Introduction to Emerging Modes of Business
Digitization, Outsourcing, and Globalisation are some of the strongest trends that are shaping business across the world. The way business is done has undergone some fundamental changes, in the last decade or so we are introduced to some different types and modes of business. ‘Mode of Business’ can be defined as the manner of conducting business. Digitization of business has helped sellers to reach new highs in terms of reach and no physical barrier.
Electronic Business (E-Business):
E-Business can be defined as the conduct of Industry, Trade & Commerce using the computer networks. It includes all the electronically conducted business functions such as production, inventory management, product development, accounting & finance, and human resource management.
E-Commerce: It can be defined as the firm’s interactions with its customers and suppliers over the internet. E-Commerce is a part of E-Business, E-Business is a broader term than E-Commerce.
Scope of E-Business:
The scope of E-Business is quite vast. Almost all the business & management functions can be carried out over computer networks. Viewing from the perspective of people and parties involved in the electronic transactions and networks the scope of E-Business is further visualized into four directions. They are-
1. B2B Commerce: B2B refers to Business to Business. Here, the parties involved in the E-Commerce transactions are business firms. With an injection of the internet into business, a network of computers is used for placing orders, monitoring production, delivery of components, and making payments between two businesses.
2. B2C Commerce: As the name implies. Business Commerce transactions have business firms at one end and its customers on the other end. B2C Commerce entails a wide range of activities including marketing, promotion, and delivery of the products. Further, the B2C variant of E-commerce enables a business to be in touch with its customers on a clock basis.
3. Intra-B Commerce: Here, the parties involved in the electronic transactions are from within the organization. E-Business is a much wider term and includes the use of intranet for managing interactions and dealing among various departments and functions within the organization. The use of computer networks makes it possible for the firm to go in for flexible manufacturing, marketing department to interact constantly with the production department or any other department for effective and efficient management.
4. C2C Commerce: Consumer to Consumer business originates from the consumer and the ultimate destination is also consumers. When there is no established market mechanism for a product, the vast space of the internet allows persons to globally search for potential buyers on their own. Additionally, E-Commerce technology provides market system security to such transactions.
Benefits of E-Business:
1. Ease of Formation and Lower Investment Requirement: E-Business is relatively easy to start, it doesn’t require heavy investment on the procedural requirement for setting up an industry.
2. Convenience: The Internet offers the convenience of time and place. You can use the internet from anywhere and at any time. So, E-Business is enabled and enhanced by electronics and offers the advantage of accessing anything, anytime and anywhere.
3. Speed: Much of the buying and selling through the internet involves the exchange of information that is allowed at the click of a mouse. Cycle Time i.e. the time taken to complete a cycle from the origin of demand to its fulfillment is substantially reduced due to the transformation of the business processes from being sequential to becoming parallel or simultaneous.
4. Global Reach/Access: The Internet is true without boundaries. It allows the seller access to the global market and it also affords the buyer the freedom to choose products from all over the world.
5. Movement Towards Paperless Society: The dependence on paperwork has been considerably reduced with the increase in the use of the internet. Maintaining records, getting permissions, approvals, licenses, etc. all are done through computers and electronic filing which helps reduce the use of paper.
Limitations of E-Business:
1. Low Personal Touch: E-Business lacks the warmth of interpersonal interactions. So, it is low preferable for products that demand high personal touch.
2. Order Fulfilment Speed: Information can flow at the click of a mouse but the physical delivery of the products takes time. So, the incongruence between order taking/giving and order fulfillment speed is a major hindrance.
3. Need for Technology Capability and Competence: E-Business requires a fairly high degree of familiarity with the world of computers, this imposes a digital divide among people.
4. Increased Risk: Due to the anonymity and non-traceability of parties, there is an increased risk.
5. People Resistance: The process of adjustment to new technology and a new way of doing things causes stress and a sense of insecurity. People may resist accepting new things.
6. Ethical Fallouts: The Internet can cause a breach of privacy. Any organization can keep an electronic eye on everything that is happening on its portal, which can go out of the boundaries sometimes.
The exchange of information in the traditional business model can only be done at severe time and cost constraints but in the presence of the internet, information or delivery of any information-intensive products and services such as software and music can take place online. There are three steps involved in online transactions. Firstly, the pre-purchase/sale of the stage includes advertising and information seeking, secondly, the purchase/sale stage is comprised of steps such as price negotiation, the closing of purchase/sale deals and payment, thirdly, the delivery stage.
1, Registration: Before online shopping one has to register with the online vendor by filling up a registration form, this process is done to have an ‘account’ with the online vendor.
2. Placing an Order: We can select items that we want to buy and place them in the shopping cart. A shopping cart is an online record of what you have picked up while browsing the online store. After being sure of what you want to buy, you can ‘checkout’ and choose the payment option.
3. Payment Mechanism: The payment for the purchase can be done in several ways-
- Cash on Delivery(COD)- Payment of goods ordered online may be made in cash at the time of delivery.
- Cheque- The online vendor may arrange for the pickup of the Cheque from the customer’s end.
- Net-Banking- Payment can be done through electronic transfer of funds over the internet.
- Credit or Debit Cards- Also known as plastic money, the majority of online transactions are done through credit or debit cards.
- Digital Cash- It is a form of electronic currency that exists only in cyberspace. This type of currency has no physical property but offers to use real currency in an electronic format.
Security and Safety of E-Transactions: E-Business Risks-:
Online transactions unlike physical transactions are prone to several risks. Risk refers to the probability of any mishappening that can result in financial, reputational, or psychological losses to the parties involved in a transaction. We will discuss them one by one-
1. Transactional Risk: Online Transactions are vulnerable to the following types of transaction risks-
- Seller denies that the customer ever placed the order or the customer denies that he ever placed the order. This is called ‘default on order taking/giving’.
- The delivery does not take place or the wrong product was delivered. This is a case of ‘default on delivery’.
- Seller does not get the payment for the goods supplied but the customer claims that the payment was made. This may be referred to as ‘default on payment’.
2. Data Storage and Transmission Risks: Data stored in the systems and en-route is exposed to several risks. Vital information may be stolen or modified.
3. Risks of Threat to Intellectual Property and Privacy: Once the information is available over the internet, it moves out of the private domain. It then becomes difficult to protect it from being copied.
Outsourcing refers to a long-term contracting out generally the non-core and of late even some of the core activities to captive or third party specialists to benefit from their experience, expertise, efficiency, and even investment. Its features include:
- Outsourcing Involves Contracting Out
- Generally, Non-core Business Activities are Outsourced
- Processes may be Outsourced to a Captive Unit or a Third Party
Need for Outsourcing:
There can be many reasons behind the importance and need of outsourcing. They are-
- Focusing of Attention
- Quest for Excellence
- Cost Reduction
- Growth through Alliance
- Supports Economic Development
Concerns Over Outsourcing:
Some of the concerns that outsourcing is besieged with are-
- Ethical Concerns
- Resentment in the Home Country
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