Chapter 5
Emerging Modes of Business
Ql. (A) Select the correct option and rewrite the sentence.
1. For online transactions ......... is required.
a. registration
b. trading
c. business
2. The term 'e-business' is derived from the term ..... and e-commerce.
a. Cash
b. e-pay
c. e-mail
3. The transactions under ....... are between consumers and consumers.
a. B2B
b. C2C
c. B2C
4. The process of contracting a business function to someone else is called as ....... .
a. outsourcing b. trading
c. e-business
5. In online shopping customers put the product in the ....... .
a. shopping mall
b. shopping cart
c. shopping bag
C) Give one word / term / phrase for the following sentence.
1) The stage where the goods bought are delivered to the customer.
2) The term derived from the terms e-mail and e-commerce.
3) The transaction which is done with the help of the internet.
4) The first step in online transaction.
5) The process of contracting a business function to specialized agencies.
6) Subset of outsourcing.
7) Sub segment of BPO
8) One of the value added BPO service which involves legal work.
(D) State whether following statements are true or false.
1) It is easy to set up e-business as compared to traditional business.
2) The term e-business is derived from the term e-mail and e-commerce.
3) e-business allows you to work across the globe in any field.
4) LPO stands for legal product outsourcing.
5) KPO requires advanced analytical and technical skills.
6) With the help of outsourcing, company cannot focus on the core areas.
(E) Find the odd one.
l) BPO,RTO,LPO,KPO
Ans: RTO
2)B2B,B2C,A2Z,C2C
Ans: A2Z
3) Debit card, Credit card, Aadhar card, ATM card.
Ans: Aadhar card
(F) Complete the sentences.
1) E-business is an abbreviation for .............. .
2) The term e-business came into existence in the year .............. .
3) E-business means using the .............. to connect people and process.
4) E-business is .............. of e-commerce.
5) E-commerce is .............. of e-business.
6) The process of contracting a business function to specialized agencies is known as .............. .
(G) Select the correct option and complete the table.
(Business to Business, First step, e-commerce, payment mechanism, e-business)
(H) Answer in one sentence.
1) What is E-business?
Ans:
The term 'E-business' i.e electronic business is derived form the terms e-mail and e-commerce
2) What is outsourcing ?
Ans:
Outsourcing is the process of contracting some business functions to specialised agencies.
3) What is Online Transaction?
Ans:
Online transactions occur when a process of buying and selling takes place
through the internet.
4) What is shopping cart ?
Ans:
5) What is digital cash ?
Ans:
Digital Cash is a form of electronic currency that exists only in cyberspace
and has no real physical properties, but offers the ability to use real currency in an electronic
format
6) What is BPO ?
Ans:
BPO refers to the outsourcing
of non primary activities of the
organisation to an external organisation to minimize cost and
increase efficiency
7) What is KPO ?
Ans:
KPO is another kind of outsourcing whereby, functions related to
knowledge and information are
outsourced to third party service
providers
8) What is LPO ?
Ans:
LPO refers to the practice of law firm or corporation obtaining legal support services from
an outside law firm or legal support services company
(I) Correct the underlined word and rewrite the following sentence.
1) E-business is hard to start.
2) There are five stages of online transactions.
3) Registration is the Last step in online transaction.
4) Digital cash is form of plastic currency.
5) KPO includes less knowledge based and specialized work.
(J) Arrange in proper order.
1) Purchase or sale / Delivery stage / Pre purchase or sale.
2) Placing an orders, Cash on delivery, Registration
Q.2. Explain the following terms / concepts.
1) E-business
Ans:
The term 'E-business' i.e electronic business is derived form the terms e-mail and e-commerce.
E- business or electronic business, is the administration of conducting business via the internet.
This would include the buying and selling of goods or services, along with providing technical or
customer support through the internet.
The concept of E-business emerged when IBM coined the term in late 90's. The purpose was to
provide buyers a platform on the internet to buy and sell goods.
2) B2B
Ans:
In this form the buyer and seller are both business entities and do not involve individual consumers. Here, both the parties involved in e-commerce transactions are business firms and
hence the name B2B i.e. business to business.
Transactions between business firms come under this category. Business firms interact with
each other for a variety of services. These include supplying ancillary parts/components to
manufacturers providing value added services like catering and also providing man power.
3) B2C
Ans:
Customer identifies a need, and searches for the product or services to satisfy the need. Customers select a vendor and negotiates a price. Customers receives the product or services,
makes payment, gets service and warranty claims. As the name implies, B2 C transactions
have business firms at one end and its customers on the other end.
The transactions under B2C are between business firms and consumer. Firms use their sites
for a range of marketing activities. These include promotion, product information, reviews
about the product/ service and delivery of the product at the doorstep. The cost of products and
services is kept low through this method and the speed of transaction is also faster. Examples
of web sites: www.flipkart.com etc.
4) C2C
Ans:
It facilitates the online transaction of goods or services between two people. Consumer to
consumer (C2 C) involves the electronically facilitated transactions between consumers
through some third party. A common consumer posts an item for sale and other consumers
bid to purchase it. The sites are only intermediaries, just to match the consumers. The internet
allows a lot of space for consumer groups to be formed. These forums are very interactive.
Redressal of complaints is also possible through such groups. For example, eBay.
5) Outsourcing
Ans:
Outsourcing is the process of contracting a business function or any specific business activity to specialized agencies mostly the non-core areas such as sanitation, security, household pantry etc. are outsourced by the company. The company makes a formal agreement with the agency.
The agency can send the required manpower to the company. The agency charges the company for their services. With the help of outsourcing, company can focus on their core areas.
Meaning / Concept :
Outsourcing is the process of contracting some business functions to specialised agencies. The company benefits in two ways.
1. It reduces its own cost
2. It uses the expertise of the firm which specialises in a particular kind of service.
Examples of outsourcing - The establishments such as shops, malls, housing societies, offices etc. outsource facilities like canteen, sanitation , security etc. In the same way arrangements for wedding, anniversary, birthday celebration can also be outsourced.
6) BPO
Ans:
Introduction :
BPO is basically the outsourcing of work to some third party service provider in order to save
money while KPO is a subset of BPO only. KPO includes more knowledge based and specialised
work. In addition to this there are many reasons that a company may choose KPO services over
BPO.
Business process outsourcing or BPO, is a business practice in which one organization hires
another company to perform a task ( process) that the hiring organization requires to operate its own
business successfully.
Meaning - BPO is a subset of outsourcing that involves the contracting of the operations and responsibilities of specific business process to a third party service provider. BPO refers to the outsourcing
of peripheral activities of the orgnisation to an external organization to minimize cost and increase
efficiency.
BPO refers to the outsourcing of peripheral activities of the organisation to an external organisation to minimize cost and to increase efficiency. For example, customer care centres for various banks,
service providers etc.
7) KPO
Ans:
KPO is described as the functions related to knowledge and information outsourced to third
party service providers.
KPO is the sub segment of BPO,in which the outsource service provider is hired not only for its
capacity to perform particular business process or function but also to provide expertise around it.
KPO is the allocation of relatively high level tasks, to an outside Organization or a different
group usually in a different geographic location. KPO is a subset of BPO. KPO involves outsource
of core functions which may or may not give cost benefit to the parent company but surely helps in
value addition. The processes which are outsourced to KPO are usually more specialized and knowledge based as compared to BPO's.
KPO is the outsourcing of core information related to business activities which are competitively important or form an integral part of a company's value chain.
Definition :
(i) "Margaret Rouse of what is.com defines KPO. "KPO is the allocation of relatively high-level
tasks to an outside organisation or a different group within the same organisation."
8) LPO
Ans:
LPO is a type of KPO that is specific to legal services, ranging from drafting legal documents,
performing legal research to offering advice.
LPO refers to the practice of law firm or corporation obtaining legal support services from
an outside law firm or legal support services company. LPO is the industry in which in house legal
departments or organisations outsourced legal work to such areas where it can be done at less cost.
For example, areas like US or Europe outsourced legal work to India, where it can be performed at
significantly decreased cost. LPO is high-end industry that has been growing rapidly in the recent
years.
LPO is apparently a media invention. It derives from BPO, but to the extent that the word 'process' suggests standardized , commoditized , easy to replicate tasks that can be performed without a
lot of education.
Meaning:
Legal outsourcing has gained tremendous ground in the past few years in India. It achieved
success by producing service such as document review, legal research and writing, drafting of
briefings etc.
Q.3. Study the following case / situation and express your opinion.
1. Abhay purchases some gift articles online from www.flipkart.com. At the same time Sheetal purchased gift from e-bay.com.
i. Which website is related to C2C?
ii. Which website is related to B2C?
iii. What first step does Abhay need to follow?
2. Satvik purchases watch from Titan shop and his friend Shambhavi purchases watch from online shopping site.
i. Which shopping is from traditional business?
ii. Which shopping is from e-business?
iii. Which business involved high risk ?
3. Mr. Ved made his payment by cheque at the same time Mr. Shlok made his payment by fund transfer.
i. Whose payment is faster ?
ii. Whose payment is related to traditional business ?
iii. Whose payment is related to e-business ?
Q.4. Distinguish between.
1) Traditional business and E-business.
2) E-business and E-commerce
3) BPO and KPO
Q.5. Answer in brief.
1) What is outsourcing ? Illustrate with suitable example.
Ans:
Outsourcing is the process of contracting a business function or any specific business activity
to specialized agencies mostly the non-core areas such as sanitation, security, household pantry etc.
are outsourced by the company. The company makes a formal agreement with the agency.
The agency can send the required manpower to the company. The agency charges the company for their services. With the help of outsourcing, company can focus on their core areas.
5.3.1 Meaning / Concept :
Outsourcing is the process of contracting some business functions to specialised agencies. The
company benefits in two ways.
1.
It reduces its own cost
2.
It uses the expertise of the firm which specialises in a particular kind of service.
Examples of outsourcing - The establishments such as shops, malls, housing societies, offices etc.
outsource facilities like canteen, sanitation , security etc. In the same way arrangements for wedding,
anniversary, birthday celebration can also be outsourced.
5.3.2 Need for Outsourcing :
Today services all over the world are becoming highly specialized. Most services require finely
tuned skills. With increasing global competition, most companies are focusing on showcasing their
product or improving the quality of their goods. This has forced the companies to concentrate on
their hard core activities, therefore companies are taking a fresh look at their business processes.
Due to this, many non-core areas are being outsourced to firms who have an especially skilled work
force. The concept of outsourcing has emerged as a result of this thinking.
2) What is BPO? Explain in detail.
Ans:
BPO is basically the outsourcing of work to some third party service provider in order to save
money while KPO is a subset of BPO only. KPO includes more knowledge based and specialised
work. In addition to this there are many reasons that a company may choose KPO services over
BPO.
Business process outsourcing or BPO, is a business practice in which one organization hires
another company to perform a task ( process) that the hiring organization requires to operate its own
business successfully.
Meaning - BPO is a subset of outsourcing that involves the contracting of the operations and responsibilities of specific business process to a third party service provider. BPO refers to the outsourcing
of peripheral activities of the orgnisation to an external organization to minimize cost and increase
efficiency
BPO refers to the outsourcing of peripheral activities of the organisation to an external organisation to minimize cost and to increase efficiency. For example, customer care centres for various banks,
service providers etc.
Advantages and Disadantages of BPO:
Advantages of BPO :
1)
Productivity improvement :
Educated or skilled people perform the task efficiently and thus improve productivity.
2)
Optimum utilization :
BPO enables optimum utilization of scarce resources.
3)
Reducation in cost :
Cost saving can be significant to any business. BPO not only helps to reducing cost but also
increase productivity and increase revenues.
4)
Improved human resources :
Improved human resources is another great advantage of BPO. Outsourcing gives a company
the ability to get access to skilled and trained man power at low rates.
Disadvantages of BPO :
1)
Communication problem :
There can be communication gap between the client and vendor companies due to misunderstanding and miscommunication.
2)
Different time zones :
The client and the vendor operate in two different time zones. The difference in time can create
many problems during online meeting, communication etc.
3)
Loss of control :
Due to communication errors, time differences, client company can at times lose control of the
project
3) What is KPO ? Explain in detail.
Ans:
KPO is described as the functions related to knowledge and information outsourced to third
party service providers.
KPO is the sub segment of BPO,in which the outsource service provider is hired not only for its
capacity to perform particular business process or function but also to provide expertise around it.
KPO is the allocation of relatively high level tasks, to an outside Organization or a different
group usually in a different geographic location. KPO is a subset of BPO. KPO involves outsource
of core functions which may or may not give cost benefit to the parent company but surely helps in
value addition. The processes which are outsourced to KPO are usually more specialized and knowledge based as compared to BPO's.
KPO is the outsourcing of core information related to business activities which are competitively important or form an integral part of a company's value chain.
Definition :
(i) "Margaret Rouse of what is.com defines KPO. "KPO is the allocation of relatively high-level
tasks to an outside organisation or a different group within the same organisation."
Meaning : KPO is a form of outsourcing, in which knowledge related and information related work
is carried out by workers in a different company or by a subsidiary of the same organisation. Which
may be in the same country or in an offshore location to save cost.
KPO requires advanced analytical and technical skills as well as a high degree of specialist expertise. KPO allows both core and non core activities.
Advantages:
(1) Cost reduction is possible as Clients get professional services at a cost effective price.
(2) Business organisations can hire skilled employees from KPO service providers.
(3) High end services are provided at a lower cost to decrease unemployment and benefit their economy.
(4) Provides flexibility in terms of HRM (human resource management) and time management.
Disadvantages:
(1) Security of organisation is questioned.
(2) The character of the employee and the quality of the work cannot be assured .
(3) KPO is time consuming and cannot provide a quick fix to the company seeking immediate
results.
( 4) Lack of communication between partners due to legal, language and cultural barriers can lead
to complications.
(5) Reduction in communication due to language barrier.
4) What is LPO ? Explain in detail.
Ans:
LPO is a type of KPO that is specific to legal services, ranging from drafting legal documents,
performing legal research to offering advice.
LPO refers to the practice of law firm or corporation obtaining legal support services from
an outside law firm or legal support services company. LPO is the industry in which in house legal
departments or organisations outsourced legal work to such areas where it can be done at less cost.
For example, areas like US or Europe outsourced legal work to India, where it can be performed at
significantly decreased cost. LPO is high-end industry that has been growing rapidly in the recent
years.
LPO is apparently a media invention. It derives from BPO, but to the extent that the word 'process' suggests standardized , commoditized , easy to replicate tasks that can be performed without a
lot of education.
Meaning:
Legal outsourcing has gained tremendous ground in the past few years in India. It achieved
success by producing service such as document review, legal research and writing, drafting of
briefings etc.
Advantages:
1)
One of the most significant advantage of outsourcing legal functions is cost savings.
2)
Outsourcing legal work to external vendors allows organisations to access high level talent
and niche expertise that does not exist within the firm.
3)
Employing a combination of in-house and external talent allows law firm and organisations to
tailor their liabilities in response to workload and client demands. Flexible staffing also reduces firm
overhead.
4)
Disadvantages :
1)
There will be problem of authenticity as some important documents need to be shared with the
outsourcing firm.
2)
There may be problem of in-depth knowledge of all relevant laws.
3)
There will be problem of cultural and language barriers that could hinder communication
between domestic and international team.
4)
L.P.O. also gets affected by geographical hurdles between firm and clients.
Q.6. Justify the following statements
1) It is easy to set up e-business as compared to traditional business.
2) E-business allows user to work across the globe in any field.
3) Online transaction is done with the help of the internet.
Q.7. Attempt the following.
1) What are the advantages and disadvantages of e-business ?
Ans:
Meaning
The term 'E-business' i.e electronic business is derived form the terms e-mail and e-commerce.
E- business or electronic business, is the administration of conducting business via the internet.
This would include the buying and selling of goods or services, along with providing technical or
customer support through the internet
Benefits of E- Business
The main advantage of e-business is people get product information online and order the product
online through cash on delivery or pre payment. In this way seller and buyer both get advantage of
internet platform.
Traditionally trading by the buyers and sellers is done through three channels like face to face,
mail and phone. The internet has become the fourth channel for trade. Internet trade is booming and
allowing business to sell more and at a lower cost. Thus, internet offers a great opportunity over
traditional channels as it has some advantages or strengths.
1) Ease of formation:
The formation of traditional business is difficult, whereas to form e-business is relatively easy
to start.
2) Lower Investment requirements:
Investment requirement is low as compared to traditional business as the store does not have
physical existence and can be managed with less manpower so if trader does not have much
of the investment but has contacts (network), he can do fabulous business.
3) Convenience:
Internet offers the convenience of 24 X 7 X 365 days a year. Business is going on any time and
flexibility is available. Yes, e-business is truly a business that has enabled and enhanced by
electronics and offers the advantage of accessing anything, any where, any time.
4) Speed:
This benefit becomes all the more attractive when it comes to information. Much of the buying
or selling involves exchange of information that internet allows at the click of mouse.
5) Global access:
Internet is truly without boundaries. On one hand, it allows the seller an access to the global
market. On the other hand, it offers a freedom to the buyer to choose products from almost any
part of the world. No need of face to face interaction between buyer and seller.
6) Movement towards a paperless society:
Use of internet has considerably reduced the dependence on paperwork. Thus, recording and
referencing of information has become easy
7) Government support:
The government provides favourable environment for setting up of e-business. This support
ensures maximum transparency.
8) Easy payment:
The payment in e-business is done by credit card, fund transfer etc. and it is available round
the clock..
5.1.4 Limitations of E- business :
E-business does have certain disadvantages when compared to the traditional way of doing
business. Some of the limitations of e-business are as follows.
(1) Lack of personal Touch : E-business lacks the personal touch. One cannot touch or feel the
products. So it is difficult for the consumers to check the quality of products.
(2) Delivery Time : The delivery of the products takes time. In traditional business you get the
product as soon as you buy it. But that doesn't happen in online business. This time lag often
discourages customers e.g. Amazon now assures one day delivery. This is an improvement but
does not resolve the issue completely.
(3) Security issues : There are a lot of people who scam through online business. Also, it is easier
for hackers to get your financial details. It has a few security and integrity issues.
This also causes disturbance among potential customers.
(4) Government interference : Sometimes the Government monitoring can lead to interference in
the business.
( 5) High Risk : High Risk is involved as there is no-direct contact between the parties. In case of
frauds, it becomes difficult to take legal action.
2) What are the types of e-business? Explain.
3) What are the advantages of outsourcing?
Ans:
Meaning / Concept :
Outsourcing is the process of contracting some business functions to specialised agencies. The
company benefits in two ways.
1.
It reduces its own cost
2.
It uses the expertise of the firm which specialises in a particular kind of service.
Examples of outsourcing - The establishments such as shops, malls, housing societies, offices etc.
outsource facilities like canteen, sanitation , security etc. In the same way arrangements for wedding,
anniversary, birthday celebration can also be outsourced.
Advantages of Outsourcing :
1)
Overall cost advantages- It reduces the cost and also saves time and efforts on training cost.
2) Stimulates entrepreneurship, employment and exports- Outsourcing stimulates
entrepreneurship, employment and exports in the country.
3)
Low manpower Cost- The manpower cost is much lower than that of the host company.
4) Access to professional, expert and high Quality services- Mostly the tasks are given to
people who are skilled in that particular field. This provides us with a better level of service and
fewer chances of errors.
5) Emphasis on core process rather than the supporting ones- With its help companies can
focus on their core areas which lead to better profits and increase the quality of their products.
6) Investment requirements are reduced - The organization can save on investing in the latest
technology, software and infrastructure and let the outsourcing partner handle the entire infrastructure.
7) Increased efficiency and productivity - There is an increased efficiency end productivity in
the non core areas of an organization.
8) Knowledge sharing - Outsourcing enables the organization to share knowledge and best
practices with each other, it helps develop both the companies and also boosts goodwill in the
industry.
4) What are the disadvantages of outsourcing?
Ans:
Disadvantages of Outsourcing / Limitations of Outsourcing
1) Lack of customer focus- An outsourced vendor may be catering to the needs of multiple
organizations at a time. In such a situation, he may lack complete focus on an individual organization.
As a result, the organisation may suffer.
2) A threat to security and confidentiality - The confidential information of the organization
may be leaked to the third party, so there are security issues.
3) Dissatisfactory services - Some of the common problem areas with outsourcing include
stretched delivery time and sub standard quality.
4) Ethical issues - The major ethical issue is taking away employment opportunities from one's
own country, when the function is outsourced to a company from another country.
5) Other disadvantages -
i)
misunderstanding of the contracts.
ii) lack of communication.
iii) poor quality and delayed services
Q.8. Answer the following.
1) Explain the steps involved in online transaction.
Ans:
Meaning:
Online transaction is done with the help of the internet. It can't take place without a proper
internet connection. Online transactions occur when a process of buying and selling takes place
through the internet. When a consumer purchases a product or a service online, he/she pays for it
through online transaction.
5.2.2 Procedure of online Transaction:
The online transaction moves through pre-purchase/sale, actual purchase/sale and delivery
stage. It involves following steps.
1) Registration - Before online shopping one has to register with the online vendor by filling up
a registration form. Registration is the first step in online transaction. For online transaction
registration is required. The consumer needs to login a particular website to buy a particular
article or service. The customers email ID, name, address, other details are saved and are
safe with the website. For security reasons, the buyer's 'Account' and his 'Shopping Cart' is an
online record of what you have picked up while browsing the online store 2) Placing an Order- It is second step in online transaction. When a customer likes a product or
service he/she puts the product in the shopping cart. The shopping cart gives a record of all
the items selected by the buyer to be purchased ,the number of units or quantity desired to be
bought per item selected and the price for each item. The buyer then proceeds to the payment
option after selecting all the products.
3)
Payment - It is the last step in online transaction. The buyer has to select the payment option.
These payment systems are secured with very high level encryption. The personal financial
information is completely secure. The following are some ways in which we can make this
payment.
a) Cash on Delivery- In this type of payment the buyer pays when he/she receives the product.
The payment is made at the doorstep. The customer can pay in cash or by debit or credit card.
b) Cheque- In this type of payment, the buyer sends a cheque to the seller and the seller sends the
product after the realization of the cheque.
c) Net Banking transfer- In this type of payment, the payment is transferred from the buyer's
account to the seller's account electronically. After the payment is received by the seller, the
seller dispatches the goods to the buyer. It is an electronic facility of transferring funds through
the internet.
d) Credit or Debit card - The buyer makes payment through debit or credit card and amount
get deducted from customers account. Debit card or credit card popularly known as "Plastic
Money". They are mostly used for online payments.
e) Digital Cash - Digital Cash is a form of electronic currency that exists only in cyberspace
and has no real physical properties, but offers the ability to use real currency in an electronic
format
2) What is outsourcing? Explain advantages and disadvantages of outsourcing.
Ans:
Meaning / Concept :
Outsourcing is the process of contracting some business functions to specialised agencies. The
company benefits in two ways.
1.
It reduces its own cost
2.
It uses the expertise of the firm which specialises in a particular kind of service.
Examples of outsourcing - The establishments such as shops, malls, housing societies, offices etc.
outsource facilities like canteen, sanitation , security etc. In the same way arrangements for wedding,
anniversary, birthday celebration can also be outsourced.
Advantages of Outsourcing :
1)
Overall cost advantages- It reduces the cost and also saves time and efforts on training cost.
2) Stimulates entrepreneurship, employment and exports- Outsourcing stimulates
entrepreneurship, employment and exports in the country.
3)
Low manpower Cost- The manpower cost is much lower than that of the host company.
4) Access to professional, expert and high Quality services- Mostly the tasks are given to
people who are skilled in that particular field. This provides us with a better level of service and
fewer chances of errors.
5) Emphasis on core process rather than the supporting ones- With its help companies can
focus on their core areas which lead to better profits and increase the quality of their products.
6) Investment requirements are reduced - The organization can save on investing in the latest
technology, software and infrastructure and let the outsourcing partner handle the entire infrastructure.
7) Increased efficiency and productivity - There is an increased efficiency end productivity in
the non core areas of an organization.
8) Knowledge sharing - Outsourcing enables the organization to share knowledge and best
practices with each other, it helps develop both the companies and also boosts goodwill in the
industry.
5.3.4 Disadvantages of Outsourcing / Limitations of Outsourcing
1) Lack of customer focus- An outsourced vendor may be catering to the needs of multiple
organizations at a time. In such a situation, he may lack complete focus on an individual organization.
As a result, the organisation may suffer.
2) A threat to security and confidentiality - The confidential information of the organization
may be leaked to the third party, so there are security issues.
3) Dissatisfactory services - Some of the common problem areas with outsourcing include
stretched delivery time and sub standard quality.
4) Ethical issues - The major ethical issue is taking away employment opportunities from one's
own country, when the function is outsourced to a company from another country.
5) Other disadvantages -
i)
misunderstanding of the contracts.
ii) lack of communication.
iii) poor quality and delayed services
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