Emerging Modes of Business

Chapter 5: Emerging Modes of Business

Understanding Emerging Modes of Business

**Emerging modes of business** refer to new ways of conducting business that have fundamentally changed due to modern technological developments. The prefix "emerging" indicates that these changes are happening currently and will continue in the future. The three strongest trends shaping modern business are:

**Digitisation**: Conversion of text, sound, images, video, and other content into binary data (ones and zeroes) that can be transmitted electronically

**Outsourcing**: Delegating business functions to external service providers

**Internationalisation and Globalisation**: Expanding business operations across national borders

These are **not new businesses** but rather **new ways of doing existing business** through improved processes and technologies. Business organisations constantly evolve their practices to create and deliver value, meet competitive pressures, and respond to consumer demands for better quality, lower prices, faster deliveries, and improved customer service.

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What is e-Business?

**e-Business (Electronic Business)** is defined as the **conduct of industry, trade, and commerce using computer networks**. It represents the digital transformation of traditional business processes.

Key Distinction: e-Business vs e-Commerce

**e-Commerce** refers specifically to a **firm's interactions with customers and suppliers over the internet** — essentially buying and selling online.

**e-Business** is a **broader term** that encompasses:

All e-commerce activities (B2C and B2B transactions)

Internal business functions conducted electronically

Production, inventory management, product development

Accounting, finance, and human resource management

Planning, organising, and controlling functions

**Remember**: e-Business includes e-commerce plus much more. It covers the entire digital transformation of business operations.

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Scope of e-Business

The scope of e-business is extensive and can be viewed from two perspectives:

(1) By Business Functions

Almost all business functions can be conducted electronically:

**Production**: Managing manufacturing processes digitally

**Marketing**: Online promotion, surveys, customer engagement

**Finance**: Electronic payments, accounting, banking

**Human Resources**: Recruitment, training, payroll management

**Managerial Functions**: Planning, organising, controlling via digital systems

(2) By Types of e-Commerce Transactions

#### **B2B (Business-to-Business) e-Commerce**

Definition: Electronic transactions between two **business firms**.

**Functions**:

Firms interact with **suppliers, vendors, and distributors**

Placement of orders and monitoring production

Real-time tracking of stock-in-transit

Electronic payments and document transfers

Customised production based on customer specifications routed through dealers

**Example**: An automobile manufacturer maintains a computer network to order components from multiple vendors, monitor delivery, control distribution through middlemen at different locations, and ensure real-time stock replenishment.

**Historical Note**: e-commerce originally meant facilitating B2B transactions using **Electronic Data Interchange (EDI)** technology to send/receive commercial documents like purchase orders and invoices.

#### **B2C (Business-to-Customer) e-Commerce**

Definition: Electronic transactions between a **business firm and its customers**.

**Activities Covered**:

**Online shopping** and product selection

**Marketing activities**: Identifying customer needs, promotion, delivery

**Customer engagement**: 24/7 availability

**Customisation**: Tailoring products to individual preferences

**Payment flexibility**: Multiple payment options at customer convenience

**Surveys and feedback**: Round-the-clock customer interaction

**Benefits to Customers**:

Individual attention and customised products

Flexible delivery and payment options

Access to products 24 hours, 7 days a week

Competitive pricing and discounts

Wider product choices

Quick and timely delivery (especially digital products)

**Example**: Rita logs onto an online shopping mall at midnight and purchases customised products with flexible delivery options, which would be impossible in traditional retail stores.

#### **Intra-B (Internal/Intra-Business) e-Commerce**

Definition: Electronic transactions **within a business firm** among different departments and employees.

**Tools and Technologies**:

**Intranet**: Private computer network within the organisation (similar to intercom for voice)

**Virtual Private Network (VPN)**: Allows employees to work remotely from any location

**Functions**:

Communication between marketing and production departments

**Flexible manufacturing**: Customised product creation based on customer specifications

**Inventory management**: Efficient stock control across departments

**Cash management**: Better financial coordination

**Human resource management**: e-Recruitment, e-Learning, e-Training

**Employee interactions** (B2E commerce): Online recruitment, interviews, selection, training

**Tele/video conferencing**: Meetings conducted online

**Field reports**: Real-time data submission via email

**Advantage**: Employees do not need to come to physical office; work can be done remotely using VPN at their own convenience.

#### **C2C (Consumer-to-Consumer) e-Commerce**

Definition: Electronic transactions **originating from consumers and destined to consumers**.

**Characteristics**:

**Suited for goods without established market mechanisms**: Used books, clothes, second-hand items

**Global reach**: Internet allows searching for buyers/sellers worldwide

**Anonymity concerns**: Transactions between unknown parties

**Security Mechanisms**:

**Rating systems**: Sellers and buyers rate each other (e.g., eBay). A seller with 2,000 customers all rating positively builds trust

**Payment intermediaries**: Services like **PayPal** hold buyer's money until goods are received and accepted, reducing fraud risk

**Example**: eBay platform enables consumers to sell used goods to other consumers globally with secure transaction mechanisms.

#### **C2B (Consumer-to-Business) e-Commerce**

Definition: Transactions initiated by **consumers** directed toward **businesses**.

**Activities**:

**Shopping-at-will**: Customers purchase according to their schedule

**Call centres**: Toll-free lines for queries and complaints 24/7

**Outsourced services**: Call centres can be outsourced to BPO providers

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Comparison: e-Business vs Traditional Business

| **Feature** | **Traditional Business** | **e-Business** |

|---|---|---|

| **Geographic Coverage** | Limited to physical location | National and international markets accessible |

| **Operating Hours** | Restricted to business hours | Available 24 hours × 7 days |

| **Investment Required** | High capital investment for infrastructure | Relatively low investment requirements |

| **Procedures** | Complex, lengthy procedural requirements | Ease of formation and startup |

| **Cost Structure** | Higher operational costs | Gradual decline in operational costs |

| **Customer Reach** | Limited by geography and distribution channels | Unlimited through internet |

| **Product Customisation** | Limited to mass production | Flexible manufacturing enables mass customisation |

| **Customer Interaction** | Periodic and limited | Round-the-clock interaction |

| **Supply Chain** | Push model (producer-driven) | Pull model (customer-driven) |

| **Competition** | Large firms dominate | Small and large firms compete equally |

| **Product Delivery** | Time-consuming | Quick, especially digital products |

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Benefits of e-Business

Benefits to Business Organisations

1. **Expands marketplace**: Access to national and international markets without physical presence

2. **Lower operational costs**: Gradual decline in overhead, staffing, and infrastructure costs

3. **Pull supply chain management**: Customer demand drives inventory and production (vs traditional push model)

4. **Competitive advantage**: Differentiation through online services and personalisation

5. **Efficient time management**: Faster order processing and delivery

6. **Small firms co-exist with big firms**: Network and contacts matter more than networth; win-win situation for all sizes

**Example of networked business**: A restaurant owner without physical space can operate online, maintaining a menu featuring cuisines from partner restaurants. Customers order online, orders route to the nearest partner restaurant, food is delivered, and payment is electronically processed. This requires network (relationships) rather than capital networth.

Benefits to Consumers and Society

1. **Flexibility**: Shop anytime, anywhere at personal convenience

2. **Competitive pricing**: Price comparisons, discounts, special offers easily available

3. **More options and customisation**: Wider product choices tailored to individual needs

4. **Quick and timely delivery**: Especially beneficial for digital products (music, films, software)

5. **Employment potential**: Creation of new job categories and business opportunities

6. **Facilitate e-Auctions and e-Tenders**: Transparent bidding processes

7. **Interaction with consumers**: Feedback collection, surveys, complaint resolution

8. **Wider outreach**: Access to rural and remote areas

**Real-world example**: **ATM (Automated Teller Machine)** speeds up money withdrawal. Previously, bank withdrawals required procedural formalities and long waiting periods. ATMs enable customers to withdraw money instantly, with back-end processes handled later. Similarly, e-commerce accelerates entire B2C transactions.

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Advantages of e-Commerce: Key Points

(i) Ease of Formation and Lower Investment

**Relatively easy to start** compared to traditional business requiring licenses, infrastructure, etc.

Internet benefits apply equally to big and small businesses

**"Networked individuals and firms are more efficient than networth individuals"**: Having contacts (network) matters more than having capital (networth)

Small entrepreneurs can start with minimal physical infrastructure

(ii) Convenience: 24 Hours × 7 Days

Customers can shop anytime without geographical or time restrictions

Businesses operate continuously without closing

Services available on customer schedules, not business schedules

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Flexible Manufacturing and Mass Customisation

Traditional manufacturing presented a **trade-off**: Craftsmen produced **customised products** (expensive, long delivery times) OR industries produced **mass-produced homogeneous products** (cheap due to economies of scale but no customisation).

**e-Commerce enables Mass Customisation**: Organisations now offer **customised products at lower costs** previously associated only with mass-produced commodities.

**Real-world Examples**:

**Dell (US)**: "Build your own PC" — customers customise specifications online

**Levi Jeans (Original Spin)**: Tailored jeans service offering 49,500 different sizes and 30 styles (1.5 million options) for $55, delivered in 2-3 weeks

**National Bicycle (Japan)**: Custom-built bicycles within 2-3 days

**Simon and Schuster (US)**: Teachers order customised textbooks matched to individual courses, with Xerox DocuTech generating 125,000+ customised books monthly

**SmithKline Beecham (US)**: Customised smoking cessation programmes based on call centre questionnaires generating personalised communications

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Business Process Outsourcing (BPO)

**Business Process Outsourcing (BPO)** is the **delegation of specific business functions or processes to external service providers**, typically in different geographic locations (often offshore).

Why BPO Emerged

Firms recognised that:

Not all business activities provide competitive advantage

Some functions could be performed more efficiently by specialist providers

Cost savings through lower labour costs in other countries

Focus on core competencies while outsourcing non-core activities

Scope of BPO

BPO covers a wide range of business services:

1. **IT Services**: Software development, IT maintenance, technical support

2. **Back-office Operations**: Data entry, accounting, payroll processing, billing

3. **Customer Service**: Call centres, customer support, helplines, complaint resolution

4. **Human Resources**: Recruitment screening, training administration, payroll

5. **Finance and Accounting**: Invoice processing, financial analysis, bookkeeping

6. **Content Moderation**: Content verification and management

7. **Market Research**: Data collection and analysis

8. **Telecommunications**: Customer communication services

Benefits of BPO

#### **To Business Organisations**:

**Cost reduction**: Labour costs in BPO destinations (India, Philippines) significantly lower than developed countries

**Focus on core business**: Management concentrates on strategic activities

**Improved efficiency**: Specialist BPO providers offer economies of scale

**Flexibility**: Scale outsourced services up or down based on demand

**Access to expertise**: BPO providers bring specialised knowledge

**24/7 operations**: Work continues across time zones

#### **To Employees/Workers**:

**Employment opportunities**: Millions of jobs created, especially in developing countries like India

**Skill development**: Workers receive training in latest technologies and processes

**Career growth**: Pathways for advancement in BPO sector

**Competitive wages**: Better salaries compared to local job markets

**International exposure**: Interaction with global companies and standards

#### **To Consumers and Society**:

**Better customer service**: 24/7 support available

**Lower product prices**: Cost savings from outsourcing reduce final product costs

**Economic development**: BPO drives growth in developing countries

**Skill transfer**: Technology and process knowledge spreads globally

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Security Concerns of e-Business

Despite numerous benefits, electronic mode of business raises significant security concerns:

(i) Data Security

**Unauthorized access**: Hackers intercepting sensitive business information

**Data breaches**: Stealing of customer personal information, financial data

**Information loss**: Accidental deletion or system failures causing data loss

(ii) Transaction Security

**Fraud and forgery**: Fake payment confirmations, fraudulent transactions

**Payment interception**: Capturing payment information during electronic transfer

**Chargeback fraud**: Customers disputing legitimate transactions

(iii) Cyber Threats

**Malware and viruses**: Programs damaging systems and stealing information

**Phishing attacks**: Deceptive emails/websites extracting credentials

**Ransomware**: Malicious software holding data hostage for payment

(iv) Authentication Issues

**Identity theft**: Criminals impersonating legitimate users

**Weak passwords**: Vulnerable account access

**Man-in-the-middle attacks**: Intercepting communications between parties

(v) Regulatory and Compliance Risks

**Data protection laws**: Compliance with government regulations (GDPR, India's data protection rules)

**Consumer privacy**: Protecting personal information as per regulations

**Intellectual property**: Preventing unauthorised copying of digital content

Security Solutions Employed

**Encryption**: Converting data into coded format unreadable without keys

**Digital certificates**: Verifying authenticity of websites and parties

**Firewalls**: Software preventing unauthorised network access

**Secure payment gateways**: Encrypted payment processing systems

**Biometric authentication**: Using fingerprints, facial recognition for access

**Multi-factor authentication**: Requiring multiple verification methods

**SSL/HTTPS protocols**: Secure communication channels

**Regular security audits**: Identifying and fixing vulnerabilities

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Requirements for Firm's Initiation into e-Business

To successfully transition to e-business, organisations must establish:

(i) Technical Infrastructure

**Internet connectivity**: Reliable, high-speed internet access

**Hardware**: Computers, servers, networking equipment

**Software**: Business management systems, payment gateways, security software

**Cloud infrastructure**: Scalable data storage and computing resources

**Network security**: Firewalls, encryption, security protocols

(ii) Website and Digital Presence

**E-commerce platform**: Website or app for conducting business

**User-friendly interface**: Easy navigation for customers

**Mobile compatibility**: Responsive design for mobile users

**SEO optimisation**: Search engine visibility

**Domain name and hosting**: Professional online address

(iii) Business Process Integration

**Digital workflow**: Converting physical processes to electronic systems

**Database management**: Efficient customer and inventory data systems

**Supply chain integration**: Linking with suppliers and distributors electronically

**Inventory management system**: Real-time stock tracking

**Order processing system**: Automated order fulfilment

(iv) Payment Systems

**Payment gateways**: Secure online payment processing

**Multiple payment options**: Credit cards, debit cards, e-wallets, net banking

**Digital wallet integration**: PayPal, Google Pay, etc.

**Fraud detection systems**: Identifying suspicious transactions

(v) Customer Service Infrastructure

**Call centres**: Handling customer inquiries (can be outsourced via BPO)

**Email support**: Customer service via email

**Chat support**: Real-time customer interaction

**CRM system**: Customer Relationship Management software tracking interactions

**Feedback mechanisms**: Collecting and managing customer reviews

(vi) Human Resource Requirements

**e-Commerce specialists**: Website developers, digital marketers

**IT professionals**: Network administrators, security experts

**Customer service representatives**: Handling online inquiries

**Data analysts**: Analysing customer behaviour and trends

**Training staff**: Ensuring employees can use new systems

(vii) Legal and Compliance Framework

**Terms and conditions**: Clear policies for online transactions

**Privacy policy**: Data protection commitments

**Return and refund policy**: Clear procedures for returns

**Legal registration**: Compliance with e-commerce regulations

**Tax compliance**: Proper reporting and tax payment for online sales

**Consumer protection**: Adherence to consumer protection laws

(viii) Cybersecurity Measures

**Security protocols**: SSL certificates, encryption

**Regular backups**: Data protection against loss

**Access controls**: Restricting employee access to sensitive data

**Security monitoring**: Detecting and preventing cyber attacks

**Compliance certifications**: ISO certifications, security standards

(ix) Logistics and Delivery

**Warehouse management**: Efficient storage and inventory

**Shipping partners**: Reliable courier services

**Tracking systems**: Real-time shipment tracking

**Return logistics**: Process for handling returned items

**Last-mile delivery**: Final delivery to customer location

(x) Financial Resources

**Capital investment**: For technology and infrastructure

**Working capital**: For inventory and operations

**Contingency funds**: For unexpected expenses and security breaches

**Insurance**: Cyber liability and e-commerce insurance

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Key Exam-Important Definitions and Concepts

**Digitisation**: Conversion of text, sound, images, and video into binary data (ones and zeroes) for electronic transmission.

**e-Business**: Conduct of industry, trade, and commerce using computer networks; includes all electronic business functions.

**e-Commerce**: Firm's interactions with customers and suppliers over internet; subset of e-business.

**B2B**: Business-to-business transactions between two business firms electronically.

**B2C**: Business-to-customer transactions between business firms and consumers online.

**Intra-B**: Internal electronic transactions within a single business firm among departments.

**C2C**: Consumer-to-consumer transactions where consumers buy from and sell to each other online.

**Intranet**: Private computer network within an organisation for internal communications.

**Virtual Private Network (VPN)**: Secure network allowing remote employees to access organisation systems.

**Electronic Data Interchange (EDI)**: Technology for sending and receiving commercial documents electronically (original form of B2B e-commerce).

**BPO (Business Process Outsourcing)**: Delegation of specific business functions to external service providers, typically in different geographic locations.

**Mass Customisation**: Offering customised products at lower costs previously associated only with mass-produced items.

**Pull Supply Chain**: Inventory and production driven by customer demand (vs push model driven by producer).

**Flexible Manufacturing**: Ability to produce customised products based on individual customer specifications.

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Important Exam Distinctions and 5-Mark Comparison

Table: e-Business vs Traditional Business (Suitable for 5-Mark Questions)

| **Aspect** | **Traditional Business** | **e-Business** |

|---|---|---|

| **Definition** | Conduct of business through physical locations and personal interaction | Conduct of business using computer networks and internet |

| **Market Scope** | Limited to geographic area of operation | Global market accessible 24/7 |

| **Operating Hours** | Fixed business hours (9-5, e.g.) | Round-the-clock operations |

| **Startup Cost** | High investment in physical infrastructure, staff, licenses | Low startup investment; network matters more than capital |

| **Customer Interaction** | Limited to office hours; personal visits required | Continuous interaction via email, chat, phone |

| **Product Customisation** | Limited; mass production preferred for economies of scale | Flexible; mass customisation possible |

| **Supply Chain** | Push model (producer decides production) | Pull model (customer demand drives production) |

| **Delivery Time** | Weeks or months; limited by physical logistics | Days or hours; instant for digital products |

| **Competition** | Large firms dominate due to capital requirements | Small and large firms compete equally |

| **Price Transparency** | Limited; customers accept quoted prices | High; customers easily compare prices |

| **Employment** | Concentrated in specific locations | Distributed globally via remote work and BPO |

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Multiple Choice Questions for Practice

**Q1. Which of the following is NOT included in e-business but is included in e-commerce?**

A) Production management

B) Customer buying and selling online

C) Inventory management

D) HR training and development

**Answer: B** (e-commerce specifically covers buying/selling; all others are broader e-business functions)

**Q2. In B2B e-commerce, which parties are involved?**

A) Business and customers

B) Two business firms

C) Consumers only

D) Employees and managers

**Answer: B**

**Q3. Which of the following best describes mass customisation?**

A) Producing identical products cheaply

B) Offering customised products at mass-produced prices

C) Producing limited quantity luxury items

D) Bulk purchasing by businesses

**Answer: B**

**Q4. Which technology allows employees to work remotely while accessing company systems?**

A) Internet

B) Intranet

C) Virtual Private Network (VPN)

D) Extranet

**Answer: C**

**Q5. The practice of outsourcing business functions to external service providers is called:**

A) Insourcing

B) Resourcing

C) Business Process Outsourcing (BPO)

D) Benchmarking

**Answer: C**

**Q6. Which type of e-commerce allows consumers to sell to other consumers?**

A) B2B

B) B2C

C) C2C

D) Intra-B

**Answer: C**

**Q7. ATM example in the chapter illustrates which benefit of e-business?**

A) Security

B) Speed and convenience

C) Cost reduction

D) Employment generation

**Answer: B**

**Q8. Electronic Data Interchange (EDI) was originally used for:**

A) Online shopping

B) Customer service

C) B2B transactions using commercial documents

D) Employee training

**Answer: C**

**Q9. Which security mechanism does eBay use to build trust in C2C transactions?**

A) Digital certificates only

B) Rating systems for buyers and sellers

C) Government verification

D) Bank guarantees

**Answer: B**

**Q10. The conversion of text, sound, and images into ones and zeroes for electronic transmission is called:**

A) Encoding

B) Compression

C) Digitisation

D) Virtualisation

**Answer: C**

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Case-Based Application Example

**Case Study**: Rita's Online Shopping Experience

Rita, a college student in Delhi, wants to purchase customised merchandise at midnight. Traditional retail stores are closed. She logs onto an online shopping portal (e-business platform) and:

1. **Browses products** (B2C interaction): Searches through thousands of products from sellers across India

2. **Customises order**: Selects a design, colour, and size exactly matching her preferences (mass customisation)

3. **Checks ratings**: Seller has 4.8/5 stars from 2,000+ customers (trust mechanism)

4. **Makes payment**: Uses multiple payment options securely (encrypted transaction)

5. **Tracks order**: Real-time shipment tracking from warehouse to doorstep

6. **Provides feedback**: Rates product and seller after delivery (C2C benefit)

**Business Benefits**: The seller operates from home (low investment), reaches national market (24/7), customises products (flexible manufacturing), and enjoys equal competition with large retailers.

**Security**: Payment processed through encrypted gateway; buyer protection via payment intermediary ensures money held until product acceptance.

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This comprehensive chapter note covers all sections, definitions, examples, distinctions, and exam-important concepts from Chapter 5 on Emerging Modes of Business. A student studying these notes thoroughly will be well-prepared to answer any CBSE board examination question on this chapter.