Unit-15 CHANGING ENVIRONMENT OF COMMERCE

Unit-15

Changing Environment of Commerce

Meaning of Business Environment

Business environment is the sum total of all external and internal factors that influence a business. There are two major factors influence the commerce.

A. Internal Factors

            These are factors which influence the inside affairs of the business organization. The following factors influence the survival of each and every business organization.

-Human Resources

-Company Image

-Management Structure

-Physical Assets

-Marketing Resources

-Financial Factors

B. External Factors (PEST Factors)

a. Political factors

These are governmental activities and political conditions that may affect the business. Examples include laws, regulations, tariffs and other trade barriers, war, and social unrest.

b. Economic factors

These are factors that affect the entire economy, not just one business. Examples include things like interest rates, unemployment rates, currency exchange rates, inflation, deflation, recessions and depressions.

Economic Conditions:

The economic conditions of a nation refer to a set of economic factors that have great influence on business organizations and their operations. Economic conditions include,

1. Economic Policies:

2. Industrial policy

3. Fiscal policy

4. Monetary policy

5. Economic System:

The world economy is primarily governed by three types of economic systems-

1. Capitalist economy;

2. Socialist economy;

3. Mixed economy

c. Social factors

The social environment of business includes social factors like customs, traditions, values, beliefs, poverty, literacy, life expectancy rate etc.

d. Technological factors

Technology is understood as the systematic application of scientific or other organized knowledge to practical tasks. Technology changes fast and to keep pace with it, businessmen should be ever alert to adopt changed technology in their businesses.

E-Shop

E-shop represents Electronic shop. It is an online business unit that sells a variety of goods and services. They are just like a retail store but instead of having a physical location, its location is on the internet. Eg:- Amazon, ebay, Alibaba, etc.

Features of E-Shop.

1.It has no physical location

            E-Shop has no any fixed place or location to meet the consumers so they can buy the things and services over internet. Goods are stored in a warehouse and delivered as per order.

2.Use of website and worldwide market

            Customers can visit the websites of each E-Shop instead of the retail unit. The list of products along with price and terms are displayed in the website. Customers from any part of the world can access the website and place order.

3.Use of own apps

            Each sellers can create their own applications for business. So customers can use the applications of each sellers through which they can select the products, order and pay the price also. Customers can download these applications from the application store (app store).

4.Wide range of goods

            E-Shops offer wide range of goods and display on their websites. They can store bulk range of goods in their warehouse as the location to store the goods are not so important as a retail unit.

5.Delivery period.

            According to the distance and location, the seller provides the expected date of delivery for each good over the website when a customer place the order for particular goods.

6.Mode of payment.

            Customers can settle the payment through the websites using internet banking platform or using cash cards such as VISA or Master or AMEX card. Some sellers offer COD (Cash on Delivery) for certain goods where they have their own delivery unit in a particular area.

7.Return and refund option

            Customers can return the goods in given period of time if any faults is detected. The sellers may refund or replace the product for a given guarantee or warranty period.

Advantages and disadvantage of E-Shop

A. Advantages of E-shop to the customers

1. Consumers get chance to select product choice from wide range of goods.

2. Consumers get goods at low price because there is no middlemen for selling goods.

3. Consumers can save time for buying goods without visiting the shop. So it is goods for working people.

4. Consumers can place order 24 hours so this offers 24x7 working hours.

5. Worldwide access using internet enables the consumers to place order and pay money anywhere anytime.

6. Lower the risk of carrying cash in hand and visiting the retail outlet. 

B. Disadvantages of E-shop to the customers

1. Consumers cannot examine the product before placing order and payment. So the chance of malpractice is high from sellers side.

2. Chance of phishing and hacking of personal information. It may lead to the loss of money if the hackers get details of cash cards and internet banking.

3. Lack of technical knowledge about online trading and payment. Traditional customers are ignorant about the modern electronic devices and handling.

4. Chance of late delivery or wrong delivery.

5. Misleading advertisement and delivery of lower quality products.

6. Inadequate after-sales service or return policy. Customers should meet the expenses to send the product to the service centre if any fault is detected.]

7. Increased shipping or delivery charge.

 

A. Advantages of E-shop to the sellers

1. Sellers can offer lower price because there is no middlemen between the buyer and seller. It increases the sales and revenue of the online sellers.

2. Sellers can save the cost of operation such as high rent and overheads. Because these sellers do not have any fixed location as other traditional retailers.

3. Sellers get immediate cash inflow through internet from the buyers so there is no risk of bad debts.

4. Sellers can process order any time as e-shop offers 24 hours service. 

B. Disadvantages of E-shop to the Sellers

1. Cost of packaging and delivery. E-shop uses courier or postal service to deliver the products to the consumers.

2. Increased use of computer and related devices as part of trade. It would increase the cost of operation.

3. Cost of warehousing and storage.

4. Cost of charge payable to the credit card companies. Annual fees and commission.

5. Chance of bad debts. If goods are sold on credit basis, delay in the payment of installments may bring shortage of capital to the sellers. 

E-Commerce and Business

Definition of E-commerce:

E-commerce represents all commercial activities are done through internet. Sharing business information, maintaining business relationships and conducting business transactions using computers connected to telecommunication network is called E-Commerce.

Business models of e-commerce:

There are mainly 4 business models in e-commerce, based on transaction.

1. Business To Consumer (B2C)

Here companies sell their goods online to consumers who are the end users of their products or services.

 

2. Business-to-Business (B2B)

Here companies sell their goods online to other companies without being engaged in sales to consumers

3. Consumer-to-Business (C2B)

Here consumers usually post their products or services online on which companies can post their bids. A consumer reviews the bids and selects the company that meets his price expectations.

4. Consumer-to-Consumer (C2C)

Here consumers sell their goods through internet to other consumers. A well-known example is ibay, etc.

Important terms used in E-Commerce

a. Plastic money

            It includes credit or debit card used to pay money

b. COD (Cash on Delivery)

            Here customers have to pay money when the company deliver the products.

c. EMI (Equated Monthly Installment)

Here customers can pay the price in installments periodically.

d. 24x7 (24 hours in 7 days)

Anytime service

Commercial and the Environmental effects of E-Commerce

Commercial effects of E-Commerce

1. Changes in supply and logistics management.

Logistics management is the part of supply management (distribution). Packaging, transport and warehousing are the major task of logistics company. In e-commerce, logistics management is the related aspect with same attention.

2. Development of communication.

            Here increased communication over the internet is required. Maintenance of websites, payment portal, app stores, email, etc. are main related aspects in e-commerce.

3. Increased use of private couriers and air transport.

            International deliveries are normally based on the availability of external courier facilities. For domestic deliveries, postal services or domestic delivery agents are preferred.

4. Growth of new international consumer markets such as India and China

            As developing countries such as China and India offers wide market for consumer goods worldwide. So most of the online traders focus to place a market in these countries.
5. Growth of micro multinationals
            Micro multinational is a new concept which means small sized business enterprises sell their products worldwide using internet services.

Environmental effects of e-commerce.

1.Increased use of transport for deliveries may result greater pollution such as burning fossil fuels.

2.Increased production and utilization of resources may affect certain countries. Usage of plastic materials and packaging materials damage the environment.

3. Greater use of power such as electricity for computers and fuel for transportation.

4. False advertisement and promotion make the new generation addictive with unnecessary habits.

Explain how business should attempt to deal with environmental impacts.

1. Business should follow the trading bloc terms and international legislations

2. Business should promote reusable or recycling products for packaging.

3. Business should promote ethically- produced goods.

4. Products should be environment friendly and not detrimental to any living organism.

 

CONSUMER PROTECTION

            Consumer protection means the protection of rights and interests of the public as a consumer. It focuses to free the consumers without exploitation from the sellers.

Why consumer protection is needed?

            Consumers face many problems in commercial sectors.

            1. Selling at higher prices

            2. Product Risk.

            3. False advertisements.

            4. Food Adulteration.

            5. Malpractices in weight and quantity.

            6. Duplication of products.

            7. Selling of expired or stale products.

8. Other issues such as late delivery of goods, improper packing, improper covering of the after sales services, sales of used products as new, etc. cause the problems to the consumers.

METHODS OF CONSUMER PROTECTION

1. CONSUMER LEGISLATION

Consumer Legislation means the law or Act passed by the government to protect rights of consumers in different fields of trade.

2. CONSUMER PROTECTION AGENCIES

            a. Citizens Advice Bureau (CAB)

Their role is to act as a mediator between consumers and traders in the areas where there are no consumer protection agencies.

           

b. The British Standard Institution (BSI)

It is an independent organization. It ensures the quality of products by providing certain standards to the manufacturers to follow. The kite-mark of the BSI is now well known, and regarded as a sign of quality.

3. CONSUMERS ASSOCIATION

Consumers Association is an independent non-profit organization established by the different consumers as members. They test the products to find the best value for money and publish the list of good and bad points of a particular product in their magazines.

4. SELF PROTECTION

Consumers can protect themselves by following proper rules and terms pertained to the trading fields. Following are the self-protection measures against the unfair trading practices.

1. Consumers should be aware about the business Acts or rules existing in the country.

2. Consumer should compare the prices and must compare the quality of different brands of goods.

3. Consumers should ensure the quality of goods by ensuring that product is labeled the quality marks such as BSI kite mark, ISI mark, etc.

4. Consumers can join in any consumers association; it enables them for collective bargaining.

5. Consumers should notice the sell by date of the products.

6. Consumers can complaint against the sellers for refunding or compensation if any risk is happened due to the products.

7. Consumer can boycott the sellers those who practice unfair measures in the market.