NCERT Solutions for Class 11 Business Studies Chapter 5

What are the ethical concerns involved in outsourcing?

Outsourcing involves third parties and when a company outsources any of its functions, it has to share a lot of insider information and knowledge with outsourcing partner.

The outsourcing entity may not preserve the confidentiality and it might be of great concern to the company. Sometimes the company is at risk of a competition being created and the outsourcing partner may start his own business with all the knowledge possessed.
Outsourcing also involves hiring of cheap labour by third parties to reduce overall cost and maximize profit. Workers are outsourced using child labour and women in the factories and workers are exploited by giving less than minimum wages.

Describe briefly the data storage and transmission risks in e-business.

• Data theft and storage risk: Data theft or breach can be destructive for a company if it reaches the wrong person. There is a risk that data might be manipulated or modified by wrong people for their selfish motives. It is exposed to the risk of virus and hacking. To make sure data is secure, installation and timely updating of anti-virus programmes is necessary to mitigate risk of systems under the attack of virus.
• Transmission Risk: Another risk involved is interception of data in the course of transmission. To protect data against this, cryptography is used. Cryptography refers to the art of protecting information by transforming it into an unreadable format called ‘cyphertext’. Thereafter only those who have a secret key can decrypt the message into ‘plaintext’. It is like coding and decoding.

Evaluate the need for outsourcing and discuss its limitations.

Outsourcing represents a new mode of business that helps a company achieve efficiency by focusing on core business activities and designating less important activities. It is fast becoming an emerging mode of business. Usually one or an entire operational process of the company is delegated/ assigned which can be efficiently and effectively carried on by other third parties. It also helps the company to achieve better customer satisfaction level. Outsourcing has emerged as a way of doing business due to global competitive pressures for higher quality products at lower costs, ever demanding customers and emerging technologies. Need for outsourcing can be understood from the benefits which are given below:

1. Focusing of Attention: Business firms focus on the core areas that are of utmost importance to the company. It helps them get rid of complex activities and excel in major operations. It will increase efficiency and effectiveness.
2. Quest for Excellence: Outsourcing enables the firms to attain excellence by focusing on core activities which increases the company’s specialization. They excel by extending their capabilities through contracting out the remaining activities to them who excel in them.
3. Cost Reduction: Outsourcing helps achieve cost reduction which is necessary to survive in the market. The economies of scale help organisation make products at a reduced price which gives competitive advantage.
4. Growth through alliance: Some activities require large capital investments and are outsourced to alliance partners. These partners invest in these activities and help in expansion with these funds.
5. Fillip to Economic Development: Outsourcing stimulates entrepreneurship, employment and exports in the host countries.

But outsourcing is not an unmixed blessing. It has its own limitations. Some of which are discussed below:

• a) Confidentiality: Outsourcing involves third parties and when a company outsources any of its functions, it has to share a lot of insider information and knowledge with outsourcing partner. The outsourcing entity may not preserve the confidentiality and it might be of great concern to the company. Sometimes the company is at risk of a competition being created and the outsourcing partner may start his own business with all the knowledge possessed.
• b) Ethical Concerns: Outsourcing also involves hiring of cheap labour by third parties to reduce overall cost and maximize profit. Workers are outsourced using child labour and women in the factories and workers are exploited by giving less than minimum wages.
  c) Sweat Shopping: Outsourcing firms go in for cheap labour to reduce effective cost. They look for ‘doing’ skills rather than ‘thinking’ skills. Therefore, they end up with labour that is not that competent enough.
  d) Resentment in their Home Countries: Outsourcing is being disliked by people in developed countries because the jobs which they could get are being transferred to developing countries through outsourcing. The problem is still more severe if there is problem of unemployment in home country of outsourcing firm.

Discuss the salient aspects of B2C commerce.

It involves transactions between a business organisation and its customer. It includes physical as well as activities through electronic mode. It also includes pre-sale and pre-service activities. The electronic mode of transaction ensures faster and economical delivery. Creation of utility requires a business to contact with a number of other businesses which may be suppliers, may act as channel of distribution, middlemen in different locations, changing production as per specifications of the customer.
The salient aspects are:

1. Global reach: Business can extend its geographical reach with global online access of their product.
2. Distribution network: It strengthens and improves the distribution system of a firm.
3. Customer satisfaction: A product can be altered according to customer’s specifications and needs.
4. Anytime Anywhere Access: Convenient and timely delivery to the customer with anytime access to after sale or pre-customer service.
5. Price Effectiveness: The products are available at a reduced cost giving competitive advantage to company.

Discuss the limitations of electronic mode of doing business. Are these limitations severe enough to restrict its scope? Give reasons for your answer.

The limitations of electronic mode of doing business are given below:

1. Low personal Touch: Sometimes a customer prefers human interaction and warmth to better understand the product for example, products which need personal touch like beauty products, garments, fashion accessories etc. can be difficult to trade through e-business.
2. Product Mismatch and delay: There might be a situation where the product ordered and the product delivered may have a mismatch or the delivery of the product gets delayed. Sometimes even websites take a long time to open which may frustrate the user
3. Need for technology: For e-commerce both the parties need to be well versed with the use of applications and payment gateways. Those who are not familiar with digital technology find it difficult to place online orders and restrict e-business growth.
4. Increased risk: Risk arises due to parties being unknown to each other and situation arises where the buyer may provide false information and may not make the payment promised. It makes e-business risky. There may also be problems of virus and hacking. The risk of customer’s information being leaked is also a problem.
5. People Resistance: Some businesses have a set customer base and people are resistant to change their ways and adopt new technology which may impact the organization’s plan to enter into e-business. Change is perceived as a source of stress and insecurity by many.
6. Ethical Concerns: Data theft or breach can be destructive for a company if it reaches the wrong person. There is a risk that data might be manipulated or exposed to the risk of Virus and hacking. Another risk involved is interception of data in the course of transmission. To protect data against this, cryptography is used.

But in spite of these limitations, e-business is the way. No, these limitations are not severe enough to restrict its scope.

• a) Cost Effectiveness: There is increasing demands from consumers for high quality products at minimum cost. Therefore, e-business and outsourcing are being chosen as newer options as they involve less working capital and operating cost, as a result the end product that reaches the customer is at a very competitive price.
• b) Innovation and Technology: Growing competition in the market calls for up to date technology and innovation to acquire large market share and to be a step forward from the competitors. E- business and outsourcing play a major role in providing new innovative products and facilitate new business techniques.
• c) Time Saving: The growing demand of anywhere anytime sale purchase has led to more businesses going towards e-commerce and outsourcing. E- business and outsourcing helps both the customer and seller save time and other resources by providing speedy delivery.
• d) After Sales Services: E-business and outsourcing provide 24/7 after sales services which make the customer more attracted towards these emerging modes.
• e) Improvement in Communication Technology: Communication technology is continually evolving and increasing the speed and quality of communication through internet.