Chapter 5 — Emerging Modes of Business

Chapter 5 covers the two emerging modes of business — e-business (electronic business driven by digitisation) and Business Process Outsourcing (BPO). It explains the meaning and scope of e-business, differences from traditional business and e-commerce, benefits, limitations, online transaction stages, security concerns, and resource requirements for e-business.

e-Business is defined as the conduct of industry, trade and commerce using computer networks. It includes not only e-commerce (interactions with customers and suppliers over the internet) but also other electronically conducted business functions such as production, inventory management, product development, accounting, finance, and human resource management.

e-Commerce covers a firm's interactions with its customers and suppliers over the internet, making it a narrower term. e-Business is a broader concept that includes e-commerce as well as internal business functions managed through computer networks, such as intra-B transactions via the firm's intranet.

The chapter identifies four types: B2B (business-to-business), where both parties are business firms; B2C (business-to-consumer), covering the marketing and selling process to end customers; Intra-B (within a single firm using intranet); and C2C (consumer-to-consumer), suited for goods like used books or clothes where no established market mechanism exists.

The chapter lists ease of formation and lower investment requirements, convenience (business is available 24 hours x 7 days x 365 days), speed due to parallel business processes that reduce cycle time, global reach as internet is truly without boundaries, and movement towards a paperless society supported by the Information Technology Act 2000.

Limitations include low personal touch making it less suitable for high-touch product categories, incongruence between fast order placement and slower physical delivery, the need for technology capability (causing a digital divide), increased risk due to anonymity and non-traceability of parties, people resistance to new technology, and ethical issues such as employers monitoring employees' e-mail and computer usage.

The chapter identifies three stages: the pre-purchase/sale stage covering advertising and information-seeking; the purchase/sale stage comprising price negotiation, closing the deal, and payment; and the delivery stage. Except for delivery, all stages primarily involve the flow of information.

The chapter describes Cash on Delivery (CoD), cheque pickup arranged by the vendor, net-banking transfer using IMPS, NEFT, or RTGS, credit or debit cards (with credit card details protected by SSL encryption), and digital cash, which is an electronic form of currency that exists only in cyberspace.

Security risks fall under three heads: transaction risks (default on order, delivery, or payment — addressed through identity/address verification and cookies), data storage and transmission risks (virus attacks and hacking — addressed by anti-virus programmes and cryptography/SSL), and threats to intellectual property and privacy (data shared online can be copied or misused leading to junk mail).

Cryptography refers to the art of protecting information by transforming it (encrypting it) into an unreadable format called cyphertext so that only those possessing a secret key can decipher (decrypt) the message into plaintext. It is used to safeguard data against interception during transmission in online transactions.

VIRUS stands for Vital Information Under Siege. It is a program that replicates itself on other computer systems. Its effects range from on-screen display annoyance (Level-1) to disruption of functioning (Level-2), damage to data files (Level-3), and complete destruction of the system (Level-4). Installing and regularly updating anti-virus programmes provides protection.

The digital divide refers to the division of society on the basis of familiarity and non-familiarity with digital technology. Because e-business requires a fairly high degree of familiarity with computers beyond the traditional three Rs, those without such competence are excluded, creating a gap between digital and non-digital participants in business.

Compared to traditional business, e-business has simple formation requirements, no locational constraints, lower operating costs, direct contact with customers and suppliers (no intermediaries), instantaneous response time, flat organisational structure, and simultaneous rather than sequential business processes, though traditional business offers greater personal touch and lower transaction risk.

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