CHAPTER - 5 EMERGING MODES OF BUSINESS

CHAPTER - 5

EMERGING MODES OF BUSINESS

Introduction

            Modes of business means the manner in which business is conducted and emerging stands for the fact that these changes are happening now, here and there and they are likely to continue.

1)        Digitisation

2)      Outsourcing

3)      Internationalization  and globalization

e-Business

            The term business comprises industry, trade and commerce. E- business may be defined as the conduct of business using the computer networks.

e-Business versus e-commerce

            The terms e-commerce and e-business are used interchangeably but they are distinct concepts. We have already seen that e-commerce refers to online transactions – buying and selling of goods and/or services over the Internet.

             E-commerce is part of e-business. In a broad sense e-Business is the sum of e-Commerce and other activities that have done to promote the business.

            E-Business = e-Commerce + Supply Chain Management + Customer Relationship Management + Business Intelligence + Enterprise Resource Planning + Knowledge Management.

            These online interaction are aimed at improving or transforming business process and efficiency. One of the first to use the term was IBM, in 1997.

Potential benefits of e-Business

£ Improved accuracy, quality and time required for updating and delivering information on products and /or services.

£ Access for customers to catalogues and prices – 24 hours * 7 days.

£ Improved ease and speed of customers ordering.

£ Enhanced market, industry or competitor intelligence acquired through information gathering and research activities.

£ New distribution channels via electronic delivery of some products and services.

£ Expansion of customer base and growth in export opportunities.

£ Reduces routine administrative tasks freeing staff to focus on more strategic activities.

Scope of e-Business

The scope of e-Business is quite vast. Business functions like production, finance, marketing, personnel, etc., and managerial activities such as planning, organising, staffing, controlling, etc., can be carried out effectively through computer networks. Another scope of e-business is to be understood in terms  of people or parties involved in electronic transactions.

B2B Transactions: Transactions taking place between two business enterprises electrically are known as B2B (Business to Business) transactions, e.g., trade negotiations, placing order with suppliers, forming joint ventures, etc.

B2C Transactions: Transactions taking place between business and individual consumers are known as B2C (Business to Consumer) transactions, e.g., consumer placing order online, electronic  payment, consumer seeking clarification on price, terms of payment, etc.

B2GTransactions: Transactions taking place between business and government are called B2G (Business to Government) transactions, e.g., application for licenses, payment of taxes, etc.

B2E Transactions: Transactions taking place between business and employees are called B2B (Business to Employees) transactions, e.g., salary payments, seeking employees’ suggestions online, etc.

Benefits of e-Business

Benefits: The benefits of e-commerce over non-electronic commerce can be seen to affect three major stakeholders: organizations, consumers and society.

1)       To organizations

·        International marketplace

·        Operational cost savings.

·        Mass customization

·        Enables reduced inventories and overheads by facilitating ‘pull’-type supply chain management

·        Lower telecommunications cost

·        Digitisation of products and processes

·        No more time constraints

2)     To consumers

·        24/7 access

·        More choices

·        Price comparisons

·        Improved delivery processes

·        An environment of competition where substantial discounts can be found

3)     To society

·        Enables more flexible working practices

·        Connects people

·        Facilitates delivery of public services

Difference between e-Business and Traditional business

Basic of difference	e-Commerce	Traditional Business
1.      Establishment	Difficult	Easy
2.     Setting up cost	Low	High
3.    Operating cost	Low	High
4.     Element of personal touch	Nil	High
5.    Physical examination of goods	Not possible	Possible
6.    Time delay	Less	More
7.     Business expansion 8.	Very much possible	Difficult;
9.    Intermediaries	Not required	various legal formalities are there Required

Limitations of e-Business

         i.            Low personal touch

        ii.            Incongruence between order taking/giving and order fulfilment speed

      iii.            Need for technology capability and competence of parties to e-Business

      iv.            Increased risk due to anonymity and non-traceability of parties concerned

       v.            People in the organization will object

      vi.            Access limitations

    vii.            Conflicting laws

   viii.            Constant evolution of software tools

      ix.            No scope for checking quality of products

 Online Transactions

v Pre-purchase/ sale-stage including advertising and information seeking

v Purchase/sale stage involving price negotiation, finalizing the purchase/ sale and making payment

v Delivery stage

Buying/selling Process

We shall now discuss from seller’s angle on resources requirements for e-business

1.         Registration

Before making online shopping, one has to register with the online vendor by filling up a registration form. It is for the purpose of opening an account with the vendor. Among various details that you fill up, password is an important item. Thereby your account shopping cart are protected. Otherwise, anyone can login using your name and shop in your name.

2.      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. After you have decided to what you want to buy, you can ‘checkout’ and choose your payment options.

3.      Payment Options

·        Cash on delivery(CoD)

·        Cheque

·        Net-banking Transfer

·        Credit Card

·        Debit Card

·        Digital Cash

Security and Safety of e-Transactions/ e-Business Risks

1.         Transaction Risks

a)      Default on order taking/ giving –  denial on the part of seller that the customer ever placed the             

                                                            order or on the part of customer that he ever placed the order.

b)      Default on delivery -  Not delivered, delivered  at wrong address or wrong goods delivered

c)      Default on payment - Claims that either payment not received by the seller or  Customer claims that payment was made.

2.      Data storage and transmission risks

                        Data stored in the systems and en-route is exposed to various risk. Valuable information may be stolen, or modified for selfish motives or for fun. We have heard about virus and hacking. A virus is a program that attacks itself to computer systems and destroys or corrupts the data stored. Installing and updating anti-virus programs is the solutions.

                     Data may be intercepted while in transmission. For this, We can use Cryptography. It is an act of protecting information by transforming it into an unreadable format called Cypher text.

3.      Risk of threat to intellectual property and privacy

                             Internet is kept open to all, When an information is available over net, it moves out of the private domain. It then becomes very difficult to protect from being copied. Data furnished to others by anyone in the course of online transactions get penalized in the form of receiving a lot of advertisement and promotional literatures into his or her e-mail box. You have no other alternative except to receive them.

Resources required for successful E-business Implementation   

         i.            Adequate computer  hardware

        ii.            Technically qualified work force

      iii.            System of receiving payments

      iv.            Well designed web sits

        v.            Effective telecommunication system

Outsourcing

             Business activities are fast changing in this dynamic world. Since the last decade, a new concept has evolved in the service sector called Business Process Outsourcing(BPO). BPO is a system of getting a business task accomplished through an outside agency. For example, transportation of raw materials into the factory may be entrusted to a transport company; conducting of canteen for employees with a hotel; recruitment of employees with a recruiting agency, etc.

                       In BPO, companies hire out on contract certain tasks, which are performed on a regular basis. It is a deviation from the earlier practice of doing all business operations on its own. Earlier, certain firms used to hire the services of outside agencies occasionally, e.g., hire the services of an advertising agency to carry out an advertisement campaign or entrust the work of conducting a trade fair with an agency to promote a particular product. All routine and regular business tasks were performed by the company staff, e.g., maintaining books of accounts, managing account receivables, etc. (core business activities). Non-core activities are outsourced BPO assumes hiring out even these regular and routine matters. This concept has its origin in the core competence theory propounded by a famous management consultant named C.K. Prahlad.

Scope of Outsourcing

                Outsourcing is more associated with IT – enabled services or BPO (Business Process Outsourcing). The frequently used term is ‘call centres ’ which provide customer-oriented services. Call centres work  24*7 (24 hours and seven days) which handle in-bound (customer queries and grievances) and out-bound (payment follow-up, telemarketing, etc.) traffic.

Need for Outsourcing

                    Necessity is the mother of inventions. This is especially true in the case of outsourcing also. Global competitiveness made business firms to rethink or re-look at very many factors. These include providing higher quality products at fair and reasonable prices, satisfying ever demanding customers, coping up with the emerging technologies, etc.

Advantages of Outsourcing

         i.            It enables the business to concentrate on areas in which it has core competency.

        ii.            Since outsourcing agencies are specialists in their fields, better quality service can be obtained.

      iii.            It can obtain the services at a lower cost than that of running a separate department for this purpose.

      iv.            It can get the advice of outsourcing agencies as they very often act as consultants for this purpose.

Types Of Outsourcing Services

a)      Financial services

b)      Advertising services

c)      Courier services

d)      Customer support services

Concerns over outsourcing

1.         Confidentiality

2.       Sweat-shopping

3.       Ethical concerns

4.       Resentment in the home countries