5.1 Introduction
- The way business is conducted has changed significantly over the last decade. These changes are known as “emerging modes of business”.
- The three strongest trends shaping business are: (i) digitisation, (ii) outsourcing, and (iii) internationalisation and globalisation. This chapter focuses on the first two: e-business and Business Process Outsourcing (BPO).
- Business firms must strengthen their ability to create utility and deliver value to meet competitive pressures and consumer demands for better quality, lower prices, and faster delivery. Business practices are constantly evolving due to the quest to benefit from new technologies.
5.2 E-Business
- E-business is defined as the conduct of industry, trade, and commerce using computer networks. The internet is the most familiar public network, while firms may use more private and secure networks for internal functions.
- E-business vs. E-commerce: While often used interchangeably, e-business is a broader term than e-commerce. E-commerce specifically covers a firm’s interactions with its customers and suppliers over the internet. E-business includes e-commerce as well as other electronically conducted business functions such as production, inventory management, and human resource management.
5.2.1 Scope of E-Business
- The scope of e-business is vast and includes almost all types of business and managerial functions, which can be carried out over computer networks. The scope can also be viewed by the parties involved in electronic transactions, which include:
- (i) B2B Commerce (Business-to-Business): This involves transactions between two business firms. For example, a car manufacturer can use a computer network to place orders with suppliers, monitor production and delivery of components, and make payments. Historically, e-commerce began with B2B transactions using Electronic Data Interchange (EDI).
- (ii) B2C Commerce (Business-to-Customers): This involves transactions between a business and its customers. It includes a wide range of marketing activities, such as product identification, promotion, and sometimes even online delivery of digital products like music or films. B2C commerce allows businesses to be in touch with customers 24/7 and conduct online surveys to gauge satisfaction levels.
- (iii) Intra-B Commerce (Within a firm): This involves electronic transactions among different departments and people within a single firm. Using an intranet allows for flexible manufacturing, efficient inventory and cash management, and effective human resource management. This also includes interactions with employees, sometimes called B2E (Business-to-Employee) commerce, where activities like recruitment and training can be done online.
- (iv) C2C Commerce (Consumer-to-Consumer): In this type of commerce, the business originates and ends with consumers. It is suitable for selling used goods, and the internet provides a market system and security for these transactions. Examples include platforms like eBay and payment intermediaries like PayPal, which hold money until the buyer receives the goods.
5.3 Benefits of E-Business
- Ease of formation and lower investment requirements: E-business is relatively easy to start and requires less investment compared to setting up a traditional industry.
- Convenience: E-business operates 24 hours a day, 7 days a week, and 365 days a year. It offers the advantage of accessing anything, anywhere, anytime.
- Speed: E-business allows for the exchange of information at the “click of a mouse”. The time taken to complete a business cycle is substantially reduced.
- Global reach/access: The internet has no boundaries, giving sellers access to a global market and buyers the freedom to choose products from almost anywhere in the world.
- Movement towards a paperless society: The use of the internet has reduced the dependence on paperwork and “red tape”. The Information Technology Act 2000 gives legal recognition to electronic records and digital signatures, enabling paperless dealings.
5.4 Limitations of E-Business
- Low personal touch: E-business lacks the warmth of interpersonal interactions, making it less suitable for products that require a high personal touch, such as garments or toiletries.
- Incongruence in speed: While information travels instantly, the physical delivery of a product takes time, which may frustrate customers.
- Need for technological capability: E-business requires a high degree of familiarity with computers, leading to a “digital divide” in society.
- Increased risk due to anonymity: Internet transactions occur between “cyber personalities,” making it difficult to establish the identity and location of parties. This increases risks like impersonation, leakage of confidential information, and threats from viruses and hacking.
- People resistance: The stress and insecurity of adjusting to new technology can cause people to resist an organization’s move into e-business.
- Ethical fallouts: Companies may use “electronic eyes” to monitor employees’ computer files, emails, and websites, raising ethical concerns.
5.5 Online Transactions
- Online transactions typically involve three stages: (i) pre-purchase/sale (advertising and information seeking), (ii) purchase/sale (price negotiation and payment), and (iii) delivery.
- The steps for a customer to make an online purchase include:
- Registration: Creating an account with the online vendor by filling out a form with details and a password.
- Placing an order: Selecting items and adding them to an online shopping cart before checking out and choosing a payment option.
- Payment mechanism: Various options are available, including Cash-on-Delivery (CoD), cheque, net-banking transfer, and credit or debit cards. Digital cash is also a form of electronic currency that can be used for web purchases.
5.6 Security and Safety of E-Transactions: E-Business Risks
- Online transactions are prone to risks that can result in financial, reputational, or psychological losses. These risks can be categorized into three types:
- Transaction risks: These include default on order taking/giving, default on delivery, and default on payment. Risks can be mitigated by identity verification, order confirmation, and using secure shopping sites and payment systems like SSL Certificate.
- Data storage and transmission risks: Data can be stolen or modified by viruses or hackers. Protection includes using anti-virus programs and cryptography, which transforms data into an unreadable format.
- Risks of threat to intellectual property and privacy: Information on the internet can be easily copied. Additionally, data furnished during online transactions may be sold to others, leading to junk emails.
5.7 Resources Required for Successful E-Business
- In addition to money, men, and machines, e-business requires resources for developing, operating, maintaining, and enhancing a website. A website is a firm’s online location on the World Wide Web and is the embodiment of the content a firm provides.
