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Class 11 Business Studies Chapter 5 Important Extra Questions Emerging Modes of Business
Emerging Modes of Business Important Extra Questions Short Answer Type
Define E-commerce and mention its opportunities in the modern business world.
Meaning of Electronic Commerce (E-commerce): Internet commerce or E-commerce (electronic-commerce) is on-line electronic technology connected via the internet to assist and enhance a variety of business processes, functions, and systems. Using the Internet for commerce means no physical presence of parties is required.
Electronic commerce is electronic communication among enterprises, including customers, suppliers, business partners, govt, organizations, and financial institutions. It encompasses a broad range of activities like ordering, invoicing, transportation, delivery, and payment can be done electronically.
Definitions of E-commerce: “It is an electronic communication among enterprises, including customers, suppliers, business partners, government organizations and financial institutions. ”- Dr. Janardhan
Thus, we can understand “e-commerce is a general concept covering any business transaction executed electronically between parties such as companies to companies (business-to-business) companies and consumers (business-to-consumer), consumers and consumers, business and the public sector and between consumers and the public sector.
Therefore, we can say that electronic commerce is a generic name for a range of technologies that allows the transfer of business information using electronic means. This would, therefore, include technologies such as Electronic Data Interchange, Universal Product Certification or Article Numbering, geographical positioning System, etc. which allows the exchange of information reducing human intervention to a minimum.
Opportunities of E-commerce: The opportunities of electronic commerce are not just available to large corporations and government departments but many small to medium businesses are also discovering new cost-effective opportunities by using internet-related technology to help their business operations locally or internationally. It makes it possible to work round the clock and around the world. It offers business concerns more cost-efficient and time-efficient.
Moreover, e-commerce offers great opportunities for developing countries. It can help them to enter the prosperous global market place and hence serve to reduce the gap between rich and poor countries.
In today’s business world corporate applications of electronic commerce have focused on computer-to-computer interactions. The output of one computer program becomes the input to another. The system that is used to generate a printed purchase order and mail it to the supplier now sends the purchase order as an electronic data interchange message to a computer at the supplier’s facility. The order is automatically, electronically received, and input by the supplier’s own order processing software and does not have to be keyed in. Payments are similarly automatic with electronic funds transfers (EFT) replacing cheques. It makes no sense to spend money on paper and people when two computers can structure the transaction for a few amount.
E-commerce offers the following opportunities to suppliers and commensurate benefits to consumers:
- Global choice.
- Improved competitiveness or quality of services.
- Personalized products and services.
- Rapid response to needs.
- New products and services.
Give the meaning of E-business.
Meaning of E-business: E-business (Electronic business) is the conduct of business on the internet. It involves not only buying and selling but also servicing customers and collaborating with business partners. E-business is the future of all business. It encompasses the use of technologies, processes, and management practices that enhance organizational competitiveness through the strategic use of electronic information.
It goes beyond e-commerce by integrating e-commerce tightly with business operations to improve performance, create value and enable new relationships between businessmen and customers. It involves strengthening relationships with customers and suppliers. It is beneficial to check the competition and useful for developing new product ideas and sources. It is more concerned with re-designing business processes.
What are the various uses on benefits of e-commerce?
Uses of E-commerce:
1. Customers search: E-commerce helps in finding customers for the product or service by sending them informative e-mails for the product or service. These e-mails help customers to understand the product and decide as to whether it should be purchased or not. It makes use of a search engine to find an appropriate seller’s website.
2. Pre-sales inquiries: Customers can contact the company’s sales executives through the company web-site to have information about the product price, specification, etc. It may select the desired seller from the advertisement or a friend’s recommendations.
3. Information publishing and dissemination Company web¬site helps in providing the latest information about the price, discount, quality of the product, etc. Web-site can be accessed anywhere in the world.
4. Sales of product: Online sales of products can be made on the website. Customers can choose the product from the catalog of photographs and order online. Payment can be made through cheque, draft, or credit card.
5. Advertising product: E-commerce helps to advertise the product through e-mails, website, telemarketing, etc. Customers can be given the latest information on the e-mail or website.
6. Sales promotions: Sales can be increased by online trading on the internet also helps to provide better customer service by receiving their complaints on the e-mail.
7. Purchasing goods: Suppliers can be found on the internet for a particular product or service. Internet search engines like Google, Yahoo help in locating suppliers from all parts of the world.
8. Funds transfer: Internet banking has the facility of funds transfer from one bank to another. The customers are provided secured identity to carry out such transactions on the internet. Payment may be made through credit card or cheque online.
9. After-sale service: Customers can be provided efficient after-sales service by contacting them via the e-mail address. Customers can put the complaints through companies e-mails.
Explain the process of E-business or online transactions.
Process of E-commerce Transactions:
1. The cardholder browses items the merchant has for sale: Traditionally, the buyer walks into a bookstore and browse items on the shelves. If he finds something that he likes, he puts it into his shopping cart.
With electronic shopping, the buyer uses his Internet browser to browse items. Arvind Cloth Mills, Surat has for sales on its web pages. If he finds a cloth that interests him, he can add it to his virtual shopping cart. Arvind Cloth Mills Website provides a mechanism for keeping track of the order state, thereby remembering which books the buyer decides to keep in his cart.
2. The cardholder decided which of the items to purchase: With electronic shopping, as well as with traditional shopping, the buyer can remove any or all of the clothing he has placed in his shopping cart. (This functionality is merchant-supplied and is not a part of SET.) He pays only for the ones that he has decided to purchase.
3. The cardholder is presented with an invoice containing the list of items and their price: Traditionally, the buyer takes his clothes to the cash register, and the clerk rings up his purchase and presents him with a total price.
With electronic shopping, the buyer makes his decision to pay via Arvind Cloth Mill’s Website by clicking on a “Pay Now” button or something similar. He is then presented with a sales order electronically, from the cloth mill’s server, or on his computer via his electronic shopping software.
4. The cardholder selects a means of payment: When standing at the checkout counter at the cloth mill, the buyer decides which of the credit cards in his wallet, he wishes to use for his purchase.
Similarly, the buyer may have multiple cards he can choose from to complete his SET transaction.
5. The cardholder gives the merchant order confirmation along with the means of payment: Traditionally, this is as easy as the buyer handing the clerk a credit card.
With SET, the order and payment instructions are digitally signed by the buyer and are then sent to the Arvind Cloth Mill, Surat.
6. The merchant requests authorization for the purchase: With both electronic and traditional shopping, the cloth mill sends an authorization request to its acquire via its payment gateway. The acquire sends this information for processing to the buyer’s issue.
The issue returns with an authorization response. The response includes an indication of whether the authorization request has been approved. In turn, the acquirer responds to Arvind Cloth Mill, Surat with the outcome (acceptance or rejection) of the processing.
7. The merchant delivers goods to the cardholder: The cloth mill’s clerk, in the case of traditional acceptance, give the buyer his clothes and sends him on his way.
What are the various security problems that arise in E-commerce transactions?
Security problems related to E-commerce: E-commerce has been facing certain problems that endanger the security and safety of business conditions.
The important problems are discussed below:
1. Hacking: It means unauthorized entry into a website. The hacker can destroy the data on the website which would cause a huge loss to the owner of the website. This would interrupt the business transactions carried out through the website. In several countries, the governments have set cybercrime cells to take action against the crimes committed by the hackers. In recent years, there has been an alarming increase in the cases of hacking.
2. Viruses: There are several viruses that can clean up all the information stored in the computer. The viruses can enter a system through e-mail or disc drive floppies or affected websites. Until the: virus is cleaned out, all operations come to a standstill. In such a situation, the business firm will suffer a loss of revenue. Viruses cause huge loss. of revenue and time to clear the disc drive floppies or websites.
3. Brand-hijacking: The Internet allows the creation of powerful brands in a very short period of time. But brand identity created through radio, T.V., and the press is very costly and time-consuming. The internet brand may overshadow the existing brands causing huge loss to their owners. For instance, Amazon became the leading bookseller brand within a period of about two years and it offered tough challenges to the established names such as Barnes and Noble. As a safeguard, each company should establish its brands in cyberspace without further delay.
4. Impersonation: Hackers may pretend to be customers themselves. They thus make use of stolen credit cards of real customers.
5. Fraudulent trading: A business enterprise operating a website may indulge in fraudulent practices. It may create a fake website, take away money from customers and not supply the product/service to the customer. It may not protect confidential information about customers. Parties to a transaction cannot deny their participation later on.
6. Improper registration of domain names: A dishonest person may register a domain name linked to the established brand name or trademark of another firm. For example, he may register vodafone.com. in his name to sell the domain name to the rightful owner at a price.
What is the meaning of the term ‘outsourcing’?
Outsourcing (Introduction): In today’s eta, businesses are more focused on cost control measures as it is not easy to increase prices if a market share has to be retained or improved. Competitive advantage can be realized only when businesses become more efficient in their operations and reduce the cost of inefficiencies. In such a case specialization plays an important role.
During the 1990s, a new trend could be seen wherein the repetitive nature of work was being transferred to outside agencies so that efficiency in day-to-day operations can be achieved and businesses remain focussed on their core competencies. This phenomenon of hiring outside firms for services is known as outsourcing of services. It is a trend that is radically reshipping business. It relates to long term contracting out the non-core activities to third parties. With a view to benefitting from their experience, expertise, efficiency, and investment.
Meaning of Outsourcing Services: Outsourcing is the latest trend in today’s business world, going outside your own organization to obtain specialized services of various kinds. It is called Business Process Outsourcing (BPO), which essentially means getting tasks accomplished through an outside agency. Every outsourcing relationship involves processes and procedures. These are often standardized but it is important that there is some flexibility to ensure that they can evolve with the relationship.
Mention the various characteristics or features of outsourcing.
1. Getting work done through outsiders: Outsourcing is the process of getting work done from specialist individuals outside the business. For example, an enterprise hires other agencies for repairing its machines rather than repair them by its staff.
2. Quality job: Through using outsourcing sources people get good quality. For example, a specialized faculty of a particular subject can teach the same subject better than general faculty.
3. Improvement in the number of products: Outsourcing helps to improve the number of products. A specialized courier agency or a transport company serves business better than its own drivers of trucks/ vehicles.
4. Expansion of business: The outsourcing process links growing businesses to a range of state-of-the-art services and, resources using outsourcing resources any business can expand as per its need. For example, using an advertising agency as a source of outsourcing a company/business can inform the features and quality of the product to people in an easy way.
5. Better standard of living- Outsourcing provided the best services to the people. In the modern world, every individual wants to avail of the maximum opportunity of his precious time. That’s why, he wants to use specialists for his different needs, which provides a better standard of living.
Mention in brief the various types of outsourcing.
Type of outsourcing: Any non-core business process can be outsourced. Outsourcing of some of the popular services are given below:
1. Financial Services: Big companies require to obtain several financial services from outside or external sources. Every business firm requires some sort of financial service, e.g. payroll accounting services, merchant banking, underwriting, etc.
Manufacturing and commercial firms except for very large size find it more convenient and economical to depend upon outside financial agencies for the various financial services. For example, Reliance Industries may outsource financial services from HSBC Bank for issuing ADRs/GDRs in foreign capital markets.
2. Advertising: All big firms outsource the assignment of advertising their products and services to specialized handling. Business firms generally depend upon advertising agencies for designing, developing, and disseminating advertisements for their products and services. Some big advertisers such as Coca Cola, Pepsi, Hindustan Lever, and others have agreements with advertising agencies. Under the agreement, the advertising agency undertakes to provide all services concerning advertising in return for a fee. Outsourcing also helps to make use of the services of experts of ad-agency.
3. Courier Service: Big business firms have to send letters, parcels, etc. in large numbers. They make use of sendees offered by courier firms such as DTH, Overnight Express, and others. These courier firms collect all articles to be deposited from the offices of client firms and dispatch them to their destinations. Courier service is faster and more efficient, cheaper, quite reliable, and personalized service to clients.
4. Customer Support Service (CSS): ‘Customer is like a precious ornament which should not be stolen by anyone else.’ Several services are offered to customers to support the purchase and use of products. Companies are realizing that customer service is an excellent way to achieves competitive advantage in a highly competitive market.
Customers need home delivery service, repair, and maintenance of consumer durables, information, and counseling about alternate brands that best meet their needs. Business firms can concentrate on the sales function by outsourcing customer support services. For example, GE Capital and some other companies have set up call centers in India to provide support services to their customers in different countries.
Give a brief view of various advantages or need of outsourcing in today’s competitive world.
Advantages/need of outsourcing: In today’s business world, outsourcing has become a buzz word to achieve specialization in services due to lack of time and unlimited requirements. Everyone wants more satisfaction in less time so that he uses specialists who create requirements of outsourcing of resources.
The principal needs of outsourcing are classified as follows:
1. Concentration on Core Competency: BPO provides an opportunity to the business to concentrate on core areas of its strength and competence. It can content rule on advertising, financial, courier, and customer services.
2. Enhancement of Business: As we know that every businessman wants more and more profit and personal development. For that, he should try to become distinguished from others by providing standard and specialized quality of a product. In order to achieve this objective, he should use outsourcing resources to make his dreams true.
3. Specialisation: Through outsourcing specialization in business operations can be achieved. This reduces cost and improves the quality of business operations.
4. Obtaining Better Quality of Product Services: The standard of living, of people, is improving day by day. Every individual wants to use the standard quality of goods and services. For this purpose they use outsourcing resources, so that standard quality of goods services could be produced.
5. Big Savings: Outsourcing agencies are competent enough in their services and perform the job at a lesser cost. It results in savings.
6. Avoidance of Labour Problems: Outsourcing requires a lesser number of persons to be employed by the business, so labor problems are also reduced.
7. Lowering the chances of Risk: Outsourcing to a service provider who is a specialist in the field adds to the success of the business firm and lowers the chances of risks.
Emerging Modes of Business Important Extra Questions Long Answer Type
What are the various requirements for the successful implementation of E-commerce?
Requirements for successful implementation of E-commerce: Resources Required for E-commerce: E-commerce has tremendous potential in the Indian economy. But it requires the following resources for its successful implementation:
1. Computer Hardware: The first requirement for the implementation of e-commerce is the availability of adequate computer hardware. The computer system with the business must have adequate speed, memory, and nodes to handle the expected volume of business transactions. It should provide the necessary internet service provider and application service provides.
2. Qualified Personnel: It is essential for the business firm to have technically qualified personnel to make use of computer networks and the internet for business transactions. In particular, the staff must be trained to handle trade inquiries, obtain and process orders from customers and ensure prompt deliveries of goods.
3. Well-designed Website: Customers will gain access to the company’s website through their computers linked to any network. To carry out e-commerce, the business enterprise must develop a comprehensive website. This will facilitate communication with customers, other business enterprises, and even government departments. The information should contain business history, nature, and types of products offered along with pictures, graphs, and other technical details. The website may also make available price lists or catalogs of various products.
4. Telecommunication Facilities: E-commerce can be carried out by a business enterprise if it has access to an effective telecommunication system. E-commerce will succeed only if adequate telephone lines and internet facilities are available and there is no interruption in these services.
For the spread of e-commerce among lower-income groups and to the rural areas, it is essential that telecommunication and internet services are adequately available at a reasonable cost, otherwise, e-commerce will remain confined to rich people. The cost of hardware and the price of using the internet must be within the reach of low and middle-income groups.
5. Reliable Payment System: For the success of e-commerce, the business enterprise needs to develop an efficient system of receiving payments for the goods sold. Electronic transfer of money from the customers should be facilitated. Similarly, there should be a facility for electronic transfer of any refund to the customers. For this, the business enterprise needs to make arrangements with commercial banks and credit card agencies. An inbuilt system of refunds, in case of the excess amount, is received should be created.
Write a note on the security of business transactions through E-commerce.
Security of business transactions in E-commerce: E-commerce can succeed when both buyers and sellers trust the system of exchange. This trust can be generated by ensuring the security of e-commerce transactions.
There are five essential elements for ensuring secure transactions over the Internet.
- Non-reputability of origin
- Non-reputability of receipt
- Authority: Authority means enabling each party in a transaction to ascertain with certainty the identity of the other party.
- Integrity: Integrity implies honesty in dealings.
- Confidentiality: Confidentiality means the privacy of the transactions.
- Non-reputability of origin: Non-reputability of origin refers to ensuring that the parties to a transaction cannot subsequently deny their participation.
- Non-reputability of receipt: Non-reputability of receipt implies that the seller cannot subsequently deny the payment received.
These mechanisms depend upon certification by a trusted third party (such as a government body). Therefore, global electronic commerce requires the establishment of a global certification system.
In order to ensure the security and safety of e-transactions, the following points need to be observed and followed:
- Authorization and Authentication of the documents precisely having no possibility of fraud.
- Confidentiality of the message, that the contents of the message may not be scanned by an unauthorized party.
- The integrity of the message and originality of the contents should be observed.
Secure transactions require that all parties use up-to-date software and hardware. Since consumers are the weakest link, organizations offering e-commerce must take special care to alert them about possible security problems. For example, www.buyandhold.com issued a security alert because some older versions of Netscape Communicator and Microsoft Internet Explorer included a root CA certificate which was set to expire at the end of 1999. The alert encouraged visitors to upgrade their browsers.
It is necessary to make customers feel comfortable about ordering online.
What are the various opportunities or benefits of E-commerce in the modern business world?
Opportunities and benefits of E-commerce: E-commerce makes it possible to work round the clock and around the world. It enables companies to be more efficient and flexible in their internal operations, to work more closely with their suppliers, and to be more responsive to the needs and expectations of their customers.
It allows companies to select the best suppliers regardless of their geographical location and to sell to a global market. It also offers business concerns more cost-efficient and time-efficient means of working with customers, suppliers, and development partners.
E-commerce offers several opportunities to suppliers and commensurate benefits to customers. These are given below:
1. Global reach/Global choice or access: The Internet is true without boundaries. The boundaries of electronic commerce are not defined by geography or by national borders, but rather by the coverage of computer networks. Since the most important networks are global presence and to conduct business worldwide.
Access to the global marketplace helps to improve the operations of business firms. It would not be an exaggeration to say that in the absence of the internet, Globalisation would be restricted in scope and speed.
The corresponding customer benefit is a global choice: a customer can select from all potential suppliers of a required product or service, regardless of their geographical location.
|Supplier opportunity||Customer benefit|
|the global presence or reach improved competitiveness mass customization and “customization” shorten or eradicate supply chains substantial cost savings novel business opportunities||having the global choice quality of service personalized products and services rapid response to needs substantial price reduction new products and services|
2. Improved competitiveness/Quality of Service: Electronic commerce enables suppliers to improve competitiveness by becoming “closer to the customer”. As a simple example, many companies are employing electronic commerce technology to offer improved levels of pre-and post-sales support, with increased levels of product information, guidance on product use, and rapid response to customer inquiries.
The corresponding customer benefit is improved quality of service. Internet is responsible for the popularity of the phrase “networked individuals and firms are more efficient than networked individuals and firms.”
3. Mass Customisation/Personalised Products and Services: With electronic interaction, suppliers are able to gather detailed information on the needs of each individual customer and automatically tailor products and services to those individual needs. This results in customized products comparable to those offered by specialized suppliers, but at mass-market prices.
One simple example is an online magazine that is tailored for the individual reader on each access to emphasize articles likely to be of interest and exclude articles that have already been read. Imagine a restaurant that does not have any requirements of physical space, but an online menu can be presented.
Customers visit your websites, decides the menu, place the order, food is delivered and the payment collected on an electronic clearing system.
4. Shorten or Eradicate Supply Chains/Rapid Response to Needs: E-business is truly a business as enabled and enhanced by electronics and offers the advantages of accessing anything anywhere, anytime. Electronic commerce often allows traditional supply chains to be shortened dramatically. There are many established examples where goods are shipped directly from the manufacturer to the end consumer by-passing the traditional staging posts of wholesaler’s warehouse, retailer’s warehouse, and retail outlet.
(Typically, the contribution of electronic commerce is not in making such direct distribution feasible since it could also be achieved using paper catalogs and telephone or postal ordering: but rather in making it practical in terms of both cost and time delays.)
The extreme example arises in the case of products and services that can be delivered electronically when the supply chain can be eradicated entirely. This has massive implications for the entertainment industries (film, video, music, magazines, newspapers), for the information and “detainment” industries (including all forms of publishing), and for companies concerned with the development and distribution of computer software.
The corresponding customer benefit is the ability to rapidly obtain the precise product that is required, without being limited to those currently in stock at local suppliers.
5. Substantial Savings/Substantial Price Reductions: One of the major contributions of electronic commerce is a reduction in transaction costs. While the cost of a business transaction that entails human interaction might be measured in dollars, the cost of conduction a similar transaction electronically might be a few cents or less. Hence any business process involving “routine” interactions between people offers the potential for substantial cost savings, which can, in turn, be transacted into substantial price reductions for customers.
What is the outsourcing of services? Mention in detail the various services which may be outsourced by a business unit.
Concept of outsourcing of services: The term ‘outsource’ means getting something from external sources rather than creating it within the organization. For instance, a firm may outsource the ‘advertising activity’ to an advertising agency instead of setting up its own advertising department. Similarly, other services may also be outsourced for better quality service and also to achieve economy.
This practice is called Business Process Outsourcing (BPO). The basic feature of BPO is that’ companies hire out.on contracting those services or tasks which are performed on regular basis’. For example, a business enterprise may outsource the employment of personnel, training of personnel, and payroll accounting to a specialized service provider
Traditionally, industrial organizations have faced the problem of ‘Make or Buy’ certain components or parts. They can compare the costs of both in-house production and outsourcing the components while taking such decisions.
Types of Services: There are several types of services that are offered by business firms to their customers or clients.
The significant services include the following:
(a) Financial services such as underwriting, issue management.
(by Advertising service.
(c) Customer support services.
(d) Courier service.
(e) Communication services such as STD, ISD, local phone, etc.
(f) Hotel services.
(g) Airlines services.
(h) Banking services.
(l) Health services.
Outsourcing of Financial Services: Big companies require to obtain several financial services from outside or external sources (i.e, outsourcing) because they don’t possess the infrastructure and capability to perform such services.
These include the following:
1. Underwing to Securities Most of the companies get their new issues of shares underwritten with the underwriters. Underwriters give a guarantee to the company that entire new issues will be sold to the public. In case, some securities are not subscribed to by the public, the underwriters undertake to purchase them. Underwriters get a small commission per share for their services.
2. Merchant Banking: Merchant bankers sponsor capital issues of companies. They help the company in drafting the prospectus, and application forms, compliance with legal formalities, the appointment of the registrar to deal with the share applications and transfers, a listing of securities, the arrangement of underwriters, selection of brokers, publicity, etc.
3. Registration of shares: Specialized firm known as registrar to issues deal with share application, registration of share, transfers, etc.
4. Depositories: They hold shares of shareholders of different companies in dematerialized (intangible or paperless) form.
Advertising Services: Business firms depend upon advertising agencies for designing, developing, and disseminating advertisements for their products and services. All big firms need to advertise their goods and services which require specialized handling. They can outsource this assignment to advertising (ad) agencies. Ad agencies help their clients in preparing the advertisement budget, advertisement program, and advertisement copy.
They prepare ad films, documentaries, and other promotional material on behalf of their clients. They also help the clients in choosing the ad media such as TV, radio, newspaper, hoarding, etc.
By entrusting the advertisement assignment to an ad-agency, the business firm is saved of the botheration and cost of employing a copywriter, film-maker, cameraman, and others. This turns out to be economical for the firm in the long-run. Outsourcing also helps to make use of the services of experts of the ad-agency.
Courier Service: Courier service involved delivery of letters, documents, and small parcels from one place to another through private operators known as couriers or courier companies.
The reasons for the popularity of courier services are as under:
- Courier service is faster and more efficient as compared to the postal service.
- Courier service is cheaper as compared to the postal services.
- Courier service is quite reliable.
- It provides personalized services to the clients.
- There is no long queue at the courier companies as is the case with the post offices.
- Courier companies provide the facility collecting the letters from the premises of their regular clients for onward delivery.
Types of Courier Services: Courier forms such as DTH, Overnite Express, and others collect all articles and dispatches to their destinations.
- Messenger Service: Under this, letters and documents could be delivered at the local and regional levels generally within a period of 24 hours.
- Inter-State Service: This courier service is intended to deliver letters and documents from one state to another within a period of 24 to 48 hours.
- Overseas Desk-to-Desk Courier Service: This service offers desk-to-desk document deliveries using air-courier services. Several international couriers with their own fleet of aircraft are operating in this field such as DHL Couriers, Transworld Couriers, Blazeflash Couriers, Express Air, United Parcel Service (UPS), etc.
Customer Support Services: ‘Customer is like a precious ornament which should not be stolen by anyone else.’ The above saying clearly states the importance of customer satisfaction and delight. It is the dissatisfied customer who does not repeat orders with the same seller. He may be dissatisfied because of some problem with the product or because of lack of care in attending to his complaints or inadequate after-sale service.
The term ‘after-sales service’ means responding to a customer with a problem. The problem may relate to ‘product complaints’ during the warranty period and even after that, spare parts, etc. This requires an organized system of efficient customer support services. Customers need home delivery service, repair, and maintenance of consumer durables, information and counseling about brands, and best meet of their needs.
In the present-day competitive environment, every business must take care of the grievances/complaints of the customers and do the needful to please the customers.
There are two options as regards provision of customer support services, namely,
- creation of customer support services department within the organization, or
- entering into an arrangement with an outside agency to provide after-sales services on behalf of the organization.
Traditionally, business organizations have organized their own customer support services departments. Such a department is manned by trained personnel to attend to the complaints of their customers.
The quality of after-sales services by this department determines the image of the organization. Every organization can’t afford to have a separate customer support service department because of a shortage of funds and inadequate infrastructure.
In such a case, it is advisable to outsource various customer support services from a reputed agency. Such an agency would take operational responsibility for providing customer support services on behalf of the organization against a stipulated amount of payment every year. If the agency or service provider fails to provide efficient and satisfactory services, the organization can cancel the contract with it and engage some other agency.
Generally, the customers of products like consumer durables (Fridge, TV, Air Conditioner, etc.) are widely spread throughout th€ country. They might need repair services during the ‘warranty period’ or even after that. If such services are not easily available, the image of the manufacturer and his brand will go down in the market. In the past, some TV manufacturers in India failed because they could not provide satisfactory after-sales services to their customers.
In such a situation, it is better to outsource such services to some reputed service provider or agency. The manufacturer will be saved from the botheration of engaging staff and creating the infrastructure for providing after-sales services to the customers.