CHAPTER – 5
EMERGING MODES OF BUSINESS
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 networks 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 function.
E-COMMERCE:-
E-commerce stands for electronic commerce and is a process through which an individual can buy, sell, deal, order and pay for the products and services over the internet. In this kind of transaction, the seller does not have to face the buyer to communicate. Few examples of e-commerce are online shopping, online ticket booking, online banking, social networking, etc.
SCOPE OF E-BUSINESS:-
- B2B COMMERCE:- Business-to-business (B2B), also called B-to-B, is a form of transaction between businesses, such as one involving a manufacturer and wholesaler, or a wholesaler and a retailer. Business-to-business refers to business that is conducted between companies, rather than between a company and individual consumer.
- B2C COMMERCE:- B2C, or business-to-consumer, is a retail model where products or services move directly from a business to the end user who has purchased the goods or services for personal use. It is often contrasted with the business-to-business (B2B) model, which involves exchanging goods and services between businesses instead of between businesses and consumers.
- INTRA-B COMMERCE:- Intra B Commerce refers to business where parties involved in the electronic transactions are from within a given business firm. It is largely due to use of intra-B commerce that today it has become possible for the firms to go in for flexible manufacturing. Use of computer networks makes it possible for the marketing department to interact constantly with the production department and get the customized products made as per the requirements of the individual customer. For example:-Virtual Private Network (VPN) technology would mean that employees do not have to come to office.
- C2C COMMERCE:-Customer to customer (C2C) is a business model whereby customers can trade with each other, typically in an online environment. Two implementations of C2C markets are auctions and classified advertisement. C2C marketing has soared in popularity with the arrival of the internet and companies such as amazon ,OLX,
ADVANTAGE OF E-BUSINESS:-
- CONVENIENCE:- Internet offers the convenience of ‘24 hours X 7 days a week X 365 days’ a year. Such flexibility is available even to the organisational personnel whereby they can do work from wherever they are, and whenever they may want to do it. Yes, e-business is truly a business as enabled and enhanced by electronics and offers the advantage of accessing anything, anywhere, anytime.
- EASE OF FORMATION AND LOWER INVERSTMENT REQUIREMENTS:- Unlike a host of procedural requirements for setting up an industry, e-business is relatively easy to start. The benefits of internet technology accrue to big or small business alike. In fact, internet is responsible for the popularity of the phrase; ‘networked individuals and firms are more efficient than networthed individuals.’ This means that even if you do not have much of the investment (net worth) but have contacts (network), you can do fabulous business.
- GLOBAL REACH/ACCESS:- Internet is truly without boundaries. On the one hand, It allows the seller an access to the global market; on the other hand. It affords to the buyer a freedom to choose products from almost any part of the world. It would not be an exaggeration to say that in the absence of internet. Globalization would have been considerable restricted in scope and speed.
- MOVEMENT TOWARDS A PAPERLESS SOCIETY:- Use of internet has considerable reduced dependence on paperwork and the attendant ‘red tape.’ you know that Maruti Udyog does bulk of its sourcing of supplies of materials and components in a paper less fashion. Even the government departments and regulatory authorities are increasingly moving in this direction whereby they allow electronic filing of returns and reports.
- SPEED:- As already noted, much of the buying or selling involves exchange of information that internet allows at the click of a mouse. This benefit becomes all the more attractive in the case of information-intensive products such as soft wares, movies, music, e-books and journal that can even be delivered online.
LIMITATIONS OF E-BUSINESS:-
- LOW PERSONAL TOUCH:- High-tech it may be, e-business, however, lacks warmth of interpersonal interactions. To this extent, it is relatively less suitable mode of business in respect of product categories requiring high personal touch such as garments, toiletries, etc.
- INCONGRUENCE BETWEEN ORDER TAKING/GIVING AND ORDER FULFILMENT SPEED:- Information can flow at the click of a mouse, but the physical delivery of the product takes time. This incongruence may play on the patience of the customers. At times, due to technical reasons, web sites take unusually long time to open. This may further frustrate the user.
- INCREASED RISK DUE TO ANONYMITTY AND NON-TRACEABILITY OF PARTIES:- Internet transactions occur between cyber personalities. As such, it becomes difficult to establish the identity of the parties. Moreover, one does not know even the location from where the parties may be operation. It is riskier, therefore transacting through internet.
- PEOPLE RESISTANCE:- The process of adjustment to new technology and new way of doing things causes stress and a sense of insecurity. As a result, people may resist an organisation’s plans of entry into e-business.
DIFFERENCE BETWEEN TRADITIONAL AND E-BUSINESS:-
| Basis of Distinction | Traditional Business | E-Business |
| Locational Requirements | Proximity to the source of raw materials or the market for the products | None |
| Operating Cost | High cost due to procurement and storage, production, marketing and distribution facilities | There is very less cost to start on e-business |
| Nature of internal communication | Hierarchical-from top level management to middle level management to lower level management to operatives | Non-hierarchical allowing direct vertical, horizontal and diagonal communication |
| Business processes and length of the cycle | Sequential precedence-succession relationship, i.e. purchase – production/operation – marketing – sales.The, business process cycle is therefore, longer | Simultaneous (concurrence) different processes. Business process cycle is, therefore, shorter |
| Nature of human capital | Semi-skilled and even unskilled manpower needed. | Technically and professionally qualified personnel needed |
Process of online trading
- Registration
- Placing an order
- Payment mechanism
1: Registration:
When you register with an online retailer, you create an ‘account’, by filling up the registration form.A “password” must be entered among the numerous details since the areas relating to an individual’s “account” and “shopping basket” are password protected.
2: Placing an order:
You can add products to the shopping cart by dragging and dropping them.A shopping cart is an online record of what an individual has added to his cart while visiting an online store.. Once you’ve decided what you want to buy, you may ‘checkout.’
3: Payment Mechanism:
Purchases through online shopping may be done in a number of ways.
- Cash-on-Delivery: Payment for things ordered online can be made in cash when the goods are delivered physically.
- Cheque: The online merchant may arrange for the customer’s cheque to be picked up. After realisation, product delivery may be attempted.
- Net-banking Transfer: Modern banks provide to their customers the facility of electronic transfer of funds over the Internet using Immediate Payment Service (IMPS), NEFT and RTGS.
- Credit or Debit Cards: The holders of credit cards can enjoy making purchases on credit. The amount owed by the cardholder to the online seller is assumed by the card issuing bank, which then transfers the transaction’s amount to the seller’s credit. A debit card permits the holder to make purchases up to the amount of money in the linked account. The moment a transaction is made, the amount due as payment is deducted electronically from the card.
- Digital Cash: This type of currency has no physical qualities, but it allows you to utilise real money in an electronic format, such as through e-wallets or PayTm.
E-Business Risks
a. Transaction Risks:
- Either the seller or the customer may refuse an order being made or placed. This might be cited as ‘default on order taking/giving.
- The supposed delivery doesn’t take place, or is delivered at the incorrect address, or product apart from ordered is delivered. This can be thought of as “default on delivery.”
- The vendor doesn’t get payment for the things provided, despite the fact that the customer states that payment was created. This might be cited as ‘default on payment.
- As a result, order taking/giving in e-business may pose a danger to the vendor or the client.
b. Data storage and transmission risks:
- Data in the systems and on the way is vulnerable to a variety of threats.
- Important data may be stolen or altered for nefarious purposes or merely for fun/adventure
- Antivirus softwares installed and updated on a regular basis prove useful in scanning files and discs, protecting data files, folders, and systems against virus attacks.
- Data could be intercepted during transmission. Cryptography can be used for this. It refers to the process of encrypting data and transforming it to cyphertext, an unreadable format. Only those with a secret key may decipher (or decrypt) the message into ‘plaintext.’
c. Risks of threats to intellectual property and privacy include:
- Once the material is available on the internet, it is no longer considered private. It got more difficult to protect it from being copied after that.
- Data provided during online transactions may be shared with others, who may begin flooding one’s inbox with advertising and promotional materials.
Outsourcing
It refers to the long-term outsourcing of non-essential and, more recently, key functions to captive or third-party specialists in order to take advantage of their expertise, efficiency, and, in certain situations, investment.
Feature of Outsourcing
- Activities that are interchangeable or fungible: Activities that are not distinguishable can be outsourced, whereas unique activities cannot.
- Requiring Explicit knowledge which is Formal and Codifiable: Although an IT programmer’s job can be outsourced to a third party, a CEO’s position requires management, technical, and human relations skills.
- Measurable Activity: You can’t outsource something you can’t quantify.
- Activity is not interconnected to other jobs: If a fungible, specialised, and measurable position is linked to other key operations within the organization, it cannot be outsourced.
- Business firms are realising the usefulness of focusing on just a few areas where they have distinct capabilities or core competence, and contracting out the rest of the activities to their outsourcing partners.
1. Quest of excellence
- Outsourcing allows the company to strive for excellence. One, due to their narrow focus, individuals excel in the activities that they can do best.
- They also succeed by increasing their capabilities by outsourcing out the remaining tasks to people who excel at them.
2. Cost reduction
- Division of labour and specialisation improve quality while also lowering costs.
- This occurs when outsourcing partners benefit from economies of scale by providing the same service to multiple organisations.
- Cost reduction is also aided by differences in the prices of various production inputs across countries.
3. Growth through Alliance
- Your investment requirements are minimised to the extent that you can utilise the services of others; others have already invested in such activities for you.
- As a result, you can grow quickly because the same quantity of investible funds creates a big number of firms.
- Inter-organizational information sharing and collaborative learning are facilitated by outsourcing.
4. Fillip to economic development
Outsourcing, particularly offshore outsourcing, encourages entrepreneurship, job creation, and exports in the host countries (i.e., the countries from where outsourcing is done).
Concern over outsourcing
1. Confidentiality
- Outsourcing necessitates the exchange of a great deal of critical information and knowledge.
- It can harm the interest of the party that outsources its processes and even has a risk of competitor firms getting information about that company.
2. Sweat shopping
- Outsourcing aims to reduce expenses by maximising the use of low-cost labour.
- So, the firms that go in for outsourcing look for the ‘doing’ skills rather than development of the ‘thinking’ skills.
3. Ethical concerns
- In order to cut the cost, the companies outsource the work to some other country where the work is done in an unethical way.
- For example work is accomplised by doing child labour.