2015 (August)
COMMERCE
Paper: 101 (Business Environment)
Full Marks – 80
Time – Three Hours
The figures in the
margin indicate full marks for the questions.
1. (a) Highlight the relevance of government and business. 16
Or
(b)
Discuss the significance of external business environment with examples. 16
Ans: External
Environment and its significance
The external environment is made up of micro and macro environment.
Micro
Environment: This refers to the factors which influence the
prospects of a particular firm; the firm can influence them with certain
efforts. They are as follows:
a) Customers: The type and the nature of the customers influence
the rate of growth of any firm. The firm has to be very particular about
choosing the inputs and transforming them in to the output. The cost factor is
subsidiary if the firm is dealing with such customers. If the customers are
more commoners the quality of the commodity if less important than the cost of
production. The customers want the commodity at a lower price so the firm will
have to conscious about the cost in purchasing the inputs, in employment of
labour, in packing and such other factors influencing the cost.
b) Competitors: In modern
age an absolute monopoly is a very rare thing. Most of the FIRMS have to work
in some type of competition such as Monopolistic Competition or Oligopoly. A
Firm has to be particular about the intensity of the competition. If the
competition is severe the firm will have to be very particular about keeping
the costs at the lowest level so that it can sell the commodity at a
competitive price.
c) Suppliers: The quality
of the commodity and the cost of production are considerably influenced by the
supplies of the inputs. If the inputs are supplied at economical prices, are of
standard quality and if the supply is uninterrupted and timely the firm can
produce a standard quality of a commodity and sell it at reasonable prices.
Often the firms employ more than one supplier so as to ensure an uninterrupted
supply of inputs. If the supplies of inputs are regular, consistent and
reliable there is no need to keep a larger quantity in stock.
d) Channel Intermediaries: They refer to the different levels in
the chain from the production unit to the final customer. The chain
incorporates the stockists, the wholesalers, the distributors, the retailer
etc. If there is a high level of efficiency maintained at every part of the
chain the commodity can reach the final consumer in good condition and at a
reasonable price. So the Firm has to select and maintain efficient
intermediaries. The firm has to offer them proper terms
e) Society: The prospects of a firm depend upon the society in
which it has to work and sell its products. In a homogenous society the job of
the firm is easy. The people have almost the same habits likes and dislikes,
values and ethical norms. In a heterogeneous society the job of the firm is
difficult. A particular product may be acceptable to a particular section of
the society but not acceptable to some other sections. In a country like India
a firm has to into consideration all types of sections of the community such as
the religious sections, the caste, the sect, language, region etc.
Conclusion: All these forces
influence the chances available to a firm to survive and develop.
Macro
Environment: The macro environment comprises of those forces
which influence all business firms operating in an economy. They can be studied
under the following categories: economic environment, political and regulatory
environment, social/ cultural environment, demographic environment and
technological. The components of these environment are discussed as below:
a) Economic Environment: The
survival and success of each and every business enterprise depend fully on its
economic environment. The main factors that affect the economic environment
are:
(i) Economic Conditions: The
economic conditions of a nation refer to a set of economic factors that have
great influence on business organisations and their operations. These include
gross domestic product, per capita income, markets for goods and services,
availability of capital, foreign exchange reserve, growth of foreign trade,
strength of capital market etc. All these help in improving the pace of
economic growth.
(ii) Economic Policies: All
business activities and operations are directly influenced by the economic
policies framed by the government from time to time. Some of the important
economic policies are: Industrial policy, Fiscal policy, monetary policy,
foreign investment policy and Export –Import policy. The government keeps on
changing these policies from time to time in view of the developments taking
place in the economic scenario.
(ii) Economic System: The
world economy is primarily governed by three types of economic systems, viz.
Capitalist economy; Socialist economy; and Mixed economy. India has adopted the
mixed economy system which implies co-existence of public sector and private
sector.
b) Political Environment: This includes the political system,
the government policies and attitude towards the business community and the
unionism. All these aspects have a bearing on the strategies adopted by the
business firms. The stability of the government also influences business and
related activities to a great extent. It sends a signal of strength, confidence
to various interest groups and investors.
c) Legal Environment: This
refers to set of laws, regulations, which influence the business organisations
and their operations. Every business organisation has to obey, and work within
the framework of the law. The important legislations that concern the business
enterprises include: Companies Act, 1956, Foreign Exchange Management Act,
1999, The Factories Act, 1948, Industrial Disputes Act, 19112, Payment of
Gratuity Act, 19112, Industries (Development and Regulation) Act, 1951 etc.
Besides, the above legislations, the following are also form part of the legal
environment of business.
(i) Provisions of the
Constitution
(ii) Judicial Decisions.
d) Social Environment: The
social environment of business includes social factors like customs,
traditions, values, beliefs, poverty, literacy, life expectancy rate etc. The
social structure and the values that a society cherishes have a considerable
influence on the functioning of business firms. For example, during festive
seasons there is an increase in the demand for new clothes, sweets, fruits,
flower, etc.
e) Technological Environment:
Technological environment include the
methods, techniques and approaches adopted for production of goods and services
and its distribution. The varying technological environments of different
countries affect the designing of products. In the modern competitive age, the
pace of technological changes is very fast. Hence, in order to survive and grow
in the market, a business has to adopt the technological changes from time to
time.
f) Demographic Environment: This
refers to the size, density, distribution and growth rate of population. All
these factors have a direct bearing on the demand for various goods and
services.
g) Natural Environment: The
natural environment includes geographical and ecological factors that influence
the business operations. These factors include the availability of natural
resources, weather and climatic condition, location aspect, topographical factors,
etc. Business is greatly influenced by the nature of natural environment. For
example, sugar factories are set up only at those places where sugarcane can be
grown. It is always considered better to establish manufacturing unit near the
sources of input.
2. (a) Are controls under planning in India effective? Justify. 16
Or
(b) Critically argue the
role played by MRTP Act in India to minimise the restrictive trade practices. 16 (THIS ACT IS NOW ABOLISHED SO NO
QUESTION EXPECTED)
Ans: Monopolistic and Restrictive Trade
Practices Act (MRTP Act)
The monopolies and
Restrictive Trade Practices Act, 1969, brought into force from 1st June 1970,
was a very controversial piece of legislation. The principal objectives of the
MRTP Act which extends to the whole of India except to the state of Jammu and
Kashmir, viz.:
a)
Prevention of concentration of economic power to
the common detriment.
b)
Control of monopolistic, restrictive and unfair
trade practices which are prejudicial to public interest.
The MRTP Act was significantly
amended in 1982, 1984, 1985 and 1991. After the amendments the first objective
has become irrelevant as the relevant provisions to achieve the objective have
been deleted. The objectives now are:
a)
Controlling monopolistic trade practices.
b)
Regulating restrictive and unfair trade
practices.
Restrictive Trade Practices (RTP):
A trade practice which
restricts or reduces competition may be termed as restrictive trade practice.
The following are the RTPs as described by section 33(1) of the MRTP Act:
(a) Refusal to deal with
persons or classes of persons: Any agreement which restricts or it likely to
restrict by any methods, the persons or classes of persons to whom goods are
sold or from whom goods are bought.
(b) Tie-in sales or full
line forcing: Any agreement requiring purchaser of goods, as a condition of
such purchase, to purchase some other goods.
(c) Exclusive dealing
agreement: Any agreement restricting in any manner the purchaser in the course
of his trade from acquiring or otherwise dealing in any goods other than those
of seller or any other goods.
(d) Collective price
fixation and tendering: Any agreement to purchase or sell goods or to tender
for the sale or purchase of goods only at prices or terms and conditions agreed
upon between the sellers or purchaser.
(e) Discriminatory
Dealings : Any agreement to grant or allow concession or benefits, including
allowances, discounts, rebate or credit, in connection with or by reason of
dealings.
(f) Re-sale price
maintenance: Any agreement to sell goods on condition that the prices to be
charged on resale by the purchaser shall be the prices stipulated by the seller
unless it is clearly stated that prices lower than those prices may be charged.
(g) Restriction on output
or supply of goods: Exclusive distributorship, territorial restriction and
market sharing.
(h) Control of
manufacturing process.
(i) Price control
arrangements.
(j) Governmental
recognition of practice as restriction.
(k) Residual restriction
trade practices: Any agreement to enforce the carrying out of any such
agreement as is referred to in the foregoing classes.
Remedies under
the MRTP Act
Under the Monopolistic and Restrictive Trade Practices Act,
1969, the commission has the power to attend complaint, inquire facts and pass
orders regarding any unfair trade practice, monopolistic trade
practice and/or restrictive trade practice. The commission can
order any person to bring in any books of accounts, or other documents to
investigate the matter of such practices. During investigation, if the
commission has grounds to believe that any books or papers are being destroyed,
mutilated, altered, falsified or secreted, it may authorize any officer of the
Commission to search and seizure any such books or papers. The
commission after inquiring the case shall pass the remedial order.
The remedies under this Act are:
a)
Temporary
Injunction
b)
Compensation
Section
12A Power of the Commission to Grant Temporary Injunctions
Section 12A of the MRTP Act, 1969, accounts for the power of the
Commission to grant temporary injunctions. The provisions of the section are:
Where it is proved that any undertaking or any person is carrying on
any monopolistic or restrictive, or unfair, trade practice and such
monopolistic or restrictive, or unfair, trade practice is likely to
affect the interest of any trader, class of traders or of any consumer or
public generally, the Commission may, for the purposes of staying or preventing
the undertaking, grant a temporary injunction restraining such undertaking or
person from carrying on any monopolistic or restrictive, or unfair, trade
practice until the conclusion of such inquiry or until further orders.
For the purposes of this section, an inquiry shall be deemed to have
commenced upon the receipt of any complaint or reference by the Commission or
upon its own knowledge or information reduced to writing by the Commission.
For the removal of doubts, the power of the Commission with respect to
temporary injunction includes power to grant a temporary injunction without
giving notice to the opposite party.
Section
12B Power of the Commission to Award Compensation
Section 12B provides for the second remedy under this Act. The
provision regarding the power of the Commission to award compensation is:
Where any loss or damage is caused to the Central Government or State
Government or trader or class of traders or any consumer because of the
monopolistic, or restrictive, or unfair, trade practice carried on by
any undertaking or any person, then such Government, trader, class of traders or
consumer may make an application to the Commission for the recovery
of any compensation from that undertaking or person. The recovery shall be of
such amount as the Commission may determine as compensation for the loss or
damage so caused.
Where any loss or damage is caused to numerous persons having the same
interest, then one or more of such persons may, with the permission of the
Commission, make an application for the benefit of all the persons so
interested.
The Commission after inquiring into the allegations made in
the application, shall make an order directing the owner of the
undertaking to make payment to the applicant, of the amount determined by it as
realizable from the undertaking as compensation for the loss or damage caused
to the applicant by reason of any monopolistic or restrictive, or
unfair, trade practice carried on by such undertaking or other
person.
Where a decree for the recovery of any amount as compensation for any
loss or damage has been passed by any court in favor of any, the amount shall
be set off against the amount payable under such decree.
Every order made by the Commission, under section 12A granting a
temporary injunction or under section 12B awarding compensation, may be
enforced by the Commission in the same manner as if it were a decree or order
made by a court. In case such orders are not executed by the undertaking or
other person, then it shall be lawful for the Commission to send such order to
the court.
3. (a) Critically evaluate the monetary
policy in the Indian context. 16
Ans: Monetary
Policy: Monetary policy
refers to policy formulated and implemented for achieving the following
objectives:
a)
Regulating the supply of money including credit
money and adjusting it to the needs of the economy
b)
To control the cost of money by regulating the
rates of interest.
c)
Directing the supply of money to the required
channels in accordance with the plan of priorities prepared by the planning
authority.
According to A.G. Hart "A policy which influences the public stock of money substitute
of public demand for such assets of both that is policy which influences public
liquidity position is known as a monetary policy."
From the above discussion, it is clear
that a monetary policy is related to the availability and cost of money supply
in the economy in order to attain certain broad objectives.
Importance of monetary policy
A modern economy is a money economy. All
transactions are effected with the help of and through the medium of money. The
prices of goods, services and factors are fixed in terms of money. People earn
their income in the form of money and spend it in the form of money. So the
supply of money creates money income in the hands of the community and expenditure of money generates the demand for
different goods and services.
The monetary authority has to maintain
a perfect balance between increase in the production of goods and services and
increase in the supply of money. If increase in the supply of money exceeds
increase in the production of goods and services the result is inflation. On
the other hand, if the production of goods and services increases at a fast
rate and the supply of money increases at a slow rate the result is recession
and maybe depression. Hence the monetary authority has to monitor the growth in
production very closely and adjust the money supply to it.
In India the monetary policy is
formulated and implemented by the Reserve Bank of India which is an autonomous
financial institution. It is expected that the RBI would use professional
expertise to control the supply of money to the benefit of the community.
Obstacles In Implementation of Monetary Policy
Through the monetary policy is useful
in attaining many goals of economic policy, it is not free from certain
limitations. Its scope is limited by certain peculiarities, in developing
countries such as India. Some of the important limitations of the monetary
policy are given below.
a)
There exists a
Non-Monetized Sector: In many developing countries, there is an existence of
non-monetized economy in large extent. People live in rural areas where many of
the transactions are of the barter type and not monetary type. Similarly, due
to non-monetized sector the progress of commercial banks is not up to the mark.
This creates a major bottleneck in the implementation of the monetary policy.
b)
Excess
Non-Banking Financial Institutions (NBFI): As the economy launch itself into a
higher orbit of economic growth and development, the financial sector comes up
with great speed. As a result many Non-Banking Financial Institutions (NBFIs)
come up. These NBFIs also provide credit in the economy. However, the NBFIs do
not come under the purview of a monetary policy and thus nullify the effect of
a monetary policy.
c)
Existence of
Unorganized Financial Markets: The
financial markets help in implementing the monetary policy. In many developing
countries the financial markets especially the money markets are of an
unorganized nature and in backward conditions. In many places people like money
lenders, traders, and businessman actively take part in money lending. But
unfortunately they do not come under the purview of a monetary policy and
creates hurdle in the success of a monetary policy.
d)
Higher Liquidity
Hinders Monetary Policy: In rapidly growing economy the deposit base of many
commercial banks is expanded. This creates excess liquidity in the system.
Under this circumstances even if the monetary policy increases the CRR or SLR,
it dose not deter commercial banks from credit creation. So the existence of
excess liquidity due to high deposit base is a hindrance in the way of
successful monetary policy.
e)
Money not
appearing in an Economy: Large percentage of money never comes in the
mainstream economy. Rich people, traders, businessmen and other people prefer
to spend rather than to deposit money in the bank. This shadow money is used
for buying precious metals like gold, silver, ornaments, and land and in
speculation. This type of lavish spending give rise to inflationary trend in
mainstream economy and the monetary policy fails to control it.
f)
Time Lag Affects
Success of Monetary Policy: The success of the monetary policy depends on
timely implementation of it. However, in many cases unnecessary delay is found
in implementation of the monetary policy. Or many times timely directives are
not issued by the central bank, then the impact of the monetary policy is wiped
out.
g)
Monetary &
Fiscal Policy Lacks Coordination: In order to attain a maximum of the above
objectives it is unnecessary that both the fiscal and monetary policies should go
hand in hand. As both these policies are prepared and implemented by two
different authorities, there is a possibility of non-coordination between these
two policies. This can harm the interest of the overall economic policy.
These are major obstacles in
implementation of monetary policy. If these factors are controlled or kept
within limit, then the monetary policy can give expected results. Thus though
the monetary policy suffers from these limitations, still it has an immense
significance in influencing the process of economic growth and development.
Or
(b) Write a detail note on the
fiscal policy of India.
4.
(a) Elucidate the redressal machinery under the Consumer Protection Act. 16
There
shall be established for the purposes of this Act, the following agencies,
namely,-
a)
The Central Consumer Protection Council
established by the Central Government by notification.
b)
The State Consumer Protection Council established by the State
Government in the State by notification; and
c)
The District Consumer Protection Council
established by the State Government in each district of the State by
notification. The State Government may, if it deems fit, establish more than
one District Forum in a district.
1.
The Central Consumer Protection Council: The
Central Government may, by notification, establish with effect from such date
as it may specify in such notification, a council to be known as the Central
Consumer Protection Council (hereinafter referred to as the Central Council).
Membership:
a)
The Minister in charge of consumer affairs in
the Central Government, who shall be its Chairman, and
b)
Such number of other official or non-official
members representing such interests as may be prescribed.
Objects of
the Central Council
The objects of the Central Council shall be to promote and protect
the rights of the consumers such as-
a)
The right to be protected against the
marketing of goods [and services] which are hazardous to life and property;
b)
The right to be informed about the quality,
quantity, potency, purity, standard and price of goods 1[or
services, as the case may be], so as to protect the consumer against
unfair trade practices;
c)
The right to be assured, wherever possible,
access to a variety of goods and services at competitive prices;
d)
The right to be heard and to be assured that
consumers' interests will receive due consideration at appropriate
forums;
e)
The right to seek redressal against unfair
trade practices 1[or restrictive trade practices] or unscrupulous
exploitation of consumers; and
f)
The right to consumer education.
Value for filling complaint in district forum: National
Consumer Disputes Redressal Commission: The National Consumer Disputes
Redressal Commission has jurisdiction to entertain complaints where the value
of the goods or services and compensation if any claimed exceeds Rs.1,00,00,000
(ONE CRORE)
2.
The State Consumer Protection Councils
The State Government may, by notification, establish with effect
from such date as it may specify in such notification, a council to be known as
the Consumer Protection Council (hereinafter referred to as the State Council).
Membership:
a.
The Minister in-charge of consumer affairs in
the State Government who shall be its Chairman;
b.
Such number of other official or non-official
members representing such interests as may be prescribed by the State
Government.
Objects of
state council:
The objects of every State Council shall be to promote and protect
within the State the rights of the consumers laid down in clauses (a) to (f) of
section 6. (Objects of National Council)
a)
The right to be protected against the
marketing of goods [and services] which are hazardous to life and property;
b)
The right to be informed about the quality,
quantity, potency, purity, standard and price of goods 1[or services,
as the case may be], so as to protect the consumer against unfair trade
practices;
c)
The right to be assured, wherever possible,
access to a variety of goods and services at competitive prices;
d)
The right to be heard and to be assured that
consumers' interests will receive due consideration at appropriate
forums;
e)
The right to seek redressal against unfair
trade practices 1[or restrictive trade practices] or unscrupulous
exploitation of consumers; and
f)
The right to consumer education.
Value for filling complaint in district forum: The State Consumer
Disputes Redress Commission is established in each state and these have
jurisdiction to entertain complaints where the value of goods or services and
the compensation if any, claimed exceeds Rs.20,00,000 (TWENTY LAKHS) but does
not exceed Rs.1,00,00,000 (ONE CRORE).
3.
The District Consumer Protection Council
Section 8-A as inserted by the Consumer Protection (Amendment)
Act, 2002. The State government shall establish for every district, by
notification, a council to be known as the District Consumer Protection
Council.
Membership
The District Consumer Protection Council (hereinafter referred to
as the District Council) shall consist of the following members:
a.
The collector of the district (by whatever
name called) who shall be its Chairman; and
b.
Such number of other official and non-official
members representing such interest as maybe described by the state government.
Objects of
the District Council:
The Objects of every District Council shall be to promote and
protect within the district the rights of consumers laid down in the clause (a)
to (f) of Section 6 (National Consumer Protection Council).
a)
The right to be protected against the
marketing of goods [and services] which are hazardous to life and property;
b)
The right to be informed about the quality,
quantity, potency, purity, standard and price of goods 1[or
services, as the case may be], so as to protect the consumer against
unfair trade practices;
c)
The right to be assured, wherever possible,
access to a variety of goods and services at competitive prices;
d)
The right to be heard and to be assured that
consumers' interests will receive due consideration at appropriate
forums;
e)
The right to seek redressal against unfair
trade practices 1[or restrictive trade practices] or unscrupulous
exploitation of consumers; and
f)
The right to consumer education.
Value for filling complaint in district forum: At the
lowest level are the District Forums and these are established in each District
and have jurisdiction to entertain complaints where the value of goods or
services and the compensation if any, claimed does not exceed Rs.20, 00,000
(TWENTY LAKHS), and a complaint can be filed in a District Forum within the
local limits of which
a)
The opposite party resides or
b)
Carries on his business or works for gain or
c)
Where the cause of action arises.
Or
(b) Explain the growth trends of India’s
foreign trade. 16
Ans: Recent
Trends and Developments in India’s Foreign Trade
I.
Trade in Merchandise
EXPORTS
(including re-exports)
In
consonance with the revival exhibited by exports in the last four months,
during January,2017 exports continue to show a positive growth of 4.32 per cent
in dollar terms (valued at US$ 22115.03 million) and 5.61 per cent in Rupee
terms (valued at Rs. 150559.98 crore) as compared to US$ 21199.02 million (Rs.
142568.31 crore) during January,2016.
Cumulative
value of exports for the period April-January 2016-17 was US$ 220922.78 million
(Rs. 1484473.55 crore) as against US$ 218532.64 million (Rs. 1420572.68 crore)
registering a positive growth of 1.09 per cent in Dollar terms and positive
growth of 4.50 per cent in Rupee terms over the same period last year.
Non-petroleum
exports in January 2017 were valued at US$ 19422.86 million against US$
19111.38 million in January 2016, an increase of 1.6 %. Non-petroleum exports
during April - January 2016-17 were valued at US$ 196254.10 million as compared
to US$ 192071.50 million for the corresponding period in 2016, an increase of
2.2%.
The
growth in exports is positive for USA (2.63%),EU(5.47%) and Japan(13.43%) but
China has exhibited negative growth of (-1.51%) for November 2016 over the
corresponding period of previous year as per latest WTO statistics.
IMPORTS
Imports
during January 2017 were valued at US$ 31955.94 million (Rs. 217557.32 crore)
which was 10.70 per cent higher in Dollar terms and 12.07 per cent higher in
Rupee terms over the level of imports valued at US$ 28866.53 million (Rs.
194134.02 crore) in January, 2016. Cumulative value of imports for the period
April-January 2016-17 was US$ 307311.86 million (Rs. 2065656.42 crore) as
against US$ 326277.38 million (Rs. 2120158.57 crore) registering a negative
growth of 5.81 per cent in Dollar terms and 2.57 per cent in Rupee terms over
the same period last year.
CRUDE
OIL AND NON-OIL IMPORTS:
Oil
imports during January, 2017 were valued at US$ 8140.83 million which was 61.07
percent higher than oil imports valued at US$ 5054.29 million in January 2016.
Oil imports during April-January, 2016-17 were valued at US$ 69062.66 million
which was 5.81 per cent lower than the oil imports of US$ 73321.66 million in
the corresponding period last year.
Non-oil
imports during January, 2017 were estimated at US$ 23815.11 million which was
0.01 per cent higher than non-oil imports of US$ 23812.24 million in January,
2016. Non-oil imports during April-January 2016-17 were valued at US$ 238249.20
million which was 5.81 per cent lower than the level of such imports valued at
US$ 252955.72 million in April-January, 2015-16.
II.
TRADE IN SERVICES (for December, 2016, as per the RBI Press Release dated 15th
February 2017)
EXPORTS
(Receipts): Exports during December 2016 were valued at US$ 13804 Million
(Rs. 93729.71 Crore) registering a positive growth of 3.49 per cent in dollar
terms as compared to positive growth of 1.72 per cent during November 2016 (as
per RBI’s Press Release for the respective months).
IMPORTS
(Payments): Imports during December 2016 were valued at US$ 8294 Million
(Rs. 56316.59 Crore) registering a negative growth of 0.35 per cent in dollar
terms as compared to positive growth of 8.37 per cent during November 2016 (as
per RBI’s Press Release for the respective months).
III.TRADE
BALANCE
MERCHANDISE: The trade deficit for April-January,
2016-17 was estimated at US$ 86389.08 million which was 19.82% lower than the
deficit of US$ 107744.74 million during April-January, 2015-16.
SERVICES: As per RBI’s Press Release dated 15th
February 2017, the trade balance in Services (i.e. net export of Services) for
December, 2016 was estimated at US$ 5510 million. The net export of services
for April- December, 2016-17 was estimated at US$ 48316 million which is lower
than net export of services of US$ 53557 million during April- December,
2015-16. (The data for April-December 2015-16 and 2016-17 has been derived by
adding April-December month wise QE data of RBI Press Release).
OVERALL
TRADE BALANCE: Overall
the trade balance has improved. Taking merchandise and services together,
overall trade deficit for April- January 2016-17 is estimated at US$ 38073.08
million which is 29.7 percent lower in Dollar terms than the level of US$
54187.74 million during April-January 2015-16. (Services data pertains to
April-December 2016-17 as December 2016 is the latest data available as per
RBI’s Press Release dated 15th February 2017)
5. (a) How far has structural reforms made an impact on reducing
poverty and provision for food security? 16
Or
(b)
Discuss the need, significance and importance of e-commerce. 16
Ans: Meaning of E-Commerce: E
– Commerce also known as Electronic Commerce refers to a firm’s interactions
with its customers and suppliers over internet. It includes purchase and sales
of goods and services, transfer of funds and data from one party to another
party. These types of business transactions can be done in four ways: Business
to Business (B2B), Business to customer (B2C), Intra-B commerce, Customer to
Customer (C2C) and Customer to Business (C2B). Amazon, Flipkart, Shopify, Olx,
Myntra are some examples of e-commerce websites.
Types of E-Commerce
business
(i) B2B Commerce: Here,
both the parties involved in e-commerce transactions are business firms, and,
hence the name B2B, i.e., business-to-business. Creation of utilities or
delivering value requires a business to interact with a number of other
business firms which may be suppliers or vendors of diverse inputs; or else
they may be a part of the channel through which a firm distributes its products
to the consumers. For example, the manufacture of an automobile requires
assembly of a large number of components which in turn are being manufactured
elsewhere— within the vicinity of the automobile factory or even overseas. To
reduce dependence on a single supplier, the automobile factory has to cultivate
more than one vendor for each of the components. A network of computers is used
for placing orders, monitoring production and delivery of components, and
making payments. Likewise, a firm may strengthen and improve its distribution
system by exercising a real time (as it happens) control over its
stock-in-transit as well as that with different middlemen in different
locations.
(ii) B2C Commerce: As the
name implies, B2C (business-to-customers) transactions have business firms at
one end and its customers on the other end. B2C commerce entails a wide range
of marketing activities such as identifying activities, promotion and sometimes
even delivery of products (e.g., music or films) that are carried out online.
E-commerce permits conduct of these activities at a much lower cost but high
speed. For example, ATM speeds up withdrawal of money.
(iii) Intra-B Commerce: Here,
parties involved in the electronic transactions are from within a given
business firm, hence, the name intra-B commerce.
(iv) C2C Commerce: Here, the
business originates from the consumer and the ultimate destination is also
consumers, thus the name C2C commerce. This type of commerce is best suited for
dealing in goods for which there is no established market mechanism, for
example, selling used books or clothes either on cash or barter basis. The vast
space of the internet allows persons to globally search for potential buyers.
OLX, PayPal is a good example of this kind.
(v) C2B Commerce: Consumer-to-business
(C2B) is a business model where a consumer makes a product or service that is
consumed by an organization to complete its business process. The C2B
methodology is completely opposite of the
traditional business-to-consumer (B2C) model, where a business produces
services and products for consumer consumption.
Need of
E-Commerce
In present
world, E-Commerce is very effective because it provides many opportunities not
only to the producers but also to the wholesalers, retailers and customers
which are stated below:
a)
Opportunity
to producers: E-Business
enables producers to select the best suppliers regardless of their geographical
location. The producers can acquire quality raw materials and latest production
technology from new suppliers.
b)
Opportunity
to wholesaler / distributes:
Wholesaler by taking the advantage of e-business can work more closely with
their suppliers and they can be more responsive to the needs and expectations
of their retailers and customers
c)
Opportunity
to retailer: A retailer can
save his existence by linking his business with the on – line Distribution. There
fore the retailers who have the capacity to link their business with the
online, E-business is a good opportunity
d)
Opportunity
to customer: Customers can
purchase required quality products and services at competitive prices from
suppliers anywhere in the world.
Role of E-Commerce
Advantages
of E-Commerce
(i)
Ease of formation and lower investment requirements: Unlike
a traditional business, e-commerce business very easy to start with low
investment. It is not necessary to build an infrastructure for business and it
can be started at the convenience of
home by developing an e-commerce website. Customer can visit websites and place
order over internet. It increases the customer base of business.
(ii)
Convenience: Internet offers the convenience of ‘24 hours × 7 days
a week × 365 days’ a year business that allowed any customer to go for shopping
well after midnight. Such flexibility is available even to the organisational
personnel whereby they can do work from wherever they are, and whenever they
may want to do it. E-business is truly a business as enabled and enhanced by
electronics and offers the advantage of accessing anything, anywhere, anytime.
(iii)
Speed: As already noted, much of the buying or selling
involves exchange of information that internet allows at the click of a mouse.
This benefit becomes all the more attractive in the case of
information-intensive products such as softwares, movies, music, e-books and
journals that can even be delivered online. Cycle time, i.e., the time taken to
complete a cycle from the origin of demand to its fulfillment, is substantially
reduced due to transformation of the business processes from being sequential
to becoming parallel or simultaneous.
(iv)
Global reach/access: Internet is truly without
boundaries. On the one hand, it allows the seller an access to the global
market; on the other hand, it affords to the buyer a freedom to choose products
from almost any part of the world. It would not be an exaggeration to say that
in the absence of internet, globalisation would have been considerably
restricted in scope and speed.
(v)
Marketing of goods: E-commerce involves
not only purchase and sale of goods and services but it started before the
development of the product. Due to which product awareness is created amongst
the customer before launch. Best example of this type of sale is Redme.
Limitations
of E-Commerce
E-Commerce
is not all that rosy. Doing business in the electronic mode suffers from
certain limitations. It is advisable to be aware of these limitations as well.
(i)
Low personal touch: High-tech it may be, e-commerce,
however, lacks personal contact between buyers and sellers. To this extent, it
is relatively less suitable mode of business in respect of product categories
requiring high personal touch such as garments, toiletries, etc.
(ii)
Incongruence between order taking/giving and order fulfillment speed: Information
can flow at the click of a mouse, but the physical delivery of the
product takes time. This incongruence may play on the patience of
the customers. At times, due to technical reasons, web sites take unusually
long time to open. This may further frustrate the user.
(iii)
Need for technology capability and competence of parties to e-business: Apart
from the traditional 3R’s (Reading, Writing, and Arithmetic),
e-business requires a fairly high degree of familiarity of the parties
with the world of computers. And, this requirement is responsible for
what is known as digital divide that is the division of society on
the basis of familiarity and non-familiarity with digital
technology.
(iv)
Increased risk due to anonymity and non-traceability of parties: Internet
transactions occur between cyber personalities. As such, it becomes
difficult to establish the identity of the parties. Moreover, one does
not know even the location from where the parties may be operating. It
is riskier, therefore, transacting through internet. e-business is riskier also
in the sense that there are additional hazards of impersonation (someone else
may transact in your name) and leakage of confidential information such as
credit card details. Then, there also are problems of ‘virus,’ and ‘hacking,’
that you must have heard of. If not, we will be dealing with security and
safety concerns of online business.
(v)
People resistance: The process of adjustment to new
technology and new way of doing things causes stress and a sense of insecurity.
As a result, people may resist an organisation’s plans of entry into
e-commerce.
(vi)
Ethical fallouts: Stealing and selling of customer’s
data is now a common practice which is against the ethics of business.
Nowadays, companies use an ‘electronic eye’ to keep track of the computer files
we use, our e-mail account, the websites we visit etc. Is it ethical?
Despite
limitations, e-commerce is the way
It
may be pointed out that most of the limitations of e-commerce discussed
above are in the process of being overcome. Websites are becoming
more and more interactive to overcome the problem of ‘low touch.’
Communication technology is continually evolving to increase the
speed and quality of communication through internet.
Efforts are on to overcome the digital divide, for example, by
resorting to such strategies as setting up of community telecentres in villages
and rural areas in India with the involvement of government agencies, NGOs and
international institutions. In order to diffuse e-commerce in all nooks and
corners, India has undertaken about 150 such projects.
In view of the above discussion, it is clear that e-business is
here to stay and is poised to reshape the businesses, governance and the
economies. It is, therefore, appropriate that we familiarise ourselves with how
e-business is conducted.
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