promotion: Compared with the traditional product promotional methods (advertisements in newspapers, on the radio and on hoardings), products can be promoted and advertised in a more innovative and interactive manner with the use of multimedia and animations through B2C e-commerce. Using e-commerce, sellers can promote their products either on their own websites or on social networking sites such as Facebook, Twitter and Gmail.
• Low promotional costs and quick post-sale services: B2C e-commerce benefits businessmen because of its low promotional costs. In addition, it also enables them to provide post-sale services through their registered call centres, which facilitates cheaper and provide faster resolution of complaints compared with traditional post-sale services
• Consumer-friendly payment methods: B2C e-commerce provides a wide range of payment options such as via debit cards, credit cards, cash on delivery and equated monthly instalment (EMI) schemes, which are consumer friendly. These methods save time and effort and are also considered safe, by and large.
• Easy access: Unlike the traditional modes of business, e-commerce provides easy accessibility to consumers round the clock. At any time during the day, throughout the year and in all seasons, customer can contact the registered call centres and support centres.
• Customised goods: In view of the growing complexities and competition in today’s world, custom-made goods have become the need of the hour. In this scenario, e-commerce has emerged as a boon for businessmen, as it allows them to manufacture products according to the individual tastes and preferences of their customers.

Q5: Discuss the limitations of electronic mode of doing business. Are these limitations severe enough to restrict its scope? Give reasons for your answer
Ans: The following are a few limitations of the electronic mode of doing business.

• Lack of personal touch: Unlike the traditional business methods, e-commerce lacks a personal touch as both the buyer and the seller are not physically present when the deal is made. As a result, direct trading is preferred over e-commerce in case of products such as clothes, shoes and jewellery, as the buyer prefers the physical presence of the seller.
• Lack of security: Online trading and transactions are highly prone to internet risks and online threats. For instance, there may be leakage of credit/debit card details to third parties, the sellers may remain anonymous and there may be virus attacks, hacking and phishing.
• Technical drawbacks: Online trading requires basic knowledge of computers and Internet familiarity. This often creates distress for people who are less tech-savvy. Often, the increase in the popularity of computers and the Internet divides society into computer literates and computer illiterates (termed digital divide). Besides, because of technical problems including server glitches, websites may sometimes stop functioning, and this may cause frustration to consumers and even discourage them from revisiting the websites which face such problems frequently. Despite these limitations of online trading, the scope of e-business remains wide, mainly owing to the continuous implementation of new technology and new updates that help in overcoming the limitations. The following are some of the reasons why the scope of online business is widening.
  (i) Day by day, websites are becoming more interactive and consumer friendly. This overcomes the problem of lack of personal touch and gives the consumers the feeling that they are physically and directly trading with the sellers.
  (ii) Continuous evolution of information technology has speeded up the flow of communication and information. This enables consumers to raise queries and clear doubts before purchasing a product.
  (iii) The Government of India and various NGOs have been making efforts to extend the scope of e-business to rural areas. This not only eliminates the hesitation among people in rural areas to opt for online trading but also increases the overall consumer base of e-commerce.