omtexclasses.com: Emerging Modes of Business

Emerging Modes of Business

3.1 e- business Meaning, scope and benefits.

3.2 Resource required for successful e- business implementation.

3.3 Online Transactions

3.4 Payment Mechanism

3.5 Security and Safety of Business Transactions.

3.6 Outsourcing - concept need and scope.

3.7 Summary

3.8 Exercise.

New Trends in Shopping...

All of you must have seen your parents buying things for you at different times. They may have gone to different shops for different goods. Today the world of shopping has changed so drastically that one need not go to any shop for purchase of goods. All you need is a basic computer with an internet facility. The goods can be purchased on the internet, payments can be made through the internet and the goods are physically delivered at your doorstep. This entire process comes under the subject of e-business.

e-business means using the internet to connect people and processes. It allows you to work across the globe in any field. It opens new doors to customers around the world. So also in business and improves efficiency, increase profits and provides better customer services of business. e-business is web-enabling existing business processes to conduct transactions over the Internet. e-business establishes more closer and responsive relationship with partners, employees and suppliers. It connects, adapts and integrates IT system, so companies are able to manage their business efficiently.

3.1 E-BUSINESS

Meaning Scope and Benefits :

The term "e-business" i.e. electronic business is derived from the terms e-mail and e-commerce. The concept of e-business emerged when IBM coined the term in late 90's. The purpose was to provide buyers a platform on the internet to buy and sell goods. Electronic commerce (e-commerce) was a revolutionary idea that crystallized into a successful concept along with e-business. In the last decade (2000-10), e-business and e-commerce have been one of the most exciting happenings globally.

Very often the terms e-commerce and e-business are used as synonyms. However, in actual terms, e-commerce is a sub branch of e-business. e-commerce is the trading aspect of e-business where it connects buyers and sellers on the internet. e-business on the other hand, includes manufacturing, buying, selling and managing the entire business on the internet.

There has been a tremendous impact of technology today on various aspects of life. Our society has to adapt to this impact and incorporate this change into daily lifestyles. Similarly in the case of business, technological advancements have changed the way in which business operates. The major benefits of e-business are cost reduction and productivity improvement. The internet is user friendly and even the common man can use it effectively. The WTO has also played a vital role in the way the business environment is changing. The use of internet medium for commercial transactions in product services broadly explains the focus of e-business. Transactions under e-business include transactions between consumers, manufacturers, suppliers and the government.

The scope of e-business is not restricted to only online shopping. It also includes online stock, transactions and the use of software. In India, till now business is managed through traditional methods. Now many businesses are becoming aware of the advantages of e-business and are incorporating this into their strategies. It also helps in better communication between business houses and makes purchasing easier for large organizations.

3.2 RESOURCE REQUIRED FOR SUCCESSFUL E-BUSINESS IMPLEMENTATION

The various types of e-business transactions are:

1. Consumer to Consumer (C to C)

Today there are number of websites where consumers can buy and sell goods like books, apparel, electronic goods, fashion jewellery, etc. Here consumers buy and sell goods and services to other consumers. The internet offers a lot of scope for this activity. The process allows buyers and sellers to display information about their goods on the web. It also permits them to rate the products or services.

The payment modes for transactions are made secured through advanced technology like Pay Net and Pay Pal. The internet allows a lot of space for consumer groups to be formed. These forums are very interactive. Redressal of complaints is also possible through such groups. Example of such a website is eBay.

2. Business to Consumer (B to C)

The transactions under B to C are between business firms and consumers. Firms use their site for a range of marketing activities. These include promotion, product information, reviews about the product / service and delivery of the product at the doorstep. The cost of products and services is kept low through this method and the speed of transaction is also faster. Examples of popular websites are www.flipkart.com, www.yebhi.com etc.

The process of withdrawal of funds from one's bank has also been made simple. The growth of Automated Teller Machines (ATM) in India has been phenomenal. Many in India call it `All Time Money'. No longer does one have to go to a crowded bank for money.

3. Business to Business (B to B)

Transactions between business firms come under this category. Business firms interact with each other for a variety of services. These include supplying ancillary parts / components to manufacturers providing value added services like catering and also providing man power.

ADVANTAGES AND DISADVANTAGES OF E-BUSINESS

Advantages of e-business

1. It is easy to set up e-business as compared to traditional business.

2. e-business does not require physical space. It requires highly qualified technical professionals.

3. Communication is easy as there is no face-to-face interaction. This results in easy approach.

4. Cost of setting up e-business is comparatively low as compared to traditional business.

5. There is a direct communication between suppliers and consumers.

6. Relationship building is very strong in e-business.

7. The World Wide Web (internet) offers a lot of exposure to business on a global platform e-business.

8. There is a lot of support from the government for e-business.

Disadvantages of e-business

1. In the absence of face-to-face interaction with business firm / sellers, many buyers hesitate to carry out transactions.

2. The personal touch of the seller / firm is missing. This at times makes the buyer insecure.

3. The consumer is not able to handle the product business transaction. Most buyers want to touch and feel the product before buying.

4. Sometimes the government monitoring can lead to interference in the business.

5. Transaction risk is high.

3.3 ON-LINE TRANSACTIONS

Three Stages in online transactions :

· Pre-Purchase / Sale

· Purchase / Sale

· Delivery stage

Pre-Purchase / Sale: It is based upon advertising and information about the product.

Purchase / Sale: It includes price of the product, price negotiation, actual purchase or sale and payment.

Delivery Stage: After completing sale-purchase stage, this is the final stage.

Steps involved in on-line transactions:

1. Registration: Registration is required for online transactions. The person who wants online transaction needs to register with the online vendor by filling up a registration form. Among various details to be filled in is a `password' relating to the registered `account' and `shopping cart.' For security reasons `Account' and `Shopping cart' are password protected.

2. Placing an order: The online shopper can pick and drop the things in the shopping cart. The shopping cart maintains the record of what items have been picked up while browsing the online store. After making sure about the items to be purchased, the shopper can choose a payment option.

3. Payments: Payment can be done in a number of ways like:

Cash on Delivery (CoD): After physical delivery of goods, payments for the online goods ordered is made.

Cheque: The vendor collects the cheque from the customer and after realization of the cheque, the goods are delivered.

Net banking Transfer: It is an electronic facility of transferring funds through the internet. The buyer transfers the agreed amount to the online vendor's account. After receipt of the amount the vendor delivers the goods.

Credit or Debit Cards: This is popularly known as `plastic money.' They are mostly used for online payments. The vendors get the amount from the buyer through credit or debit card and make the delivery of goods after receiving the payment.

Digital Cash: It is a form of electronic currency that exists only in cyberspace. It has no real physical properties, but offers the ability to use real currency in an electronic format.

In all the transactions information plays a very important role. Information is exchanged in both traditional as well as on line (Internet) business. But as compared to traditional business internet transactions are easier. In traditional business, time is required to travel, to negotiate, to convince, presence of both the parties for face to face interaction. In this process lot of time is wasted. Whereas in on line transaction required information is provided with terms and conditions and it is free from most of the problems referred above. So online transactions are easier and result oriented than traditional business.

While watching television or browsing through internet, note down the information of the companies which are buying and selling their products online.

The following chart explains the difference between the traditional and online buying and selling process:

TRADITIONAL BUYING AND SELLING PROCESS

3.4 PAYMENT MECHANISM

You must have gone many times for shopping with your parents to purchase clothes, books or other goods. The shopkeepers in small shops take cash for the goods sold. In turn they may give you a handwritten cash memo. In bigger shops situated in shopping malls or branded stores, there is a Point of Sale (POS) terminal. This has a small sensor which scans the bar code on the goods and the product is automatically registered along with its price on the computer. The print out is then given to the buyer who pays by cash or by credit / debit card. In e-business payments have to be made online. There is no physical exchange of cash across a counter. Payments have to be made through the web. This is done by an e-commerce application service provider called as payment gateway.

A payment gateway authorizes payments made online for anyone who is trading, buying or selling. These may include retailers, manufacturers, dealers and buyers and sellers of goods on the internet. It

is the virtual equivalent of a physical Point of Sale. Payments are made through debit cards, credit cards and by direct transfers from bank accounts through the net banking facility. Most gateways offer all these options for payments.

Working of a payment gateway

Any customer who uses the payment gateway goes through the following steps:

1. He/she places an order for the goods to be bought and clicks on a button called `SUBMIT' once the merchandise is chosen.

2. The site then asks for the customer's credit card details. Once the details are entered, the browser codes the information.

3. The transaction details are forwards by the e-business website to the payment gateway. At this stage again information is coded.

4. The payment gateway forwarded the information to the payment processor which is used by the credit card issuing bank.

5. The payment processor sends the information to the card association (VISA / MASTER / AMEX)

6. The card association forwards the transaction to the card issuing bank.

7. The card issuing bank authorises the payment. Then it sends its request back through the same process to the merchant website. Once the authorization is received, the sale is approved.

8. The entire process does not take more than 2-3 minutes depending on the speed of the internet connection.

9. If the internet connection fails at any step of the process, then the appropriate procedure is adopted. e.g. if the connection fails after payment has been made but before the order is finalized, then the payment is credited back to the card account within a stipulated time.

The flow chart given below indicates the, steps in the process of a secure transaction.

3.5 SECURITY AND SAFETY OF BUSINESS TRANSACTIONS

While transacting online, payment gateways ensure that the details of the debit/credit cards are protected from misuse. This is done by a method of encrypting sensitive information. Encryption is a process by which readable text information is converted into coded information which can be read only through a special process. A major role for this process is played by software companies. In e-business, the data or information about payments made online is protected through the process of encryption. The information is made secure and then passed on to the merchant establishment or the company which processes these payments. One of the most well-known methods of encryption is Secure Sockets Layers (SSL).

1. Secure Sockets Layers (SSL) : This was developed by the company Netscape in the nineties for transmitting private documents over the internet. The encryption is done using mathematical programmes or protocols which use logical reasoning. SSL is a protocol which is used by many web sites. The sites use the protocol to obtain confidential user information like credit card number etc. Many search engines on the internet such as internet explorer support SSL. A secure connection between client and server is created by using SSL.

In addition to SSL, there is another protocol known as secure HTTP (Hyper Transfer Text Protocol) (s-HTTP). This provides security in transmitting individual messages. Both SSL and s-HTTP have been approved by the Internet Engineering Task Force (IETF) as standards.

3.6 OUTSOURCING :

In many big establishments, shops, markets or bazaars you will often find security guards who are monitoring the parking around the place. These guards are not employee of the establishments but have been recruited through an agent. This agent provides the establishments with the services of the guards. In other words, the establishment has outsourced the security services.

Outsourcing is the process of contracting a business function to specialised agencies. In doing so, the company benefits in two ways:

1. It reduces its own cost.

2. It uses the expertise of the firm which specializes in a particular kind of service.

Generally companies outsource their non-core areas. e.g. in many corporate organizations, hospitals etc. The canteen and sanitation services are usually outsourced to contractors. The contractors enter into an agreement with the company for providing the service. The waiters at the canteen or sanitation workers are not employees of the company but work directly under the contractor. The company makes payments to contractor who in turn pays his employees.

Another example of outsourcing is seen in weddings. The wedding planner outsources all services like decoration, catering, band, etc to providers who are experts in these areas.

Now-a-days many municipal corporation and municipalities have outsourced collection of household waste to private companies.

Household waste being collected by private companies outsourced by Municipal Corporations.

Need for Outsourcing

Today services all over the world are becoming highly specialized. Most services require finely tuned skills. With increasing global competition, most companies are focusing on showcasing their products or improving the quality of their goods. This has forced companies to concentrate on their place in the world market. Therefore, companies are taking a fresh look at their business processes. Due to this, many non-core areas are being outsourced to firms who have an especially skilled work force. The concept of outsourcing has emerged as a result of this thinking.

Advantages of Outsourcing

1. It leads to better efficiency and effectiveness.

2. The companies are able to focus their attention on improving the quality of their product.

3. Outsourcing leads to cost reduction for the company. The cost of outsourcing services is much less than keeping such a large work force on the rolls of the company.

4. Manpower through outsourcing is available at a lower cost.

5. Investment requirements of the company are reduced.

6. Outsourcing helps in knowledge sharing between organizations.

7. It stimulates entrepreneurship, employment and exports in the country from where outsourcing is done.

Disadvantages of Outsourcing

1. There is always a danger of the misuse of company information by the contractor.

2. Many companies compromise on the quality of outsourcing in order to cut costs. This is especially seen in the IT sector where companies try to get cheap manpower from the other countries.

3. In some cases, companies ignore ethical issues related to outsourcing.

4. The quality of the outsourced service is sometimes not up to the mark.

· e-business means using the internet to connect people and processes.

· e-business is web-enabling existing business processes to conduct transactions over the internet.

· The term "e-business" i.e. electronic business is derived from the terms e-mail and e-commerce.

· e-commerce is the trading aspect of e-business where it connects buyers and sellers on the internet.

· e-business on the other hand, e-business includes manufacturing, buying, selling and managing the entire business on the internet.

· The major benefits of e-business are cost reduction and productivity improvement.

· The internet is user friendly and even the common man can use it effectively.

· The various types of c-business transactions are:

Consumer to Consumer (C to C): Here consumers buy and sell goods and services to other consumers. The internet offers a lot of scope for this activity. Examples of such websites are eBay.

Business to Consumer (B to C): The transactions under B to C are between business firms and consumers. Firms use their site for a range of marketing activities.

Examples of popular websites are www.flipkart.com, www.yebhi.com etc.

Business to Business ( B to B): Business firms interact with each other for a variety of services. e.g. value added services like catering and also providing man power.

Three Stages in online transactions:

Pre-Purchase/Sale

Purchase/Sale

Delivery stage

· e-business payments have to be made online.

· There is no physical exchange of cash across a counter.

· Payments have to be made through the web.

· This is done by an e-commerce application service provider called as payment gateway.

· A payment gateway authorizes payments made online for anyone who is trading, buying or selling.

· While transacting online, payment gateways ensure that the details of the debit/credit cards are protected from misuse.

· This protection is done by a method of encrypting sensitive information.

· Encryption is a process by which readable text information is converted into coded information which can be read only through a special process.

· One of the most well-known methods of encryption is the Secure Sockets Layers (SSL). SSL is a protocol which is used by many web sites. There is another protocol known as secure HTTP (Hyper Transfer Text Protocol) (s-HTTP).

· Outsourcing is the process of contracting a business function to someone else. Generally companies outsource their non-core activities.

· By outsourcing the company benefits in two ways:

1. It reduces its own cost.

2. It uses the expertise of the firm which specializes in a particular kind of service.

3.7 EXERCISE

Q.1 A) Select the proper option from the options given below and rewrite the completed sentence :

1. In e-business payments have to be made ......................

a) in cash, b) on credit, c) online

2. The term "e-business" is derived from the terms ........................and e-commerce.

a) e-mail, b) e-pay, e),cash

3. The transactions under ...................... are between business firms and consumers.

a) C to C, b) B to C, c) B to B

4. The process of contracting a business function to someone else is called as ..............

a) e-business, b) outsourcing, c) trading

5. For online transaction ..................... is required.

a) trading, b) registration, c) business

6. The online shopper can pick and drop the things in the ......................

a) shopping mall, b) shopping cart, c) shopping bag

7. An electronic facility of transferring funds through the internet is ................. transfer.

a) cash, b) net banking, c) credit

8. Credit or Debit Cards are popularly known as ..................Money.

a) paper, b) plastic, c) polymer

9. In bigger shops situated in shopping malls or branded stores, there is a .................... terminal.

a) SSL, b) POS, c) HTTP

10. Wedding Planning is an example of .........................

a) corporate organisation, b) outsourcing,

c) buying and selling of goods

B) Match the pairs :

Group "A"	Group "B"
a. e-business b. B to C c. ATM d. Payment gateway e. HTTP	1. cost reduction 2. Hyper Transfer Text Protocol 3. encryption 4. electronic business 5. point of sale 6. Business to Consumer 7. Business to Business 8. authorizes payments made online 9. outsourcing 10. Automatic Teller Machine