Class 11 Business Studies Notes Chapter 5 (Emerging Modes of Business) – Business Studies Book

Alright class, let's delve into Chapter 5: Emerging Modes of Business. This chapter is crucial as it explains the significant shift in how businesses operate, driven largely by technology. Understanding these concepts is vital not just for your Class 11 curriculum but also forms a base for many competitive government exams where questions on modern economic activities are common.

Chapter 5: Emerging Modes of Business - Detailed Notes

1. Introduction

• The way business is conducted has undergone fundamental changes over the past few decades.
• The emergence of the Internet and related technologies has led to new ways of performing business activities, often referred to as 'Emerging Modes of Business'.
• Key emerging modes include E-business and Outsourcing.

2. E-Business (Electronic Business)

• Definition: E-business refers to conducting industry, trade, and commerce using computer networks, primarily the internet. It encompasses not just buying and selling (e-commerce) but also other business functions like production, inventory management, product development, accounting, finance, and human resource management conducted electronically.

• E-commerce vs. E-business:

  • E-commerce: Covers a firm's interactions with its customers and suppliers over the internet (buying and selling). It is a part of e-business.
  • E-business: Is a broader term. It includes e-commerce plus electronically conducted business functions within the firm (like inventory management, production planning, HR processes) and interactions with other businesses.

• Scope of E-business: E-business transactions can be categorized based on the parties involved:

  • B2B Commerce (Business-to-Business): Transactions between two or more business firms. Examples include a manufacturer sourcing raw materials from a supplier online, or distributors checking inventory levels with manufacturers electronically. This forms the largest volume of e-commerce.
  • B2C Commerce (Business-to-Consumer): Transactions between business firms and end consumers. Examples include online retail (Amazon, Flipkart), online travel bookings, online bill payments. This involves activities like marketing, sales, and customer support.
  • C2C Commerce (Consumer-to-Consumer): Transactions between consumers. Typically involves selling used goods or services. Examples include platforms like eBay or OLX where individuals can buy and sell directly from each other. Requires a market maker (the platform) to facilitate the transaction.
  • Intra-B Commerce: Transactions and interactions within a single business firm. Examples include communication between departments, online recruitment, internal inventory tracking, employee portals, virtual team collaborations. This enhances operational efficiency.
  • (Note: Sometimes B2G (Business-to-Government) and C2G (Consumer-to-Government) are also mentioned, involving transactions like tax payments, license renewals, etc., with government portals.)

• Benefits of E-business:

  • Ease of Formation and Lower Investment: Setting up an online business can be relatively easier and cheaper than a traditional brick-and-mortar store (no need for large physical premises, lower setup costs).
  • Convenience: Business can be conducted 24/7, from anywhere, offering flexibility to both businesses and customers.
  • Speed: Information exchange and transactions can occur almost instantaneously, reducing cycle times.
  • Global Reach/Access: Breaks geographical barriers, allowing businesses to access markets worldwide and consumers to choose from global options.
  • Movement Towards a Paperless Society: Reduces paperwork, leading to cost savings and environmental benefits.
  • Cost Savings: Reduced marketing costs (digital marketing can be cheaper), lower personnel costs (automation), reduced inventory holding costs (better management).

• Limitations of E-business:

  • Low Personal Touch: Lack of face-to-face interaction can be a drawback for products requiring high personal engagement (e.g., certain types of clothing, furniture) or for building strong customer relationships.
  • Incongruence between Order Taking/Giving and Order Fulfilment Speed: While ordering is quick, physical delivery takes time, which can sometimes lead to customer dissatisfaction. Logistics management is critical.
  • Need for Technology Capability and Competence: Requires users (both businesses and consumers) to be reasonably familiar with technology. The digital divide (unequal access to technology) can be a barrier.
  • Increased Risk: Due to the anonymity and non-traceability of parties, e-business faces higher risks related to transaction defaults, data security breaches, hacking, viruses, and intellectual property theft.
  • People Resistance: Some employees and customers may resist adopting new technologies and processes.
  • Ethical Fallouts: Concerns regarding online privacy, data usage without consent, and electronic eye on employees/customers.

3. Online Transactions

• Process:
  1. Registration: Typically, the buyer needs to register with the online vendor by providing basic details (name, address, contact, etc.) and setting up a password. This creates a unique account or 'shopping cart'.
  2. Placing an Order: The buyer selects the desired products/services, adds them to the shopping cart, and proceeds to checkout. The system usually confirms availability and final price (including taxes, shipping).
  3. Payment Mechanism: Various options are available:
     • Cash-on-Delivery (COD): Payment is made in cash when the goods are physically delivered.
     • Cheque: The vendor arranges for cheque pickup upon delivery (less common now) or receives it beforehand. Goods are delivered upon realization.
     • Net Banking Transfer: Electronic transfer of funds from the buyer's bank account to the seller's account. Requires authorization through the bank's secure portal.
     • Credit/Debit Card: Most common method. Buyer provides card details (number, expiry date, CVV). Payment gateways process the transaction securely. Often involves OTP (One-Time Password) verification.
     • Digital Cash/E-cash: A form of electronic currency existing only in cyberspace, stored on hard drives or smart cards. Used for online payments (less prevalent than cards/net banking in many regions but growing with mobile wallets).

4. Security and Safety of E-transactions (E-business Risks)

• E-business transactions are vulnerable to specific risks:

  • Transaction Risks:
    • Seller denies order: Seller claims they never received the order.
    • Buyer denies order: Buyer claims they never placed the order (order repudiation).
    • Default on Delivery: Wrong items delivered, wrong address, or non-delivery.
    • Default on Payment: Seller doesn't receive payment for goods supplied, or buyer's card issuer refuses payment.
  • Data Storage and Transmission Risks:
    • VIRUS (Vital Information Under Siege): Malicious programs that can disrupt computer systems, replicate, and destroy data. Spread through email attachments, infected websites, storage devices.
    • Hacking: Unauthorized access to computer systems to steal or manipulate data (e.g., customer information, financial details).
    • Phishing: Fraudulent attempts, usually via email or fake websites, to trick users into revealing sensitive information (passwords, credit card numbers).
  • Risks to Intellectual Property and Privacy:
    • Intellectual Property Theft: Online content (text, images, software) can be easily copied and used without authorization.
    • Privacy Violation: Collection and misuse of personal customer data without consent.

• Need for Security Measures: To mitigate these risks:

  • Encryption: Converting data into an unreadable code (ciphertext) during transmission. Only authorized parties with a 'key' can decrypt it.
  • Digital Signatures: Electronic signatures used to authenticate the sender's identity and ensure the integrity of the message.
  • Secure Sockets Layer (SSL) / Transport Layer Security (TLS): Protocols that create a secure, encrypted link between a web server and a browser. Indicated by 'https://' in the URL and a padlock icon.
  • Firewalls: Hardware or software systems that act as a barrier between a trusted internal network and untrusted external networks (like the internet), controlling incoming and outgoing traffic.
  • Anti-virus Programs: Software designed to detect, prevent, and remove malware, including viruses.

5. Outsourcing

• Definition: Outsourcing is the practice of contracting out non-core business activities or processes to external, specialized agencies. The goal is to leverage their expertise, efficiency, and cost-effectiveness, allowing the main company to focus on its core competencies.

• Business Process Outsourcing (BPO): A common term for outsourcing operational functions.

• Knowledge Process Outsourcing (KPO): Outsourcing of higher-end, knowledge-based tasks requiring specialized domain expertise (e.g., research, analytics, legal services).

• Need for Outsourcing / Advantages:

  • Focusing on Core Activities: Allows businesses to concentrate resources and efforts on what they do best (their core competencies).
  • Quest for Excellence: Specialized vendors often possess superior expertise and technology for the outsourced task, leading to higher quality.
  • Cost Reduction: Achieved through economies of scale enjoyed by the vendor, lower labor costs (especially in offshore outsourcing), and reduced investment in non-core infrastructure.
  • Growth Through Alliance: Enables firms to expand quickly by leveraging the vendor's capacity and investment, without needing significant internal capital expenditure.
  • Fillip to Economic Development: Outsourcing (especially offshore) can create employment opportunities and economic growth in the host countries (where the vendors are located).
  • Access to Specialized Skills: Companies gain access to skills and expertise that might not be available or affordable internally.

• Concerns over Outsourcing / Disadvantages:

  • Confidentiality: Sharing sensitive business information with external vendors poses a risk of leaks or misuse. Requires strong contractual safeguards.
  • Sweat-shopping: Concerns that outsourcing firms (especially in developing countries) may exploit workers with low wages, poor working conditions, and long hours to keep costs down.
  • Ethical Concerns: Issues related to using child labor or discriminatory practices by the vendor. Also, the ethical implications of sharing customer data.
  • Resentment in the Home Countries: Outsourcing, particularly offshore, can lead to job losses in the company's home country, causing social and political backlash.
  • Loss of Managerial Control: The company might lose some control over the quality and execution of the outsourced process.
  • Dependency on Vendor: Over-reliance on a single vendor can be risky if the vendor fails or increases prices significantly.

• Commonly Outsourced Services: Customer support (call centers), IT services (software development, maintenance), financial and accounting services, advertising, courier services, human resource functions (payroll, recruitment).

6. Conclusion

E-business and Outsourcing represent fundamental shifts in business operations. They offer significant benefits in terms of efficiency, reach, and cost savings but also present challenges related to security, ethics, and human factors. Businesses need to carefully weigh the pros and cons and implement appropriate strategies to leverage these emerging modes effectively.

Multiple Choice Questions (MCQs)

1. Which of the following best describes the scope of E-business compared to E-commerce?
   a) E-business is limited to online buying and selling.
   b) E-commerce includes all electronically conducted business functions, including production.
   c) E-business is a broader term than E-commerce, encompassing internal processes and B2B transactions as well.
   d) E-commerce and E-business are identical terms.

2. A company using the internet to manage its inventory levels across different warehouses is an example of:
   a) B2C Commerce
   b) C2C Commerce
   c) Intra-B Commerce
   d) B2B Commerce

3. Which of the following is NOT typically considered a benefit of E-business?
   a) Global reach
   b) Increased personal touch with customers
   c) Lower investment requirements
   d) Convenience of 24/7 operation

4. The risk associated with a customer falsely denying placing an online order is known as:
   a) Hacking
   b) Phishing
   c) Order repudiation (Default on order taking/giving)
   d) Virus attack

5. Which security measure involves converting data into an unreadable code during transmission to protect it from unauthorized access?
   a) Firewall
   b) Digital Signature
   c) Anti-virus software
   d) Encryption

6. Outsourcing is the practice of:
   a) Selling goods directly to consumers online.
   b) Contracting out non-core business activities to third-party specialists.
   c) Expanding business operations into foreign countries.
   d) Conducting all business functions electronically within the firm.

7. A primary reason why companies outsource activities like customer support or IT services is:
   a) To increase direct control over all business functions.
   b) To comply with government regulations mandating outsourcing.
   c) To focus on their core competencies and reduce costs.
   d) To eliminate the need for online security measures.

8. The term 'Sweat-shopping' in the context of outsourcing refers to concerns about:
   a) Leakage of confidential company data.
   b) Job losses in the home country.
   c) Exploitative working conditions (low wages, poor environment) at the vendor's location.
   d) The technical incompetence of the outsourcing vendor.

9. Which payment mechanism involves the buyer paying in physical currency only upon receiving the goods?
   a) Credit Card
   b) Net Banking Transfer
   c) Digital Cash
   d) Cash-on-Delivery (COD)

10. OLX, a platform where individuals can buy and sell used goods directly to each other, primarily facilitates which type of e-commerce?
    a) B2B
    b) B2C
    c) C2C
    d) Intra-B

Answer Key for MCQs:

1. c
2. c
3. b
4. c
5. d
6. b
7. c
8. c
9. d
10. c

Study these notes thoroughly. Focus on understanding the concepts, differences (like E-business vs E-commerce), the scope, benefits, limitations, and risks associated with these modern business methods. Good luck with your preparation!