Contemporary and Evolving Modes of Business | ISC Class 11 Business Studies Notes

This note covers the meaning and scope of e-Business, the resources needed to run e-business successfully, how online transactions and payment mechanisms work, the meaning of blockchain and crypto-assets, the security and safety of online transactions, the meaning of e-Commerce and its B2B/B2C/C2C forms, Q-Commerce and the use of artificial intelligence in it, the meaning, features, advantages and disadvantages of e-Banking, the main online banking services (RTGS, NEFT, IMPS, Digital Banking, UPI, e-wallet and the Digital Rupee), mobile banking, debit cards versus credit cards, the ATM, and the demand draft.

What is e-Business, and what is its scope?

e-Business may be defined as the conduct of industry, trade and commerce using computer networks.

Business is a wider term than commerce, and in the same way e-business is a more elaborate term than e-commerce: it comprises every business function carried out electronically, including production, inventory management, product development, accounting and finance, and human resource management, not just buying and selling.

The scope of e-business can be seen in two ways. First, almost all business functions, such as production, finance, marketing and personnel administration, and managerial activities such as planning, organising and controlling, can be carried out over computer networks.

Second, viewed by the parties involved, a firm's electronic transactions extend in three directions: B2B commerce (a firm's interactions with other businesses), B2C commerce (a firm's interactions with its customers) and intra-B commerce (a firm's own internal processes conducted over an intranet).

Definition: e-Business. The conduct of industry, trade and commerce using the computer networks.

What resources does a firm need for successful e-business implementation?

Setting up any business needs money, men and machines (hardware). For e-business, a firm additionally needs resources for developing, operating, maintaining and enhancing a website, which is the firm's location on the world wide web, an online embodiment of all the content the firm wants to offer to others.

A website is not a physical location; it still needs technically and professionally qualified personnel to design, run and update it, along with secure network connections and software for processing orders and payments.

Firms use more private and secure networks than the public internet for managing their internal functions, which is why intra-B commerce over an intranet allows the marketing department to interact constantly with production to get customised products made as per individual customer requirements.

Closer computer-based interaction among departments also brings advantages in inventory and cash management, plant utilisation, handling of customer orders and human resource management.

How do online transactions take place, and what payment mechanisms are used?

Online trading, from a customer's standpoint, follows four steps.

1. Registration. Before shopping online, the buyer registers with the vendor by filling in a registration form and setting a password so that the account and shopping cart are protected from unauthorised use.
2. Placing an order. The buyer picks items into a shopping cart, an online record of what has been picked while browsing, and can add or remove items before checking out and choosing a payment option.
3. Payment. The buyer settles the amount due using one of the mechanisms below.
4. Delivery. The goods are delivered physically, or, for digitisable products such as software, music or e-books, delivered online.

The payment mechanisms available for online shopping include:

• Cash on Delivery (CoD): payment is made in cash at the time of physical delivery of goods.
• Cheque: the vendor arranges to pick up a cheque from the customer, and goods are delivered on realisation of the cheque.
• Net-banking transfer: the buyer transfers the agreed price electronically to the vendor's account, using services such as IMPS, NEFT and RTGS.
• Credit or debit cards: popularly called "plastic money" and the most widely used medium for online payment. A credit card allows the holder to purchase on credit; the card-issuing bank pays the seller and later debits the buyer, who may repay in instalments. A debit card allows purchases only to the extent of the amount already lying in the holder's account, and the amount due is deducted electronically at the moment of the transaction.
• Digital cash: a form of electronic currency that exists only in cyberspace. The buyer first pays an equivalent amount to a bank by cheque or draft, and the bank issues special software that lets the buyer draw digital cash from the account to make purchases over the web.

A customer wishing to sell places an advertisement on a website; another customer who wants to buy views it, pays for and receives the product, while the selling customer receives the money, with the website acting as the intermediary platform between the two consumers.

What is blockchain, and how is it applied in business?

Blockchain is a shared, digital record (a ledger) of transactions that is distributed across many computers in a network rather than held by one central authority.

Each new transaction is added as a "block" that is linked to the previous block, and once recorded, an entry cannot normally be altered without the agreement of the network, which makes the record highly tamper-resistant and transparent to everyone who holds a copy.

In supply chain management, blockchain is applied to track a product as it moves from the raw-material supplier through the manufacturer and distributor to the retailer and the final consumer.

Every party updates the same shared record with verified information such as the origin of the goods, the date of dispatch, the quality checks passed and the current location of the consignment, so that all parties can trust the information without relying on a single intermediary to verify it.

Note: Blockchain in a supply chain. Because each stage of the chain adds its own verified entry to the shared ledger, a buyer can trace a product's journey back to its origin, which helps in checking authenticity and in reducing fraud and disputes between the parties.

What are crypto-assets?

Crypto-assets are digital assets that exist only in electronic form and whose ownership, issue and transfer are recorded and secured using the kind of distributed-ledger (blockchain) technology described above, rather than being issued or guaranteed by a central bank or government.

Because their value is not backed by a government, crypto-assets are usually far more volatile and speculative than conventional currency, and their meaning, for this unit, is limited to this basic understanding rather than a study of how they are traded or regulated.

How secure are online business transactions?

Because online transactions do not involve the arm's length, face-to-face contact of traditional business, they carry a greater probability of risk.

Risk here refers to the probability of any mishappening that can result into financial, reputational or psychological losses to the parties involved in a transaction. These risks can be grouped under three headings.

• Transaction risks: default on order taking or giving (the seller denies the order was placed, or the customer denies placing it), default on delivery (goods not delivered, delivered to the wrong address, or the wrong goods delivered), and default on payment (the seller does not receive payment the customer claims to have made). These can be reduced by verifying identity and address at registration, confirming orders through cookies (which, like a telephone caller ID, record the consumer's name, address and purchase history), and by shopping only from well-established sites, some of which, such as eBay, rate sellers.
• Data storage and transmission risks: a virus, sometimes expanded as "Vital Information Under Siege," is a program that replicates itself on other computer systems; its effects range from mere on-screen 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 protects data from such attacks. Data intercepted during transmission is guarded using cryptography, the art of transforming (encrypting) readable information into an unreadable "ciphertext," which only a holder of the secret key can decrypt back into "plaintext," similar to using code words so others cannot follow a conversation. Shopping sites commonly use encryption technology such as Secure Sockets Layer (SSL) to protect credit card details from misuse.
• Risks of threat to intellectual property and privacy: once information is placed on the internet it leaves the private domain and becomes hard to protect from being copied, and details given during a transaction may be passed on to others, resulting in unwanted advertising and promotional mail.

Note: Information Technology Act, 2000. This Act gives legal recognition to electronic records (Section 4) and digital signatures (Section 5), allows government offices to accept forms, licences and payments in electronic form (Section 6), and permits records required to be retained for a specific period to be kept in electronic form (Section 7), which together support secure and paperless business and government dealings.

What are the advantages of e-business?

e-Business offers several benefits over traditional business.

• Ease of formation and lower investment: unlike the procedural requirements of setting up an industry, e-business is relatively easy to start, and networked individuals and firms can be more efficient than firms with a large networth but no network of contacts.
• Convenience: the internet offers "24 hours × 7 days a week × 365 days a year" business, allowing customers and staff to transact or work from wherever and whenever they wish.
• Speed: much of buying and selling is an exchange of information that the internet allows at the click of a mouse, cutting the cycle time between the origin of demand and its fulfilment, especially for information-intensive products such as software, music and e-books that can even be delivered online.
• Global reach: the internet is without boundaries, giving the seller access to the global market and the buyer the freedom to choose products from almost anywhere.
• Movement towards a paperless society: reliance on the internet has reduced paperwork and red tape; for example, government departments increasingly allow electronic filing of returns and reports.

For the business organisation, e-commerce also expands the marketplace, gradually lowers the cost of operations, facilitates pull-based supply chain management, gives a competitive advantage, improves time management, and lets small firms co-exist with big firms.

For consumers and society, it brings flexibility, competitive prices and discounts, more options and customised products, quick and timely delivery of digitisable products, employment potential, e-auctions and e-tenders, direct interaction with consumers, and wider outreach.

What are the limitations of e-business?

e-Business is not without drawbacks.

• Low personal touch: it lacks the warmth of face-to-face interaction, making it less suitable for products needing high personal touch, such as garments.
• Incongruence between order speed and fulfilment speed: information flows at the click of a mouse, but physical delivery still takes time, and slow-loading websites can frustrate the user further.
• Need for technology competence: e-business requires familiarity with computers beyond the traditional 3 R's, and this requirement creates a digital divide, the division of society on the basis of familiarity or non-familiarity with digital technology.
• Increased risk from anonymity: it is hard to establish the identity or location of parties transacting online, raising the risk of impersonation and leakage of confidential information such as credit card details.
• People resistance: adjusting to new technology causes stress and insecurity, so people may resist a firm's move into e-business.
• Ethical fallouts: companies can use an "electronic eye" to track employees' computer files, e-mail and websites visited, raising questions about whether such monitoring is ethical.

What is e-Commerce, and what are its main types?

e-Commerce covers a firm's interactions with its customers and suppliers over the internet; it is the narrower, more widely used part of the broader term e-business. Viewed by the parties who interact, e-commerce is usually grouped into:

• B2B commerce (business-to-business): both parties are businesses, for example a vehicle manufacturer using a computer network to place orders with and monitor delivery from several component suppliers it has cultivated to avoid depending on a single vendor.
• B2C commerce (business-to-customer): a firm transacts with its customers, covering a wide gamut of marketing activities carried out online, not just selling; customers can also use round-the-clock call centres to raise queries or complaints, which firms often outsource rather than running themselves.
• C2C commerce (consumer-to-consumer): the transaction originates and ends with consumers, suited to goods with no established market mechanism, such as selling used books or clothes. On a site such as eBay, buyers and sellers can rate one another, which helps future buyers judge a seller's reliability, and a payment intermediary such as PayPal holds the buyer's payment until the goods are shipped and accepted, reducing the risk of dealing with an unknown seller.

A network links a business firm with several other business firms acting as its suppliers and distribution channel partners, through which orders, production monitoring, delivery and payments all flow electronically.

What is Q-Commerce, and how is artificial intelligence used in it?

Q-Commerce (Quick Commerce) is a form of e-commerce built around delivering a narrow range of everyday goods, typically groceries and household essentials, to the customer within a very short time of the order being placed, often within minutes, usually by routing the order to a small warehouse or store located close to the customer rather than a large central warehouse.

Artificial intelligence is built into Q-commerce platforms in several ways: algorithms predict which items a particular area is likely to need so stock can be positioned in advance, and chatbots handle customer queries and track orders automatically.

Chatbots and AI-driven recommendation systems also study a customer's past orders and browsing to offer a customised consumer experience, suggesting products and offers tailored to that individual rather than showing the same catalogue to everyone.

What is e-Banking? What are its features, advantages and disadvantages?

e-Banking means carrying out banking transactions, such as checking balances, transferring funds, paying bills and applying for products, through electronic channels such as the internet, rather than by visiting a branch in person.

Its main features are that it is available at any time and from any location with internet access, it replaces most paper-based forms with electronic records, and it links the customer's account directly to the bank's systems for near-instant processing of instructions.

Advantages of e-banking include round-the-clock access to banking services without the need to visit a branch, faster processing of transactions and transfers, easier record-keeping through downloadable statements, and lower transaction costs for both the bank and the customer.

Disadvantages include the risk of fraud, hacking or phishing if security details are compromised, dependence on a stable internet connection and electricity supply, difficulty for customers who are not comfortable with digital technology, and the loss of personal, face-to-face service that some customers value for complex queries.

What are the main online banking services?

Several electronic fund-transfer services allow money to move between bank accounts without a physical visit or a paper instrument.

Through net-banking transfer, a buyer can use services such as IMPS, NEFT and RTGS to transfer the agreed price of an online purchase directly into the seller's bank account, after which the seller arranges delivery of the goods.

What is mobile banking?

Mobile banking allows a customer to carry out banking transactions through a mobile phone, using either an SMS-based service or a dedicated banking app.

It includes SMS alerts that notify the customer of transactions, balances or due dates, the transfer of funds between accounts, and making payments for bills or purchases, all from the phone.

Advantages of mobile banking include being able to bank from almost anywhere without visiting a branch or even a computer, receiving immediate alerts about account activity that help in detecting fraud quickly, and the convenience of making payments at the moment they are needed.

Disadvantages include the risk of loss of the phone leading to misuse of the banking app, dependence on network connectivity, and difficulty of use for customers unfamiliar with smartphones.

How do debit cards and credit cards differ, and what is an ATM?

A debit card allows its holder to make purchases only to the extent of funds already lying in the corresponding account; the amount due is deducted electronically the moment the transaction is made.

A credit card allows its holder to make purchases on credit: the amount due is first met by the card-issuing bank, which later recovers it from the cardholder, who often has the freedom to repay in instalments at his or her own convenience.

An ATM (Automated Teller Machine) is a machine that allows a customer to withdraw cash and carry out other basic banking transactions without a bank employee processing the request in person.

Before ATMs became common, withdrawing one's own money from a bank involved a tedious series of procedural formalities; with an ATM, the customer is able to withdraw the money immediately, with the remaining back-end processing of the transaction taking place afterwards.

What is a demand draft, and how is it issued online?

A demand draft is an instrument issued by a bank, at the request of a customer, instructing another branch or bank to pay a stated sum of money to a named person on demand; because the bank itself guarantees payment, it is treated as a safer way of transferring money than a personal cheque, particularly between parties in different cities.

Earlier, a customer had to visit the branch in person to apply for and collect a demand draft.

Through online banking, a customer can now request the issue of a demand draft electronically, the bank debits the specified amount from the customer's account and prepares the draft, and the draft is then either made available at a chosen branch or despatched to the customer, without the applicant having to visit the branch to place the request.

Going beyond the syllabus

Many of the online payment and e-banking services covered here work together in a single transaction: for example, an online purchase may be registered on a seller's website, paid for instantly through UPI or an e-wallet, with the funds finally settled between the buyer's and seller's banks through NEFT or IMPS behind the scenes, while the Digital Rupee is being gradually introduced as a direct digital equivalent of cash for such transactions, rather than a bank deposit.

Glossary

• e-Business — the conduct of industry, trade and commerce using computer networks.
• e-Commerce — a firm's interactions with its customers and suppliers over the internet.
• B2B commerce — electronic transactions in which both parties are business firms.
• B2C commerce — electronic transactions between a business firm and its customers.
• C2C commerce — electronic transactions that originate from and are directed to consumers.
• Digital divide — the division of society based on familiarity or non-familiarity with digital technology.
• Blockchain — a shared, distributed digital ledger of transactions linked in blocks that cannot easily be altered.
• Crypto-assets — digital assets whose ownership and transfer are recorded using distributed-ledger technology, not issued by a government.
• Q-Commerce — quick commerce, delivering everyday goods to the customer within a very short time of ordering.
• Chatbot — a software program that interacts with customers automatically, answering queries and personalising recommendations.
• e-Banking — carrying out banking transactions through electronic channels rather than visiting a branch in person.
• UPI — Unified Payments Interface, a mobile system linking bank accounts for instant transfer through a virtual payment address.
• Digital Rupee — a digital form of official currency issued by the central bank, usable like physical cash electronically.
• Demand draft — a bank instrument guaranteeing payment of a stated sum to a named person on demand.
• Cryptography — the art of transforming readable information into an unreadable form to protect it during transmission.

Common errors and misconceptions

• Misconception: e-business and e-commerce mean the same thing. Correct: e-business is the wider term covering every electronic business function; e-commerce is only the part dealing with buying, selling and interacting with customers and suppliers.
• Misconception: a debit card lets a customer borrow from the bank. Correct: a debit card only allows spending up to the balance already held in the account; borrowing is a feature of a credit card.
• Misconception: RTGS, NEFT and IMPS are all the same service. Correct: they differ in settlement speed and typical transfer size, with RTGS settling individually in real time, NEFT in batches, and IMPS instantly round the clock.
• Misconception: blockchain and crypto-assets are the same thing. Correct: blockchain is the underlying distributed-ledger technology; crypto-assets are one application of it, representing digital value rather than the technology itself.
• Misconception: e-business has no limitations because it is "modern" and technology-driven. Correct: it suffers from real limitations, including low personal touch, security risks and a digital divide.
• Misconception: a demand draft can only be obtained by visiting a bank branch in person. Correct: many banks now allow a customer to request a demand draft online.
• Misconception: Q-commerce is simply fast online shopping of any kind. Correct: it specifically refers to ultra-quick delivery of a narrow range of everyday items, usually from stores located very close to the customer.

Exam-style questions with model answers

Q1. State the meaning of e-Commerce. [1 mark]

1. e-Commerce covers a firm's interactions with its customers and suppliers over the internet, forming the buying-and-selling part of the wider term e-business.

Q2. State any two differences between a debit card and a credit card. [2 marks]

1. A debit card allows spending only up to the balance already in the account, with the amount deducted immediately, whereas a credit card allows the holder to spend up to a credit limit extended by the bank and repay later.
2. A debit card does not involve borrowing, while a credit card involves the bank first paying on the holder's behalf and later recovering the amount, often in instalments.

Q3. Explain any four benefits of e-business to a business organisation. [4 marks]

1. e-business expands a firm's marketplace to national and international customers instead of limiting it to a local area.
2. It brings a gradual decline in the cost of operations because fewer physical facilities are needed.
3. It gives the firm a competitive advantage over rivals who have not adopted electronic methods.
4. It supports better time management and business processes, since information and documents can move quickly between departments and with other firms.

Q4. Distinguish between B2B and B2C commerce on any four bases. [4 marks]

1. Parties involved: in B2B commerce both parties are business firms, such as a manufacturer and its component suppliers, whereas in B2C commerce one party is a business and the other is an individual customer.
2. Purpose: B2B transactions usually involve placing orders, monitoring production and delivery of inputs, while B2C transactions cover marketing, selling and after-sales interaction with the final consumer.
3. Example: a car manufacturer ordering components from several vendors is B2B, while a customer buying goods from an online shopping site is B2C.
4. Scale: B2B transactions are often larger in value and more repetitive, while B2C transactions are typically smaller, individual purchases made by many separate customers.

Q5. Explain the meaning of blockchain and state one application of blockchain in supply chain management. [4 marks]

1. Blockchain is a shared digital ledger of transactions distributed across many computers in a network, rather than kept by one central authority.
2. Each new transaction is added as a block linked to the previous block, and once recorded it cannot normally be changed without agreement of the network.
3. This makes the record transparent and resistant to tampering, since every party holds a copy of the same ledger.
4. In supply chain management, it is applied to track a product from the raw-material supplier through the manufacturer and distributor to the retailer, with each party adding verified information such as origin, dispatch date and quality checks, which helps trace the product's journey and reduces fraud and disputes.

Q6. Discuss the limitations of e-business. [6 marks]

1. Low personal touch: e-business lacks the warmth of face-to-face interaction, making it less suitable for products such as garments that need high personal attention.
2. Incongruence between order speed and fulfilment speed: information moves instantly, but physical delivery of goods still takes time, and slow-loading websites can further frustrate customers.
3. Need for technology competence: e-business requires a fair degree of familiarity with computers, and this requirement creates a digital divide between those who are comfortable with digital technology and those who are not.
4. Increased risk due to anonymity: it is difficult to establish the identity or location of parties transacting online, raising the risk of impersonation and leakage of confidential details such as credit card information.
5. People resistance: adjusting to a new way of doing business causes stress and a sense of insecurity, so employees or customers may resist a firm's move into e-business.
6. Ethical fallouts: firms can monitor employees' computer files, e-mail accounts and websites visited through an "electronic eye," which raises genuine questions about whether such close monitoring is ethical.

Q7. Explain the steps involved in an online transaction, including the payment mechanisms available to a customer. [6 marks]

1. Registration: the customer sets up an account with the online vendor, protected by a password, so that only the authorised person can access the account and shopping cart.
2. Placing an order: the customer adds items to and removes items from an online shopping cart while browsing, and checks out once ready.
3. Payment: cash on delivery, where payment is made in cash when the goods are physically delivered.
4. Payment: cheque, which the vendor arranges to collect, delivering the goods once the cheque is realised.
5. Payment: net-banking transfer using services such as IMPS, NEFT or RTGS, where the buyer transfers the price directly into the vendor's bank account, or by credit or debit card, or digital cash drawn against a prior deposit with a bank.
6. Delivery: the goods are delivered physically, or, for digitisable products such as software or e-books, delivered directly online.

Q8. State the meaning of Q-Commerce. [2 marks]

1. Q-Commerce, or Quick Commerce, is a form of e-commerce that delivers a narrow range of everyday goods, such as groceries, to the customer within a very short time of ordering, usually from a small store or warehouse located close to the customer rather than one large central warehouse.

Key takeaways

• e-Business is the conduct of industry, trade and commerce using computer networks, and e-commerce is its buying-and-selling part.
• e-Business covers B2B, B2C and intra-B transactions, while e-commerce specifically includes the consumer-facing C2C form as well.
• Online transactions proceed through registration, placing an order, payment and delivery, with cash on delivery, cheque, net-banking transfer, cards and digital cash as the main payment mechanisms.
• Blockchain is a shared, tamper-resistant digital ledger used, among other things, to trace products through a supply chain; crypto-assets are digital value recorded using similar technology.
• Online transactions face transaction risks, data storage and transmission risks, and risks to intellectual property and privacy, and are supported legally by the Information Technology Act, 2000.
• e-Business brings convenience, speed and global reach, but suffers from low personal touch, the digital divide and anonymity-related risks.
• Q-Commerce uses ultra-fast, localised delivery together with AI-driven chatbots and recommendations for a customised consumer experience.
• e-Banking offers round-the-clock access and faster processing but carries fraud and connectivity risks; RTGS, NEFT, IMPS, UPI, e-wallets and the Digital Rupee are its main electronic payment channels.
• A debit card spends only what is already in the account, while a credit card allows spending against a credit limit to be repaid later; an ATM lets customers withdraw cash without a branch visit.
• A demand draft is a bank-guaranteed payment instrument that can increasingly be requested and issued online.

Test yourself

What is the difference between e-business and e-commerce?

e-business is the wider term, covering every electronic business function, including production and finance; e-commerce is narrower, covering only a firm's buying, selling and interactions with customers and suppliers.

Give one example of a B2B transaction from the automobile industry.

A car manufacturer using a computer network to place orders with, and monitor delivery from, several component suppliers.

How does the seller later confirm that a customer's registration details match an order?

Cookies, which record details such as the customer's name, address and previous purchase record, similar to a telephone caller ID.

What does SSL do?

SSL is an encryption technology used by shopping sites to protect credit card and other sensitive details from being misused during an online transaction.

How does a credit card differ from a debit card in timing of payment?

A credit card lets the holder pay later, often in instalments, while a debit card deducts the amount immediately from the account at the time of the transaction.

What is the purpose of UPI?

UPI lets a customer link multiple bank accounts to one mobile app and transfer funds instantly using a virtual payment address.

Why might a firm choose RTGS over NEFT?

RTGS settles large-value transfers individually and immediately, while NEFT settles transfers in batches, so RTGS suits urgent, high-value payments better.

What is a demand draft used for?

It is a bank-guaranteed instrument used to pay a stated sum of money to a named person on demand, often preferred over a personal cheque for safety.