NCERT Solutions for Class 11 Business Studies – Chapter 5 – Emerging Modes of Business

Q.1 E-commerce does not include

1. a business’s interactions with its suppliers.
2. a business’s interactions with its customers.
3. interactions among the various departments within the business.
4. interactions among the geographically dispersed units in the business.

Ans.

c) Interactions among the various departments within the business.

Explanation:

Interactions among the various departments within the business are included in e- business not in e-commerce.

Q.2  Outsourcing

1. restricts only to the contracting out of information technology enabled services (ITES).
2. restricts only to the contracting out of non-core business processes.
3. includes contracting out of manufacturing and R& D as well as service processes- both core and non-core – but restricts only to domestic territory.
4. includes off- shoring.

Ans.

d) includes off-shoring.

Explanation:

The term outsourcing means getting something from external service rather than creating within organisation. Off shoring means the transfer of service operations to foreign countries in order to take advantage of a supply of skilled but relatively cheap labour. Services may be outsourced to a foreign company or a wholly owned foreign subsidiary company may be established.

Q.3  The payment mechanism typical to e-business

1. cash on delivery.
2. cheques.
3. credit and debit cards.
4. e-cash.

Ans.

d) e-cash.

Explanation:

The payment mechanism typical to e-business is e-cash. The other payment mechanism like COD, cheques, credit and debit cards are used for transactions in traditional modes of business as well as in e-business. E-cash can be made only in case of online transfer.

Q.4  A call Centre handles

1. only in-bound voice based business.
2. only out- bound voice based business.
3. both voice based and non – voice based business.
4. both customer facing and back-end business.

Ans.

c) both voice based and non – voice based business.

Explanation:

A call centre is an outsourced unit which supports the company by handling customer care services comprising of in bound and out bound calls. Call centre handles both voice based and non – voice based businesses. The voice based businesses are related to clarifying consumers’ doubts either online or over the telephone.

Q.5  It is not an application of e-business

1. online bidding.
2. online procurement.
3. online trading.
4. contract R& D.

Ans.

d) contract R &D.

Explanation:

Contract R & D is an outsourcing activity not covered under e-business.

Q.6  State any three differences between e-business and traditional business

Ans.

The three differences between e-business and traditional business are

Q.7  How does outsourcing represent a new mode of business?

Ans.

Outsourcing represents a new mode of business as it is a departure from the traditional thinking of self sufficiency in business. It refers to a long term contracting out of business activities to captive or third party specialists with a view to benefitting from their experience , expertise, efficiency and investment. Generally the non- core business activities are outsourced but of late even some of the core activities have started been outsourced.

Outsourcing comprises four segments – contract manufacturing, contract research, contract sales and informatics. Global competitive pressures for higher quality products at lower costs, demanding customers and emerging technologies have introduced a re-look at business processes and hence resulted in outsourcing as a new mode of business which is now being resorted to not out of compulsion but out of choice.

Q.8  Describe briefly any two applications of e-business.

Ans.

Two applications of e- business are

1. E-procurement: It involves internet based sales transactions between business firms including ‘reverse auctions’ that facilitate online trade between a single business purchaser and many sellers and digital market places that facilitate online trading between multiple buyers and sellers.
2. E- communication promotion: It includes e-mails, publication of online catalogues displaying images of goods, advertisement through banners, pop-ups, opinion polls and customer surveys etc. Meetings and conferences can be held by means of video conferencing.

Q.9  What are the ethical concerns involved in outsourcing?

Ans.

Outsourcing has raised certain ethical concerns which need to be considered. In search of cheap labour, manufacturing processes are being outsourced to developing countries where they use child labour or women in factories. Working conditions are unhygienic and unsafe. The labour force in these countries is exploited to the maximum by industries in pursuit of higher production targets. Labour laws in many poor nations are not very strict which results in exploitation of labourers.

Q.10  Describe briefly the data storage and transmission risks in e-business.

Ans.

Risks refer to the probability of any mishappening that can result into financial, reputational or psychological losses to the parties involved in a transaction. Online transactions in e-business are prone to a number of such risks.

Data Storage and Transmission Risks: Data stored in the database and en-route is exposed to a number of risks. Vital information may be stolen or modified for some selfish motives or sometimes only for fun. It may be a big loss for the secrecy also. Virus is a program (a series of commands) which replicates itself on the other computer systems. The effect of computer viruses can range some on-screen display (Level-1 virus), disruption of functioning (Level-2 virus) damage to target data files (Level-3 virus), to complete destruction of the system (Level-4 virus). Installing and timely updating anti-virus programmes and scanning the files and disks with them provides protection to your data files, folders and systems from virus attacks. Data may be intercepted in the course of transmission. For this, one may use cryptography. It refers to the art of protecting information by transforming it (encrypting it) into an unreadable format called ‘cyphertext’. Only those who possess a secret key can decipher (or decrypt) the message into ‘plaintext’. This is similar to using ‘code words’ with someone so that others do not understand your conversation.

Q.11  Why are e-business and outsourcing referred to as the emergence modes of business? Discuss the factors responsible for the growing importance of these trends.

Ans.
Today the way of doing business has changed. The manner of conducting business is referred to as the ‘mode of business’. E- business and outsourcing is referred to as ‘emerging modes of business’ as these have brought new ways to in which business is conducted.

E-business covers a firm’s interaction with its customers and suppliers over the internet and also other electronically conducted business functions such as production, inventory management, product development, accounting and finance and human resource management.

Outsourcing refers to a long term contracting out of business activities to captive or third party specialists with the view to benefitting from their experience, expertise, efficiency and even investment.

The various factors responsible for the growing importance of these trends are as follows:

• Outsourcing has become important due to the following reasons:
  To achieve better efficiency of core activities: Firms are realising the fact that efficiency and effectiveness can be achieved only by focusing on just a few areas where they have distinct capability or core competence. Hence, the firms contract out rest of the activities to their outsourcing partners who have specialisation in those activities.
• To minimise cost: Due to the presence of cut throat competition, the only way to survival and profitability is cost reduction. This can be achieved by outsourcing since the outsourcing partners deliver the same service to a number of organisations and enjoy the economies of large scale.
• To improve quality: Outsourcing enables the firms to get the benefits of division of labour and specialisation as core activities are done by them and other activities are outsourced to those firms who excel in performing them. Ultimately, it improves the quality of the product of a firm.
• To grow through alliance: Investment requirement can be reduced by outsourcing some activities to others agencies as they have invested in those activities on behalf of the business. In case, a business has stake in the business of an outsourcing agency, it derives the benefit of reduced costs and also shares the profits of the overall business of the outsourcing firms.
• To achieve economic development: Outsourcing stimulates entrepreneurship, employment and export in the host countries. This encourages economic development in countries which obtain outsourcing business.

E-business has become important due to the following reasons:

• Easy to Start: Procedural requirements for setting up e-business are very less in comparison to traditional business. There is less requirement of capital but more of customer contacts. No physical location is required for setting up the business.

• Flexibility: Customers can shop conveniently sitting at home at any time. It provides greater flexibility to the personnel as they can do work from wherever they are and whenever they may want to do it.
• High Speed: Buying and selling involve exchange of information that internet allows at the click of a mouse. The cycle time of business transaction is substantially reduced.
• Global Access: It provides global access to the companies as well as to the customers. It allows the seller an access to the world market and on the other hand, it allows the buyer a freedom to choose products from almost any part of the world.
• Paperless Society: It has considerably reduced dependence on paperwork. For instance, the companies can source their supplies of materials and components through the net, without involving paperwork. Even government departments and regulatory authorities are increasingly allowing electronic filing of returns and reports.

Q.12  Elaborate the steps involved in on-line trading.

Ans.
The following are the steps involved in online trading-

1. Registration: The first step towards online trading is registration .Before online shopping, one has to register with the online vendor by filling-up a registration form. Registration means that you have an ‘account’ with the online vendor. Among various details that need to be filled in is a ‘password’. This is password protected otherwise anyone can login using your name and shop in your name.
2. Placing an order: The next step after registration is placing an order. You can pick and drop the items in the shopping cart. Shopping cart is an online record of what you have picked up while browsing the online store. Just as in a physical store you can put in and take items out of your cart, likewise, you can do so even while shopping online. After being sure of what you want to buy, you can ‘checkout’ and choose your payment options.
3. Payment mechanism: The last step is payment which can be done in the following ways –

• Cash-on Delivery (CoD): Payment for the goods ordered online may be made in cash at the time of physical delivery of goods.
• Cheque: The online vendor may arrange for the pickup of the cheque from the customer’s end. Upon realisation, the delivery of goods may be made.
• Net-banking Transfer: In this case, the buyer may transfer the amount for the agreed price of the transaction to the account of the online vendor who may, then, proceed to arrange for the delivery of goods.
• Credit or Debit Cards: Credit card allows its holder to make purchase on credit. About 95 per cent of online consumer transactions are executed with a credit card. The amount due from the card holder to the online seller is assumed by the card issuing bank, which later transfers the amount involved in the transaction to the credit of the seller. Buyer’s account is debited.
• Digital Cash: This is a form of electronic currency that exists only in cyberspace. This type of currency has no real physical properties, but offers the ability to use real currency in an electronic format. This type of payment system hopes to resolve the security problems related to the use of credit card numbers on the internet.

Q.13  Elaborate the need for outsourcing and discuss its limitations.

Ans.
It is a fact that today outsourcing is being resorted to not out of compulsion, but also out of choice. Organisations are contracting out non-core and sometimes core activities to captive units or third party specialists in order to benefit from their expertise, efficiency and experience.

Outsourcing has become important due to the following reasons:
a) To achieve better efficiency of core activities: Firms are realising the fact that efficiency and effectiveness can be achieved only by focusing on just a few areas where they have distinct capability or core competence. Hence, the firms contract out rest of the activities to their outsourcing partners who have specialisation in those activities.
b) To minimise cost: Due to the presence of cut throat competition, the only way to survival and profitability is cost reduction. This can be achieved by outsourcing since the outsourcing partners deliver the same service to a number of organisations and enjoy the economies of large scale.
c) To improve quality: Outsourcing enables the firms to get the benefits of division of labour and specialisation as core activities are done by them and other activities are outsourced to those firms who excel in performing them. Ultimately, it improves the quality of the product of a firm.
d) To grow through alliance: Investment requirement can be reduced by outsourcing some activities to others agencies as they have invested in those activities on behalf of the business. In case, a business has stake in the business of an outsourcing agency, it derives the benefit of reduced costs and also shares the profits of the overall business of the outsourcing firms.
e) To achieve economic development: Outsourcing stimulates entrepreneurship, employment and export in the host countries. This encourages economic development in countries which obtain outsourcing business.

The following are the limitations of outsourcing:

a) Confidentiality: Outsourcing involves sharing of vital information with an outsourcing agency. If the outsourcing agency does not preserve the confidentiality of information and leaks it to the competitors, it can harm the interest of the organisation. Moreover, if complete processes are outsourced, there is a further risk of the outsourcing partner starting up a competitive business.
b) Sweat shopping: The organisations that outsource their activities try to extract maximum work from low cost manpower of the host countries. The work outsourced is relatively simple such that it does not build much competency and capability of the outsourcing partner.
c) Ethical Issues: Outsourcing at times overlooks ethical issues. In fact, outsourcing to countries with low cost labour encourages unethical practices in the host country such as low wage payment, child labour etc.
d) Resentment in Home Countries: Outsourcing involves shifting out of a process to a host country. It may cause resentment back in the home country from which the job is being sourced out, particularly if the home country is suffering from the problem of unemployment.

Q.14 n Discuss the salient aspects of B2C commerce.

Ans.
B2C is the firm’s interaction with the customers. B2C transactions have business firms at one end and its customers on the other end.

The salient aspects of B2C commerce are:

Lower Cost: Marketing, promoting and selling of goods or services can be carried out online at a much lower cost but at a high speed due to the use of internet.
Online Surveys: Companies can conduct online surveys to ascertain as to who is buying what and what the customer satisfaction level is.
Customer Satisfaction: It helps in making the products as per the requirements of the customers. When the customers find the products as per their needs, it provides them satisfaction.
Feedback: It enables a firm to be in touch with its customers always. Customers can give their valuable suggestions and feedback to the company.

Q.15 Discuss the limitations of electronic mode of doing business. Are these limitations severe enough to restrict its scope? Give reasons for your answer.

Ans.
Following are the main limitations of electronic mode of doing business

Low Personal Touch: E-business lacks interpersonal interaction with the customers. For this reason, it becomes less suitable mode of business for products such as garments, jewellery etc., which require high personal touch with the customers.

Time Delay in Physical Delivery: There is time gap between placing an order online and obtaining physical delivery of the goods. This may frustrate the customer.

Risk in Transactions: Transactions occur over the internet. There is no personal contact between the parties. There is risk of impersonation, leakage of confidential information, data hacking etc. Hence, the transactions are riskier.

Need for Technology: Both the parties need a fairly high degree of familiarity with modern technology. Persons who are not much aware about the internet cannot go for e-business.

• : Sometimes organisations planning entry in e-business face employees’ resistance. If the employees are not well versed with the IT skills, they think that it may harm their interests.

Ethical Concerns: With the advanced technology, it is possible to keep a secret and close watch on one’s files on computer, e-mail account, web sites visited etc. It provokes some ethical concerns from the employees’ point of view.

These limitations are not severe enough to restrict its scope because most of these are in the process of being overcome. Websites are becoming more and more interactive to overcome the problem of ‘low touch.’ Communication technology is continually evolving to increase the speed and quality of communication through internet. Efforts are on to overcome the digital divide, for example, by resorting to such strategies as setting up of community telecentres in villages and rural areas in India with the involvement of government agencies, NGOs and international institutions. India has undertaken about 150 such projects to spread e-commerce everywhere.