Multiple choice questions : Solutions of Questions on Page Number : 137
Q1 :e-commerce does not include
(a) A business’s interaction with its suppliers.
(b) A business’s interactions with its customers.
(c) Interactions among the various departments within the business
(d) Interactions among the geographically dispersed units of the business.
Answer :
e-commerce does not include interactions among the various departments within a business. This is because inter-department interactions that take place among the departments of a business enterprise are not related to trade. On the other hand, interactions between a business and its suppliers and customers, and among its geographically dispersed business units, form part of e-commerce.
Hence, the correct answer is option (c).
Short answers, long answers and multiple choice questions : Solutions of Questions on Page Number : 138
Q1 :State any three differences between e-business and traditional business.
Answer :
The differences between traditional business and e-business are presented in the table below.
| Basis of difference | Traditional business | e-Business |
| Ease in formation | Formation is relatively difficult as there exist numerous formalities that are required to be fulfilled. | Relatively easier to start. |
| Internal communication | Follows a hierarchical communication structure (from top to bottom) | Follows a non-hierarchical communication structure (no defined structure) |
| Start-up cost | Heavy start-up cost | Relatively low start-up cost (as physical facilities are not required) |
| Market access | Access is restricted to the physical domain. | Access is comparatively wide and unlimited. |
Q2 :Why are e-business and outsourcing referred to as the emerging modes of business? Discuss the factors responsible for the growing importance of these trends.
Answer :
Numerous factors, such as rapid globalization and continuous innovations of products, have triggered a sea change in the modes of business. E-business and outsourcing are two emerging ways of doing business. E-business refers to the trading done online, through computer systems. It enables consumers and sellers to trade goods round the clock, saving time, cost and effort.
Outsourcing refers to the process of contracting out non-core business activities to external agencies. It enables companies to focus on important activities such as research and development for the innovation of sophisticated products.
The following are the factors that are responsible for the growing importance of e-business and outsourcing.
(a) They speed up the business process: The demands of consumers are growing, and it has become necessary to facilitate trade from anywhere and also round the clock. E-business and outsourcing help speed up the process of buying and selling around the clock.
(b) They facilitate innovation and technology development: To sustain in the market, every business needs to innovate and develop new ideas and products. In this scenario, e-business and outsourcing have emerged as a boon for producers as they facilitate continuous development of business strategies and new technologies.
(c) They help make available quality products at lower costs: The demand for high quality and customized products has increased, and e-business and outsourcing play a major role in providing consumers with the required products at a reasonable cost. By facilitating the production and supply of quality products, e-business and outsourcing help attain the objective of excellence.
(d) They pave the way for effective post-sale services: It is important for any business to cater to the needs of its customers. E-business and outsourcing play an important role here by providing quick and effective post-sale services to customers.
Q3 :Outsourcing
(a) restricts only to the contracting out of Information Technology.
(b) restricts only to the contracting out of non-core business.
(c) includes contracting out of manufacturing and R&D as service processes-both core and non-core-but restricts only to domestic territory
(d) includes off-shoring.
Answer :
Outsourcing refers to the process of contracting out non-core activities of a company to external agencies. It involves outsourcing those activities which are not so essential and which are less important for a company. Thus, option (b) is correct, as it states that outsourcing is restricted only to contracting out non-core (less important) business activities.
Hence, the correct answer is option (b).
Q4 :How does outsourcing represent a new mode of business?
Answer :
Outsourcing refers to the process of contracting out less important (i.e., non-core) business activities to external agencies. These external agencies are highly specialized and enjoy expertise in specific business activities such as advertisement and promotion of products and post-sale services.
The basic rationale behind outsourcing is that it allows a company to focus on its core functions while leaving less important activities to specialized agencies. Thus, we can say that outsourcing increases a company’s efficiency in performing its important or core activities and reduces the overall cost of production.
It is owing to these benefits associated with outsourcing that it has become an emerging trend among business houses. Outsourcing has clearly redefined the way businesses are run. In addition, today, consumers are well informed, well educated and discerning, and are aware about all types of products.
This has made industries focus on research and development for the continuous innovation of sophisticated products, increasing their need to outsource less important functions. Research has led to the development of better products for consumers, along with round-the-clock customer care services. Hence, it can be said that outsourcing has emerged as a new facet of business.
Q5 :Elaborate the steps involved in on-line trading.
Answer :
Online trading enables its customers to trade from anywhere. The following are the various steps involved in online trading.
(a) Registration: To begin with, an indenting buyer needs to find an appropriate and reliable shopping website to buy the desired product or products. Once the buyer finds the website, he or she needs to register his or her name by opening a shopping account with the website. For doing so, the buyer is required to key in details such as his or her name, address, unique user name and secret password.
(b) Placing an order: After opening an account, the buyer can start browsing through the products listed, go through other customers’ reviews and compare products. The buyer may select various items according to his or her preferences and put them in a ‘cart’. The buyer can place an order and proceed towards the payment window.
(c) Payment mechanism: In this step, the buyer chooses a preferred mode of payment. The following are the different payment modes that are generally available to a trading website user.
(i) Cash on delivery (CoD): Here, payment is made in cash at the time of delivery of a product.
(ii) Cheque: The user makes payment through cheque, and when the cheque is realized, the goods selected are delivered by the seller.
(iii) Net banking: The user makes an electronic payment to the bank account of the online vendor through the Internet.
(iv) Credit or debit card: The user can also use a credit or debit card (also known as plastic money) to make an online payment. The payment so made is linked to the bank account of the user.
(v) Digital cash or e-cash: This type of currency has no physical existence. It is a system of purchasing cash in relatively small amounts and storing it in the computer system. The consumer can spend the cash when making electronic purchases over the Internet.
Q6 :The payment mechanism typical to e-business
(a) cash on delivery (CoD)
(b) cheques
(c) credit and debit cards
(d) e-cash
Answer :
The payment mechanism that is typical to e-business is e-cash. The other payment mechanisms mentioned – CoD, cheques, and credit or debit cards – are used for transactions in traditional modes of business as well as in e-business.
However, e-cash payment can be made only in the case of online transactions and cannot be used in traditional modes of business.
Hence, the correct answer is option (d).
Q7 :Describe briefly any two applications of e-business.
Answer :
The following are the two applications of e-business.
(a) B2B Commerce (Business-to-Business Transactions): The term ‘B2B commerce’ refers to the transactions or trade between one business and another. All business firms buy (or sell) raw materials, machines and other inputs and services to carry out their business processes.
In doing so, firms have to maintain a good relationship with their distributors, suppliers and vendors. In this context, B2B e-commerce enables businesspersons to strengthen their communication and distribution networks, facilitating the smooth transfer of information, technological know-how and money.
(b) B2C Commerce (Business-to-Customers Transactions): The term ‘B2C commerce’ refers to the transactions between a business firm and its customers; B2C e-commerce transactions not only include activities such as sale or purchase of goods and services but also other marketing activities through the online mode.
It basically involves pre-sale activities (such as promoting products through advertisements) and pre-sale services (such as providing product information and cash-on-delivery services) besides post-sale services (such as customer care services). E-commerce enables business firms to conduct these activities faster and at much lower costs.
Q8 :Evaluate the need for outsourcing and discuss and its limitations.
Answer :
Outsourcing refers to the process of contracting out less important (i.e., non-core) business activities to other agencies, while retaining the more important areas.
Advantages of Outsourcing
The following are the advantages of outsourcing.
(a) Focus on core activities: Outsourcing allows a business enterprise to focus on the activities that are more important to it. This helps it to come up with more sophisticated and superior products, which builds goodwill for it in the market.
(b) Specialisation: The external agencies to which tasks are contracted out are highly specialized in their areas of activity and have expertise in performing the assigned tasks. This contributes to the overall efficiency and excellence of the company which is outsourcing work.
(c) Cost savings: The larger the company, the higher are its constraints in minimizing the cost of its back-office operations. In view of this, outsourcing enables companies, especially large-scale organisations, to perform these operations at reasonable costs (compared with the costs that they would have incurred by performing the operations themselves). Thus, outsourcing is regarded as cost efficient.
Limitations of Outsourcing
The following are the limitations of outsourcing.
(a) Confidentiality: Outsourcing involves sharing vital information and technological knowledge with the firms to which tasks are outsourced. As a result, there is always a risk that these firms might share vital information with the business rivals of the companies which have outsourced tasks to them. This lack of confidentiality can pose a serious threat to companies which rely on outsourcing.
(b) Quality concerns: Once the contract is given and the rates are fixed, it may happen that the firm to which tasks have been outsourced starts using cheap and inferior inputs in order to reduce their own costs and increase their profits. This adversely affects the quality of products and services of the companies outsourcing tasks.
(c) Resentment in home country: Global enterprises outsource their activities to firms located in countries where labour costs are much less. However, if the home countries of these enterprises are facing unemployment, then this may lead to resentment and disturbances.
Q9 :A call center handles
(a) Only in-bound voice based business
(b) Only out-based voice based business.
(c) Both voice based and non-voice based business.
(d) Both customer facing and back-end business.
Answer :
Call centers handle both voice-based and non-voice-based businesses. The voice-based businesses are related to clarifying consumers’ doubts either online or over the telephone. On the other hand, non-voice-based businesses are related to technical back-end activities. The voice-based businesses mainly involve the telecom and banking industries, whereas the non-voice-based businesses are related to information-technology-related products, such as computers, cell phones and television sets.
Hence, the correct answer is option (c).
Q10 :What are the ethical concerns involved in outsourcing?
Answer :
There are numerous ethical concerns that are involved in outsourcing. One of these concerns is related to the use of the cheap-labour tactic in order to reduce the overall cost of production.
This tactic is mainly followed by industries in developed countries, which outsource their production activities to less developed and developing countries, where labour is abundant and available at lower rates.
The labour force in these countries, which may include destitute women, child labourers and unskilled labourers, is exploited to the maximum by industries in their pursuit of higher production targets.
Labour laws in many poor nations are not very strict, which results in the exploitation of labourers. Hence, outsourcing often neglects the ethical, moral and social well-being of labourers in less developed countries.
Q11 :It is not an application of e-business
(a) Online bidding
(b) Online procurement
(c) Online trading
(d) Contract R&D
Answer :
Contracting research and development is not an application of e-business. On the other hand, activities such as online bidding, online procurement and online trading are applications of e-business. Research and development activities are mainly conducted by industries on their own. These activities are very important and, therefore, cannot be contracted out as e-business.
Hence, the correct answer is option (d).
Q12 :Describe briefly the data storage and transmission risks in e-business
Answer :
(a) Data storage risk: Data stored in a system is subject to various kinds of risks, especially during business transactions. If data get into the wrong hands, they may be used by individuals to fulfill their own purposes. In addition, because of malicious and pirated computer software, the data stored may get corrupted by virus attacks.
(b) Transaction risk: Online transactions are highly prone to the following risks.
(i) Default on order taking or giving: Such a situation arises when either the seller denies that the buyer has placed an order, or the buyer denies that he or she has placed an order.
(ii) Default on delivery: This refers to the situation where the wrong goods are delivered at the right place, or the right goods are delivered at the wrong place, or the goods are not delivered.
(iii) Default on payment: This refers to the situation in which the seller does not receive payment, while the buyer claims that he or she has made payment.
Long answers : Solutions of Questions on Page Number : 139
Q1 :Discuss the salient aspects of B2C commerce.
Answer :
The following are the various salient aspects of business-to-consumer (B2C) commerce.
(a) Wide coverage: The term ‘B2C commerce’ refers to the transactions between a business firm and its customers; B2C e-commerce enables businesspersons to extend their trade to a large number of consumers by providing them online global access to their products. It can be said that B2C e-commerce has shrunk the world, and that international boundaries do not play any role.
(b) Effective promotion: Compared with the traditional product promotional methods (advertisements in newspapers, on the radio and on hoardings), products can be promoted and advertised in a more innovative and interactive manner with the use of multimedia and animations through B2C e-commerce. Using e-commerce, sellers can promote their products either on their own websites or on social networking sites such as Facebook, Twitter and Gmail.
(c) Low promotional costs and quick post-sale services: B2C e-commerce benefits businessmen because of its low promotional costs. In addition, it also enables them to provide post-sale services through their registered call centres, which facilitates cheaper and provide faster resolution of complaints compared with traditional post-sale services.
(d) Consumer-friendly payment methods: B2C e-commerce provides a wide range of payment options such as via debit cards, credit cards, cash on delivery and equated monthly installment (EMI) schemes, which are consumer friendly. These methods save time and effort and are also considered safe, by and large.
(e) Easy access: Unlike the traditional modes of business, e-commerce provides easy accessibility to consumers round the clock. At any time during the day, throughout the year and in all seasons, customer can contact the registered call centers and support centers.
(f) Customized goods: In view of the growing complexities and competition in today’s world, custom-made goods have become the need of the hour. In this scenario, e-commerce has emerged as a boon for businessmen, as it allows them to manufacture products according to the individual tastes and preferences of their customers.
Q2 :Discuss the limitations of electronic mode of doing business. Are these limitations severe enough to restrict its scope? Give reasons for your answer
Answer :
The following are a few limitations of the electronic mode of doing business.
(a) Lack of personal touch: Unlike the traditional business methods, e-commerce lacks a personal touch as both the buyer and the seller are not physically present when the deal is made.
As a result, direct trading is preferred over e-commerce in case of products such as clothes, shoes and jewelry, as the buyer prefers the physical presence of the seller.
(b) Lack of security: Online trading and transactions are highly prone to internet risks and online threats. For instance, there may be leakage of credit/debit card details to third parties, the sellers may remain anonymous and there may be virus attacks, hacking and phishing.
(c) Technical drawbacks: Online trading requires basic knowledge of computers and Internet familiarity. This often creates distress for people who are less tech-savvy. Often, the increase in the popularity of computers and the Internet divides society into computer literates and computer illiterates (termed digital divide). Besides, because of technical problems including server glitches, websites may sometimes stop functioning, and this may cause frustration to consumers and even discourage them from revisiting the websites which face such problems frequently.
Despite these limitations of online trading, the scope of e-business remains wide, mainly owing to the continuous implementation of new technology and new updates that help in overcoming the limitations. The following are some of the reasons why the scope of online business is widening.
(i) Day by day, websites are becoming more interactive and consumer friendly. This overcomes the problem of lack of personal touch and gives the consumers the feeling that they are physically and directly trading with the sellers.
(ii) Continuous evolution of information technology has speeded up the flow of communication and information. This enables consumers to raise queries and clear doubts before purchasing a product.
(iii) The Government of India and various NGOs have been making efforts to extend the scope of e-business to rural areas. This not only eliminates the hesitation among people in rural areas to opt for online trading but also increases the overall consumer base of e-commerce.