Class 11 NCERT Solutions: Chapter 5 Emerging Modes of Business Exercise 5.1 (Business Studies)

Short Answer Questions

Question 1: State any three differences between e-business and traditional business.

Answer:

E-business: Conducting business activities over the internet or any other computer network is known as E-business or Electronic Business. E-business conducts all business activities, like trade, commerce, and industry; electronically. It is about using the internet and other computer networks and technologies to provide superior customer service, increase sales and reduce costs. Computer networks, which are more secure, effective, and efficient as compared to the internet are often used in E-business. 

Traditional business: A traditional business is a local store, shop, etc., which offers its services or products to its local customers. It is a set-up where customers will have to visit the store physically to buy the products or services. In traditional business, infrastructure is required, and staff is hired to carry on the business. It involves huge costs, and there are more opportunities for a personal touch. 

Difference between E-business and Traditional Business 

Basis	E-business	Traditional Business
Meaning	Conducting business activities over the internet or any other computer network is known as E-business or Electronic Business.	A Traditional business is a local store, shop, etc., which offers its services or products to its local customers. It is a set-up where customers will have to visit the store physically to buy the products or services.
Ease of Formation	Formation of E-business is easy.	Formation of traditional business is comparatively difficult.
Physical Presence	Physical presence is not required.	Physical presence is required.
Locational Requirements	There is no requirement for location.	There is a requirement for location, and a location near raw materials and markets is preferred.
Cost of Setting up	The cost of setting up an E-business is low as there is no requirement for physical facilities.	The cost of setting up a traditional business is high as there is a requirement for physical facilities.
Operating Cost	Operating cost is low.	Operating cost is high because of fixed charges associated with storage, marketing, etc.

Question 2:  How does outsourcing represent a new mode of business?

Answer: Outsourcing refers to a long-term contracting out generally the less important activities to specialized service providers to take benefits of their expertise, experience, and cost-effectiveness and allow managers to focus on the core activities. The fundamental idea behind outsourcing is that it enables a business to concentrate on its core functions while outsourcing less important tasks to specialist agencies. As a result, outsourcing improves a company’s effectiveness when performing its essential or core activities while decreasing total output costs.

Outsourcing is represented as a new mode of business because it is now becoming an emerging mode of business through which an organisation can focus on its core functions by contracting out its less important activities. Other factors of outsourcing that help in growing its importance in the market include:

• Outsourcing helps in making high-quality products affordable for customers.
• By outsourcing non-important activities, a business can attain success in the things it does best by focusing on them only.
• Outsourcing enables a business to focus its attention and resources on the selected areas for better efficiency and effectiveness.
• It also facilitates innovation and technological development.

Question 3:  Describe briefly any two applications of e-business.

Answer: Conducting business activities over the internet or any other computer network is known as e-business or Electronic Business. e-business conducts all business activities, like trade, commerce, and industry; electronically. It is about using the internet and other computer networks and technologies to provide superior customer service, increase sales and reduce costs. Computer networks, which are more secure, effective, and efficient as compared to the internet are often used in e-business. 

Two applications of e-business are:

1. E-Procurement : It refers to internet-based transactions between businesses, such as “reverse auctions” that enable online trade between a single company purchaser and many vendors and digital platforms that facilitate online trading between multiple buyers and sellers.

2. E-Communication/E-Promotion: This includes e-mails, the publishing of online catalogues with product images, advertising through banners, pop-ups, opinion polls, customer questionnaires, and so on. Meetings and conferences can be conducted using video conferencing.

Question 4: What are the ethical concerns involved in outsourcing?

Answer: Every organisation is not competent in every activity, and to get those things done properly and efficiently, it needs to outsource some of its activities from outside. This contracting out of some activities that were earlier performed by the company itself to a third party is known as Outsourcing. 

However, there are some ethical concerns involved in outsourcing. Some of these concerns are as follows: 

1. Confidentiality: Outsourcing necessitates the exchange of a great deal of critical knowledge and information. It can harm the interest of the party that outsources its processes and even has a risk of competitors getting information about the company’s policies, deals, technology, etc.

2. Sweat shopping: The countries which outsource their work seek to get the maximum benefit from the low-cost manpower of host countries. Moreover, the work outsourced requires ‘doing skills’ instead of ‘thinking skills’, which does not build the competency and capability of the outsourcing partner.  

3. Ethical Concerns: In order to cut the cost, the company has to outsource the work or get the job done from other countries where the work is done in an unethical way. For example, In some of developing countries, weak laws prevail for child labour and women.

4. Resentment in the Home Countries: Because of outsourcing, employment opportunities are shifted to other countries indirectly. Resentment is caused in the home countries amongst the people, especially when the home country is suffering from the problem of unemployment.

Question 5: Describe briefly the data storage and transmission risks in e-business.

Answer: Unlike arm’s length transactions in physical exchange, online transactions are subject to a number of risks. The probability of any mishap resulting in financial, reputational, or psychological losses to the parties involved in a transaction is referred to as risk. Because of the greater probability of such risks in online transactions, security and safety issues have emerged as the most immediate concern in e-business.

These issues can be broadly classified into three categories: Transaction Risks, Data storage and Transmission Risks, and Intellectual property and Privacy Risks.

Data Storage and Transmission Risks:

Indeed, knowledge confers power. But consider what happens if power falls into the wrong hands. Data stored in systems and in transit is exposed to a wide range of threats. Vital information may be stolen or altered for selfish reasons or simply for fun/adventure.

You’ve probably heard the terms ‘virus’ and ‘hacking. ‘Do you know what the full form of the acronym ‘VIRUS’ stands for?

It stands for Vital Information Under Siege. A virus is a programme (a set of commands) that replicates itself on other computers. Computer viruses can cause annoyance in the form of some on-screen display (Level-1 virus), disruption of functioning (Level-2 virus), damage to target data files (Level-3 virus), or complete system destruction (Level-4 virus). Data can be intercepted during transmission. Cryptography can be used for this. It refers to the art of safeguarding information by converting it (encrypting it) into an unreadable format known as ‘cyphertext.’ Only those with a secret key are able to decipher (or decrypt) the message into ‘plaintext.’ This is analogous to using ‘code words’ with someone so that others do not understand what you are saying.

Antivirus software (such as Norton, AVG, and others) should be installed. To protect data files, folders, and systems from virus attacks, all files and discs should be thoroughly scanned with such programmes. Encryption is the process of converting data into code that cannot be read by unauthorised users. Because the sender converts the data into code and the receiver knows the rules for encoding and decoding, no one else can read the message.

Long Answer Questions

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: A number of factors such as rapid globalisation and continuous product invention, have sparked a major shift in business models. E-business and outsourcing are two emerging business models. 

E-business relates to internet trading via computer networks. It allows consumers and sellers to trade products 24 hours a day, seven days a week; saving time, money, and effort.

Outsourcing is the process of contracting out non-core company tasks to third-party vendors. It allows companies to concentrate on important tasks such as research and development to ensure the development of sophisticated products.

The following reasons are responsible for the increasing importance of these trends:

1. Improvements in Information Technology: In order to profit from emerging technologies, businesses have to continuously evolve by adopting new technologies. With advancements in information technology and the rise of the internet, the process of outsourcing and e-business is expanding. Websites are becoming more engaging. It is resolving the ‘poor contact’ issue. In order to remain competitive, every company needs to innovate and create new concepts and products. In this context, e-business and outsourcing have proven to be beneficial for producers because they enable the continuous expansion of company strategies and new technology.

2. Communication Technology Advancement: To effectively face competitive pressures, businesses have to improve their skills for creating utilities and providing value. Communication technology is constantly changing, improving the pace and quality of contact via internet. 

3. Helps in Making High-quality Goods More Affordable: Consumers are more demanding than ever before in terms of higher standards, reduced costs, faster deliveries, and superior customer service. Demand for high-quality, customised goods has increased; and e-commerce and outsourcing are becoming more important in supplying consumers with goods at a reasonable cost. By making it possible to manufacture and supply high-quality goods, e-business and outsourcing help to accomplish the objective of excellence.

4. Diffusion of E-Commerce in all Nooks and Corners of the Country: In order to spread e-commerce in all nooks and corners, India has done about 150 projects. The importance of these trends is also increasing. It is now essential to allow trade from anywhere and at any moment as customer demands increase. The purchasing and selling process has speed up constantly due to e-commerce and outsourcing.

5. Worldwide Competitive Pressures for Higher-quality Products: Managers of businesses and thinkers are constantly developing newer and better methods of doing things in order to enhance company operations. Due to the implementation of a new economic policy in India in 1991, there has been an increase in competitive pressure from large MNCs and global enterprises.

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

Answer: Business transactions conducted through the internet are called online transactions or online trading. It is a payment method that aims to settle money transfers or funds settlements via electronic mode. It also requires security and protection using basic methods like password protection and OTP verification to safeguard the transactions better. It is an increasingly popular method and is the backbone of e-commerce. Basically, online transactions permit buyers and sellers to meet online, trade as needed, and exchange goods or services for money, and give a wider reach. 

The steps involved in on-line trading are: 

1. Registration: In the first step, the customer has to register on that specific e-commerce platform by filling in the details required by that online vendor. By register, we mean that one must have an account with the online vendor. The account is usually password-protected for security reasons. It also includes some sensitive information about the person, such as name, email ID, contact details, bank details, etc. Hence, protecting the account is also of significant importance.

2. Placing an Order: After registration with the vendor, the next step is to add products or services, which you want to buy to the cart. This method of adding items to the cart is quite similar to physical stores, as, in physical stores, we put items in the cart. The order is first saved in a ‘shopping cart’, so as to give the option to the customer to order everything they need in one go. After placing all the items, customers can ‘checkout’ and choose the payment method. 

3. Payment: The buyer usually has a wide variety of payment options to choose from. This payment page is usually highly encrypted, protected, and secured to protect financial information from being leaked out. As this is the most sensitive information, data is avoided to be collected, and leakage of data on this page could be disastrous for everyone involved, as a malicious hacker could gain access to the buyer’s bank account.

There are various payment options allowed in online transactions. 

• Cash on Delivery: As the order is delivered, the cash is handed over simultaneously to finish the trade on both ends. In this case, as the cash is handed, the goods are also delivered from the other end, or services are given simultaneously upon the realization of the delivery of goods or services.
• Cheque: In this mode of payment, a cheque is written from buyer to seller. The seller then takes the cheque and hands it over to the bank. Goods or services are usually delivered only after the realization of the cheque to avoid bouncing of the cheque.
• Net Banking: Money is transferred from the buyer to the seller electronically through the internet from the bank. After the payment is received by the seller, goods are dispatched or services are provided.
• Credit or Debit Card: This is one of the most popular methods of online transactions, and these cards are referred to as ‘plastic money’. A credit card allows customers to make a purchase on credit, whereas a debit card allows customers to purchase products to the extent of the amount in the bank account. The buyer sends his credit or debit card details to the seller, allowing the deduction of a set amount from his/her account. As the seller receives the money, they provide the goods and services for which they have been paid.
• Digital Cash: Digital cash is a piece of electronic media stored in cyberspace that does not exist physically, but can be traded like real cash. Here, the money is saved on a code in a hard drive, USB or cloud that when shared, can be used to trade money from one account to the other. As the buyer uses digital cash to pay for the goods and services, the seller upon receiving the money provides the products or services.

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

Answer: Outsourcing refers to a long-term contracting out generally the less important activities to specialized service providers to take benefits of their expertise, experience, and cost-effectiveness and allow managers to focus on the core activities. 

Need for Outsourcing:

Several factors are responsible for the emergence of outsourcing as a mode of business. Today outsourcing is used not as a compulsion, but also out of choice. Some of the reasons for adopting business outsourcing are discussed below:

1. Focusing of Attention: Outsourcing allows businesses to concentrate on the core (significant) areas and outsource routine tasks. It enables them to focus their attention and resources on the selected areas for better efficiency and effectiveness. For example, the company can focus on maintaining the quality of the products and increasing the productivity of the employees by outsourcing the activities, such as advertisement and book-keeping. 

2. Cost Reduction: In the competitive world, the only way to ensure the survival and profitability of businesses is cost reduction. With the division of labour, and specialization, the company can reduce its cost. It happens due to economies of scale, which accrue to the outsourcing partners, as they perform the same task for different companies. So, it helps client companies to get the benefit of economies of scale and save 10% to 20% of costs. In case, a foreign company outsources its activities to an Indian organization, the foreign company can get the benefit of cheap manpower in India. It also reduces the cost of production.

3. Quest for Excellence: Outsourcing helps firms to get excellence in two ways:

• The business can succeed in the things it does best.
• The firms can contract out the remaining activities to expert and specialized service providers. For example, a company can give the work of developing software to TCS or Infosys.

4. Excellence-driven Growth: The company avails services from other firms enabling the growth and expansion of business as resources saved from outsourcing can be used for expanding the production capacity and exploring new markets. Therefore, businesses can expand rapidly. Apart from financial returns, it facilitates inter-organizational knowledge, sharing, and collaboration. For this reason, today, firms are outsourcing not only their routine, non-core activities, but also, their strategic processes, like Research and Development, etc.

Limitations of Outsourcing: 

1. Confidentiality: Outsourcing necessitates the exchange of a great deal of critical knowledge and information. It can harm the interest of the party that outsources its processes and even has a risk of competitors getting information about the company’s policies, deals, technology, etc.

2. Sweat shopping: The countries which outsource their work seek to get the maximum benefit from the low-cost manpower of host countries. Moreover the work outsourced requires ‘doing skills’ instead of ‘thinking skills’, which does not build the competency and capability of the outsourcing partner.  

3. Ethical Concerns: In order to cut the cost, the company has to outsource the work or get the job done from other countries where the work is done in an unethical way. For example, In some of developing countries, weak laws prevail for child labour and women.

4. Resentment in the Home Countries: Because of outsourcing, employment opportunities are shifted to other countries indirectly. Resentment is caused in the home countries amongst the people, especially when the home country is suffering from the problem of unemployment.

Question 4: Discuss the salient aspects of B2C commerce.

Answer: Business to customer (B2C)  is a model where the sale of the product is between the business concern to the end-users. In this business, the model seller is the business concern person and the consumer is the buyer. Amazon, Flipkart, and Myntra are some good examples where consumers are the end-users.

B2C (business-to-customers) transactions involve business firms on one end and their customers on the other. Although online shopping is the first thing that comes to mind, it is important to remember that selling is the outcome of the marketing process. Marketing begins before a product is offered for sale and continues after the product is sold. As a result, B2C commerce entails a wide range of marketing activities such as identifying activities, promoting, and sometimes even delivering products that are carried out online.

e-business enables these activities to be carried out at a much lower cost but at a much faster pace. For example, an ATM helps to withdraw money 24×7 in a convenient and fast manner.

Salient aspects of B2C commerce

1. Payment Options are Flexible: The most essential function of a B2C company is receiving payment for orders. As a result, its framework must provide consumers with flexible options for payment when processing payments online. The integration of various payment methods expands the possibilities for purchase completion.

2. Customer-specific Goods and Pricing: B2C businesses can charge various prices for their goods depending on the customer type or set of customers. While most businesses are personalising the shopping experience of their customers, it is essential for B2C business software to provide unique product catalogues and pricing. This approach differs from competitive pricing as it establishes various basic prices and distributes them to different categories of consumers.

3. Simple and Secure Shopping Cart: The purchasing cart experience is one of the most vital aspects of a B2C website. Every year, more than 70% of purchasing carts (99 companies) are abandoned for numerous reasons. The easy-to-use, optimised, and secure shopping cart can significantly increase your sales and eventually, company profits.

4. Product Management: The products are the main feature of a B2C site, and it is necessary for a business to convince the customers to continue purchasing on the screen. To convert potential consumers into paying customers, B2C business software responds to product inquiries via live chat features, provide personalised product suggestions, and so on.

5. Buying and Browsing: Customers today want choices, including broad product lists, expanded information, how-to-use (even in the form of videos), immediate assistance via “click or chat” features, and, in many instances, the ability to buy directly from the manufacturer.

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: Even though the electronic mode of doing business is becoming very popular and useful in the present times, it has various disadvantages to it. The limitations of the electronic mode of doing business are:

1. Low Personal Touch:  There is no personal touch in e-business even though it is very high-tech, as it lacks interpersonal touch. And because of this, it is not suitable for businesses, which require a personal touch, such as garments, toiletries, etc. 

2. Incongruence between Order taking/giving and Order fulfilment Speed:  Physical delivery of products may take time, even after the flow of information at a single click of a mouse. So, there is an incongruence between order taking/giving and order fulfilment speed. Users are also frustrated because of technical reasons, such as websites taking an unusually long time to open, servers being unreachable, etc.

3. Need for Technology Capability and Competence of Parties to e-business:  The parties involved in e-business should be well versed with the technologies and world of computers apart from the traditional 3 R’s (Reading, WRiting, and ARithmetic). And this requirement leads to the digital divide, which divides society on the basis of familiarity and non-familiarity with digital technology. Many businessmen and customers who are technologically challenged are unable to grab the benefits of e-business.

4. Increased Risk due to Anonymity and non-traceability of Parties:  It becomes difficult to establish the identity of the parties, as internet transactions occur between cyber personalities. Moreover, it is very difficult to know the location from where the parties may be operating. Therefore, it is riskier to transact through the internet. There are also additional hazards of impersonation (someone else may transact in your name) and leakages of confidential information, such as misuse of OTP and credit card details. Problems of viruses and hacking are also there in e-business.

5. People Resistance:  There is a lot of resistance by people in the case of e-business. Stress and a sense of insecurity are caused amongst people because of the process of adjustment to new technologies and a new way of doing things. As a result, there is resistance amongst people to an organisation’s plans of entry into e-business. 

6. Ethical Fallouts:  There are ethical fallouts in businesses because of e-businesses. Companies use an ‘electronic eye’ to keep track of the computer files, e-mail accounts, etc. of employees. Companies use such information against employees, which is unethical.

Despite these limitations, the scope of e-business is quite broad, which helps in overcoming them. Many companies in India are becoming aware of the advantages of e-commerce and are incorporating it into their strategies. Almost all business tasks, including manufacturing, banking, and marketing, as well as managerial actions such as planning and organising, can be performed over a computer network. Various company and payment applications are widely used in e-business transactions. As a result, despite its limitations, the scope of e-business cannot be restricted. some of the reasons are:

1. Improvements in Information Technology: With advancements in information technology and the rise of the internet, the process of outsourcing and e-business is expanding. Websites are becoming more engaging. It is resolving the ‘poor contact’ issue. In order to remain competitive, every company needs to innovate and create new concepts and products. In this context, e-business and outsourcing have proven to be beneficial for producers because they enable the continuous expansion of company strategies and new technology.

2. Communication Technology Advancement: Communication technology is constantly changing, improving the pace and quality of contact via internet. Therefore, a business must meet the needs of its customers. E-commerce and outsourcing are advantageous to consumers because they allow for quick and efficient post-sale services.

3. Helps in Making High-quality Goods More Affordable: Consumers are more demanding than ever before in terms of higher standards, reduced costs, faster deliveries, and superior customer service. Demand for high-quality, customised goods has increased; and e-commerce and outsourcing are becoming more important in supplying consumers with goods at a reasonable cost. By making it possible to manufacture and supply high-quality goods, e-business and outsourcing help to accomplish the objective of excellence.