CHAPTER 5

EMERGING MODES OF BUSINESS

Definition of E business
E business may be defined as the conduct of industry trade and commerce using the computer network
Scope of E business

1. B2B Commerce: Both the parties involved in E commerce transactions are business firms and hence the
name B 2B i.e business to business For example an automobile manufacturer makes several B 2B transactions
for buying tires doors handle etc and delivering cars to showroom
2. B2C Commerce: B2 C business to customer transactions have business firm at one end and its customers on
the other end. It enables the business to remain in touch with the customer. It includes activities like selling
and distribution of goods, promotional activities after sales services etc. For example with the distribution of
ATM it is now possible to withdraw money anytime in safe and secure manner
3. C2C commerce: Here the business originates from the consumer and the ultimate destination is also
consumers thus the name C2C commerce for example sale of used goods household equipments on eBay.com
Olx.com quicker.com
4. Intra B commerce: Here parties involved in the electronic transactions are from within a given business firm
hence the name intra B commerce, It involves interaction and dealing among various departments and
persons within the firm for inventory and cash management, reporting by employees to their seniors,
selection and training of employees VPN is also used
Difference Between E-Business and Traditional Business

Points of E-Business Traditional business

differences

Meaning It refers to electronic commerce and It refers to a local store that offers
also internet-based activities. products and services to local
customers.

Cost Starting an electronic business is Traditional businesses have high

inexpensive. start-up costs in terms of location
and market.

Operating E-business has lower operating costs Traditional businesses have high
Cost because all activities are conducted operating costs.
online.

Physical In an e-business, no physical This business includes all activities

Examination examination of goods is required. related to the local market, a physical
examination is possible.

Distribution As all transactions are conducted via Various intermediaries such as

the internet, there is no channel of wholesalers, retailers, and sales
distribution for an online business. agents are involved in this business.

Risk The electronic business is risky because Transaction risks are low due to
there is no direct or personal contact arm’s length transactions and face-
between the parties. to-face contact.

Human An online business requires technically Traditional businesses can be run

Resources qualified IT professionals. smoothly with semi-skilled and skilled
labour.

Benefits of E business
1. Ease of formation and lower investment requirement: E business is relatively easy to start there less legal
formalities to set up moreover e-business does not require investment in shop or display
2. Convenience: Internet offers the convenience of 24/7 days a week 365 days a year business It offers The
advantage of Access anything anywhere any time
3. Speed: Information moves very fast through Internet which speed up the process of buying and selling E
business needs very less time to complete the business cycle as the entire process is done on a click of a
mouse
4. Global reach: Internet is truly without boundaries. On the it allows the seller an access to global market on
the other hand it efforts to the buyer a freedom to choose products from almost any part of the world
5. Movements towards a paperless society: Has considerably reduced dependence on paperwork as most of
the work is done electronically through computers even the government departments and regulatory
authorities have started using computers in their working
 Limitations of E-business:
 o 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.
o 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.
o 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.
o 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.
o People Resistance: Some employees and customers may resist adopting new technologies and
processes.
o Ethical Fallouts: Concerns regarding online privacy, data usage without consent, and electronic
eye on employees/customers.

Outsourcing (Business process outsourcing-BPO)

It refers to a long-term contracting out generally the non-core and off late even some of the core activities to
captive or third-party specialists with a view to benefiting from their experience, expertise, efficiency and even
investment
Features
 Outsourcing involves contracting out.
 Generally, noncore business activities are outsourced.
 The process may be outsourced to a captive unit or a third party. (Captive services providers are set up
for providing services of a given kind to only one firm whereas third-party services provide services to
other firms also.)
Scope of Outsourcing
The term outsourcing has more popularly come to be associated with business process outsourcing (BPO).
BPO is more popularly known as call centres which provide customer-oriented voice-based services 24 hours *
7 days. About 70% of BPO Industries revenue comes from call centres.
Need for Outsourcing:
Businesses are realising the value of concentrating on a small number of areas where they excel or have core
competency while outsourcing the remaining tasks to their outsourcing partners.
By focusing their attention and resources on a few key operations, they may be able to narrow the scope of
their business and increase efficiency and effectiveness.
1.Quest of Excellence
 The use of outsourcing enables businesses to pursue excellence. One is that people who have a narrow
focus excel at what they are best at.
 Additionally, they succeed by enhancing their abilities by delegating the remaining tasks to experts.
2.Cost Reduction
 Specialisation and the division of labour raise quality while reducing costs.
 This happens when outsourcing partners offer the same service to numerous organisations, thereby
releasing economies of scale.
 The fact that different production inputs are priced differently in different nations also helps to reduce
costs.
3.Fillip to Economic Development
 Offshore outsourcing, in particular, promotes entrepreneurship, job growth and exports in the host
countries (i.e., the countries from where outsourcing is done).
4.Growth Through Alliance
 The need for investments is reduced to the extent that one can use other people’s services. This is
because others may have already made these investments.
 The same amount of investible funds can therefore support numerous businesses in terms of growth.
Outsourcing promotes collaborative learning and information sharing across organisations.
Business Process Outsourcing (BPO)
BPO is a subset of outsourcing that involves the contracting of a specific business task, such as human
resources and customer service, to a third-party service provider.
Knowledge Process Outsourcing (KPO)
KPO is form of outsourcing that involves the contract of knowledge intensive business processes that require
specialized domain expertise to a third-party service provider.
Concern Over Outsourcing
Confidentiality
The surplus exchange of crucial knowledge and information is necessary for outsourcing. It may be detrimental
to the interests of the party outsourcing its operations, and there is even a chance that information about that
company may be obtained by rival firms.
Sweat Shopping
As a result, companies that outsource focus more on developing “doing” skills than “thinking” skills.
Ethical Concerns
Companies outsource their work to another nation where it is carried out unethically to reduce costs. For
instance, child labour is used to complete tasks.
Resentment in the Home Countries
In the process of outsourcing manufacturing, marketing, R&D or IT-based services, “employment” or jobs are
ultimately contracted out from one country to another. Especially if unemployment is a problem in the home
country, this might make people bitter there.