Class 11 Business Studies

Emerging Modes of Business

NCERT Solution

Long Answer Type

Question 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: Outsourcing and e-business are happening here and now and these trends are likely to continue. Hence, e-business and outsourcing are referred to as the emerging modes of business.

Factors responsible for growing importance of e-business:

Digitization: Digitization involves conversion of content into binary format. Contents; like text, images, video and music can be converted into digital format. Digitization helps in prolonging the shelf life of content and it becomes easier to transmit the content across geographical boundaries. Sharing of information and transferring money can now be done in real time because of digitization. This has helped in growth of e-business and outsourcing.

Outsourcing: Most of the business organizations are now in favour of outsourcing their non-core activities to other organizations. Some business organizations even outsource some of their core activities to another organization. Outsourcing helps in freeing up the resources so that focus can be given to more important aspects of the business. Because of internet, various data based and voice based operations can be easily outsources to different locations. Outsourcing a particular service to low-wage countries; like India can help in huge savings on operational costs.

Internationalization and globalization: Internationalization and globalization is increasing at a faster pace than before because of new developments in telecommunication. This means that a certain section of people across the globe now speaks in the same lingo and has developed better cross-cultural sensitivities. This new trend has also helped in growth of e-business.

Question 2: Elaborate the steps involved in on-line trading.

Answer: Following are the main steps involved in online trading:

  1. Registration: This is the first step in online trading. Before executing an order you need to get yourself registered with an e-commerce portal. Registration is like opening an account. In most of the cases, the registration form asks for certain personal information; like name, address, date of birth, e-mail ID, etc. The registration process also requires you to create a user name and password combination. A password is like a security key to which only you have the access.
  2. Placing an order: After completing the registration, you can place an order. Most of the shopping portals show a shopping cart which shows various items and their quantities selected by you. The shopping cart also shows the total bill amount which you need to pay.
  3. Payment Mechanism: Once you have placed the order, you need to make the payment. There are various options through which you can make payment. These are as follows:
    1. Cash on Delivery (COD): As the name suggests, this option allows you to pay in cash when the good is delivered at your doorstep. COD has been quite popular in India because of low penetration of credit cards.
    2. Cheque: Instead of making cash payment, you can also pay through cheque. The person from the e-shopping portal will come to your home or office to collect the cheque. Goods will be delivered after clearance of cheque.
    3. Net Banking Transfer: Now-a-days, you can also transfer money directly from your bank account to the shopping portal’s account.
    4. Credit/Debit Card: For using these facilities, you need to fill the details of your credit/debit card. A credit card gives you money on credit, while a debit card allows you to spend the amount in your saving account.
    5. Digital Cash: Many companies have come with the facility of digital cash. You can buy certain amount of credit from these companies by paying that amount of money. Digital cash is supposed to be more secure than other forms of online payment.

Question 3: Evaluate the need for outsourcing and discuss its limitations.

Answer: Some of the major reasons for emergence of outsourcing are as follows:

Focusing of attention: By outsourcing non-core activities, an organization can channelize its focus on its core activities. Let us take an example of a school. The core competency of a school lies in teaching. Running a cafeteria or a book shop are non-core activities. Hence, by outsourcing a cafeteria and a book shop, the school can focus its energy and resources on its core activity.

Quest for excellence: Outsourcing is also done in order to achieve excellence. Let us take the example of a car company. A car company can be an expert in making the engine and body of the car. But it may not be an expert in making seats and seat belts. On the other hand, a company which only makes seat belts has the expertise in doing so. Hence, if the car company procures seat belts from that company, it can be assured of a high level of quality in the seat belts.

Cost reduction: Outsourcing also helps in cost reduction. Let us once again take the example of company which specializes in making seat belts. It may be supplying seat belts to numerous automobile companies. So, because of large volume of sales it can attain the economy of scale which is not possible for a car manufacturing company. Thus, outsourcing seat belts can help the car company in cost reduction.

Growth through alliance: By tying up with a company for outsourcing, the organization also facilitates learning from each other. This helps in better growth of business because both the organizations can follow the best practices of each other.

Fillip to economic development: Outsourcing helps in developing the business climate in host countries. This helps in increasing entrepreneurship and employment. Let us take the example of India. The BPO sector has generated a large number of employment opportunities in India. This has definitely helped in economic development in the country.

Question 4: Discuss the salient aspects of B2C commerce.

Answer: The salient aspects of B2C commerce are as follows:

  1. Speed: B2C commerce facilitates speed of business transactions. For example; withdrawing money from an ATM hardly takes time. You may ask your parents how much time it took when they had to withdraw money from a branch of a bank. While browsing through an e-shopping portal you can look at hundreds of products within a flash. You can even complete placing the order and making payment within a few seconds.
  2. Convenience: While going to a market to buy something involves time and money, buying online helps in saving a lot of time and money. Most of the markets operate within some fixed hours. B2C commerce operates 24 x 7 which means you can make a transaction at a time and place which suits you.
  3. Doorstep Delivery: B2C commerce facilitates doorstep delivery of physical products. This also saves time and money for customer. Sometimes, in big cities buying a small item can be highly inconvenient because for most of the things people may need to commute at least 10 km. Availability of such products on shopping portals is a boon for today’s busy life.
  4. Real time response to grievances: The call centres which work for shopping portals are available 24x7. This means that a customer can easily register her complaints at any time. In most of the cases, the grievance is immediately addressed. All of this is possible because of technology.

Question 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: Following are the limitations of electronic mode of doing business:

  1. Low personal touch: Compared to traditional business, e-business has very low scope for personal touch. While browsing through a shopping portal, you are interacting with a machine. This takes the fun which is inherent in shopping and haggling in a real market. This is also a big hurdle for companies in developing the brand equity.
  2. Incongruence between order taking/giving and order fulfillment speed: While placing an order in e-business take no time, a product will have to be delivered by conventional means. For this, someone has to go the customer’s home to deliver the product. This often takes anywhere between two days to a week. This can be quite frustrating for many.
  3. Need for technological capability of parties to do e-business: For a person to be able to do transaction in e-business, he needs to be technically capable to carry out the transaction. At present, there is a huge technical divide among people. While some people are quite friendly with computer and internet, there are many who do not know how to use this new technology. Thus, a large section of customer is unable to get the benefit of e-business.
  4. Increased risk due to anonymity and un-traceability of parties: While a customer or seller is interacting with a website, it is difficult to know the exact location of that person. Moreover, this increases the chances of impersonation as well. There is always a risk of some fly-by-night operator trying to sell you even the moon.
  5. People resistance: People usually show resistance to change. The same thing is happening in case of e-business as well. Many people; seller and buyer both included; are resisting this new mode of business because of certain real and certain imaginary fears.

However, these limitations are not going to restrict the scope of e-business. This is because the benefits of e-business far outweigh its limitations. Moreover, technology is growing by every day and necessary gadgets are becoming cheaper. Internet connectivity has improved a lot and with the advent of 3G, it will penetrate to small towns and villages as well. Hence, it can be said that e-business is here to stay for a long time to come.