Business Study Chapter wise notes-

Chapter-5 Emerging Modes of Business-

The ways is done has undergone fundamental changes during the last decades or so. The three
strongest trends that are shaping business are-

(i) Digitisation- the conversion of text, sound, images, video and other series of one and zero
that can be transmitted electronically.
(ii) Outsourcing-
(iii) Internationalisation and globalization

e-Business- refers to conducting business activities over internet or any other computer network. As
business covers wide range of activities like trade, coomerce and industry, e-business also covers these
activities electronically.

e-Business vs e-Commerce- e-commerce deals only with distribution of goods and services, whereas e-
Business is a wider term not only includes e-commerce but also include other electronically conducted
business functions like production, accounting, finance, personnel and administration etc. Therefore
scope is wider of e-business.

Scope od e-Business

1. B2B Commerce- The transactions taking place between business firms are referred to as B to B
transactions..

Example- An automobile manufacturer (like Maruti Udyog) makes several B to B transactions,

such as buying tyres, glass for wind screens, door handles etc for its vehicles from different
business units.

2. B2C Commerce- The transactions taking place between business and customers. eCommerce
facilitates and speeds up the entire B to C process.

It covers following activities

(i) Selling and distribution expenses;

(ii) Conducting surveys to determine customer’s preference;
(iii) After sales service;
(iv) Promotional Activities
3. C to C Commerce – The transactions taking place between two or more customers are known as
C to C Commerce.

Example – Sale of used books or household equipments on cash or barter basis. An excellent
example of OLX and Quikr where consumers can sell their goods and services to other
consumers using e-commerce technology.
 4. Intra-B Commerce- It refers to inter-actions and dealings among various departments and
persons within the firm. It includes the use of interanet to interact and deal between various
departments and persons within a firm. It has facilitated flexible manufacturing within the
company after regular interaction of marketing department with production department.

It is used for conducting transactions o

(i) Inventory and cash management

(ii) Reporting by employees to their seniors
(iii) Human Resource Management
(iv) Recruitment and selection;
(v) Training, development and education.

Companies also resorting to Virtual Private Network (VPN) Technology through which employees can
access to organization network and can work from anywhere through computer network.

e-Business vs Traditional Business

Read from Sandeep Garg on Page no. 5.5

Benefits of e-Business

1. Ease of formation and lower investment requirements;

2. Convenience
3. Speed
4. Global Reach/Access
5. Movement towards paperless society

Limitations of e-Business

(i) Low personal touch;

(ii) Incongruence between order taking/giving and order fulfillment speed
(iii) Need for technology capability and competence of parties to e-business;
(iv) Increased risk due to anonymity and non-traceability of parties;
(v) People resistance;
(vi) Ethical fallout by company using electronic eye to keep track of computer files you use, your
e-mail account and the website you visit etc.

Online transactions

It involves three stages-

1. Pre-purchase/ sale stage including advertising and information seeking

2. Purchase/sales stage comprised of steps such as price negotiations, closing of purchase/sales
deal and payment;
3. Delivery stage

Steps involved in online shopping-

 1. Registration;
2. Placing an order;
3. Payment mechanism
(a) Cash on delivery;
(b) Cheque;
(c) Net banking transfer;
(d) Credit or Debit cards
(e) Digital Cash

Security and safety of e-transactions;

(i) Transactional risks;

(ii) Data storage and transmission risks;
(iii) Risks of threat to intellectual property and privacy.

Outsourcing- Outsourcing refers to contracting out some of its activities to a third party which were
earlier performed by the organization. Like many companies outsource cleaning and security services to
outside agencies on a contractual basis. It is generally involves contracting less important activities to
specialized service providers to take benefits of their expertise, experience and cost effectiveness and
allow managers to concentrate on their core activities.

Need for outsourcing

1. Focusing on areas having core competencies

2. Quest for excellence- Firm can excel in activities that they can do the best by virtue of limited
focus and excel by contracting out the remaining activities to expert and specialized service
providers.
3. Cost Reduction- It not only provides benefits of expert and specialized service of outsourcing
partners but also reduces cost due to economies of large scale which accrue to the outsourcing
partners.

Business Process Outsourcing(BPO)- It is a sub-set of outsourcing that involves contracting of

specialised business tasks, such as human resources and customer services to a third party service
provider

Example- An insurance company outsource their claims processing programme or a bank might
outsource their loan processing system.

Knowledge Processing Outsourcing (KPO)- It is a form of outsourcing that involves the contracting of
knowledge intensive business processes that require special domain expertise to a third party service
provider.

Example-Reasearch & Development, Animation and Design, Legal Services, Data Analytics etc.
Chapter-3 Private, Public and Global Enterprises

India is a mixed economy where both private and public (government) enterprises are allowed to
operate. Therefore its economy may be classified into two sectors-

1. Private Sector- It includes all those entreprises which are managed and owned by individuals.
Group of individuals. The various form of organisations under private sectors are-
 Sole Proprietor;
 Partnership;
 Joint Hindu Family Business;
 Cooperative Society;
 Company
2. Public Sector- It includes all those enterprises which are managed and owned partially or wholly
by the Central Govt.or Stae Govt. Such enterprises may also be part of the Ministry or come into
existence by special Act of Parliament.

Forms of Public Sector Enterprises

(a) Departmental Undertaking – It is financed by Government budget and all activities performed
by it are the integral part of the government functioning. These are under the control of Central/
state Govt.and rules of Central/State Govt undertakings.

In India, railways and posts and telegraph are working as government departments. Similarly strategic
industries like defence and atomic power are also work as departmental undertaking.

Merits of Departmental Undertaking-

1. Complete Govt. Control- Owned, managed and controlled by Govt. Ministry. Facilitates
Parliament to exercise effective control over their operations.
2. Answerable to Parliament- Accountable to Parliament for their performances.
3. Source of Income-Revenue earned by the enterprise is a source of income for the Govt. as it
goes directly to the Govt. treasury.
4. Suitable for national security- Most suitable when national security is concerned as it is under
direct control and supervision of the concerned Ministry.

Limitations of Departmental Undertaking-

1. Lack of flexibility in operations

2. Delay in decision making
3. Bureaucracy and conservative approach
4. Red Tapism
5. Undue govt. interference
6. Indifferent to consumer needs

Suitability of Departmental Undertaking

1. Utmost secrecy- In strategic industries like atomic power and defence sector.
 2. Require absolute govt. control- Like in case of broadcasting( Ministry of Communication such as
India Post, All India Radio and Doordarshan etc.
3. Huge capital investments- Like Indian Space Research Organisation.
4. Source of Revenue- Like in case of Indian Railwys.

(b) Statutory Corporations- It is a corporate body with special legal existence set up under special
Act of Parliament or of the state legislature. The Act defines its powers and functions, rules and
regulations governing its employees and relationship with Govt departments managed and
controlled by Board of Directors appointed by Govt of India. Financially independent and clear
control over specified area. It is a corporate entity with perpetual succession and common seal
with power to acquire, hold, control and dspose of the property.

Example- RBI and Food Corporation of India are some example of Statutory Corporation.

Merits of Statutory Corporations

1. Operational flexibility
2. Freedom from interference
3. Autonomous set up
4. Facilitates economic growth

Limitations of Stautory Corporations

1. Theoretical autonomy
2. Government interference
3. Undesirable practices
4. Delay in action
5. Rigid structure

Suitability of Statutory Corporations

1. Require special powers defined by the Act;

2. Huge capital investments
3. Regular grant from the Govt.
4. Undertakings which require proper balancing between public accountability and operational
autonomy

(c ) Government Company- The company is established under the Companies Act. It is registered and
governed by the provisions of the Companies Act. It is established for the purpose of running an
industrial or commercial undertaking. In this company, not less than 51% of the paid up capital is held
by Central Govt or by any State Govt or partly by Central Govt and partly by one or more State Govt and
includes a company which is a subsidiary of Govt company. It can be formed as a private limited
company or a public limited company. The shares are purchased in the name of President of India.

Features of Govt, Company-

 1. Incorporation- It is formed by an executive rather than any legislative decision.
2. Separate legal entity
3. Management
4. Governed by the provisions of Memorandum and Article of Association
5. Accounting and audit procedures
6. Finance

Merits of Govt. Company-

1. Easy formation;
2. Operational Autonomy
3. Independent Status
4. Prevent unhealthy business practices

Limitations of Govt. Company-

1. Namesake freedom
2. Lack of accountability
3. Defeat of main purpose

Suitability

1. Where Govt. wants its control without its nationalization;

2. Wants to launch an enterprise in collaboration with certain private enterprises.
3. Where big projects requires government planning and funding

(c) Global Enterprises or Multinational Companies (MNCs)- It is a company whose business

operations extend beyond the country in which it has been incorporated. Global enterprise have
their head office in one country but they carry on business operations in other countries.

Example- Pepsi and Coca Cola companies are registered in USA, whereas they operate across the world.

These companies extend their industrial and marketing operations through a network of branches in
several countries. These enterprise do not aim to maximize their profits from one or two products.
Rather they operate in several areas and produce multiple products. They significantly influence the
international economy because their size, large number of products, advanced technology, marketing
strategies and network of operations all over the world.

Merits of Global Enterprises/MNCs

1. Employment opportunities;
2. Advanced technology
3. Inflow of foreign capital
4. Improves standard of living
5. Growth of domestic firms
6. Healthy competition
 7. World economy

Demerits of Global Enterprises or Multinational Companies

1. Disregard of national priorities

2. Creation of monopoly
3. Depletion of natural resources
4. Obsolete technology
5. Threat to National Sovereignty

(e)Public Private Partnership (PPP)

It is a legally binding contract between government and private business firm for the provision of public
assets and/ or public services for the benefit of public. In short, PPP is relationship between private and
public entities in the context of infrastructure and other services.

Example- Kundali Manesar Expresswyas Ltd, PPP model allocate tasks, obligations and tasks among the
public and private partners in an optimal manner.

It is suitable for the projects with small operating requirements. It is also suitable for the projects where
public sector wishes to retain the operating responsibilities.

Advantages

1. Sharing of project risks

2. Increased efficiency
3. Innovation
4. Better viability

Weakness

1. Conflict may arise between the parties on environmental considerations.

2. It does not attract private finance easily.