MDU BBA NOTES

SEMESTER-1

Business Organisation

Entrepreneurial Opportunities In Contemporary Business Environment.

Business Environment

The term business environment refers to:-

1. the aggregate of all the forces, factors, and institutions, which are internally affecting the business through the management structure.
2. As well as which are external to & which are beyond the control of business enterprises.

• Environment refers to forces- economic, social, political & technological factors apart from internal details of the organization that are uncontrollable in nature and affects the functioning of the organization.
• The success of every business depends on adapting itself to the environment within which it functions

3. Ex- with changes in government policies, the business has to make the necessary changes to adapt to the new policies.

4. Ex- change in technology, may render existing products obsolete.

Emerging Trends in Business

• Analytics- the most significant source of ideas for business that don’t even exist yet.
• New ideas of entrepreneurs coupled with technological advances have led to a changing business environment.
• Various forms of business organization have emerged –

1. Network Marketing
2. Franchising
3. Business Process Outsourcing
4. E-Commerce
5. M-Commerce

Network Marketing

• A business model in which a distributor network is needed to build a business.
• Multilevel Marketing -payouts occur at more than one level.
• Independent business persons act as a distributor of the company’s products.
• Each distributor can further engage sub-distributors who can further add other distributors and so on.
• Thus, a network of distributors is formed who operate at various levels.
• Network Marketing distributors purchase the product at wholesale prices, may either use discounted products themselves or retail the products to others for a profit.
• Distributors receive a commission for their personal volume, which is the value of every product which the customer buys or sells.
• Net Commission on overall turnover from their group personal volume.

Advantages of Network Marketing

1. Network grows continuously- distributor manage their own sales force.
2. Network companies can maintain higher margins on their products. No Advertisement expenditure & retailer margin.
3. Lower overhead costs as no infrastructure are required.
4. Opportunity to earn unlimited income in form of commission & sales revenue of recruits.

Disadvantages of Network Marketing

• As sales forecasting is difficult, understocking or overstocking of various products occurs.
• Manufacturers do not have effective control over their sales team as distributor take over the control of the company.
• Networker needs extra efforts other than their core line of work, which creates the risk of failing in business, which happens in 95% of such cases.

Franchising

• A ‘franchise’ means the special right given by a manufacturer or a parent organization to another individual or a firm to sell the product or service in a given specified area.
• In franchising a firm allows another firm or individual to use technical know-how, trade mark, patents & trade secrets.
• The individual or a firm that grants the right is called a ‘franchiser’.
• The individual or firm to whom the right is granted is called a ‘franchisee’.
• The right granted by a franchiser to a franchisee is given under a special agreement known as a Franchise Agreement
• Franchising helps to build chain stores.
• Franchisors’ success is franchisee success.

Franchising Advantage

To the Franchiser

• Expansion.
• Feedback on local customer preference from the franchisee.
• Increased Reputation & Goodwill by expanding the network.
• Rights are protected- only franchisees can use them.

To the Franchisee

• Groundwork checkout can be done before committing.
• Full assistance in staff training, product promotion & designing store layout.
• Brand Advantage.
• Can satisfy customers by supplying quality products.
• Exclusive rights.

Franchising Disadvantage

• To the Franchiser-

1. Franchisees may start a similar business.
2. Image can be tarnished if standards are not maintained.
3. Initial assistance has to be provided.
4. Trade secrets are leaked out.
5. There are ongoing costs of supporting the franchise & national advertising.

• To the Franchisee-

1. Restrictions.
2. Payment of Royalty.
3. Conflicts may arise in the maintenance of accounts, payment of royalties, and violation of quality norms.
4. Business cannot be sold without the Franchiser’s permission.

Business Process Outsourcing (BPO)

Outsourcing is popularly associated with ITES. Also known as BPO. Knowledge Process Outsourcing (KPO) & Legal Process Outsourcing (LPO) are some of the sub-segments of BPO. Contracting of operations and responsibilities of a specific business. functions to a third-party service provider. Ex- Coca-Cola outsourced large segments of its supply chain. BPO is typically categorized into back office outsourcing like-

• Human Resources, finances, or accounting.
• 24*7 Customer care service, telemarketing.

BPO that is contracted outside the company’s country- offshore.

BPO that is contracted to a company’s neighboring country- near shore.

Advantages of BPO

• Ensuring Smooth operations
• Expansion of Business
• Specialized Performance
• Getting Better Results
• Cost Effectiveness- Outsourcing IT requirements save 30% of the company’s expenditure
• Skilled Manpower

Disadvantages of BPO

• Communication Challenges & Different Standards.
• Time Zone in offshore BPOs can create problems with online meetings
• Loss of control in case of loss of transparency
• Service Provider looks for diversification
• Dependence- Reduces the flexibility

E-Commerce

• A comprehensive system of trading that uses networks of computers for buying and selling goods, information & services.
• E-commerce includes buying & selling-
  – Goods- eg. Digital cameras, music systems, clothes, accessories.
  – Information- eg. Subscription to a site & get access to information.
  – Services- eg shaadi.com, naukri.com 16

Types of E-Commerce

E-commerce can take place

a) between the companies
b) between the companies & the customers
c) between the companies & government departments

Based on the type of entities involved in a transaction, e-commerce has been classified into the following category:-

1. Business to Business (B2B)
2. Business to Consumer (B2C)
3. Consumer to Business (C2B)
4. Consumer to Consumer (C2C)

Advantage of E-commerce

• Global Advantage
• Lower Transaction Cost & Higher Margin.
• Saving time & effort.
• 24*7 working.
• Quick Supplies- less inventory.
• Wider Choice.
• Customer Convenience.
• Launching new products is easier.

Disadvantages of Ecommerce

• High-start costs.
• High Risk.
• Organizations require trained staff.
• Trained staff is required to maintain the web page.
• Fulfillment problems- website crashing during festive seasons
• Lack of personal interaction.
• Security.
• Viruses can cause unnecessary delays, file backups, and storage problems.
• Corporate Vulnerability- Access to the competitors.
• People’s Resistance- Sofa.

M-Commerce

• M-Commerce or mobile commerce refers to buying & selling products through wireless handheld devices such as mobile phones & personal digital assistants (PDAs).
• The phrase mobile commerce was originally coined in 1997 by Kevin Duffey at the launch of the Global Mobile Commerce Forum
• Mobile Commerce is often called “a retail outlet in your customer’s pocket.“
• M-commerce opened the door for new applications & services.
• Critical news that people need while traveling is made available- traffic news, weather news, and stock market reports.
• Ex- Book my show, Paytm.

Advantages of M-Commerce

– Ready convenient & secure way to do transactions
– New distribution network is open
– Large reach

Disadvantages of M-Commerce

– Existing technology is not best suited for M-Commerce- slow data transfer
– Acceptance of m-commerce is slow
– Poor display in cell phones

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