CONTENTS
Unit No. Title Page No.
SEMESTER - II
Module 1
1.Concept of Services 01
2. Marketing Mix 15
3. Service Strategies 25
Module 2
4. Introduction to Retailing 38
5. Retail Format 50
6. Retail Scenario 59
Module 3
7. Information Technology Enabled Service Sector 75
8. Banking & Insurance Sector 85
9. Logistics & Network 100
Module 4
10. Introduction E-Commerce 110
11. Present Status of E-Commerce in India 122
munotes.in
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Unit-1
CONCEPT OF SERVICES
Unit structure :
1.0 Objectives
1.1 Introduction
1.2 Meaning & Definition
1.3 Features a nd Characteristics of Services
1.4 Difference b etween Goods and Services
1.5 Classification of Services
1.6 Scope of Service
1.7 India ’s Global Trade o f Commercial Services
1.8 Service Sector in India
1.9 Summary
1.10 Questions
1.0 OBJECTIVES
After studying the unit the students will be able to:
Understand the concept of service .
Know the main features of services.
Explain the differ ence between goods and services.
Understand the scope of services.
Classify the services.
Discuss about the importance of service sector in India.
1.1INTRODUCTION
A service is an act or performance offered by one party to
another. Although the process m ay be tied to a physical product,
the performance is essentially intangible and does not normally
result in ownership of any of the factors of production.munotes.in
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Services are economic activities that create value and provide
benefits for customers at specific t imes and places as a result of
bringing about a desired change in –or on behalf of –the recipient
of the service.
1.2 MEANING AND DEFINITION
More amusingly, services have been described as “something
that may be bought and sold, but which cannot be dr opped on your
foot.”
Definition and Meaning:
The term services is not limited to personal services like auto
servicing, beauty parlors , Medical Services, legal service,
Consultancy services etc. On the contrary, it has other
connotations according to management gurus. Services have been
defined in several ways but there does not exist any universal
definition. Some definitions have been mentioned below:
‘Establishments’ primarily engaged to provide various
services to individuals, businesses and gov ernment
establishments, other organizations, hotels and other lodging
places, establishments providing personal services as per
individual requirement, entertainment services. Educational
institutions, membership organizations and other miscellaneous
servi ces are included’ -Saser, Olson and Wyekoffs
‘Services refer to social efforts which include government to
fight five giant evils, want, disease, ignorance, squalor and illness in
the society.’ -Sir William Bieveridge
‘Services can also be defined as an a ction(s) of
organization(s) which maintain and improve the well –being and
functioning of people”. Hasenfield
‘Services are activities, benefits or satisfactions which are
offered for sale or are provided in connection with the sale of
goods.’ -American Marketing Association
Philip Kotler and Bloom (1984) Philip Kotler and Bloom defined
service as “any activity or benefit that one party can offer to another
that is essentially intangible and does not result in the ownership of
anything. Its production may or may not be tied to a physicalmunotes.in
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product.” This definition more or less follows the earlier ones. The
focus was given to the absence of ownership as a special feature of
services, which has significant business implications.
Christian Gronroos (1990 )According to Gronroos “a Service is an
activity or series of activities of more or less intangible nature that
normally, not necessarily take place in interactions between the
customer and service employees and / or physical resources or
goods and / or s ystems of the services provider, which are provided
as solutions to customer problems.”
These definitions make it clear that services are activities,
benefits or satisfactions given to the individual and the society in a
larger perspective. The applicat ions of all these definitions apply to
the sale of products to consumers, which may be tangible or
intangible in nature.
1.3 FEATURES AND CHARACTERISTICS OF
SERVICES
For services marketing, the distinguishing features or
characteristics of services are i mportant in the design of an
appropriate marketing mix. The core characteristics are defined
below:
1.Intangibility:
Even though many services include tangible aspects such as
an airline seat, a classroom, a restaurant table and food, the
service performanc e leading to a customer’s experience is
intangible. The benefits of buying a service are from the nature of
the performance. In comparison to physical goods, services cannot
be stored or readily displayed. They are difficult to communicate,
cannot be prote cted through patents and prices are difficult to set.
The intangible nature of services often means that customers have
difficulty in evaluating and comparing services. As a result they may
use price as a basis for assessing quality and they may place
greater emphasis on personal information sources. All this leads to
consumers having higher levels of perceived risk.
2.Inseparability:
Because services are processes, deeds or acts, customers
are involved in the production of a service. Also other consumers
may be involved in the production environment and centralizedmunotes.in
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mass production is difficult, particularly if the service is more
complex or customized. For most services both the buyer and the
seller need to be at the same place at the same time for the serv ice
to occur. Because centralized mass production is difficult,
consumers often have to travel to the point of service production.
For example, it is hard to imagine a haircut without both customer
and hairdresser. For a bank clerk or hairdresser the manne r in
which the service is produced is an essential element of the total
promotion of the service.
Thus the behavior and attitude of other consumers may have
an impact upon the nature and experience of a service. For
example, a loud or over –demanding cu stomer can deflect the
service staff’s attention and impact the quality of service delivery to
other consumers. In this circumstance it may be difficult for the
service providers to control the quality and consistency of the
service, unless the staff has b een trained to deal with such
situations in a precise and effective manner.
3.Perishability:
Given the intangible nature of services, they cannot be
inventoried, stored warehoused or re –used. A lawyer cannot store
parts of his or her knowledge for others to use while the lawyer is in
court or on holiday. The hairdresser cannot store haircuts so that
when a rush occurs on a Sunday morning all customers can have
their hair cut at once. Thus the availability of enough opportunities
for service delivery at re levant times is important for service
managers.
4.Customer participation:
Service production is not a one –sided activity. Customers
are co –producers of service. The production quality of the service
greatly depends upon the ability, skill and performa nce of the
employees as well as the ability and performance of the customer.
In the service interaction, although the employees and the
customers do not play an equal part in production, the role of the
customer cannot be overemphasized. Service firms shou ld make
the customers cannot be overemphasized. Service firms should
make the customers aware of the service package and the
production process through proper communication media. They
should take necessary steps to train customers, if necessary, to
provid e quality experience of the service. Perfection from the
organization’s side in service production cannot ensure positivemunotes.in
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results unless the consumers are involved with the process.
Therefore, specific and special orientation to different groups of
custome rs is necessary.
5.No Ownership:
Service consumers will have experiences but not ownership.
Since the services are intangible and perishable, the question of
ownership doesn’t arise. But this characteristic will add to the
problems of the service marketer . Convincing the customer with
tangible goods on which he will have ownership through transfer of
title is much easier than selling an experience where nothing
remains after consumption, except the memory of it. Customer
dissonance would be higher in the c ase of services than of goods.
6.Variability or Non –Standardization or Heterogeneity.
The service industry suffers from a curious characteristic –
Variability –that greatly affects its offer. The service offer is never
consistent in its quality and de livery. The same service product is
never delivered in the same way to the same customer across two
different time periods; a customer perceives the service transaction
as having a different quality when delivered from two different
places –or even on tw o different occasions at the same service
outlet. By its very nature, it can never be an identical, repeatable
experience every time –only an approximation thereof. This is so
unlike goods, where the customer is convinced that the product that
he buys is the same -irrespective of where he has purchased it and
whom he has purchased from. The Dove bath soap that Mrs. Roy
buys from her retailer in Mumbai would be the same if she bought it
in Chennai during her business trip or in Kodaikanal, Tamil Nadu
while holidaying. Thus, while there is homogeneity or some kind of
standardization in the product features of goods, a service offer
lacks them.
1.4 DIFFERENCE BETWEEN GOODS AND
SERVICES:
Goods are defined as those which can be physically
experienced, ver ified and treated or exchanged with or without
making profits. This includes necessities like food, clothes, and
books, other domestic and industrial items which can be stored and
are tangible in nature.munotes.in
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Services, on the other hand, are activities, benefi ts or
satisfactions which are available to consumers through sale. For
example, hotel business, personal care, legal or medical services,
banking and insurance services, etc. cannot be stored at any place
and one has to hire someone else to perform the ser vices. The
result is a positive social existence.
GOODS
1.5 CLASSIFICATION OF SERVICES
Classification of services helps service managers to cross
their industry boundaries and gain experience from other service
industr ies which share common problems and have similar
characteristics. Solutions to problems and breakthroughs in similar
service industries can then be applied by managers to their own
service businesses.
At the simplest level we can categorize services by ex clusion:
Services are that part of the economy left over after the exclusion of
agriculture, manufacturing and mining.
A description of services typically includes the following industry
sectors:
Retailing and wholesaling.
Transportation, distribution and storage.
Banking and insurance
Real EstateSALE/
TRANSACTIONPRODUCTION/
MANUFACTURECONSUMPTION/
USAGE
MARKETING /
COMMUNICATIONTRANSACTION/ SERVICE
DELIVERY
+
CONSUMPTION/
EXPERIENCE
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Communications and information services.
Public utilities, government and defense.
Health Care.
Business, professional and personal services.
Recreational and hospitality services.
Education.
Other non –profit organizations.
However, such listings are not very helpful in identifying the
features relevant to the marketing of services.
Many other approaches have been used to classify services.
Classification schemes use a wide range of factors such as:
Type of service.
Type of seller.
Type of purchaser
Demand characteristics.
Rented v/s Owned services.
Degree of intangibility
Buying motives.
Equipment based versus people based.
Amount of customer contact.
Service delivery requirements
Degree of customization.
Degree of labour intensity.
Check Your Progress
1.State whether following statement are True of False.
a.A service is any act or performance that one part y can offer to
another that is essentially tangible and does not result in the
ownership of anything.
b.It is very easy to make each service experience identical.
c.Service provider always visit the customers site to provide
services.
d.Service deliverers involve the pure service rendered by the
professional staff like doctors in hospitals, teachers in
academics.
e.Services can be produced in anticipation of demand.munotes.in
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f.Service analysts are the people who are entrust ed with the task
of concurrent review and evaluation of services in the
organization
g.Services can be touched as they are intangible.
h.The potential service product is the lowest level of a service
product.
2.FILL IN THE BLANKS
a. ___________ is a type of economic activity that is intangible,
is not stored and does not result in ownership.
b. You cannot own and s tore a service like you can
___________.
c. Services are generally_______________.
d. Services cannot be separated from the___________
___________.
e. The production and consumption of services may take place at
______________.
f. ___________ ___________is the element of the service mix
which allows the consumer again to make judgments on
the organization.
g. ___________ ___________are the personnel who provide the
supporting managerial services like administration. ,
h. ___________ ___________are the per sonnel employed in
manual jobs in the service organizations such as nurses in
hospitals.
i. Services may be classified on the_____________ basis.
j. Service sector provides revenue to Govt. by way
of_______________.
1.6 SCOPE OF SERVICES
When discussing strategies to market manufactured goods,
marketers usually address four basic strategic elements; product,
price, place (or distribution), and promotion (or communication).
Collectively, these categories are often referred to as the 4 Ps of
the marketing mix. However, the distinctive nature of service
performances, especially such aspects as customer involvement in
production and the importance of the time factor, requires that other
strategic elements be included. To capture the nature of this
challenge, we will be using the 8 Ps model of integrated service
management, which highlights the strategic decision variables
facing the manager of a service organization.munotes.in
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Product Elements :
Managers must select the features of both the core product
(either a good or service) and the bundle of supplementary service
elements surrounding it, with reference to the benefits desired by
customers and how well competing products perform. In short, they
must be attentive to all aspects of the service performance that
have the potential to create value for customers.
Place, Cyberspace, and Time :
Delivering product elements to customers involves decisions
on the place and time of delivery as well as on the methods and
channels employed. Delivery may involve physical or ele ctronic
distribution channels (or both), depending on the nature of the
service being provided. Use of messaging services and the Internet
allows information –based services to be delivered in cyberspace
for retrieval by telephone or computer wherever and whenever it
suits the customer. Firms may deliver service directly to customers
or through intermediary organizations, such as retail outlets that
receive a fee or percentage of the selling price to perform certain
tasks associated with sales, service and customer contact. Speed
and convenience of place and time for the customer are becoming
important determinants in the service delivery strategy.
Process:
Creating and delivering product elements to customers
requires the design and implementation of ef fective processes that
describe the methods and sequence of actions in which service
operating systems work. Badly designed processes are likely to
annoy customers when the latter experience slow, bureaucratic,
and ineffective service delivery. Similarly, poor processes make it
difficult for frontline staff to do their jobs well, result in low
productivity, and increase the likelihood of service failures.
Productivity and Quality:
These elements, often treated separately, should be treated
strategically a s interrelated. No service firm can afford to address
either element in isolation. Productivity relates to how inputs are
transformed into outputs that are valued by the customer, whereas
quality refers to the degree to which a service satisfies customers
by meeting their needs, wants and expectations. Improving
productivity is essential to keep costs under control, but managers
must beware of making inappropriate cuts in service levels that are
resented by customers (and perhaps by employees, too). Servicemunotes.in
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quality as defined by customers is essential for product
differentiation and building customer loyalty. However, investing in
quality improvement without understating the tradeoff between
incremental costs and incremental revenues may hurt profitability.
People:
Many services depend on direct, personal interaction
between customers and a firm’s employees (such as getting a
haircut or eating at a restaurant). The nature of these interactions
strongly influences the customer’s perceptions of service qualit y.
Customers will often judge the quality of the service they receive
based on their assessment of the people providing that service.
They may also make judgments about other customers they
encounter. Successful service firms devote significant effort to
recruiting, training and motivating their personnel. Firms often seek
to manage customer behavior too.
Promotion and education:
No marketing programme can succeed without effective
communications; this component plays three vital roles: providing
needed information and advice, persuading target customers of the
merits of a specific product, and encouraging them to take action at
specific times. In services marketing, much communication is
educational in nature, especially for new customers. Companies
may need to teach these customers about the benefits of the
service, as well as where and when to obtain it, and provide
instructions on how to participate in service processes.
Communications can be delivered by individuals, such as
salespeople and trainers, or through such media as TV, radio,
newspapers, magazines, poster, brochures, and Web sites.
Promotional activities may serve to marshal arguments in favor of
selecting a particular brand or use incentives to catch customers’
attention and motivate them to act.
Physical Evidence:
The appearance of buildings, landscaping, vehicles, interior
furnishing, equipment, staff members, printed materials, and other
visible clues all provide tangible evidence of a firm’s service quality.
Service firms need to manag e physical evidence carefully, because
it can have a profound impact on customers’ impressions. In
services with few tangible elements, such as insurance, advertising
is often employed to create meaningful symbols.munotes.in
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Price and other User Costs:
This compo nent addresses management of the expenditures
and other outlays incurred by customers in obtaining benefits from
the service product. Responsibilities are not limited to the traditional
pricing tasks of establishing the selling price to customers, they
also include seeking to minimize other burdens that customers may
bear in purchasing and using a service, including time, mental and
physical effort, and unpleasant sensory experiences, such as
noises and smells.
Services Sector contribution to the Indian E conomy
The Services Sector contributes the most to the Indian GDP.
The Sector of Services in India has the biggest share in the
country's GDP for it accounted for around 53.8% in 2005. The
contribution of the Services Sector in Indian GDP has increased a
lot in the last few years. The Services Sector contributed only 15%
to the Indian GDP in 1950. Further the Indian Services Sector's
share in the country's GDP has increased from 43.695% in 1990 -
1991 to around 51.16% in 1998 -1999. This shows that the
Servi ces Sector in India accounts for over half of the country's
GDP. India’s share in worldwide service exports is expected to
almost triple itself from current the 2.3 % to 6 % by 2012, if the
present annual growth rate of 28% has been maintained. India’s
global exports of commercial services during the last 10 years can
be seen from the table below –
1.7 INDIA’S GLOBAL TRADE OF COMMERCIAL
SERVICES
US $ (Billion)
Years Exports
1997 8.9
1998 11.0
1999 14.0
2000 16.0
2001 16.8
2002 19.1
2003 23.1
2004 38.5munotes.in
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2005 68.0
2006
2007
200873.0
86.0
106.0
Source: WTO
Strong and consistent emphasis o n self -reliance in its
economic development programmes ove r the years by the
Government of India has enabled India to build up a huge and
versatile cadre of professionals with expertise and skills across a
vast and wide -ranging spectrum of disciplines like Health Care,
Tourism, Education, Engineering, Communicati ons, Transportation,
Information Technology, Banking, Finance, Management and a
host of others. A sizeable part of this workforce of professionals
makes up the country’s growing consultancy sector which is
offering its accumulated experience and expertise at home and
abroad.
1.8 SERVICES SECTOR IN INDIA
India ranks fifteenth in the services output and it provides
employment to around 23% of the total workforce in the country.
The various sectors under the Services Sector in India are
construction, trade, h otels, transport, restaurant, communication
and storage, social and personal services, community, insurance,
financing, business services, and real estate.
The Reasons for the growth of the Services Sector
contribution to the Indian GDP
The contribution o f the Services Sector has increased very
rapidly in the Indian GDP for many foreign consumers have shown
interest in the country's service exports. This is due to the fact that
India has a large pool of highly skilled, low cost, and educated
workers in the country. This has ensured sure that the services that
are available in the country are of the best quality. The foreign
companies seeing this have started outsourcing their work to India
especially in the area of business services which includes business
process outsourcing and information technology services. This has
given a major boost to the Services Sector in India, which, in its
turn has made the sector contribute more to the Indian GDP.munotes.in
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The Services Sector in India must be given a boost
The Servi ces Sector Growth Rate in Indian GDP registered a
significant growth over the past few years. The Indian government
must take steps in order to ensure that the Services Sector Growth
Rate in Indian GDP continues to rise or this will ensure the growth
and p rosperity of the country's economy.
India's economy is the eleventh largest in the world by
nominal GDP and the fourth largest bypurchasing power parity
(PPP). The country's per capita GDP (PPP) was $3,176 (IMF,
127th) in 2009. Following strong economic reforms from the
socialist inspired economy of a post -independence Indian nation,
the country began to develop a fast -paced economic growth , as
free market principles were initiated in 1990 for international
competition and foreign investment. Economists predict that by
2020, India will be among the leading economies of the world.
India was under social democratic -based policies from 1947
to 1991. The economy was characterized by extensive regulation ,
protectionism ,public ownership ,pervasive corruption and slow
growth . Since 1991, continuing economic liberalization has moved
the country toward a market -based economy . A revival of econ omic
reforms and better economic policy in the first decade of the 21st
century accelerated India's economic growth rate . In recent years,
Indian ci ties have continued to liberalize business regulations. By
2008, India had established itself as the world's second -faste st
growing major economy . However, as a result of the financial crisis
of 2007 –2010 , coupled with a poor monsoon, India's gross
domestic pr oduct (GDP) growth rate significantly slowed to 6.7
percent in 2008 -09, but subsequently recovered to 7.2% in 2009 -
10, while the fiscal deficit rose from 5.9% to a high 6.5% duri ng the
same period. India ranks 51stin the Global Competitiveness Report .
The country has major stock andcommodities exchanges likeBSE,
NSE,USE and a few other exchanges as well.
India's large service industry accounts for 57.2% of the
country's GDP while the industrial and agricultural sector contribute
28% and 14.6% respectively. Agriculture is the predominant
occupation in India, accounting for about 52% of employment. The
service sector makes up a further 34%, and industrial sector around
14%. The labour force totals half a billion workers . Major
agricultural products include rice,wheat ,oilseed ,cotton ,jute,tea,
sugarcane ,potatoes ,cattle ,water buffalo ,sheep ,goats ,poultrymunotes.in
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and fish. Major industries include telecommunications ,textiles ,
chemicals ,food processing ,steel ,transportation equipment ,
cement ,mining ,petroleum ,machinery ,information technology
enabled services and pharmaceuticals .
Previously a closed economy, India's trade has grown fast.
India currently accounts for 1.5% of world trade as of 2007
according to the WTO. According to the World Trade Stat istics of
the WTO in 2006, India's total merchandise trade (counting exports
and imports) was valued at $294 billion in 2006 and India's services
trade inclusive of export and import was $143 billion. Thus, India's
global economic engagement in 2006 coveri ng both merchandise
and services trade was of the order of $437 billion, up by a record
72% from a level of $253 billion in 2004. India's trade has reached
a still relatively moderate share of 24% of GDP in 2006, up from 6%
in 1985.
1.9 SUMMARY
The Serv ice sector is the lifeline for the social economic
growth of a country. It is today the largest and fastest growing
sector globally contributing more to the global output and employing
more people than any other sector. In alignment with the global
trends, the Indian service sector has witnessed a major boom and
is one of the major contributors to both employment and national
income in recent times.
1.10 QUESTIONS
1. Define service and explain its characteristics.
2. How does service differ from product? Make a
comparative analysis.
3. Explain the various basis of classification of services.
4. What is the scope of services?
5. Explain the importance of Services.
6. Explain the importance of Services in Indian context.
7. Write short notes:
a.Scope of services
b.Difference be tween product and services
munotes.in
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Unit-2
MARKETING MIX
Unit Structure :
2.0 Objectives
2.1 Introduction
2.2 Meaning and Types of Service Expectations
2.3 Services andthe Marketing Mix
2.4 Marketing Mix Elements
2.5 Summary
2.6 Questions
2.0OBJECTIVES
After studying the unit stud ents will be able to :
Understand the concept Customer Expectations of services.
Know the meaning and types of service expectations .
Explain the elements of marketing mix.
2.1INTRODUCTION
Customer expectations are beliefs about service delivery
that func tion as standards or reference points against which
performance is judged. Because customers compare their
perceptions of performance with these reference points when
evaluating service quality, thorough knowledge about customer
expectations is critical to services marketers. Knowing what the
customer expects is the first and possibly most critical step in
delivering quality service. Being wrong about what customers want
can mean losing a customer's business when another company hits
the target exactly. Bei ng wrong can also mean expending money,
time, and other resources on things that don't count to the
customer. Being wrong can even mean not surviving in a fiercely
competitive market.munotes.in
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Among the aspects of expectations that need to be explored
and understo od for successful services marketing are the following:
What types of expectation standards do customers hold about
services? What factors most influence the formation of these
expectations? What role do these factors play in changing
expectations? How can a service company meet or exceed
customer expectations?
FIGURE -Possible Levels of Customer Expectations
High
LowIdeal
expectations
or desires
Normative
"should"
expectations
Experience-
based
norms
Acceptable
expectations
Minimum
tolerable
expectations"Everyone says this restaurant
is as good as one in France
and I want to go somewhere very
special for my anniversary."
"As expensive as this
restaurant is, it ought to have
excellent food and service."
"Most times this restaurant
is very good, but when it gets
busy the service is slow."
"I expect this restaurant
to serve me in an
adequate manner."
"I expect terrible service
from this restaurant but come
because the price is low."
2.2MEANING AND TYPES OF SERVICE
EXPECTATIONS
To say that expectations are reference points against which
service delivery is com pared is only a beginning. The level of
expectation can vary widely depending on the reference point the
customer holds. Although almost everyone has an intuitive sense of
what expectations are, service marketers need a far more thorough
and clear d efinition of expectations in order to comprehend,
measure, and manage them.munotes.in
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Let's imagine that you are planning to go to a restaurant. The
Figure shown above, a con tinuum along which different possible
types of service expectations can be arrayed from low to high. On
the left of the continuum are different types or levels of expec -
tations, ranging from high (top) to low (bottom). At each point we
give a name to the type of expectation and illustrate what it might
mean in terms of a restaurant you are consi dering. Note how
important the expectation you held will be to your eventual as -
sessment of the restaurant's performance. Suppose you went into
the restaurant for which you held the minimum tolerable
expectation, paid very little money, and were served imm ediately
with good food. Next suppose that you went to a restaurant for
which you had the highest (ideal) expectations, paid a lot of money,
and were served good (but not fantastic) food. Which restaurant
experience would you judge to be best? The answer i s likely to
depend a great deal on the reference point that you brought to the
experience.
Because the idea of customer expectations is so critical to
evaluation of service.
2.3SERVICES AND THE MARKETING MIX
The increased attention to the application of marketing in the
service sector has brought into question what the key components
or elements of a marketing mix for service are or what they should
be. If the elements chosen to develop a marketing mix for a service
are not comprehensive, it is likely tha t a service quality gap will
occur between the market requirements and the firm’s marketing
offer.
It is therefore appropriate to reconsider the traditional
marketing mix in the context of service. The 4Ps of the marketing
mix are derived from a much lon ger list developed from the Harvard
Business School in the 1960s. The original list consisted of twelve
elements, including product plan, pricing, branding, channels of
distribution, personal selling, advertising, promotions, packaging,
display, servicing, physical handling, fact finding and analysis. Over
time, the marketing mix concept gained considerable acceptance
and the 4Ps were adopted to capture the key elements.
However, it has been argued that simplifying the original list
offers a seductive sen se of simplicity which may lead to neglect of
some key relevant elements. As a result many authors have addedmunotes.in
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to the basic 4Ps framework. Lists of additional marketing mix
elements have been added which extend the 4Ps framework to
five, seven and eleven ke y elements which should be considered in
the marketing mix. Several authors have argued that a different
marketing mix is needed for services. Some writers have suggested
specific marketing mix elements for service industries like banking
and airlines, whi lst others have suggested different elements for
professional service.
Our view of the Marketing mix accords closely with that of a
colleague, Simon Majaro, who argues that three factors determine
whether or not a specific element should be included in a firm’s
marketing mix. These include the following.
The level ofexpenditure on a given ingredient in the
marketing mix, i.e. how important that element is in the firm’s
overall expenditure.
The perceived level of elasticity in customer
responsiveness; fo r example, in the case of a monopoly or
government body, prices may be set externally and thus
need not be included in the marketing mix.
Allocation of responsibilities is based on the belief that a
well defined and well structured marketing mix needs a clear
cut allocation of responsibilities.
We consider the 4Ps model unnecessarily restrictive; an
expanded marketing mix is more appropriate. At the same time we
should recognize the diversity of the services economy , which
includes both services firms as well as manufacturing firms to
whom services are important. We advocate the expanded
marketing mix shown in the figure below. This reflects the
traditional elements of the marketing mix –product, price,
promotion and place, plus three additional elements –people,
processes and the provision of customer service. We regard this as
a framework particularly appropriate for service, but also relevant
for non –service industries, given the importance of the service
dimension in most manufacturing companies.munotes.in
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2.4 MARKETING MIX ELEMENTS:
The marketing mix concept is a well established tool used as
a structure by marketers. It consists of the various elements of a
marketing programme which need to be considered in order to
successfu lly implement the marketing strategy and positioning in
the company’s markets. The discipline of considering the
integration of the elements of the marketing mix, as well as the
individual various elements, helps to ensure that there is
consistency within the marketing strategy as a whole.
Traditionally, most marketers have considered four basic
components or elements of a marketing mix; product, price,
promotion and place, however, within services marketing, as
explained earlier, it is useful to extend t his list to include other key
ingredients. A consideration of each element of marketing mix and
how they fit together forms the basis of marketing programme.
Having outlined the element of marketing mix for services we
will now consider each of them in more detail. The underlying
concept in developing each of these elements is to use them to
support each other, to reinforce the positioning of the product and
to deliver appropriate service quality to achieve competitive
advantage.Customer
serviceProduct
Processe sPromotion
PlacePeoplePrice
munotes.in
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Product
Indiscussing products and services there is often confusion
over terminology, so it may be useful to repeat a point made earlier.
A product is an overall concept of objects or processes which
provide some value to the consumer; goods and services are
subcate gories which describe two types of products. Thus the term
‘product’ is frequently used in a broad sense to denote either a
manufactured good or product, and a service.
In fact customers are not buying goods or services -they are
really buying specif ic benefits from the total offering. We term this
total offering to customers as ‘the offer’; it represents those benefits
that customers derive from the purchase of goods or services. Most
services (or goods) are not pure; thus the use of the term ‘the of fer’
or ‘the offering’ can avoid some of the problems of semantics. In
practice, in different service industries, the terms, product, service
product are all used. Even within the same service organization,
such terms may be used interchangeably.
The core or generic product: This consists of the basic
service product, e.g. a bed in a hotel room for the night.
The expected product: This consists of the generic product
together with the minimal purchase conditions which need to
be met. When customers buy an airline ticket they expect, in
addition to a seat on the aeroplane, a range of additional
elements, including comfort clean lavatories and arrival on
time.
The augmented product: This is the area which enables one
product to be differentiated from anoth er. For example, IBM
has a reputation for excellent customer service although they
may not have the most technologically advanced core
product. They differentiate by adding value to their core
product in terms of reliability and responsiveness.
The potential product: This consists of all potential added
features and benefits that are or may be of utility to buyers. It
includes the potential for redefinition of the product to take
advantage of new users and the extension of existing
applications. This could involve building in switching costs
which can make it difficult or expensive for customers to
switch from their existing service provider.munotes.in
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Thus a service product is a complex set of value satisfactions.
People buy services to solve problems and the y attach value to
them in proportion to the perceived ability of the service to do this.
Price
Price plays a pivotal part in the marketing mix of a service
because pricing attracts revenues to the business. Pricing
decisions are significant in determini ng the value for the customer
and play a role in the building of an image for the service. Price
also gives a perception of quality. Pricing decisions are often made
by adding a percentage mark up on cost. This approach, however,
loses the benefits which a pricing strategy can offer within the
marketing strategy. Service firms, at least within deregulated
markets need to use pricing more strategically to help gain
competitive advantage.
Pricing decisions have an impact on all parts on all parts of
the sup ply / marketing channels. Suppliers, sales people,
distributors, competitors and customers, all are affected by the
pricing system. Further pricing affects buyers’ perceptions of the
service offered. For example, a hotel chain servicing the tourist
package holiday market will offer cheap prices and its customers
will have a lower expectation of service quality a for a premium
priced hotel.
Pricing decisions for services are particularly important given
the intangible nature of the product. The price charg ed for a service
signals to customers the quality of the service that they are likely to
receive. Thus, a restaurant that places its menu on its window for
prospective customers to view is giving customers information
about what they can expect in terms of quality of food and service
levels as well as cost.
Place
The location and channels used to supply services to target
customers are two key decision areas. Location and channels
decisions involve considering how to deliver the service to the
customer a nd where this should take place. This has particular
relevance to services as very often they cannot be stored and will
be produced and consumed at the same point. ‘Place’ also has
importance as the environment in which the service is delivered,
and how it is delivered are part of the perceived value and benefits
of the service.munotes.in
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Service marketers should seek to develop appropriate
service delivery approaches that yield competitive advantage for
their firms.
Location is concerned with the decisions a firm makes about
where its operations and staff are situated. The importance
of location for a service depends upon the type and degree
of interaction involved.
When the customer has to go to the service provider, site
location becomes very important. For a s ervice business such as a
restaurant, location may be one of the main reasons for patronage.
In this type of interaction, service providers seeking growth can
consider offering their services at more than one location.
Sellers’ and buyers’ agents or broke rs, e.g. stockbrokers and
affinity groups.
Franchises and contracted service deliverers, e.g. fast food,
car service and dry cleaning.
The choice of both distribution and channels for services largely
depends on the particular requirements of the market and the
nature of the service itself. Technology has in some instances,
changed the advantage to be gained by proximity of a service to
the customer market. For example, electronic banking has removed
some of the need for banks to be located on high stree ts and also
the requirement for long opening hours to deliver their services.
Many banking transactions can now be performed easily without
personal contact. Technology has allowed changes in the location
decision in many service industries, but the decisi on on where and
how to distribute services is often still dependent on the needs of
the customers.
Some services are required in clusters of associated
services and products and so proximity to other service offerings
can play a major role. This is part icularly the case in services for
businesses where provision of a fast and integrated service
requires not only proximity to the client but also access to other
business services. This applies to some communications and
business agencies.
Service deliver y channels are often the service providers.
This highlights the importance of the selection of the appropriate
delivery channel. If a franchised delivery system is chosen, then the
choice of franchisee is of great importance to ensure the quality ofmunotes.in
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the se rvice. Stringent requirements are therefore often applied to
franchisees to maintain the standard of service. Training of service
deliverers is thus vital to provide consistency of quality. This poses
a particular problem to those services where service pr oviders may
have relatively low qualifications and may not remain in one job for
long (e.g. the hotel and catering trade.)
Promotion
The promotion element of the services marketing mix forms
a vital role in helping to communicate the positioning of the se rvice
to customers and other key relationship markets. Promotion adds
significance to services; it can also add tangibility and help the
customer make a better evaluation of the service offer.
The promotion of services encompasses a number of major areas.
These areas known as the communications mix or promotions mix,
include the following elements:
Advertising
Personal selling
Sales promotion
Public relations
Word of mouth.
Direct mail.
The choice of the communications mix for service involves
decision s on such issues as whether to advertise, use personal
selling or numerate publicity through greater public awareness by
such means as through editorials, publication and press activity.
The choice of medium is determined by decisions on how to create
themost favorable awareness amongst the target audience.
2.5SUMMARY
Marketing is a process of perceiving, understanding,
stimulating and satisfying the needs of specially selected target
markets by channeling an organization’s resources to mee t those
needs. Marketing is thus a process of matching an organization’s
resources to the needs of the market. Marketing is concerned with
the dynamic interrelationships between a company’s products and
services, the consumers’ wants and needs, and the act ivities of
competitors. The marketing mix concept is a well established tool
used as a structure by marketers. It consists of the various
elements of a marketing programme which need to be considered
in order to successfully implement the marketing strateg y andmunotes.in
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positioning in the company’s markets. The discipline of considering
the integration of the elements of the marketing mix, as well as the
individual various elements, helps to ensure that there is
consistency within the marketing strategy as a whole.
2.6QUESTIONS:
1. Explain the various consumer expectations about
services.
2. Explain briefly the finding of Accentor on importance of
Service in determining consumer’s buying decision.
3. Explain the marketing mix for services.
4. Write short note on:
a) Place ele ment in service
b) Physical element in services
c) Promotion of services
d) Pricing of services
e) Consumer expectation of services
5. State whether following statement are True of False.
aService quality is not a reason why consumers le ave a provider
or choose a new one.
b.To create a better customer experience tangible el ements are
also delivered with the service.
c.The corporate image of service provider does not influence
pricing.
d.Promotion element does not have any impact on customer
loyalty.
e.Place and time does not play any importance in service mix.
6. FILL IN THE BLANKS
a.A _____________ approach enables companies to understand
their customers more deeply.
b.The product in service marketing is ________ in nature.
c.In India service sector co ntribute about________% of GDP.
d.___________ is the primary level of service product.
e.In India, the service sectors contribute about ____________%
of total employment in India.
munotes.in
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Unit-3
SERVICES STRATEGIES
Unit Structure :
3.0 Objectives
3.1 Introduction
3.2 Principles of Service Marketing
3.3 Service Development Life Cycle
3.4 Demand and Supply Management in Services
3.5 Understanding Capacity Constraints
3.6 Opportuniti es inthe Service Sector
3.7 Challenges inthe Service Sector
3.8 Summary
3.9 Questions
3.0OBJECTIVES
After studying the unit the students will be able to:
Know the principles of service marketing.
Understand service development cycle
Explain the demand and supply management in service
sector.
Discuss about the opportunities in service sector
Know the challenges to service sector.
3.1INTRODUCTION
Service industries are facing the challenge of managing
long term customer interactions at multiples service touch point .
Through marketing research the challenge can be accepted by the
service industries.
Marketing research is a systematic approach to solve
marketing problems. The Ameri can Marketing Association define
marketing research “The systematic gathering, recording and
analyzing of data about problems relating to marketing of goods
and services.”munotes.in
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3.2PRINCIPLES OF SERVICE MARKETING
When we observe the process of selling a servi ce we realize
how difficult it is to sell a service and how scary it is to buy one.
Apart from the differences in characteristics between products and
sales another difference is in the after sale experience.
1.Focus on the service itself. The service co mpanies spend too
much on promotion or spreading the word and do not concentrate
ontheir primary focus, the services. The importance of promotion
shouldn't be ignored but most of the times it is either done too
quickly or the effort on promotion exceeds t he attempts made to
improve the service. If the focus is primarily on constant
improvement on service then promotion a marketing efforts are
cheaper, easier and effective.
2.Facing the reality. To assume that our service is bad rather
than good drives u s to continually improve our services. Most of the
service industries are not aware of their service problems or they
are under the illusion that their service qual ity is good.
Typically most of the small industries and mid -sized ones are
finding it di fficult to maintain the adequate level off service .
3.Selling a service is like selling a relationship. When we are
selling a service we are not only selling our expertise. This is so as
the client does not always have the expertise to evaluate our
expe rtise. Instead we should focus on selling a -relationship
because that is the only way it works. When we are selling a
service we are selling a relationship.
4.Focus onInnovation. The service industry not only needs to
deliver what the customer needs or wants but also what he would
love to have. Very few service industries reach the stage of
innovation. In this stage the industry creates something which its
customers have not thought could even exist.munotes.in
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3.3SERVICE DEVELOPMENT LIFE CYCLE
The diagram identifies the four phases of the service
Development Lifecycle:
Service Development Lifecycle
1.Identifying customer needs:
The starting point is the market research phase of Identifying
the Customer Pain Point. During this phase the cust omer ’spain
points and requirements are captured.
2.Developing service
The nex t phase, developing the Service , takes these needs
and tries to convert them into a set of service components that form
the heart and soul of the customer engagement.
3.Marketing and selling
The third phase, Marketing and Selling, develops the
customer -facing portfolio used to communicate and sell the service
product to a customer. Once the service is purchased by a
customer,
4.Delivering and supporting
The fourth phase, Delivering and Supporting, is used to
implement the service. Insight gained during this implementation
phase is used as input into the identification of new customer pain
points, leading to the development of additional services.
3.4DEMAND AND SUPPLY MANAGEMENT IN
SERVICES
The fundamental issue underlying supply and demand
management in services is the lack of inventory capability. Unlike
manufacturing firms, service firms cannot build up inventories
during periods of slow demand to use later when demand
increases. T his lack of inventory capability is due to theIdentifying
Customer Developing Service
Need
Delivering Marketing
& Supporting & Selling
munotes.in
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Perishability of services and their simultaneous production and
consumption. An airline seat that is not sold on a given flight cannot
be resold the following day: the productive capacity of that seat has
perished. Similarly, an hour of a lawyer's billable time cannot be
saved from one day to the next. Services also cannot be
transported from one place to another or transferred from person to
person. Thus the Ritz -Carlton's services cannot be moved to an
altern ative location in the summer months —say, to the Pacific
Coast where summers are ideal for tourists and demand for hotel
rooms is high.
The lack of inventory capability combined with fluctuating
demand leads to a variety of potential outcomes, as illustrate d in
the Figure below. The horizontal lines in the Figure below indicate
service capacity, and the curved line indicates customer demand
for the service. In many services, capacity is fixed; thus capacity
can be designated by a flat horizontal line over a certain time
period. Demand for service frequently fluctuates, however, as
indicated by the curved line. The topmost horizontal line in the
Figure below represents maximum capacity. For example, in our
opening vignette, the horizontal line would represent the Ritz -
Carlton's 281 rooms, or it could represent the approximately 70,000
seats in a large university football stadium. The rooms and the
seats remain constant while demand for them fluctuates. The band
between the second and third horizontal lines repr esents optimum
capacity —-the best use of the capacity from the perspective of both
customers and the company (optimal versus maximal capacity
utilization is discussed later in the chapter). The areas in the middle
of the Figure below are labeled to represe nt four basic scenarios
that can result from different combinations of capacity and demand:
1.Excess demand .The level of demand exceeds maximum
capacity. In this situation some customers will be turned away,
resulting in lost business opportunities. Fo r the customers who
do receive the service, its quality may not match what was
promised because of crowding or overtaxing of staff and
facilities.
2.Demand exceeds optimum capacity .No one is being turned
away, but the quality of service may still suffe r because of
overuse, crowding, or staff being pushed beyond their abilities
to deliver consistent quality.munotes.in
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3.Demand and supply arebalanced atthelevel ofoptimum
capacity .Staff and facilities are occupied at an ideal level. No
one is overworked, fac ilities can be maintained, and customers
are receiving quality service without undesirable delays.
4.Excess capacity .Demand is below optimum capacity.
Productive resources in the form of labor, equipment, and
facilities are underutilized, resulting in lost productivity and lower
profits. Customers may receive excellent quality on an individual
level because they have the full use of the facilities, no waiting,
and complete attention from the staff. If, however, service
quality depends on the presence of other customers, customers
may be disappointed or may worry that they have chosen an
inferior service provider.
FIGURE -Variations in Demand Relative to Capacity
Valume Demanded
Maximum capacity
Optimum capacity
(demand and supply are well
balanced)
Low utilization
(may send bad signals)
TimeExcess demand
(business is lost)
Demand exceeds
optimum capacity
(service quality declines)
Ideal use
Excess capacity
(wasted
resources)
Not all firms will be challenged equally in terms of managing
supply and demand. The seriousness of the problem will depend on
theextent of demand fluctuations over time, and the extent to which
supply is constrained . Some types of organizations will experience
wide fluctuations in demand (telecommunications, hospitals,
transportation, restaurants), whereas others will have narrower
fluctuations (insurance, laundry, banking). For some, peak demand
can usually be met even when demand fluctuates (electricity,
telephone), but for others peak demand may frequently exceedmunotes.in
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capaci ty (hospital emergency rooms, restaurants, hotels). Those
firms with wide variations in demand (cells 1 and 4 in the Table
below), and particularly those with wide fluctuations and demand
that regularly exceeds capacity (cell 4), will find the issues and
strategies in this chapter particularly important to their success.
Those firms that find themselves in cell 3 need a "one -time-fix" to
expand their capacity to match regular patterns of excessive
demand. The example industries in Table below are provided t o
illustrate where most firms in those industries would likely be
classified. In reality, an individual firm from any industry could find
itself in any of the four cells, depending on its immediate
circumstances.
To identify effective strategies for manag ing supply and
demand fluctuations, an organization needs a clear understanding
of the constraints on its capacity and the underlying demand
patterns.
TABLE -Demand versus Supply
Extent to Which
Supply Is
ConstrainedExtent of Demand
FlActuations over
Time
Wide Narrow
1 2
Peak demand can
usually be met
without a major
delay.Electricity, Natural
gas, Telephone,
Hospital maternity
unit, Police and
fire emergenciesInsurance, Legal
services, Banking,
Laundry and dry
cleaning
4 3
Peak d emand
regularly exceeds
capacity.Accounting and
tax preparation,
Passenger
transportation,
Hotels
Restaurants,
Hospital
emergency roomsServices similar to
those in 2 that have
insufficient capacity
for their base level
ofbusinessmunotes.in
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3.5UNDERSTANDING CAPACITY CONSTRAINT S
As we see later in the chapter, there are some creative ways
to expand and contract ca pacity in the short and long term, but at a
given point in time we can assume service capacity is fixed.
Depending on the type of service, critical fixed -capacity factors can
be time, labor, equipment, facilities, or (in many cases) a
combination of these.
Time, Labor, Equipment, Facilities
For some service businesses, the primary constraint on
service production is time. For example, a lawyer, a cons ultant, a
hairdresser, and a psychological counselor all pri marily sell their
time. If their time is not used productively, profits are lost. If there is
excess demand, time cannot be created to satisfy it. From the point
of view of the in dividual servic e provider, time is the constraint.
From the point of view of a firm that employs a large number
of service providers, labor or staffing levels can be the primary
capacity constraint. A law firm, a university department, a
consulting firm, a tax accounting firm, and a repair and
maintenance contractor may all face the reality that at certain times
demand for their organizations' services cannot be met because the
staff is already operating at peak capacity, How ever, it doesn't
always make sense (nor may it be possible in a competitive labor
market) to hire additional service providers if low demand is a
reality at other times.
In other cases, equipment may be the critical constraint. For
trucking or air -freight delivery services, the trucks or airplanes
needed to service demand may be the capac ity limitation. During
the Christmas holidays, UPS, Federal Express, and other delivery
service providers face this issue. Health clubs also deal with this
limitation, particularly at certain times of the day (before work,
during lunch hours, after work) and in certain months of the year.
Telecommunications companies face equipment constraints when
everyone wants to communicate during prime hours on holidays.
For network service providers, bandwidth, servers, and swit ches
represent their perishable capacity.
Finally, many firms face restrictions brought about by their
limited facilities. Hotels have only a certain number of rooms to sell,munotes.in
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airlines are limited by the number of seats on the aircraft,
educational instit utions are constrained by the number of rooms
and the number of seats in each classroom, and restaurant
capacity is restricted to the number of tables and seats available.
TABLE -Constraints on Capacity
Nature of the
ConstraintType of Service
Time Legal Consulting, Accounting, Medical
Labor Law firm, Accounting firm, Consulting firm,
Health Clinic
Equipment Delivery services, Telecommunications,
Network services, Utilities, Health club
Facilities Hotels, Restaurants, Hospitals, Airlines,
Schoo ls, Theaters, Churches
Understanding the primary capacity constraint, or the
combination of factors that restricts capacity, is a first step in
designing strategies to deal with supply and demand issues.
3.6OPPORTUNITIES IN THE SERVICE SECTOR
The servi ces sector contributes significantly to the growth of
the economy. It provides employment, generates foreign exchange
and contributes to the GDP of a nation. In India and in several other
countries the services sector offers great opportunities, which are
due to the following reasons:
1. Liberalization of Policy :The Industrial Policy of 1991 has
liberalized the Indian economy, including the services sector. The
services sector is opened up to the private sector. For example, the
banking, insurance, teleco mmunications, airlines, etc., have been
privatized. Prior to 1991, these sectors were the monopoly of public
sector. Due to privatization, there is good competition between the
private sector and the public sector. The Competition has improved
efficiency o f the firms. Therefore, liberalization of the Indian
economy has opened up opportunities for private parties in the
services sector.
2. Fast Growth in the Services Sector: The services sector is
growing at a fester rate as compared to primary and the se condary
sector. The growth in services sector provides good opportunities
to the existing firms and to those who want to enter into the
services sector. Currently the services growth rate is about 10%
despite economic slowdown in the world.munotes.in
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India is the second fastest emerging country in the services
growth, behind China. In some of the services sectors, the growth
is very high. For instance, at present, the overall growth in the IT
services is over 20% per year.
3. Increase in Earning Capacity :There is huge potential for
growth in the services sector due to increase in disposable income,
increasing urbanization , and growing middle class.
According to one study, India's middle class would increase
to 267 million by 2015, and over 580 million by 2025 , and further to
600+ million by 2030.
India's middle class is likely to overtake US, China and
Europe in terms of consumption in the years to come. A study by
H. Kharas -(The Emerging Middle Class in Developing Countries)
indicates that by 2020 India is likely to get the third rank for
consumption behind China, and USA and by 2030; India is likely to
be the number 1 in terms of total consumption, followed by China
and USA.
The study by H. Kharas indicates that by 2020 India would
have 11% (US $37 33 billion) of the global share in terms of
consumption, and by 2030 India's share in global consumption
would increase to 23% (US $ 12777 billion).
4. Foreign Direct Investment: The s ervice sector is likely to
gain considerably due to FDI inflows, which gives good
opportunities for professionals to enter into the services sector.
The Government has allowed FDI even upto 100% in certain
sectors. For instance, sectors like exports, consultancy, advertising,
tourism, etc., FDI is allowed upto 100%. In sec tors like private
banking an d telecom, FDI is allowed upto 74%. FDI brings certain
benefits to Indian partners such as:
5. Increase in Export Earnings :The services export sector
provides good opportunities for entrepreneurs. This is because the
services export sector is witnessing tremendous growth despite
global slowdown in 2008 -09 and 2011 -12.
The services export sector contributes about 35% of the total
exports of India. For instance, in 2010 -11 the merchandise exports
were US $ 250 billion and serv ices exports were US $ 133 billion.
The services exports are growing at the rate of about 20% per year.
Among the services exports, the software exports accounted for
over 40% of the total services exports followed by business
services, travel and transpor tation.munotes.in
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6. Population Growth: India is fastest growing in terms of
population. At present, India is second largest in population
terms after China. India is likely to take world Number 1 position in
population by 2030. The growth in India's population wo uld be a
great opportunity for certain service sectors such as education,
insurance, banking, retail and so on.
7. Free Trade Agreements: India is looking forward to
conclude a pact with ASEAN nations for opening up trade in
services and liberalization of investment norms in the near future.
India has already signed FTA with ASEAN nations in the goods
sector in 2009 and came into force since 2010.
The India -ASEAN free trade agreement in services will open
up a host of business opportunities and projec ts, especially in
construction for Indian business firms. Construction of bridges,
canals, roads, water -treatment plants, construction of buildings
would provide a good opportunity for Indian firms in the 10 ASEAN
member nations (Malaysia, Philippines, In donesia, Thailand,
Singapore, Brunei, Laos, Cambodia, Vietnam, and Myanmar).
Indian entrepreneurs in the telecom, consultancy, accounting,
health, etc., would also get opportunity once the free trade
agreement is finalized in the near future.
India is a lso in negotiations to sign free trade agreements in
goods and services with European Union (27 nations) and also
with Australia. Once, the free trade agreements are finalized and
come into operation, Indian entrepreneurs would have good
opportunities in such countries.
8. Growing Professionalism :India is growing pool of
competent professionals. Various management institutes are
grooming up professionals in the field of banking, insurance,
hospitality, logistics, media, and so on. The availability of
competent professional has a strong effect on the growth of
services sector in India. Therefore, Indian entrepreneurs would
have good opportunities in the service sector in the years to come.
3.7CHALLENGES IN THE SERVICE SECTOR
The services sector is f acing a number of challenges mainly
on account the unique characteristics. Some of the challenges are
as follows:
1. Intangibility: The intangibility characteristic of services
creates certain challenges such as:
Demonstration of services is difficul t.
Pre-purchase evaluation is not possible.munotes.in
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2. Inseparability: Services cannot be easily separated from
the service provider. This characteristic of services creates certain
problems such as:
Restricts geographical reach.
Physical presence of the custom er and service provider is
essential.
3. Inconsistency: Service performance may vary from one
person to another within thesame organiz ation. This Characteristic
of services creates certain problems such as lack of standardization
and quality control.
4. Perishability: Services are highly perishable. Therefore,
there is a mismatch between demand and supply. This
characteristic of services poses certain challenges such as -
Services cannot be kept in inventory.
5. Managing High Demand: At times, a serv ice firm may get
very high demand, especially during the peak timings. Therefore,
there is need to manage demand and capacity.
6. Customer Retention: Service providers face the challenges
of customer retention. Customers may switch over to the
competito rs. Therefore, a service firm needs to undertake customer
satisfaction surveys, and make changes in marketing mix, including
introduction of new and innovative services.
7. Managing Workforce Diversity: Diversity among
employees is an asset because it br ings to the organization a range
of skills and talents. At the same time, individual differences pose a
challenge to managers. Managers must be sensitive to individual
differences and manage them effectively.
8. Employees' Retention: Nowadays, there is g rowing attrition
among service sector employees, especially in software,
advertising, consultancy, media, etc. Certain amount of employee
turnover is good for the organization because it gives chances to
talented outsiders to join the organization . Howev er, frequent
employee turnover is bad for the organization as it increases
selection and training costs, and it also affects the performance of
employees. Therefore, the service providers need to introduce
certain measures to overcome the probl em of emplo yee retention.
3.8SUMMARY
We have learn edin this unit thevarious principles of service
marketing . Cycles from which thedeve lopment of service hasgone
through. How the management of demand and supply of service ismunotes.in
36
done. We underst oodthe capacity con straints of service. We have
learn edabout the various opportunities as well as cha llenges faced
by the participants of the service sector.
3.9QUESTIONS
1.What are the v arious principles of Service Marketing?
2.Explain the service development cycle in detai l.
3.How should demand and capacity in service industry by
managed?
4.Define marketing research. Explain the role of marketing
research in service marketing.
5.Explain the various opportunities in the service sector.
6.What are the challenges in the Service sect or?
7.Explain the various challenges of service sector in India.
8.State whether following statement are True of False.
a.The starting point is the market research phase of Identifying
the Customer Pain Point.
b.Balancing the supply and demand sides of a service industry is
easy
c.Service providers needs to conduct marketing research.
d.Since service cannot be transported, the consumer must be
brought to the service delivery system or the system to
the consumer
e.Generally, a firm collects marketing research data from
secondary data.
f.Generally services are produced and consumed separately.
g.Idea generation is an important step in service development
cycle.
h.At the pre launch period, the service marketer can conduct
satisfaction surveys.
9.FILL IN THE BLANKS
a.The identification of the customer_________ _________can
involves the use of formal and informal market research
methods.
b.The service marketers face the challenges of _____________.
c.Generally, a company collects data from________ _____.munotes.in
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d.The second phase of the Service Development Lifecycle is
developing the _________ _________.
e.Services are direct; they cannot be_________.
f.The problem of insep arability of services requires _________ of
the customers.
g.There is a high de gree of _________ interaction in the
production of service.
h.Customers satisfaction surveys help to retain___________.
munotes.in
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Unit-4
INTRODUCTION TO RETAILING
Unit Structure :
4.0 Objectives
4.1 Introduction
4.2 Organized and Unorganized Retailing
4.3 Trends In Retailing
4.4 Growth o f Organised Retailing inIndia
4.5 Survival Strategies for Unorganized Retailers
4.6 Summ ary
4.7 Questions
4.0OBJECTIVES
After studying the unit students will be able to:
Understand the concepts Organized and Unorganized
Retailing .
Know the trends in relating.
Explain the growth of organized retailing in India .
Elaborate the r easons for s low growth of organized retailing
in India .
Explain the s urvival strategies for unorganized retailers .
4.1INTRODUCTION
Retailing in India is one of the pillars of its economy and
accounts for 14 to 15 percent of its GDP. The Indian retail market is
estimated to be US$450billion and one of the top five retail
markets in the world by economic value. India is one of the fastest
growing retail markets in the world, with 1.2 billion people.
India's retailing industry is essentially owner manned small
shops. In 2010, larger format convenience stores and supermarkets
accounted for abou t 4 percent of the industry, and these were
present only in large urban centers. India's retail and logisticsmunotes.in
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industry employs about 40 million Indians (3.3% of Indian
population).
Until 2011, Indian central government denied foreign direct
investment (FD I) in multi -brand retail, forbidding foreign groups
from any ownership in supermarkets, convenience stores or any
retail outlets. Even single -brand retail was limited to 51% ownership
and a bureaucratic process.
In November 2011, India's central governmen t announced
retail reforms for both multi -brand stores and single -brand stores.
These market reforms paved the way for retail innovation and
competition with multi -brand retailers such as Wal-
Mart,Carrefour andTesco , as well single brand majors such
asIKEA, Nike , and Apple .The announcement sparked intense
activism, both in opposition and in support of the reforms. In
December 2011, under pressure from the opposition, Indian
government placed the retail reforms on hold till it reaches a
consensus .
In January 2012, India approved reforms for single -brand
stores welcoming anyone in the world to innovate in Indian retail
market with 100% ownership, but imposed the requirement that the
single brand retailer source 30 percent of its goods from India.
Indian government continues the hold on retail reforms for multi -
brand stores.
In June 2012, IKEA announced it has applied for permission
to invest $1.9 billion in India and set up 25 retail stores. Fitch
believes that the 30 percent requirement is like ly to significantly
delay if not prevent most single brand majors from Europe, USA
and Japan from opening stores and creating associated jobs in
India.
On 14 September 2012, the government of India announced
the opening of FDI in multi -brand retail, subj ect to approvals by
individual states. This decision has been welcomed by economists
and the markets, however has caused protests and an upheaval in
India's central government's political coalition structure. On 20
September 2012, the Government of India f ormally notified the FDI
reforms for single and multi brand retail, thereby making it effective
under Indian law.
On 7 December 2012, the Federal Government of India
allowed 51% FDI in multi -brand retail in India. The Feds managed
to get the approval of multi -brand retail in the parliament despite
heavy uproar from the opposition. Some states will allow foreign
supermarkets like Wal-Mart, Tesco and Carrefour to open while
other states will not.munotes.in
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4.2ORGANIZED AND UNORGANIZED RETAILING
4.2.1MEANING
Orga nized retailing, in India, refers to trading activities
undertaken by licensed retailers, that is, those who are registered
for sales tax, income tax, etc. These include the publicly traded
supermarkets , corporate -backed hypermarkets and retail chains,
and also the privately owned large retail businesses.
Unorganized retailing, on the other hand, refers to the
traditional formats of low -cost retailing, for example, the local corner
shops , owner manned general stores, paan /beedi shops,
convenience stores, hand cart and pavement vendors, etc.
4.2.2 Distinguish between organized Retailing and
Unorganized Retailing.
Organized Retailing Unorganized Retiling
1. Meaning Organized retiling refers
to trading activates
undertake n by licensed.Unorganized retailing
refers to the traditional
formats of retail industry.
2.Market
ShareOrganized retailing is
around 7% in India.Unorganized retailing
comprises around 93% of
retail market.
3. Dominated
byOrganized retailing is
dominated by big
retailers like malls, hyper
markets, supermarkets
etc.Unorganized market is
dominated by Mom and
Pop Stores. Around 96%
of retailers have ship area
less than 500 square feet.
4.Product
TypeThey Mainly sell
branded products.They sel l branded as well
unbranded products.
5. Investment Investment in organized
retailing is huge.Investment in unorganized
retiling is less.
6. Area Organized retailing is
mainly in metro, tier II
and tire III cities.Unorganized retailing is
spread t hroughout the
country.
7. Scientific Organized retailing
involves scientific
planning and execution.
This ensures that the
resources are utilized in
an effective manner.Unorganized retailing is
unscientific in nature.
Wastages can occur due
to oversto cking, stocking
of non –saleable products
etc.munotes.in
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8. Value Organized retailing tries
to provide more value to
the customers by
bringing operational
efficiencies.Unorganized retailing is
basically an effort to reach
customer without much
effort to add to the value
to goods and to the
customers.
4.3TRENDS IN RETAILING
The trends in retailing are briefly stated as follows:
1. High Growth Rate: According to the Global Retail
Development Index (GRDI) 2012 of AT Kearney -India
remains a high pote ntial market with annual retail growth of 20
per cent expected over the next five years. The Indian retail
industry is pegged at US$ 500 billion in 2012 and is expected
to reach US$ 1.3 trillion by 2020.
The NCAER, study based on its Market I nformatio n Survey
of Households (MISH), has projected Indian retail industry to grow
to about US $ 590 billion by 2011 -12 and further to over US $ 1
trillion by 2016 -17
2. Trends in Food and Grocery Business: Food and grocery
stores account for the largest share o f retail (about 3/4th of total
retail business). In 2007, nearly 99 per cent of food and grocery
market is in the unorganized sector. But this may change in the
next few years as it is estimated that food and grocery revenue in
the organized retailing ma rket would multiply five times, taking the
organized shares of the market to 30 per cent.
3. Share in GDP and Employment: Retail is India's second
largest sector after agriculture, accounting for over 15 percent of
thecountry's GDP and around 6 to 8 per cent of employment. Retail
in India is at the crossroads. It has emerged as one of the most
dynamic and fast growing in dustries with several players entering
the market. Heavy investments in this se ctor are taking place with
theentry of corporate giants l ike Tatas, Birlas, Am banis (Reliance),
Rahejas, and others. Therefore, the future is promising; the marke t
is growing, government policies a re becoming more favourable and
emerging technologies are facilitating operations. As such the
share of retail share in India's GDP and employment is likely to go
up.
Retailing in India is gradually inching its way to becoming the
next boom industry. The whole concept of shopping has alteredmunotes.in
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in terms of format and consumer buying behavior, ushering in a
revolution i n shopping.
4. Trends in FDI: On 14th September 2012, the government of
India announced the opening of FDI in multi brand retail, (up to
51%) subject to approvals by individual states.. This decision has
been welcomed by economists and the markets. Howeve r, this
decision has caused protests in India especially by the opposition
parties. On 20th September 2012, the Government of India formally
notified the FDI reforms for single brand (100%) and multi brand
retail (51%), thereby making it effective under I ndian law.
5.Training to Retail Personnel: Prior to 2000, there was hardly
any emphasis on training in the retail sector. With the entry of
organized retailers, emphasis is placed on training and
development of retail p ersonnel. The need for specializ ed skills
is increasingly felt in the areas of:
Strategic management -strategiz ing, targeting and positioning,
marketing and site selection, among others
Merchandise management -Vendor selection, inventory
management, pricing and so on
Store management -Layout, display, customer relationship,
inventory management, etc.
Administrative Management -Human resources, finance,
marketing and so on
With the need for specialized skill set, retailing has become
a specialized area of knowledge and training. A num ber of training
institutes have been set up in India.
6.Share of Organized Retail: The share of organized retail is
likely to go up from the current 7 % to about 25% of the total retail
busine ss by 2020. This is due to the increasing investment in
organi zed retail by corporate, favourable government policies
towards organized retailing, and at the same time clos ing of
traditional retail outlets, especially in metros.
Over the next few years, the share of the organized retail will
go up mainly due to the following factors:
Favourable government policies towards organized retailing.
Consumer preference to shop in favourable environs of
organized outlets.
Increasing investment by the corporate in the retail sector.
Availability of quality reality space in m etros.munotes.in
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7. Increased Interest by Overseas Retailers: There is a
growing interest of overseas retailers to set up retail outlets in
India. For example:
Wal-Mart has huge plans for retail business India. Wal -Mart, the
world's largest retailer, and Bharti En terprises have signed a
Memorandum of Understanding (MoU) to explore business
opportunities in the Indian retail industry.
New York -based high -end fashion retailer Saks Fifth Avenue
has tied up with realty major DLF Properties to set up shop in a
mall in N ew Delhi.
Tommy Hilfiger, retailer of apparels, has already set up stores in
metros and planning for more such stores in the near future.
8. Technology in Retailing: There is a growing trend of the
use of IT in retailing business. Computerization is incr easingly used
in almost all operations in the organized sector, such as billing,
inventory management, accoun ting, and so on. It is technology that
will help the organized retai ler score over the unorganized players,
giving both cost and service advantages .
4.4GROWTH OF ORGANISED RETAILING IN INDIA
4.4.1 INTRODUCTION
Organized ret ail is expected to grow from 7 % to 14 -18 % of
the total retail market by 2015, according to a McKinsey &
Company report titled 'The Great Indian Bazaar: Organized Retail
Comes of Age in India'.
The Retailer' report from Ernst & Young 2009 highlights that
organized retail sector's penetration level is 85% in US, 80% in
France, 66% in Japan, 20% in China and, merely 5 -6% in India.
This confirms that India is at an early stage of evolution in the
organized retail space and has a huge growth potential.
Many big players are already here in India. For instance,
hypermarkets like Spencer's and Big Bazaar, departmental stores
like Shopper's Stop and Lifestyle and Supermarkets like Apna
Bazaar and Food Bazaar have set up shops and are busy
expanding.
4.4.2 FACTORS RESPONSIBLE FOR GROWTH OF
ORGANIZED RETAILING IN INDIA
Some of the factors responsible for growth of organized retailing
are:munotes.in
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1. Rapidly growing middle class consumers
In Ind ia, there is a rapid growth in the number of middle
class consumers. These consumers seek value added products at
decent prices and convenience in shopping. Modern retailers offer
a wide range of products, good ambience, value added services
etc. to such c onsumers. Hence they prefer to buy their
requirements from modern retail outlets such as supermarkets,
shopping malls, hypermarkets etc.
2. Rising Incomes
Over the past decade, India's middle and high income
population has grown at a rapid pace of over 10 % per annum. Such
a growth has taken place not only in cities and towns but also in
rural areas. As a result, there is an increase in the demand for
better quality consumer goods.
3. Media explosion
There has been an explosion in media. Due to satellite
television and Internet, Indian consumers are exposed to the
lifestyles of more affluent countries. This has increased their
aspiration levels and expectations. They now demand more choice,
value for money, service and convenience.
4. Increase in nuclear f amilies
Indian society is undergoing lots of changes. There is a rise
in number of nuclear families, especially in urban areas., It is
common to see the entire family going for shopping together. They
look out for shopping places which have the right mix o f shopping,
eating joints and entertainment. Shopping malls provide all these
facilities under one roof. Hence their popularity is increasing day by
day.
5. Increase in number of working women
The urban women today are literate, professionally qualified
and working. They have to maintain the right balance between
home and work. Such consumers do not have much leisure time
and want everything under one roof. Further they look for speed
and efficiency. Modern retail outlets, which offer one -stop shopping,
are therefore becoming popular.
6. Value for money
Organized retail outlets deal in volumes. As a result they are
able to enjoy economies of scale in production and distribution.
Further they eliminate wholesalers in the distribution process. As a
result th ey can offer products at competitive rates. For instance, Big
Bazaar, offers products at cheaper prices.munotes.in
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7. Emerging rural market
The rural market in India is fast emerging as a retail
consumption area. The rural consumers are now more aware. The
rural middle class is steadily increasing. Thus due to huge potential
in rural retailing, organized retailers have developing new products
and marketing strategies to serve rural consumers.
8. Entry of the corporate sector
Large business houses like the Tatas, ITC, RPG group,
Reliance, the Piramals, the Birlas, Rahejas etc. have entered the
retail sector in a big way. They are in a position to provide quality
products at competitive rates, promotional offers, quality
salespeople, entertainment, etc.
9. Entry of Foreign retailers
The retail sector in India has drawn the interest of many
global retailers. Due to liberalization policies adopted by the
government, many multinational companies have entered our
country through joint ventures, franchising or even self -owned
stores. Further, the government has allowed up to 51% FDI in
'single brand' retail. This will further boost organized retailing.
10. Technological Impact
Technology is one of the dynamic factors that has affected
the retailing industry. Computerizat ion of various operations in a
retail store, use of bar coding, MIS, Electronic Article Surveillance
System, closed circuit televisions etc., have changed the face of
retailing.
Debit cards, credit cards, smart cards etc., have made
shopping easier for co nsumers. Technology has further facilitated
online shopping and tele -shopping. In short, emerging technologies
have given a momentum to organized retailing.
4.4.3 REASONS FOR SLOW GROWTH OF ORGANISED
RETAIL IN India
In India organized retail is largely an urban phenomena.
Organized retailing accounts for only 7% of the retailing industry in
India. The pace of its growth is still slow. Some of the reasons for
this slow growth are:
1. Lack of recognition as an Industry
Retail is not yet recognized as an i ndustry in India. This
hampers the availability of finance to the existing and new players.
2. High costs of real estate
There has been a constant increase in real estate prices.
Moreover, real estate prices in some cities in India are amongst themunotes.in
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highest in the world. Hence the retail space is available at high
lease rentals which reduce the profit earned by retailers.
3. Lack of adequate Infrastructure
Infrastructure facilities are not yet developed in India. Poor
roads, lack of warehousing facilities, power shortage etc. hamper
the development of food and fresh grocery.
4. Complex taxation system
The sales tax rates vary from state to state. Organized
retailers have to face multiple tax system. Due to this, it becomes
expensive to transfer goods from o ne store to another.
5. Restrictions on foreign direct investment
FDI is not permitted in pure retailing. Global retailers can
enter India only by way of a franchise with an Indian partner or
through technological alliances. This has restricted the growth of
retail in India.
6. Huge geographical and regional differences
India is a. vast country (7th largest in the world and second
highly populated one). There exists huge diversity. Hence it
becomes difficult for retailers to cater to the needs of such a d iverse
population.
Check Your Progress
1.State whether following statement are True of False.
a.Organized retailing refers to trading activities undertaken by
licensed retailers
b.Organized retailing tries to provide more valu e to the customers
by bring ingoperational efficiencies.
c.Currently, the organized retail is enjoying a large market share
of the total retail trade in India.
d.India is one of the biggest organized retail markets in the world.
e.The entry of corporate sector in retail trade ha s given a big
boost to the unorganized retail sector.
f.The operating costs of organized retail are lower as compared
to unorganized retail.
2. FILL IN THE BLANKS
a.At present, FDI is allowed upto _________ % in single brand
retail.
b._______ ____retailing refers to the traditional formats of the
retail industry.munotes.in
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c.Indian retails face the challenges of __________.
d.Retailer has to develop innovative solution for managing the
___________chain problems.
e.Due to ___________television and Int ernet, Indian consumers
are exposed to the lifestyles of more affluent countries.
f.The share of organized retail is about _______% of the total
retail trend in India.
4.5SURVIVAL STRATEGIES FOR UNORGANIZED
RETAILERS
1. Right Positioning
The effective ness of the retailer's communication of the
offering to the target customers determines how well the retailer
gets positioned in their minds. At this stage, the communication has
to be more of relative nature. This implies that the message
conveyed to the target customers must be effective enough in
differentiating the retailer's offering from that of the malls without
even naming them.
2. Effective Visual Communication
Retailer has to place more emphasis on visual display,
merchandising, lighting, signage and specialized props. The visual
communication strategy might be planned and also be brand
positioned. Theme or lifestyle displays using stylized mannequins
and props, which are based on a season or an event, are used to
promote collections and have to c hange to keep touch with the
trend. The merchandise presentation ought to be very creative and
displays are often on non -standard fixtures and forms to generate
interest and add on attitude to the merchandise.
3. Strong Supply Chain
Critical components of supply chain planning applications
can help manufacturers meet retailers' service levels and maintain
profit margins. Retailer has to develop innovative solution for
managing the supply chain problems. Innovative solutions like
performance management, fre quent sales operation management,
demand planning, inventory planning, production planning, lean
systems and staff should help retailers to get advantage over
competitors.
4. Changing the Perception
Retailers benefit only if consumers perceive their store
brands to have consistent and comparable quality and availability in
relation to branded products sold in malls. Retailer has to provide
more assortments for private level brands to compete with
organized retailing. New product development, aggressive ret ailmunotes.in
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mix as well as everyday low pricing strategy can be the strategy to
get edge over competitors' brand.
5. Electronic Cash Register (ECR)
ECR is a commonly used for billing by most retailers. An
entry -level billing system can also generate 11 types of s tock
reports; ECR is best suited for small retailers. It speeds up the
billing process and saves customers' time.
6. Pleasant Experience
The customer touch -points which involve the interaction of a
customer with a store need to be properly managed. These involve
the interactions before he reaches the store, while at the store and
after leaving the store. Positive experience at the retail outlet will
bring back the consumer again & again.
7. People and Physical Evidence
Since a retail store is an integral part of the service industry,
the people they employ and their physical evidence should be such
that the customer comes often. It shouldn't look like that the
customer is buying from the road. If he goes to a store, it should
look at least like a store so improve the ambience at retail outlet.
8. Loyalty programme
A loyalty programme is something which can attract a
customer again and again to a store. It encourages a customer to
spend more to buy more. More loyalty programme should be
introduced by retail outlets.
9. Customization
Customization on the basis of their demographics and
psychographics is becoming the name of the game as all these
retailers have databases of loyal customers. Customization makes
consumer feel important as the product or service is tailored to suit
individual expectation.
4.6SUMM ARY
Organized retailing refers to trading activities u ndertaken by
licensed retailers.
Unorganized retailing, on the other hand, refers to the
traditional formats of low -cost retailing.
The factor s responsible for growth of organized retailing In
India are: a rapid growth in the n umber of middle class consumers,
growth in the middle and high income population ,an explosion in
media ,rise in number of nuclear families , literate , professionally
quali fied and working urban women ,eliminating wholesalers in themunotes.in
49
distribution process , emerging rural market , entry of the corporate
sector in retail marketing, e ntry of Foreign retailers , improved
technology.
Though the Organized retailing is growing in Indi a its growth
is slow due to reasons like: Lack of recognition as an Industry ,High
costs of real estate ,Lack of adequate Infrastructure ,Complex
taxation system ,Restrictions on foreign direct investment ,Huge
geographical and regional differences etc.
As the organized retailing is growing in India the
unorganized retailers are using the business strategies such as:
Right Positioning ,Effective Visual Communication ,Strong Supply
Chain ,Changing the Perception ,Electronic Cash Register (ECR) ,
Pleasant Ex perience ,People and Physical Evidence , loyalty
programme, Customization etc.
4.7QUESTIONS
1.Define retailer and explain his functions.
2.Distinguish between organized retailing and unorganized
retailing.
3.Explain the various trends in retailing.
4.Discuss the survival strategies for unorganized retailing in India.
5.What are the various factors responsible for the growth of
organized retailing in India?
6.What are the various reasons for slow growth of organized
retailing in India.
munotes.in
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Unit-5
RETAIL FORMAT
Unit Structure :
5.0 Objectives
5.1 Introduction
5.2 Retail Format
5.3 Store Planning -Store Design and Layout
5.4 Types of Floor Layout
5.5 Summary
5.6 Questions
5.0OBJECTIVES
After studying the unit the students will be ab le to:
Explain the Retail format.
Know the concepts store planning, Design and Layout
Explain the important aspects of Store planning.
Understand the guidelines for effective Store Layout Design .
Explain the types of layout.
5.1INTRODUCTION
The word ‘r etail’ is derived from the French word ‘retailer’
which means to cut off a piece or to break bulk. A retailer is a
dealer or a trader who sells gods in small quantities. A retailer links
the producers and the Ultimate consumers and provides services to
both. Lakhs of retailers are spread throughout the country. They
form an important link in the distribution of goods.
David Gilbert has defined retail as “any business that directs
its marketing efforts towards satisfying the final consumers based
upon the organization of selling go ods and services as a means of
distribution.”munotes.in
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5.2RETAIL FORMAT
Retail Format
Store Formats Non –Store Formats
A.STORE FORMATS
There are various stores based retail formats that operate in India:
1. Shopping Malls: They are the largest form of organized
retailing today. They are located mainly in metro cities, in
proximity to urban outskirts ranging from 60,000 sq. ft. to 7,00,000
sq. ft. and above. They lend an ideal shopping experience with an
amalgamation of product, service and entertainment, all under a
common roof. Examples include, Inorbit, Hyper City, Prime Mall
and so on.
2. Specialty Stores: Chains such as the Bangalore based Kids
Kemp, RPG's Music World and the Times Group's music chain
Planet M, arefocusing on specific market segments and have
established themselves strongly in their sectors.
3. Discount Stores: As the name suggests, discount stores or
factory outlets, offer discounts on the MRP through selling in bulk
reaching economies of scal e or excess stock left over at the
season. The product category can range from a variety of
perishable/ non perishable goods.
4. Department Stores: These are large retail store offering a
variety of services and merchandise organized in separate
departmen ts and occupies prominent positions in the heart of town
or as anchor stores in out -of-town malls. Departmental Stores are
expected to take over the apparel business from exclusive brand
showrooms. Among these, the biggest success is K Raheja's
Shoppers Stop, which started in Mumbai and now has more than
seven large stores (over 30,000 sq. ft.) across India and even has
its own in store brand for clothes called Stop!.
5. Hypermarts /Supermarkets: Hyper mart is a store that
combines a supermarket and a department store. It is a gigantic
retail facility that carries a big range of products under one roof,
including fresh groceries and apparel. When planned, constructed
and executed correctly,' hyper mart caters to routine weekly
shopping needs in one tri p. Example: Big Bazaar.munotes.in
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6. Convenience Stores: These are relatively small stores with
an area of 400 -2,000 sq. feet located near residential areas. They
stock a limited range of high -turnover convenience products and
are usually open for extended periods d uring the day, seven days a
week. Prices are slightly higher due to the convenience premium.
7. Multi Brand Outlets: MBOs, also known as Category
Killers, offer several brands across a single product category.
These usually do well in busy market places a nd Metros. For
example in electronics -Vijay Sales.
8. Independent retailer: An independent retailer is one who
owns and operates only one retail outlet. The owner of the shop is
assisted by a few local staff or family members. Many independent
stores ar e passed on from one generation to the other. Stores like
the baniya, kirana store and panwala are examples of independent
retailers. The independent retailer often has a direct rapport with
most of his customers.
9. A chain retailer: When two or more ou tlets are under a
common ownership it is called a retail chain. These stores offer
similarity in products, ambience, advertising, promotions etc.
Examples in India include Louis Phillipe, Van Heusen, Globas,
Planet M, Arrow etc.
10. Franchise: A franch ise is a contractual agreement between
the franchiser and the franchisee, which allows the franchisee to
conduct business under an established name and as per a
particular business format. In return, the franchisee has to pay a fee
or compensation to the franchisor. For instance, Pizza Hut, NUT,
Mc Donald's, Domino's, Baskin Robins etc.
11. Leased departments: These are also termed as 'shop -in-
shops.' When a section of a department in a retail store is rented to
an outside party, it is called a leased de partment. In India, many
large department stores operate their perfumes and cosmetics
counters in this manner.
12. Consumer Co –Operative: A Consumer co –operative is a
retail organization owned by its member customers. Their objective
is to provi de co mmodities at a reasonable price. Examples of co –
operatives in India are Sahakari Bhandar, Apna Bazaar, Kendriya
Bhandar etc.
B.NON -STORE FORMATS
Non-store retailing is a form of retailing in which sales are
made to consumers without using stores. While only 10% of retailmunotes.in
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sales are made through non -store channels, sales in non -store
formats are growing faster than store sales.
The various types of non -store formats include :
1. Automatic Vending Machines: Vending Machine retailing
is a non -store format in which goods or merchandise are stored in
a machine and dispensed to customers when they deposit cash or
use a credit card.
The automatic vending machines are mostly found in
developed countries like USA, UK, Japan, etc. However,
nowadays, they have made in roads in developing countries like
India as well.
Initially, impulse goods with high convenience value such as
cigarettes, soft drinks, candy, newspapers, and hot beverages were
offered. However, a wide array of products such as hosiery,
cosmet ics, food snacks, postage stamps, paperback books,
record albums, camera film, etc., are now available through
machines, especially in developed countries. Vending machines
can expand a firm's market by reaching to customers where and
when they cannot co me to a store.
2. Electronic Retailing: Electronic retailing is a retail format in
which the retailer and custo mer communicate with each other
through an interactive electronic network. Alter an electronic
dialogue between the retailer and customer, th ecustomer can
order merchandise directly throug hthe interactive network or by
telephone and the merchandis e is typically delivered to the
customer's home. Payment can be made with the help of credit
card or debit card or cash on delivery.
The main ben efits to the customer include lower costs
because the electronic retailer generally sells the goods at
discounted prices. The main disadvantage is that the customer
cannot examine the goods before placing the order.
3. Direct Selling: The direct s elling involves direct personal
presentation, demonstration, an d sale of products and services to
consumers, usually in their homes or at their workplace.
Direct selling is distinct from direct marketing because it is
about individual sales agents dealing direc tly with clients. Direct
marketing is about business organizations seeking a relationship
with their customers without going through an agent or retail outlet.
Direct selling often uses multi -level marketing (salesperson
is paid for selling and for sales made by people he recruits ormunotes.in
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sponsors) rather than single -level marketing (salesperson is paid
only for the sales he makes by himself).
4. Direct Marketing: In direct m arketing, the marketing is done
directly to the customers without the help of an agen t. There is no
intermediary involved. Direct marketing involves:
(a) Mail Order Retailing -The order from the customers is
received through the mail, and accordingly the goods are delivered
to the customer and the payment is collected. However, Indian
customers hardly place orders through the mail.
(b) Television Shopping -Details about the products such as
features, uses, price, and guarantee/warranty are explained on the
television network. Phones numbers are provided to order. If the
buyer is convin ced, the buyer places the order and accordingly the
goods are delivered at buyer's address and payment is collected.
Check Your Progress
1.Define the following terms:
a.Automatic vending machine
b.Direct marketing
c.Direct selling
d.Hyper mart
e.Discount stores
f.Shopping molls
g.Convenience Stores
h.Multi brand outlets
i.Franchise
2.Give the examples of Store format.
5.3STORE PLANNING -STORE DESIGN AND
LAYOUT
Store planning involves location of the store, store design
and layout, the type of merchandise to display and se ll, etc. Store
planning goes beyond the process of building the structure of the
store; it is a process which involves every aspect of designing the
store. The store must be planned from the view point of the
customers who would patronize the store.
Guide lines for Store Planning (Design and Layout)
1. Location: A store's location should always be a part of store
planning. Thestore should be preferably in a prime location which
is easily accessible to the customers. Avoid locating the store at amunotes.in
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seclude d place. The store's decor and merchandise should also
reflect the store's location.
It is always advisable to locate the store at a place where
there are other similar stores. There are chances that the customers
who are loyal to neighbourhood stores may visit your store as well,
especially, when they may not find their product hoice in the store
which they regularly visit. Also, the ambience of your store may
attract them to your store.
2. Signage: The signage displaying the name and logo of the
store must be inserted at a place where it is visible even from a
distance. The signage may be placed at different sides of the store,
especially, when the store has different sides facing the road/
street. Too much information must be avoided.
3. Colour: The stor e must have the right colour on the walls
both external and internal. Generally dark shades may be avoided.
Preferably, light and subtle shades may be used. The colour sets
the mood of the store, which in turn influences the mood of the
customer shopping i n the store.
4. Entrance and Exit: There must be proper entrance and exit.
In small stores, the entrance and exit is normally one and the same.
In large stores, there must be an emergency exit. Do not stock
anything at the entrance or exit of the store.
5. Flooring and Ceiling: The store need to have decent floor
tiling, and the ceiling must be properly done. The floor and the
ceiling must be kept clean. Stains must be avoided on the floor and
on the ceilings. In some stores, carpets may be laid.
6. Fixtures: Fix tures must be installed properly in the retail
store. Fixtures inside the store should have anaesthetic look and
must be able to store and display the store's merchandise.
Customers may focus not only the merchandise but also on the
fixtures of the store. The fixtures should enable to display the
products to their fullest extent, and should provide easy access for
customers. The shelves should not be too high and the racks
should not be too full.
7. Lighting and Music: The store should be adequately lighted
so that the products are easily visible to the customers. Also, light
music may be played at the store. Loud music must be avoided.
During festival season, good lighting effect needs to be created
within and outside the store.
8. Arrangement of Merchandise: The merchandise must be
well arranged and organized on the racks. The shelves must carrymunotes.in
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necessary labels which would enable the customers to locate the
products. Avoid overloading in the racks.
Products should be grouped logically. For example, in a
readymade garments shop, the gents clothing may be stocked at
one place and the ladies wear must be stocked at another place.
Also, kids' wear may be displayed separately. In a grocery store,
cereals and breakfast food could be in one aisle. Bread and biscu its
should be near the payment counter.
9. Fragrance: The store may use light fragrance. Avoid bad
odour inside the store, as it may drive away the customers and the
store would lose sales.
5.4TYPES OF FLOOR LAYOUT
The layout of the store should be easy t o move and should lead the
customers to the merchandise with ease. There are various forms
of floor plans:
(a) Straight Floor Plan -Where the merchandise in shelves/
racks is arranged in a straight line, which you normally comes
across in most of the st ore. The straight floor plan provides enough
space for the customers to move and shop freely.
(b) Diagonal Floor Plan -The shelves/racks are kept diagonal
to each other for the manager to have a watch on the customers.
The diagonal floor plan enable s the customers to move freely to
select the merchandise.
(c) Angular Floor Plan -The fixtures and at times even the
walls are given a curved look. It gives a stylish look to the store.
Such layouts are often seen in high end stores, or malls, where
premium Scotch whisky or wine bottles are displayed. It can
be also used in case of garments as well.munotes.in
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(d) Mixed Floor Plan -It is a combination of straight, diagonal,
and angular floor space. Shopping malls may adopt this type of
floor plan.
5.5SUMM ARY
Retail formats includes the Store formats and Non store
formats. Thevarious stores based retail formats oper ating in India
are:Shopping Malls ,Specialty Stores , Discount stores,
Department stores, Super markets, Convenience stores, Multi
brand outlets, Independent retailer, Chain retailer, Franchise,
Leased departments, Consumer co -operative.
Non-store retailing is a form of retailing in which sales are
made to consumers without using stores. This form includes:
Automatic Vending Machines ,Electronic retailing ,Direct selling and
Direct marketing.
Store planning involves location of the store, store design
and layout, the type of merchandise to display and sell, etc .
While deciding the Design and Layout of the store following
points shoul d be considered: store's location ,the signage
displaying the name and logo of the store ,the right colour on the
walls , proper entrance and exit, decent floor tiling, and the ceiling ,
Fixtures ,Lighting and Music , Arrangement of Merchandise ,light
fragra nce.
The various types of floor layout are Straight Floor plan,
Diagonal Floor plan, Angular Floor plan and Mixed Floor plan.
5.6QUESTI ONS
1.Explain in detail the retail store format.
2.Explain various types of store format.
3.Explain various types of no n store format.
4.What is store planning and design and layout?
5.Explain the important aspects of store planning.
6.Explain various types of layout.
7.State whether following statement are True of False.
a.An independent retailer is one who owns and operates only one
retail outletmunotes.in
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b.Convenience stores enable consumers to make purchases
quickly.
c.In direct selling, there is no personal contact with the ultimate
consumer
d.In Telemarketing the product is not advertised on television
e.Store planning and des ign is a process which does not involve
every aspect of designing the store. .
f.Exit of a store must be overcrowded with goods.
g.The decor of the store includes the color scheme of the area,
pasted and displayed signs, and other special finishes such as
lighting, flooring etc.
h.Grid (Straight) Design is best used in retail environments in
which majority of customers shop only in a certain part of the
store
i.Curving/Loop (Racetrack) Design exposes shoppers to the
greatest possible amount of merchandise b y encouraging
browsing and cross -shopping.
j.Facility management at a mall involves only infrastructure
management.
k.A store layout is the design in which a store's interior is set up.
l.Department store is a form of non stores format.
8.FILL IN THE BLANKS.
a.When two or more outlets are under a common ownership it is
called a________ ________.
b.________ departments are also termed as 'shop -in-shops.
c.A consumer ________is a retail organization owned by its
member customers.
d.The ________ of the store i ncludes the color scheme of the
area, posted and displayed signs, and other special
finishes such as lighting, flooring ETC.
e. ________ Design is best used in retail environments in
which majority of customers shop the entire store.
f.________ L ayout Works best when merchandise is of the same
type, such as fashion apparel.
g. ________Layout is based on single main aisle running from
the front to the back of the store.
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Unit-6
RETAIL SCENARIO
Unit Structure :
6.0 Objectives
6.1 Retail Scenario in India and Global context
6.2 Entry of MNCS
6.3 India Retail Reforms
6.4 Mall Management
6.5 The Core of Mall Management
6.6 Retail Franchising
6.7 FDIin Retailing
6.8 Retail Management a saCareer
6.9 Retail Management: Eligibility and Course Areas
6.10 Summary
6.11 Questions
6.0OBJECTIVES
After studying the unit students will be able to:
Know the Prospects and challenges in India.
Explain the retail reforms in India.
Discuss about Mall management.
Know about FDI in retailing.
Know the careers in Retailing.
6.1RETAIL SCENARIO IN INDIA AND GLOBAL
CONTEXT
Indian market has high complexities in terms of a wide
geographic spread and distinct consumer preferences varying b y
each region necessitating a need for localization even within the
geographic zones. India has highest number of outlets per person
(7 per thousand) Indian retail space per capita at 2 sqft (0.19 m2)/
person is lowest in the world Indian retail density o f 6 percent is
highest in the world. 1.8 million households in India have an annual
income of over Rs.45 lakh ( US$81,900).munotes.in
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While India presents a large market oppor tunity given the
number and increasing purchasing power of consumers, there are
significant challenges as well given that over 90% of trade is
conducted through independent local stores. Challenges include:
Geographically dispersed population, small ticket sizes, complex
distribution network, little use of IT systems, limitations of mass
media and existence of counterfeit goods. Indian apparel retailers
are increasing their brand presence overseas, particularly in
developed markets. While most have identifi ed a gap in countries in
West Asia and Africa , some majors are also looking at
theUSandEurope . Arvind Brands, Madura Garments, Spykar
Lifestyle and Royal Classic Polo are busy chalking out foreign
expansion plans through the distribution route and standalone
stores as well. Another denim wear brand, Spykar, which is now
moving towards becoming a casual wear lifestyle brand, has
launched its store in Melbourne recently. It plans to open three
stores in London by 2008 -end.
The low -intensity entry of the diversified Mahindra Group into
retail is unique becaus e it plans to focus on lifestyle products.
TheMahindra Group is the fourth largest Indian business group to
enter the business of retail after Reliance Industries Ltd , the Aditya
Birla Group , and Bharti Enterprises Ltd. The other three groups are
focusing either on perishables and groceries, or a range of
products, or both.
REI AGRO LTD Retail: 6TEN and 6TEN kirana stores
Future Groups -Formats: Big Bazaar, Food B azaar, Central,
Fashion Station, Brand Factory, Home Town, E -Zone
etc.
Raymond Ltd.: Textiles, The Raymond Shop, Park Avenue,
Park Avenue Woman, Parx, Colourplus, Neck Ties &
More, Shirts & More etc.
Fabindia : Textiles, Home furnishings, handloom apparel,
jewellery
RP-Sanjiv Goenka Group Retail -Formats: Spencer’s Hyper,
Spencer's Daily, Music World, Au Bon Pain, Beverly Hills
Polo Club
The Tata Group -Formats: Westside, Star India Bazaar ,
Steeljunction, Landmark, Titan,Tanishq, Croma.
Reliance Retail -Formats: Reliance MART, Reliance SUPER,
Reliance FRESH, Reliance Footprint, Reliance Living,
Reliance Digital, Reliance Jewellery, Reliance Trends,
Reliance Autozone, iStore
K Raheja Corp Group -Formats: Shoppers Stop , Crossword,
Hyper City, Inorbit Mallmunotes.in
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Nilgiri’s -Formats: Nilgiris’ supermar ket chain
Shri Kannan Departmental Store (P) Ltd ., : Groceries, Clothing,
Cosmetics [Western Tamil Nadu's Leading Retailer]
Lifestyle International -Lifestyle, Home Centre, Max, Fun City
and International Franchise brand stores.
Pyramid Retail -Formats: P yramid Megastore, TruMart
Next retail India Ltd (Consumer Electronics)( www.next.co.in )
Vivek Limited Retail Formats: Viveks, Jainsons, Viveks Service
Centre, Viveks Safe Deposit Lockers
PGC Retail -T-Mart India [4], Switcher, Respect India, Grand
India Bazaar,etc.,
Aditya Birla Group -Formats: more., acquiured Pantaloon from
Future group, acquired Trinetra (Fabmall and Fabcity)
Vishal Retail Group -Formats: Vishal Meg a Mart
BPCL -Formats: In & Out
Shoprite Holdings -Formats: Shoprite Hyper
Paritala stores bazar: honey shine stores
Kapas -Cotton garment outlets
AaramShop -a platform which enables hybrid commerce for
thousands of neighborhood stores.
Gitanjali -Nakshatr a, Gili, Asmi, D'damas, Gitanjali Jewels,
Giantti, Gitanjali Gifts, etc.
6.2ENTRY OF MNCS
A spice market
The world's largest retailer by sales, Wal-Mart Stores Inc and
Sunil Mittal's Bha rti Enterprises have entered into a joint
venture agreement and they are planning to open 10 to 15 cash -
and-carry facilities over seven years. The first of the stores, which
will s ell groceries, consumer appliances and fruits and vegetables
to retailers and small businesses, is slated to open in north India by
the end of 2008. See also for more Detail Pick/Müller Carrefour ,
the world’s second largest retailer by sales, is planning to set up
two business entities in the country one for its cash -and-carry
business and the other a master franchisee which will lend its
banner, technical services and know how to an India n company for
direct -to-consumer retail.
The world’s fifth largest retailer by sales, Costco
Wholesale Corp (Costco) known for its warehouse club model is
also interested i n coming to India and waiting for the right
opportunity.munotes.in
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Tesco Plc., plans to set up shop in India with a wholesale
cash -and-carry business and will help Indian conglomerate Tata
group to grow its hypermarket business.
Prospects andChallenges in India
AMcKinsey study claims retail productivity in India is very
low compared to international peer measures. For example, the
labor productivity in Indian retail was just 6% of the labor
productivity in United States in 2010. India's labor productivity in
food retailing is about 5% compared to Brazil's 14%; while India's
labor productivity in non -food retailing is about 8% compared to
Poland's 25%.
Total retail employment in India, both organized and
unorganized, account for about 6% of Indian labor work force
currently -most of which is unorganized. This about a third of levels
in United States and Europe; and about half of levels in other
emerging economies. A complete expansion of retail sector to
levels and productivity similar to other emerging economies and
developed economies such as the United States would create over
50 million jobs in India. Training and development of labor and
management for higher retail productivity is expected to be a
challenge.
To become a truly flourishing industry, retailing in India
needs to cross the following hurdles:
Automatic approval is not allowed for foreign investment in
retail.
Regulations restricting real estate purchases, and cumbersome
local laws.
Taxation, which favours small retail businesses.
Absence of develop ed supply chain and integrated IT
management.
Lack of trained work force.
Low skill level for retailing management.
Lack of Retailing Courses and study options
Intrinsic complexity of retailing –rapid price changes, constant
threat of product obsolescenc e and low margins.
In November 2011, the Indian government announced
relaxation of some rules and the opening of retail market to
competition.munotes.in
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6.3INDIA RETAIL REFORMS
Until 2011, Indian central government denied foreign direct
investment (FDI) in mul ti-brand Indian retail, forbidding foreign
groups from any ownership in supermarkets, convenience stores or
any retail outlets, to sell multiple products from different brands
directly to Indian consumers..
The government of Manmohan Singh, prime minister , announced
on 24 November 2011 the following:
India will allow foreign groups to own up to 51 per cent in "multi -
brand retailers", as supermarkets are known in India, in the
most radical pro -liberalization reform passed by an Indian
cabinet in years;
Single brand retailers, such as Apple and Ikea, can own 100
percent of their Indian stores, up from the previous cap of 51
percent;
Both multi -brand and single brand stores in India will have to
source nearly a third of their goods from small and medium -
sized Indian suppliers;
All multi -brand and single brand stores in India must confine
their operations to 53 -odd cities with a population over one
million, out of some 7935 to wns and cities in India. It is
expected that these stores will now have full acce ss to ov er 200
million urban consumers in India;
Multi-brand retailers must have a minimum investment of
US$100 million with at least half of the amount invested in back
end infrastr ucture, including cold chains, refrigeration,
transportation, packing, so rting and processing to considerably
reduce the post harvest losses and bring remunerative prices to
farmers;
The opening of retail competition will be within India's federal
structure of government. In other words, the policy is an
enabling legal framewo rk for India. The states of India have the
prerogative to accept it and implement it, or they can decide to
not implement it if they so choose. Actual implementation of
policy will be within the parameters of state laws and
regulations.
The opening of ret ail industry to global competition is
expected to spur a retail rush to India. It has the potential to
transform not only the retailing landscape but also the nation's
ailing infrastructure.munotes.in
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A Wall Street Journal article claims that fresh investments in
Indian organized retail will generate 10 million new jobs between
2012 –2014, and about five to six million of them in logistics alone;
even though the retail market is being opened to just 53 cities out of
about 8000 towns and cities in India.
It is ex pected to help tame stubbornly high inflation but is
likely to be vehemently opposed by millions of small retailers, who
see large foreign chains as a threat. The need to control food price
inflation —averaging double -digit rises over several years —
prompted the government to open the sector, analysts claim.
Hitherto India's food supplies have been controlled by tens of
millions of middlemen (less than 5% of Indian population). Traders
add huge mark -ups to farm prices, while offering little by way of
technica l support to help farmers boost their productivity, packaging
technology, pushing up retail prices significantly. Analysts said
allowing in big foreign retailers would provide an impetus for them
to set up modern supply chains, with refrigerated vans, cold storage
and more efficient logistics. "I think foreign chains can also bring in
humongous logistical benefits and capital," Chandrajit Banerjee,
director -general, Confederation of Indian Industry, told Reuters.
"The biggest beneficiary would be the small farmers who will be
able to improve their productivity by selling directly to large
organized players," Mr Banerjee said.
6.4MALL MANAGEMENT:
6.4.1 Introduction:
If we look at the customer’s perspective, there are two major
benefits that every customer seeks out of shopping in Mall. One is
an overall experience and the other is a whole variety of goods
under one roof.
These two expectations cannot be met satisfactorily either
by the Mall developer or the Retailer. But if roles are clearly defined
and each one develops a core competence, then a fantastic
synergy can arise between the two parties. The Mall and the
Retailer should work out a strategy where the Mall focuses on
enhancing the overall experience and the Retailer focuses on the
delivering a g ood variety of products. To formalize this association,
there would have to be a clear definition of expectations and most
importantly sharing of profits.
6.4.2 Specifying Expectations:
Redefinition of relationship between malls and retailers. It is no
more the tenant landlord relationship that existed traditionally.
Both need to consider each other as partners or associates,
where one party's growth is greatly dependent on the other.munotes.in
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Malls and Retailers work together to offer the customers the
complete e xperience. This complete experience would include
products that can offer value for money on the one hand and
attractive entertainment on the other hand.
Through mutual discussions, collaborative strategy is defined
and areas of core competence are identi fied. Each one seeks to
improve and perfect the specific area of Competence. For e.g.
Mall Developer could take up the responsibility of organizing
promotions, while the retailer plans the merchandise according
to the promotions requirements.
6.4.3 Mercha ndise
The Mall management would also have to restructure the way ,
products are Id in their malls. One of the ways could be to create
mini malls within malls. Fore.g. all stores in related categories
could be placed in close proximity, so as to idea a bett er variety to
the customers and at the same time increase impulse the stores.
Thus Apparel stores, Accessories stores and Shoes stores could
placed together and thus create complete segments of related
products within the Mall. The malls could now organize specific
promotion events for these ones or categories.
6.4.4 Financials
While financial strategies would always be specific to the Mall and
Retailers, this strategy in its basic form incorporates the following
strategies:
1. Sharing of expenses betwee n the Retailer and Mall would be
undertaken, mobilities include a fixed fee to be paid by all the
Retailers to the Mall developer. This fee would be over and above
the rentals being pa id already. As a justification to the costs the
strategic team may be h eld accoun table for either foot calls or
certain minimum number of events in a year. Sinc e these events
would always be held in consultation with the retailer, he would
stand to benefit directly from these events.
2. Another strategy for financial collabo ration could be by way
of Revenue sharing. The Mall developer gets cut out of the
revenues of t he Retailers during a specific promotion.
6.4.5 Indian experience
InIndia, mall management is more like a mix of the
functions, property and asset management. There is a property on
which a mall is built, retailers are called in who establish their shops
and then the asset is maintained.
Mall management largely encompasses several activities/
functions that go into the maintenance of the mall. This coversmunotes.in
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facilities management functions, operation management, marketing
management, accounts management and customer service. It is
basically a combination of services that factor in people, place,
processes and technology in a particular building. Professional mall
management results in the best possible utilization of resources
available.
Mall management begins with taking care of issues such as
positioning, tenant mix, infrastructure facilities, the kind of
environment required and finance management. It also takes care
of issues like positioning, zoning that include tenant mix and
placement within mall, promotions and marketing.
The demand for superior shopping experience goes parallel
with superior mall management, which is inclusive of appropriate
maintenance of retail space using the latest technology, trained
manpower, standard operating practices and schedules.
Customer service is also an important function of mall
management. Customers are not only mall visitors but also retailers
who have bought space in th e mall. A mall has to keep these
internal as well external customers happy through various activities.
Generally there are two types of consumers who visit malls -
focused buyers and impulse buyers. Mall management activities
are designed from the perspect ive of both these buyers.
Providing value -added services is also an important part of
mall management. Value -added services include simple activities
like lighting, safety and security, making the mall, kid and senior
citizen -friendly, which in turn make the mall desirable for visitors
and add a personalized touch.
6.5THE CORE OF MALL MANAGEMENT
6.5.1 Skilled operations necessary
A mall, by virtue of the business, is such that it needs to be
handled, secured and managed in the hands of skilled people.
As retail experts point out that mall management as a
concept has justbegun to emerge in India as a possible route to
maximize profitability and reduce overheads. Being in such nascent
stage, India has no formal training module designed for mall
manageme nt.
There are very few mall management companies here at
present. Large real estate developers and retail chains either have
their own mall management divisions or have contracts with
international consultants. In developed markets like the US andmunotes.in
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Europe, mall management is an established independent service
line.
A specialist's property management skills enable property
owners to receive the benefit of master planning and development
expertise, which is critical to ensure that malls are positioned for
long-term growth and success.
6.5.2 Few training School s
Since the concept is still picking up, formal training courses
in mall management are also not too many. Although several
institutes have rolled out short -term courses in retail and mall
management, i ncluding IIM -Indore and IIM -Calcutta, the formal
inputs and experience will take some time to get to the desired
levels.
Today, for a large section of the urban population, a mall is a
place to splurge, pay a visit on the weekends, shop and spend cash
inthe food court. Even as we move into the second phase of mall
development, it is actually the concept of properly practiced mall
management that will give existing and future players an edge in
the sector.
Check Your Progress
1.State whether following stat ement are True of False.
a.The organized retail industry in India evolved in 1890s
b.Facility management at a mall involves only infrastructure
management.
c.The primary goal of the most retailers is to sell the right kind
of merchandise.
d.Customer s ervice is also not an important function of mall
management
e.Generally there are two types of consumers who vi sit malls -
focused buyers and impulse buyers.
6.6RETAIL FRANCHISING
6.6.1 MEANING
“A franchise operation is a contractual relationship betw een
the franchisor and franchisee in which the franchisor offers or is
obliged to maintain a continuing interest in the business of the
franchisee in such areas as know -how and training; wherein the
franchisee operates under a common trade name, format and /or
procedure owned or controlled by the franchisor, and in which themunotes.in
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franchisee has or will make a substantial capital investment in his
business from his own resources.”
-Definition by International Franchise Association
Meaning
Franchising is more th an distributorship
*Extends to an entire operation or method of business
*Greater assistance, control and longer duration
*Distributor merely re -sells products to retailers or customers
Growth of Franchising
*Singer Sewing Machine –first franchise (m id-19th century)
*Automobile (e.g. Ford), petroleum products (e.g. Shell), soft
drinks (e.g. Coca Cola)
*Food and restaurants (e.g. McDonald’s, Starbucks)
Growth of Franchising
*Home markets saturated –attractive opportunities overseas
*Lack of/relax ation of regulations in most countries
*Expansion of international trade
*Exposure to international media
6.6.2 TYPES OF FRANCHISE
*3 main types of franchise:
*Product distribution franchise;
*Business format franchise; and
*Management franchis e.
1.PRODUCT DISTRIBUTION FRANCHISES
*A product distribution franchise model is very much like a
supplier -dealer relationship.
*Typically, the franchisee merely sells the franchisor’s products.
However, this type of franchise will also include some fo rm of
integration of the business activities.
2.BUSINESS FORMAT FRANCHISING
*In a business format franchise, the integration of the business is
more complete.
*The franchisee not only distributes the franchisor’s products and
services under the franc hisor’s trade mark, but also
implements the franchisor’s format and procedure of conducting
the business.munotes.in
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3.MANAGEMENT FRANCHISE
*A form of service agreement.
*The franchisee provides the management expertis e, format
and/or procedure for conducting th e business.
6.6.3 Importance of f ranchise
*Franchises offer important pre -opening support:
*Siteselection
*Design and construction
*financing (in some cases)
*Training
*Grand -opening program
*Franchises offer ongoing support
*Training
*National and regional advertising
*operating procedures and operational assistance
*Supervision and management support
*increased spending power, access to bulk purchasing and
economies of scale
Check Your Progress
1.FILL IN THE BLANKS.
a._________ _ is the prime mover of the retail revolution.
b.The Mall and the Retailer should work out a strategy where
the Mall focuses on __________
the overall experience and the Retailer focuses on the
delivering a good variety
of____________.
c. ____ ______ mall management results in the best
possible utilization of resources
available.
d.A__________ usually lasts for a fixed time period and
serves a specific territory or geographical area surrounding
its location.
e.__________ creates another source of income for the
franchisor.
g.Under franchising, the franchisor transfers __________ to
the franchisee.munotes.in
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6.7FDI IN RETAILING
FDI can be defined as a cross border investment, where
foreign assets are invested into the organizations of the dome stic
market excluding the investment in stock. It brings private funds
from overseas into products or services. The domestic company in
which foreign currency is invested is usually being controlled by the
investing foreign company. Eg. An American company taking maj or
stake in a company in India, t heir ROI is based on the performance
of the project.
In the past decades, FDI was concerned only with highly
industrialized countries. US was the world’s largest recipient of FDI
during 2006 with an investment o f 184 million from OECD
(Organization for Economic Co -operation and Development)
countries. France, Greece, Iceland, Poland, Slovak Republic,
Switzerland and Turkey also have a positive record in FDI
investments. Now, during the course of time, FDI has bec ome a
vital part in every country more particularly with the developing
countries. This is because of the following reasons:
Availability of cheap labor.
Uninterrupted availability of raw material.
Less production cost compared with other developed
countri es.
Quick and easy market penetration.
FDI in the Retail sector:
Retailing is one of the world’s largest private industry.
Liberalizations in FDI have caused a massive restructuring in retail
industry. The benefit of FDI in retail industry superimposes its cost
factors. Opening the retail industry to FDI will bring forth benefits in
terms of advance employment, organized retail stores, availability
of quality products at a better and cheaper price. It enables a
countries product or service to enter into the global market.munotes.in
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Cheaper production facilities:
FDI will ensure better operations in production cycle and
distribution. Due to economies of operation, production facilities will
be available at a cheaper rate thereby resulting in availability of
variety products to the ultimate consumers at a reasonable and
lesser price.
Availability of new technology:
FDI enables transfer of skills and technology from overseas and
develops the infrastructure of the domestic country. Greater
managerial talent inflow fro m other countries is made possible.
Domestic consumers will benefit getting great variety and quality
products at all price points.
6.8 RETAIL MANAGEMENT AS A CAREER
In the Information, Communication & Entertainment (ICE) age
shoppi ng has become a hobby for the new generation. The whole
concept of shopping has altered with time, in terms of format and
consumer buying behaviour. Thanks to rapid urbanization and
sprawling shopping malls, Multi formats of retail stores and huge
complexe s that have emerged at an ever increasing speed in every
upcoming city, retailing has grown into one of the largest sectors in
the global economy.
Retail Industry, one of the fastest changing and vibrant
industries in the world, has contribu ted to the economic growth of
many countries. The term ‘retail’ is derived from the French word
retailer which means ‘to cut a piece off’ or ‘to break bulk’. Retailing is
a vital part of the business industry that involves selling products
and services to consumers for their individual or family use.
Retailing can also be defined as the timely delivery of goods
demanded by consumers at an affordable and competitive price. It is
a vertical and people -oriented business industry. Retail business in
India boome d in the 80’s and within a short span of time, Indian
retail sector has been rated as the fifth most attractive, emerging
retail market in the world. Indian retail sector which account for over
10 percent of the country’s GDP (gross domestic product) and
around eight percent of employment, is expected to grow at a
compound rate of 30 per cent over the next five years.
Retailing process involves a direct interface with the
customer and the coordination of business activities from the design
stage of a product to its delivery and post -delivery service.
Generally, retail business can be classified into several types
depending on their size, shape, product lines, amount of service
they offer and price they charge etc. Some among them are
specialt y stores, supermarket/ malls, factory outlets, franchises,munotes.in
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chain stores, discount stores, lifestyle & personal products,
furnishing household appliances & groceries stores etc.
With the tremendous growth of economy, retail management
has emer ged as one of the fastest growing careers in India. The
enormous expansion in the retail sector during the past few years
has thrown up a big demand for skilled professionals in the field. It is
an industry looking for people at all levels, from the school pass out
with basic skills, to the well qualified supply chain and retail
management professionals. One can take up a job depending on
one’s interest and aptitude, since retail industry is an array of
activities starting from marketing to branding. This m akes retail
profession one of the most demanding careers of the era.
The working time and atmosphere all depends upon the
company one works for. One could start his career as a
management trainee, and with hard work and right attitude, could
reach the manager posts of different departments. Advertising
agencies, Airlines, insurance companies, banks etc are some other
areas where one can find jobs, apart from retail shops. One can
even start one’s own business and be an entrepreneur.
Job prospe cts in Retail Sector are:
Customer Sales Associate: It is the entry -level post of retail
business. But as every retail shop is completely dependent
upon the sales they get, this is one of the important posts in
this profession. To be a good sales person, one should have
good knowledge about the products, the shop, the customers
etc.
Department Manager / Floor Manager/ Category
Manager -These are some of the posts one could handle in
the store.
Store Manager: Store managers sometimes called General
Manager or Store Director, are responsible for managing an
individual store and its day -to-day functioning. The store
manager is in charge of the employees of the store and he
himself may report to a District or Area manager or the store’s
owner.
Retail Ope ration Manager: It is the duty of a retail manager
to plan and coordinate the operations of the outlet. This
involves the layout of merchandise, monitoring the retail
orders and stock, analyzing the supply etc. Candidates with
Master Degree can start off a s retail managers.munotes.in
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Retail Buyers and Merchandisers: They are the persons
who select and buy the goods for the retail shop. They should
understand the needs of the customer, should be aware of
the trends in the market, and should possess great
enthusiasm and energy.
Visual Merchandisers: These people give the brand a face,
so they hold one of the very important positions in the
industry. Being a part of concept and design one could also
be a technical designer, product developer and store planner.
Manag er Back -end Operations
Logistics and Warehouse Managers
Retail Communication Manager
Manager Private label Brands
Retail Marketing Executives:
Trained and talented retail management professionals are
always in great demand not only in India bu t abroad also. Big brands
have opened retail chains throughout the cities & rural areas that
offers huge job openings. A professional with excellent
communication skills and a flair for convincing people can be
recruited as store managers, customer care ex ecutives,
merchandise officers, public relations executive and so on, in a
multinational company.
6.9 RETAIL MANAGEMENT: ELIGIBILITY AND
COURSE AREAS
There are options for taking up a degree or diploma in retail
management, for those who choose the career. Various institutes
offer courses in retail management such as MBA in retail
management, Post Graduate Diploma in Retail Management and so
on. Candidates having a high school, graduation or its equivalent,
plus two or degree can apply for certificate, diploma or bachelors
courses in Retail Management respectively. Retailers Association of
India (RAI), is the first independent body of retailers in India.
A course in retail management helps one to learn the
concepts o f retailing, which would be helpful for future undertakings
as well as practical experiences. Marketing strategies, Accounting,
Business mathematics, ethics and law, Customer relation, visual
Merchandising, Merchandising, Retail communication, Mall
Managem ent and Retail buying and operations are some of the
topics related to Retail management courses. The courses will also
provide information on merchandising, finance management,
electronic retail, supply chain management etc.munotes.in
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Indian Institut es offering Programmes/courses in Retail
Management:
B.Sc. in Fashion Merchandising and Retail Management
(B.Sc. -FMRM)
M.Sc. in Fashion Merchandising and Retail Management
(M.Sc. -FMRM)
M.B.A. -Retail Management
Bachelor of Fashion Retail Management
Post Gr aduate Certificate in Retail Management (P.G.C.R.M)
Post Graduate Diploma in Marketing and Retail Management
(P.G.D.M.R.M)
Post Graduate Diploma in Retail Management (P.G.D.R.M)
Post Graduate Programme in Fashion Retail Management
6.10 SUMMARY
We have learn edin this unit about retailing in the context of
India as well as theworld at large. The paradigm shift in the retail
sector due to the entry of g iant MNC’s made it competitive. Due to
this government has introduced reforms such as FDI in retailing ,
Franch ising,etc,which helps to cope with the growing c ompetition
and acquired thelatest technologies. Mall as anew form of retailing
and its core management give young and experience dtalent’s new
avenues of career s.
6.11 QUESTIONS
1. Give an over view of retailing in India.
2. Explain retail prospects in India.
3. Explain the challenges faced by retailers in India.
4. Write a note on mall Management.
5. What is retail franchising? Explain the types ofretail
franchising.
6. Write a note on FDI in retailing.
7. Explain the advantages of allowing FDI in retailing.
8. Explain various career options in retailing.
munotes.in
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Unit-7
INFORMATION TECHNOLOGY ENABLED
SERVICE SECTOR
Unit Structure :
7.0 Objectives
7.1 Introduction
7.2 Meaning and Objectives of BPOand KPO
7.3 LPO(Legal Process Outsourcing)
7.4 ERP (Enterprise Resource Planning)
7.5 Summary
7.6 Questions
7.0OBJECTIVES
After studying the unit students will be able to:
Know about ITES sector.
Understand the meaning and objectives of BPO and KPO.
Explain the term LPO and its objectives.
Understand about ERP, its advantages and disadvantages.
7.1INTRODUCTION
ITES Sector –Meaning
ITES, Information Technology Enabled Service is defined as
outsourcing of processes that can be enabled with information
technology and covers diverse areas like finance, HR,
administration, health care, telecommunication, manufacturing etc.
An obvious advantage of BPO is the immediate cost savings
(over 30 per cent) and yet a steadfast focus on high quality
standards. This also allows the in -house team (of the overseas
client) to focus their expertise on more value -added work while
delegating the lower -end work to more cost -effective resources. For
India, it is a new job creator. It is estimated that the total number of
jobs created so far as a result of outsourcing, primarily call centremunotes.in
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operations, is about 180,000. Of these, the U.S . and the U.K.
together have a share of over 86 per cent. By 2010, the share of
non-call centre outsourcing is placed at 50 per cent of the total
number of jobs created. One estimate places the KPO jobs alone at
over a quarter of a million by then.
At the same time, companies abroad are skeptical about
outsourcing high -end services for varied reasons such as data
security, quality and professionalism in a remote location, political
and regulatory climate. Collaborative approach clearly, this is an
evolutio nary process and certain roadblocks that exist need to be
taken care of. Companies need to adopt a collaborative approach
to tackle such issues. For instance, Scope has addressed these
issues by adopting a relationship -based model. In this model,
concerns on quality and timeliness have been addressed by Scope
through a process of pilots and phased transfer of work.
Technology —hardware and software —is world class.
International certifications such as ISO and BS7799 also help.
Likewise, Service Level Agre ements that are mutually fair have
been put in place.
What helps the India case is the ready access to a large
intellectual pool with expertise in areas such as research and
analysis, not to mention reasonable English language skills (that
need honing) a nd strong domain expertise. But finally, it is the
management that plays a vital role in enabling the smooth
operationalisation of such remote knowledge partnerships.
There is tremendous potential in the KPO space. Only
companies that have a strong pedig ree, domain expertise, clear
focus on the high -end space, a proactive solution orientation and a
collaborative mindset will emerge as the winners.
7.2MEANING AND OBJECTIVES OF BPO AND KPO
7.2.1 MEANING
While outsourcing is present in numerous business
functions, including manufacturing, legal, financial and human
resources, it is the term BPO (Business Process Outsourcing) that
is largely in the news on a daily basis. India's capabilities in this
area have been moving towards enhancing the nature of the w ork
done. From mere data entry kind of work, the focus has shifted to
transaction processing. Now, there is a nascent move towards
knowledge process outsourcing (KPO).munotes.in
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BPO stands for business process outsourcing and KPO
stands for knowledge process outsou rcing.
An advanced stage of BPO is KPO ( knowledge process
outsourcing ). KPO includes those activities that require greater skill,
knowledge, education and expertise to handle. For example,
whereas an insurance company might outsource data entry of its
claims forms as part of a BPO initiative, it may also choose to use a
KPO service provider to evaluate new insurance applications based
on a set of criteria or business rules; this work would requ ire the
efforts of a more knowledgeable set of workers than the data entry
would.
Unlike in BPO where the focus is on executing standardiz ed
routine processes, KPO involves processes that demand advanced
information search, analytical, interpretation and technical skills as
well as some judgment and decision making. Examples of KPO
functions are intellectual property or patent research, R&D in
pharmaceuticals and biotechnology, data mining, database
creation, and a range of analytical services such as equi ty
research, competitive intelligence, industry reports and financial
modeling . Many of these activities lend themselves to remote
execution from anywhere.
Typical users of KPO services include market research and
consulting firms, investment banks and f inancial services
institutions, industry associations, media, publishing and database
firms, and corporate planning departments of large Fortune 500
companies. Several global players such as McKinsey, Goldman
Sachs, Reuters, IMS Health, Harris Interactive, Ipsos, Maritz, AC
Nielsen, TN0S and the WPP group are already using India as a
remote base.
The KPO Value Chain Typically, the extent of off shoring is a
function of the degree of e -enablement possible and the quality of
the human capital required. Some activities such as paralegal and
medical transcription require low quality human capital as
compared to activities such as data mining and analysis,
engineering design and e -learning. The latter are also highly
amenable to IT enablement. Other services suc h as legal
consulting, intellectual property research and strategic consulting
require the highest level of human capital and are the least
amenable to IT enablement. A veritable gold mine Companies in
the KPO space thus need to make the transition from o fferingmunotes.in
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services that require low human capital quality and low IT
enablement to those that require a high degree of human capital
and IT enablement. The National Association of Software and
Service Companies projects that the total global off shoring mark et
opportunity by 2008 will touch $141 billion. Of this, data search,
integration and management will account for $18 billion. Medical,
legal content and associated services represent an opportunity of
$2 billion. However, Scope e -Knowledge Center estimate s that only
45-50 per cent (about $65 -70 billion) of the total off -shoring
opportunity is likely to be realized even by 2010. According to
Scope, the global offshore BPO (non -IT) revenue in fiscal 2003 was
close to $9 billion and this is expected to grow b y about 35 per cent
a year through 2008.
7.2.2 OBJECTIVE OF BPO / KPO
The objective of BPO includes:
To reduce the cost of operations by delegating the non –core
activities to a third –party service provider.
To put the resources available with the org anization to better
use thereby increasing its profitability.
To avail the specialized services of the third –party service
provider.
To enable the organization to focus exclusively on core
services.
To strengthen strategic business relationship with a number of
organizations. This can ensure consistently economical service
for a long period of time.
TO free management from day –to–day operations
To increase flexibility to meet changing business conditions.
7.3LPO (LEGAL PROCESS OUTSOURCING)
Legal outsourcing, also known as Legal Process
Outsourcing (LPO) refers to the practice of a law
firmorcorporation obtai ning legal support services from an outside
law firm or legal support services company (LPO provider). When
the LPO provider is based in another country the practice is
called off shoring and involves the practice of outsourcing any
activity except those where personal presence or contact is
required e.g. appearances in court and face -to-face negotiations.munotes.in
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When the LP O provider is based in the same country the practice
of outsourcing includes agency work and other services requiring a
physical presence such as court appearances. This process is one
of the incidents of the larger movement towards outsourcing. The
most c ommonly offered services have been agency work,
document review, legal research and writing, drafting of pleadings
and briefs, and patent services.
The concept of legal process outsourcing is based on the
division of labour principle, prevalent in law fir ms, where various
time consuming and onerous processes like due diligence are
delegated to paralegals, document reviewers or interns. This allows
the firm to address the various legal issues that arise on a daily
basis while being able to streamline produc tivity.
The process involves a contract, with due consideration,
between both firms.
The following are the various methods by which the process
could be initiated:
Direct Contract –This is the most straight forward means of
establishing contact. The firm needing legal services directly
approaches the legal process outsourcing vendor.
Managed Outsourcing –This is a case where the firm
establishes contact with a legal process outsourcing vendor
and retains a traditional law firm to coordinate the vendor's
activities and to ensure quality control.
Required Outsourcing –This form of outsourcing occurs
when the firm mandates a certain level of outsourcing in
the legal proces s, either to reduce costs or to fulfill statutory
requirements.
Multi -sourcing –This involves segregating the work
assigned to LPO providers in order to reduce risk and take
advantage of each provider's streng ths. This approach is
helpful in cases where expertise is required on matters of
jurisdiction and merits having more than one prov ider “on
deck” also allow a service recipient to obtain more favorable
pricing. On the other hand, multi -sourcing can be more
complicated than other approaches. Successfully managing
multiple, competing providers requires strong and effective
governance p rocedures.munotes.in
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Check Your Progress
1.Define the following terms:
a. BPO
b.KPO
c.LPO
d.Multi -sourcing
e.Managed outsourcing
f.Required outsourcing
g.Off shoring
2. Fill in Blanks.
a.___________ involves delegation of internal business
process to an outside service provider who owns, administers
and manages it according to pre -decided parameters.
b. ___________ enables the management to hand over non -
core activities of the bus iness to a third party.
c.___________ is, essentially, high -end business process
outsourcing.
e. ___________Outsourcing which includes internal business
functions such as human resources or finance and
accounting.
3. Distinguish between BPO and KPO.
7.4ERP (Enterprise Resource Planning)
7.4.1 MEANING
Enterprise Resource Planning (ERP) systems integrate
internal and external management information across an e ntire
organization embracing finance /accounting ,manufacturing ,sales
and service, customer relationship management , etc. ERP systems
automate this activity with an integrated software application. The
purpose of ERP is to facilitate the flow of information between all
business functions inside the boundaries of the organization and
manage the connections to outside stakehold ers.
ERP systems can run on a variety of computer
hardware andnetwork configurations, ty pically employing
adatabase as a repository for information.munotes.in
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7.4.2 Origin of "ERP"
In 1990 Gartner Group first em ployed the acronym ERP as
an extension of material re quirements planning (MRP),
later manufacturing resource planning andcomputer -integrated
manufacturing . Without supplanting these terms, ERP came to
represent a larger whole, reflecting the evolution of application
integration beyond manufacturing. Not all ERP packages were
develope d from a manufacturing core. Vendors variously began
with accounting, maintenance and human resources. By the mid –
1990s ERP systems addressed all core functions of an enterprise.
Beyond corporations, governments and non –profit organizations
also began to e mploy ERP systems.
7.4.3 Expansion
ERP systems experienced rapid growth in the 1990s
because the year 2000 problem and introduction of
theEuro disrupted legacy systems. Many companies took this
opportunity to replace such systems with ERP.
ERP systems initially focused on automating back
office functions that did not directly affect customers and the
general public. Front office functions such as customer rela tionship
management (CRM) dealt directly with customers, or e–
business systems such as e –commerce, e –government, e –
telecom, and e –finance, or supplier relationship
management (SRM) became integrated later, when the Internet
simplified communicating with external parties .
7.4.4 Characteristics
ERP (Enterprise Resource Planning ) systems typically include the
following characteristics:
*An integrated system that operates in real time (or next to real
time), without relying on periodic updates.
*A common database, which supports all applications.
*A consistent look and feel thr oughout each module.
*Installation of the system without elaborate application/data
integration by the Information Technology (IT) department.munotes.in
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7.4.5 Advantages
The fundamental advantage of ERP is that integrating myriad
businesses processes saves time a nd expense. Management can
make decisions faster, and with fewer errors. Data becomes visible
across the organization. Tasks that benefit from this integration
include:
*Sales forecasting, which allows inventory optimization .
*Chronological history of ev ery transaction through relevant data
compilation in every area of operation.
*Order tracking, from acceptance through fulfillment
*Revenue tracking, from invoice through cash receipt
*Matching purchase orders (what was ordered), inventory
receipts (what arrived), andcosting (what the vendor invoiced)
* ERP can greatly improve the quality and efficiency of a
business. By keeping a company's internal business process
running smoothly, ERP can lead to better outputs that benefit the
company such as customer service, and manufacturing.
* ERP provides support to upper level management to provide
them with critical decision making information. This decision
support allows the upper level management to make managerial
choices that enhance the business down the road.
* ERP also creates a more agile company that can better
adapt to situations and changes. ERP makes the company
more flexible and less rigidly structured in an effort to allow the
different parts of an organization to become more cohesive, in turn,
enhancing the business both internally and external ly.
7.4.6 Disadvantages
*Customization is problematic.
*Re-engineering business processes to fit the ERP system may
damage competitiveness or divert focus from other critical
activities.
*ERP can cost more than less integrated or less comprehensive
solutions.munotes.in
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*High ERP switching costs can increase the ERP vendor's
negotiating power, which can result in higher support,
maintenance, and upgrade expenses.
*Overcoming resistance to sharing sensitive information between
departments can divert management attention.
*Integration of truly independent businesses can create
unnecessary dependencies.
*Extensive training requirements take resources from daily
operations.
*Due to ERP's architecture (OLTP, On -Line Transaction
Processing) ERP systems are not well suited for
production planning and supply chain management (SCM)
*Harmonization of ERP systems can be a mammoth task
(especially for big companies) and requires a lot of time,
planning and money.
7.5 SUMM ARY
Generally the business processes are information
technology -based, and are referred to as ITES -BPO .Here ITES
stands for Information Technology Enabled Service. Knowledge
process outsourcing (KPO) and legal process outsourcing (LPO)
are some o f the sub -segments of business process outsourcing
industry.
BPO is distinct from information technology (IT) outsourcing ,
which focuses on hiring a third -party company or service provider to
do IT -related activities, such as application management and
application development, data center operations, or testing and
quality assurance.
Anadvanced stage of BPO is KPO --knowledge process
outsourcing . KPO includes those activities that require greater skill,
knowledge, education and expertise to handle.
Legal outsourcing , also known as legal process outsourcing
(LPO) refers to the practice of a law firm orcorporation obtaining
legal support services from an outside law firm or legal support
services company (LPO provider).munotes.in
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7.6QUE STIONS
1. What is ITES?
2. What is BP O? Explain its objectives .
3. What is KPO? Explain its objectives .
4. What Is LPO? Explain its scope.
5. What is EPR? Explain its scope.
6. Write short notes:
a.BPO
b.LPO
c.ERP
7. State w hether following statement are True of False.
a.ITES, Information Technology Enabled Service, is defined as
outsourcing of processes that can be enabled with information
technology and covers diverse areas like finance, HR, etc.
b.BPO enables the management to concentrate on non cor e
business areas.
c.Legal Process Outsourcing (LPO) is one of the value added
BPO services.
d.Enterprise resource planning (ERP) systems integrate internal
and external management information across an entire
organization, embracing finance/ accounting, manufacturing,
sales etc.
e.Back Office Outsourcing includes customer related services
such as contact centre services.
munotes.in
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Unit-8
BANKING AND INSURANCE SECTOR
Unit Structure :
8.0 Objectives
8.1 Introduction
8.2 Automated Teller Machine (ATM)
8.3 Debit Card
8.4 Credit Card
8.5 Internet Banking
8.6 Opening of Insurance Sector for Private Players
8.7 Impact o f FDIon Bankin gand Insurance Sector inIndia
8.8 Summary
8.9 Questions
8.0OBJECTIVES
After studying the unit students will be able to:
Understand the meaning, features and advantages of ATM.
Know the meaning, features and advantages of Debit card
Explain the meani ng, advantages and disadvantages of
Credit card.
Elaborate the term Internet banking.
Discuss the impacts ofFDI on Banking and Insurance sector
in India .
Explain about the Opening of Insurance Sector for Private
players .
8.1INTRODUCTION
The Banking andInsurance sector in India has always been
the most preferred avenues of employment. In the current decade
the Banking sector has emerged as a resurgent sector in the Indian
economy.
Today, banks have diversified their activities and are getting
into new products and services that include opportunities in ATM
card, Debit card, credit cards, Internet banking, consumer finance,
wealth management, life and general insurance, investment
banking, mutual funds, pension fund regulation, stock brokingmunotes.in
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services, c ustodian services, private equity, etc. Further, most of
the leading Indian banks are going global, setting up offices in
foreign countries, by themselves or through their subsidiaries.
Liberal policies, Government support and huge development in
other eco nomic segments have made the Indian banking industry
more progressive and inclusive with regard to global banking
standards.
A well developed and evolved insurance sector is a boon for
economic development of a country. It provides long -term funds for
infrastructure development and concurrently strengthens the risk -
taking ability of the country. India’s rapid rate of economic growth
over the past decade has been one of the most significant
developments in the global economy. The penetration is quite less
in India as against its peers and hence, the Indian insurance market
provides ample opportunities to domestic and international players
to harness the profitable avenues in the same. India tops all the
countries in terms of life insurance density, according to the World
Economic Forums’ Financial Development Report 2012.
The banking and insurance industry is challenged by
competitive pressures, changes in customer loyalty, stringent
regulatory environment and entry of new players, all of which are
pressuri ng the organizations to adopt new business models,
streamline operations and improve processes.
8.2AUTOMATED TELLER MACHINE (ATM)
8.2.1 MEANING:
An A utomated Teller Machine o r Automatic Teller Machine
(ATM), is a computerized telecommunications device that provides
the clients of a financial institution with access to financial
transactions in a public space without the need for a cashier.
ATM is a computerized machine that enables a bank's
customers to access their account for withdrawing cash, and to
carry out other financial and non -financial transactions without
visiting the bank's branch.
All banks have introduced the ATM facility. Banks provide
on-site and off -site ATM facility to their customers. It is to be noted
that the total number of ATMs of public sector banks is quite higher
as compared to new private sector banks and foreign banks in
India .
8.2.2 Procedure of ATM transactions
For transacting at an ATM, the customer inserts or swipes the
card in the ATM and enters personal identific ation number (PIN)
issued by the bank. The PIN is the numeric password which is
provided to the customer by the bank while issuing the card.munotes.in
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8.2.3 Types of Cards:
There are various types of cards that can be used at an ATM. The
cards include:
* ATM De bit Cards
* ATM Credit Cards
* ATM Prepaid Card
8.2.4 Features of ATM:
The main features of an ATM are:
1. Services :The ATM provides various facilities to the bank's
customers:
* Account balance information
* Transfer of funds from one account to another.
* Cash withdrawal
* Cash deposit
* Mini bank statement of bank transactions.
2. Multipurpose :The ATM card of one bank can be used at
any bank ATM within India under the Shared Payment Network
System. For instance, a person holding Bank of Baroda ATM can
withdraw the money from SB IATM. The amounts are accordingly
adjusted by the banks. The savings bank account holders can
transact a maximum of five transactions free in a month at other
bank's ATM. Beyond the five transactions, the customer can be
charged by his/her bank.
3. Cash Withdrawal :Banks issuing ATM card impose
withdrawal limits. The customer is informed of the withdrawal limit.
Beyond the withdrawal limi t, the customer cannot withdraw the
cash.
4. Customer Support :Customers can complain the bank
regarding deficiency in ATM services. For instance, if a customer is
wrongly debited for amount which he has not withdrawn, he/ she
can complain to the bank. As per RBI instructions banks have to
resolve customer complaints by re -crediti ng the customer's account
within 7 working days from the date of complaint. The customer can
take recourse to the local Banking Ombudsman if the complaint is
not resolved by his/her bank within the stipulated period.
8.2.5 Advantages of ATM :
1. 24 x 7 Ba nking Services: The customers can avail of 24 x 7
banking services. For instance, the introduction of ATMs has
enabled the customers to obtain 24 x 7 banking services with
reference to withdrawal of money, transfer of funds, etc. Customers
no lon gerhave towait in queue to withdraw money nor they have to
operate the services only during the banking hours. There fore,
ATMs not only, provide quick service but also convenience to the
customers.munotes.in
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2. Convenience to Customers: The ATMs has reduced the
physical presence of customers in the bank during the banking
hours. The customers need not wait in queue to withdraw cash
from the bank. Due to ATM, there are fewer customers in the bank
during the banking hours, and therefore, the customers that visit
bank get quick service.
3. Travel without Cash: ATM facilitates withdrawal of cash
from the bank account whenever and wherever a customer needs
it. This means one can travel anywhere without cash. If the location
has ATM, one can withdraw money with the help of A TM card.
Therefore, anATM card holder does not have the botheration to
carry lots of cash during long distance travel, especially while on a
holiday tour.
4. Good Quality Currency Notes: ATM withdrawals enable a
customer to get good quality or fresh cur rency notes from the ATM
machine. The customer may not get soiled notes from the ATM
machine.
8.3DEBIT CARD
8.3.1 MEANING
A debit card is a plastic card issued by a bank to its
customers. With the help of debit card, a customer can make
payment for goo ds and services, and the amount gets deducted
from the bank balance of the bank's customer. Thus, a debit card
can be used as an alternative payment method to cash when
making purchases.
8.3.2 Features of Debit Card
1. Easier to Obtain Debit Card: Obtai ning a debit card is often
easier than obtaining a credit card. For issuing credit card, the
bank has to check the credit worthiness of the customer. In case of
debit card, there is no need for such verification of credit
worthiness.
2. Personal Identif ication not Required: Using a debit card
instead of writing cheques saves you from showing identification or
giving out personal information at the time of the purchase
transaction at the payment counter of the merchant.
3. Cash -less Transactions: Using a debit card frees you from
carrying cash or a cheque book. Using a debit card means you no
longer have to carry travelers’ cheques or cash when you travel.
4. Easily Accepted by Merchants: Debit cards may be more
readily accepted by merchants than chequ es, especially in other
states or countries wherever your card brand is accepted.munotes.in
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5. Threshold Limit: Use of debit card is not usually limited to
the existing funds in the account to which it is linked. Most banks
allow a certain threshold over the avail able bank balance, which
can cause overdrawn amount lees.
6. Universal Usage: Like credit cards, debit cards also have
universal usage. For instance, the international debit card issued by
Bank of Baroda is accepted at over 32000 Visa Electron ATMs in
India and 1 million ATMs worldwide. The card is also accepted at
3,50,000 merchant outlets in India and around 29 millions globally.
8.3.3 Advantages of Debit Card
1. Convenience in Payments: The debit card provides
tremendous convenience in payments and he lps the customers
reduce the amount of cash they need to carry. Besides that
customer always stays in control of his finances as he can spend
only what he has in his account. It also gives an unparalleled
access to his account, whenever he wants, wherever he goes.
2. No Interest / service Charges: in case of debit card, there
is any interest charge and service charge. However in the case of
credit cards, there are interest charges on the unpaid balances at
the end of the month, and sometimes even service charges.
3. Suits to the Indian Psyche of Limited Expenditure:
Generally, the debit cards suits the Indian psyche of limited
expenditure. Most of the Indians do not want to spend lavishly.
The debit card allows only limited payment, and that too upto the
balance amount in the bank account. However, credit cards may
encourage expenditure beyond the means of the customer,
because under credit card, line of credit is offered by the bank to
the customer.
4. Instant Withdrawal of Cash: Debit cards allow f or instant
withdrawal of cash, acting as the ATM card for withdrawing cash.
Therefore, debit cards can enjoy all the advantages of ATM cards.
Merchants (shopkeepers) may also offer cash -back facilities to
customers, where a customer can withdraw cash alo ng with then-
purchase.
5. Less Identification and Scrutiny by Merchants: Like credit
cards, debit cards are accepted by merchants with less
identification and scrutiny than personal checks, thereby making
transactions quicker and hassle free.
6. Paym ent is not Dishonoured: Payment through the debit
card is always honoured by the bank upto the balance of the
account holder. Therefore, merchants accepting the debit cards do
not have to bother about the honouring of payment. However, in
the case of pers onal cheque, the payee may not get the payment
due to dishonour of cheque.munotes.in
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8.4CREDIT CARD
8.4.1 MEANING
A credit card is a payment card issued to users as a system of
payment. It allows the cardholder to pay for goods and services.
The issuer of the ca rd creates a revolving account and grants a line
of credit to the customer or user. The line of credit enables the user
to make payment to a merchant.
8.4.2 Advantages of Credit Card
1. Convenience: The main benefit to credit card holder is
convenience. Compared to debit cards and cheques, a credit card
allows short term credit to customers who need not calculate the
balance in her/her account before each transaction. However, the
total amount to be paid to the merchant does not exceed the
maximum credi t line for the card.
2. Rewards: Many credit cards offer rewards and benefits
package. For instance, credit cards can offer reward points which
may be redeemed for cash, or for products. Users of credit cards
can get special discounts which customers wh o make cash
payment may not get, such as at petrol pumps for fuel, or at
restaurants/hotels, booking of air tickets, etc.
3. Benefits to Merchants: For merch ants, a credit card
transaction is often secure than cheque paymen t. This is because;
the i ssuing bank commits to pay the merchant the moment the
transaction is authorized regardless of wheth er the customer
defaults on the credit card payment.
4. Protection of Purchases: Credit cards may also offer you
additional protection if something you have boug ht is lost,
damaged, or stolen. Both your credit card statement (and the credit
card company) can vouch for the fact that you have made a
purchase if the original receipt is lost or stolen. In addition, some
credit card companies offer insurance on large purchases.
5. Emergencies: Credit cards can also be useful in times of
emergency. Forinstance, if there is an accident or breakdown of
your car, and you need money to face emergency situation, the
credit card may come to the rescue.
6. Universal Accep tance: Most of the credit cards are
accepted internationally. This means, a holder of credit card can
use it for make purchases within the country, as well as in
international market subject to a certain limit.
8.4.3 Disadvantages of Credit Card
1. Overspending: Credit cards can be dangerous for
individuals who are not good at budgeting. The temptation is verymunotes.in
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easy to overspend because you don't need to pay for your
purchases upfront. Regardless of how much money is actually in
your bank account, you can make purchases up to your maximum
credit card limit. Somehow signing a piece of paper at the time of
purchase doesn't always feel like you are actually spending
money. This is exactly the mentality that the credit card companies
want users to adopt.
Especially the youngsters become compulsive buyers and
tend to overspend because of the ease of using credit cards.
Cards can encourage the purchasing of goods and services people
do not need or cannot really afford.
2. High Interest Rates and Increase d Debt: Credit card
companies charge you an enormous amount of interest on each
balance that you don't pay off at the end of each month. The
interest rate on unpaid balance is about 20% p.a. This is how the
credit card companies make their money and this is how most
people in India and other countries get into debt and even
bankruptcy.
3. Credit Card Fraud: Like cash, sometimes credit cards can
be stolen. They may be physically stolen (if you lose your wallet) or
someone may steal your credit card number (from a receipt, over
the phone, or from a Web site) and use yourcard to rack up
debts. The good news is that, unlike cash, if you realize your credit
card or number has been stolen and you report it to your credit card
company immediately, you will not be charged for any purchases
that someone else has made.
8.5INTERNET BANKING
8.5.1 Meaning
Internet banking is also called as online banking or e -
banking. It allows customers of a bank to conduct banking
transaction through a website operated by the b ank.
8.5.2 Custo mer's Access to On -line Banking
To access bank's online banking facility, a customer must
have personal internet facility. The customer must register with the
bank for on -line banking. The bank allocates customer number and
the customer m ust set up password. To access online banking, the
customer needs to go the bank's website, enter the online banking
facility using the customer number and password.
8.5.3 Internet Banking Services
The internet banking services can be divided into two gr oups:
*Transactional services like hind transfer, payment of bill ,
investment relating to purchase or sale, loan application and
transactions.munotes.in
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*Non-transactional services like stop payment of a cheque,
obtaining online statements of banking transactions , ordering
for a cheque book, viewing account balances, and so on.
8.5.4 Advantages of Internet Banking:
1. Convenience to Customers: Internet banking provides
convenience to customers to undertake banking transactions.
Customers can undertake banking transactions while at home,
office, or even during traveling.
2. 24 x 7 Banking : Internet banking is available all the time,
i.e., 24 x 7. One can undertake banking throughout the year
at any time of the day or even at night. The only thing which one
needs is internet facility and registration with the bank for on -
line facility.
3. Monitoring the Account: Internet banking enables the
customer to monitor the banking transactions at any time. This
facility keeps the bank account safe. The customer can come to
know of any fraud before it is too late. If fraud is noticed, the
customer must immediately report to the bank.
4. Bill Payment: The bill payment in respect of electricity bill,
house maintenance bill, mobile bill, etc., can be done efficiently wi th
the help of on -line banking facility. Under standing instructions, a
bank can directly make payment to the creditors. Due to efficient
bill payment system, a customer need not wait in a queue to pay
bills. Also, a customer need not keep receipts of all bill payments,
as one can easily view all the payments through the net.
5. Endorsement of Bank's Products: Internet banking is also
a great medium for the banks to endorse their products and
services. The products/services include loans, investment op tions,
etc.
6. Fast and Efficient: Online banking is very fast, effective and
efficient. Over the Internet, you can make transactions that are
typically executed and performed at a much faster pace than at
ATM's. These services also give you the option of handling several
different bank accounts from one site itself. Most online banking
sites are compatible with programs like Microsoft Money and
Quicken, which makes management of assets more effective.
8.5.5 Disadvantages
1. Technology Related Problem s:Internet banking may be
affected due to technology related problems. For instance, one
cannot use internet facility, if the bank's server is down. There may
be also loss of internet connectivity in between the transaction
operations.munotes.in
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2. Initial Diffi culty : Understanding the usage of internet
banking might be difficult for a beginner at the first instance. There
are some sites which offer a demo as to how to use internet
banking facility. However, a person who is new to internet banking
might face som e difficulty at the beginning to operate the facility.
Therefore, there is lack of adaptability to internet banking in India.
3. Need for Internet Connection : One cannot operate on -line
banking transactions, when there is no internet facility . Therefore,
those who do not have internet connection would not be able to
take the advantage of on -line or internet banking.
4. Hacking: Security of transactions is a problem. Hackers may
obtain account information of the bank's customers and hack the
account. Th is means hackers may commit internet fraud and siphon
off money from the customer's bank account.
5. Password Security : For operating on -line banking,
password is a must. The customer needs to memorize the
password rather than recording it ondiaries or somewhere else.
There are chances that the password may be misused when
someone gets to know it. This may create a loss to the customer.
6. Lack of Trust : The biggest problem is that most people lack
trust. Quite often, a customer wonders whether or not h e/she
performed the on -line banking transaction properly. Of course, you
can overcome any uneasiness by printing the transaction receipt.
This receipt will -conform whether or not your transaction has gone
through successfully.
Check Your Progress
1.Defin e the terms
a.ATM
b.Debit card
c.Credit card
d.Internet Banking
e.PIN
2.Distinguish between Debit card and Credit card.
3.Fill in the blanks:
a.Payment of bill is a ---------------------- service provided by
Internet banking.
b.Stop payment of a cheque, obtaining online sta tements of
banking transactions, ordering for a cheque book are the----
------------------ service provided by Internet banking.
c.To access bank's online banking facility, a customer must
have ------------------------------------ .
d.Internet banking is also ca lled as -------------- or------------ .
e.Thevarious types of ATM cards are ---------------------------- .munotes.in
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f.As per RBI instructions banks have to resolve customer
complaints relating to ATM by re -crediting the customer's
account within -------------- working d ays from the date of
complaint .
8.6 OPENING OF INSURANCE SECTOR FOR
PRIVATE PLAYERS
8.6.1 INTRODUCTION
In 1991, when rapid changes took place in many parts of the
Indian economy, nothing happened to the institutional structure of
insurance: it remained a monopoly of the Government.
In 1993, Malhotra Committee was set up headed by Mr. R.
N. Malhotra (the then Governor of the Reserve Bank of India).. In
1994, Malhotra Comihittee recommended for the liberalization of
theIndian insurance. sector. The Commi ttee recommended that the
insurance sector to be opened to the private -sector.
Only in 1999, a new legislation came into effect signaling a
change in the insurance industry structure. Therefore, in 1999
private insurance companies were allowed back into t he business
of insurance with a maximum of 26% FDI.
In 1999, The IRA bill is renamed the Insurance Regulatory
and Development Authority (IRDA) Bill which was cleared by the
Govt. In 2000 IRDA Bill became an Act with the assent of the
President of India.
8.6.2 Private Firms in the Indian Insurance Sector
The Indian Insurance Industry has undergone several
changes in trends and policies in the year 2010. The $ 41 billion
industry is considered the fifth largest life insurance market, and is -
growing at a ra pid pace of 32 -34% annually, according to the Life
Insurance Council.
State -owned Life Insurance Corporation (LIC) of India has
recorded about 37% growth in its new business premium to US$
15.1 billion during April to January FY 2010, the data from IRDA
stated. Overall, 23 life insurers in the country collectively mopped
US$ 21.35 million as new first year premium during the period, a
26% increase from US$ 17 billion during April -January 2009 -2010.
Out of this, the 22 private life insurers together accoun ted for
US$ 6.26 billion worth of new business in April -January 2010 -11,
compared to US$ 5.91 billion in the year ago period, a growth of
about 6%.
Among the private life insurance players, SBI Life saw its
premium collections from new business grew by 9% to US$ 1.1munotes.in
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billion during the period, while ICICI Life's premium collections from
new businesses grew to US$ 1.15 billion April -January 2010 -11,
from US$ 964 million during the same period last year.
However only 0.2% of population covered
Currently, in India only two million people (0.2% of the total
population of 1 billion) are covered under Mediclaim, whereas in
developed nations like USA about 75% of the total population sare
covered under some insurance scheme. With more and more
private companies i n the sector, the situation may change soon.
India insurance is a flourishing industry, with several national
and international players competing and growing at rapid rates.
Thanks to reforms and the easing of policy regulations, the Indian
insurance sect or has been allowed to flourish, and as Indians
become more familiar with different insurance products, this growth
can only increase, with the period from 2010 -2015 projected to be
the 'Golden Age' for the Indian insurance industry.
1. HDFC Standard Li fe.
2. Tata-AIG General
3. BirlaSunLife
4. Bajaj -Allianz General
5. SBI Cardiff Life
6. ICICI -Lombard and so on.
8.7IMPACT OF FDI ON BANKING AND INSURANCE
SECTOR IN INDIA
Foreign direct investment (FDI) is direct investment into
production in a countr y by a company in another country, either by
buying a company in the target country or by expanding operations
of a existing business in that country.
8.7.1 Investment up to 74% in private banks
"The Indian government brought into effect liberalized norm s
for foreign direct investment (FDI) in the financial sector allowing up
to 74 percent investment in private banks.
At all times, at least 26 percent of the paid up capital will
have to be held by residents, except in regard to a wholly -owned
subsidiary of a foreign bank. The guidelines would apply to all
existing private sector banks.
The notification clarifies that in the case of FII, the earlier
restriction of investment limit of 49 percent with the approval of the
board of directors followed by a spe cial resolution by the general
body would remain.munotes.in
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8.7.2 NRIs -
In the case of NRls, individual holding is restricted to five
percent and the aggregate limit cannot exceed 10 percent.
However, NRI holding can be allowed up to 24 percent, provided
the ba nking company passes a special resolution to that effect in
the general body.
In the post liberalization period, the Government of India has
allowed FDI in private banking sector upto 74% and in the private
insurance sector upto 26% of the total equity. T he FDI in insurance
sector may increase to 49% in the near future, once the Parliament
clears the proposal.
8.7.3 Importance (Positive Impact) of FDI
1.Transfer of Technology: The foreign partner transfers
technology and process to the domestic. The tra nsfer of
technology would help to improve quality, improve quantity (due
-to speed) and reduction of costs. This helps to improve
productivity of the domestic banks / insurance firms.
2.Professional Skills: The foreign partner may depute
professional ma ngers to assist the management of the domestic
bank / insurance firm. The foreign bank / insurance firm may
also provide training to the staff of its domestic partner. This will
help to improve efficiency of the personnel, which in turn can
generate higher returns.
3.Economic Development: FDI in banking / insurance sector
facilitates economic development of a nation. Due to FDI, the
domestic bank can provide more funds (loans/advances) to
firms. This increases the production of goods and services,
which in turn enhances economic growth of the nation.
4.Employment: FDI helps to create direct and indirect
employment.
*Direct employment in the banks / insurance firms where FDI is
deployed.
*Indirect employment in the sectors in primary and secondary
sectors. Due to employment, the purchasing power of the
employed increases and therefore, they can enjoy higher
standard of living.
5.Corporate Image: Foreign banks / insurance firms invest equity
in select domestic banks / insurance firms. Therefore, the
corporate image of the domestic banks (in which FDT is
undertaken) improves not only in the domestic market but also
in international markets.munotes.in
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6.Revenue to Government: Due to FDI, the domestic bank /
insurance firm can lend more funds in the market to pr ovide
insurance. The business firms can expand their business
activities due to the credit / insurance provided by the banks /
insurance firms. Expansion of business may enable to earn
higher returns. As a result the Govt, may earn higher revenue
by way of direct and indirect taxes.
7.Customer Service :FDI brings in modernization and
professionalism. Therefore, customers get better services due to
professional approach of the staff.
8.Entry in Overseas Markets: FDI may enable private banks /
insurance f irms to set up branches abroad. The Indian banks
can take the advantage of goodwill of the foreign partner to set
up branches in overseas markets. Setting up bank branches /
insurance branches abroad facilitates the growth and expansion
of Indian players.
9.Improvement in Efficiency: FDI may generate higher efficiency
in the banking / insurance sector. The efficiency of the staff may
improve due to the following reasons:
*Training and development.
*Technology up gradation.
8.7.4 Problems faced by the Indian Banking Sector :
Inefficiency in management
Instability in financial matters
Innovativeness in financial projects or schemes
Technical development happening across various foreign
markets
Non –performing areas or properties
Poor marketing strat egies
Changing financial market conditions
8.8SUMM ARY
Theservices provided by banks have become more easy and
convenient. ATM, Debit card, Credit card, Internet banking are
some of the popular services.
ATM is a computerized machine that enables a ba nk's
customers to access their account for withdrawing cash, and to
carry out other financial and non -financial transactions without
visiting the bank's branch.
Credit cards are financial instruments, which can be used more
than once to borrow money or b uy products and services on credit.
Basically banks, retail stores and other businesses issue these.
Credit card is a way to "pay later."munotes.in
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Debit cards operate like cash or a personal check. Debit card is
a way to "pay now." When we use a debit card, our m oney is
quickly deducted from the bank account. Debit cards are accepted
at many locations, including grocery stores, retail stores, gasoline
stations, and restaurants. It’san alternative to carrying a checkbook
or cash. With debit card, we use our own mo ney and not the
issuer's money. In India almost all the banks issue debit card to its
account holders.
Internet banking orE-banking allows customers of a financ ial
institution to conduct financial transactions on a secure webs ite
operated by the institution. Customers can check the account,
transfer the funds or make various payments through internet
banking.
8.9QUESTIONS
1.Write a note on ATM.
2.Explain the advantages and limitations of ATM.
3.What is a debit card? Explain its advantages and
disadvantages.
4.What is credit Card? Explain its advantages and disadvantages.
5.What is internet banking? Explain internet banking in India.
6.What are the various service s which could be availed through e
–banking.
7.Write a note on ‘opening of insurance sector for private players.’
8.What is FDI? Explain its impact on banking sector in India.
9.What is FDI? Explain its impact on insurance sector in India.
10.State whethe r following statement are True of False.
a.An Automated Teller Machine or Automatic Teller Machine
(ATM), is a computerized telecommunications device that
provides the clients of a financial institution with access to
financial transactions in a public s pace with the need for a
cashier.
b.In a debit card you have to pay only one time fee with no extra
interests or surcharges like late fee.
c.Foreign direct investment (FDI) is direct investment into
production in a country by a company in another cou ntry, either
by buying a company in the target country or by expanding
operations of an existing business in that country.
d.Foreign Direct Investment (FDI) in the insurance sector is
capped at 36 percent.
e.The debit card encourages lavish expenditur e as compared to
credit card.munotes.in
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f.Most banks in India do not issue AMT cards.
g.Internal banking offers banking services only to fixed hours.
h.At present, FDI is allowed only in the case of single brand retail.
11.Fill in the blanks.
a.______ _____ATMs are typically more advanced, multi -function
machines that complement a bank branch's capabilities.
b.A ___________card is an electronic card issued by a bank
which allows bank clients access to their account to
withdraw cash or pay for goods and services.
c.foreign Direct Investment is seen as an important source of
inflows.
d.___________ Banks have the largest number of ATMs in India.
f.___________ is issued to customers who have a bank balance.
munotes.in
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Unit-9
LOGISTICS AND NETWORK
Unit Structure :
9.0 Objectives
9.1 Introduction
9.2 Meaning and Definition
9.3 Introduction to Networking
9.4 Importance of Networking
9.5 Challenges of Networking
9.6 Logistics Sector inIndia
9.7 Summary
9.8 Questions
9.0OBJECTIVES
After studying the unit students will be able to:
Know the meaning and elements of Logistics.
Understand the meaning of Networking.
Explain the importance of Networking.
Elaborate the challenges of Networking.
9.1INTRODUCTION TO L OGISTICS
Logistics is the management of the flow of resources,
between the point of origin and the point of destination in order to
meet some requirements, i.e. of customers or corporations. The
resources managed in logistics can include physical items as ,food,
materials, equipment, liquids and staff as well as abstract items as
information. The logistics of physical items usually involves the
integration of information flow, material handling, production,
packaging, inventory, transportation, warehousing and oftentimes
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9.2MEANING AND DEFINITION
9.2.1MEANING AND DEFINITION
The logistics network is a vast system of companies
/organisations, people, technology, activities, information and
resources involved in moving a product or service from supplier to
customer.
Philip Kotler defines logistics as "planning, implementing,
and controlling the physical flows of materials and finished goods
from the place of origin to the point of use to meet the customer
needs at a profit."
The International Council of Logistics Management
defines logistics as"the process of planning, implementing, and
controlling the efficient and effective flow and storage of raw
materials, in -process inventory, finished goods and related
information from the point of origi n to the point of consumption to
meet customer requirements."
9.2.2 Elements of Logistics:
The elements of logistics network are as follows:
1. Facility Location and Network Design: The logistics
department must design the location of facilities from where
the logistics operations would be carried out and their
interconnection.
The logistics department should decide about the location,
size and number of logistics facilities like material handling facilities,
manufacturing plants, warehouses, wholesa le and retail outlets.
These aspects of logistics would affect other aspects like levels of
inventory, transportation, packaging and delivery.
2. Information: Logistics is essentially an information -based
activity of inventory movement across a supply ch ain. Information
systems play a vital role in delivering superior service to customers.
Use of the Information Technology (IT) tools for information,
identification, access, storage, analysis, retrieval and decision
support in logistics enables firms to co mpete effectively.
3. Customer Order Processing: The purchase order placed
by the buyer contains details of quality and quantity of product,
price, delivery schedule, payment terms, and other terms as agreed
upon. The customer order processing must verify the following:munotes.in
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* Delivery schedule.
* Location of delivery.
* Specifications of the product.
* Payment terms and conditions including credit period, etc.
4. Inventory Management: It is concerned with maintaining
enough inventories to meet customer requi rements. Inventory
management tries, to ach ieve a balance between customer
satisfaction and costs of maintaining inventories. The firm should
not maintain too high inventories or too low inventories. If too high
inventories are maintained, it would affect working capital
requirements, and if too low inventories are maintained, it may
affect delivery schedules. Ther efore, inventory management is
concerned with maintaining the right level of inventory to meet
customer requirements at lowest cost.
The follo wing activities are involved in inventory
management:
• Analysis of on -hand inventory.
• Communicating the quantity, quality and timing of material
requirements with the supply points.
• Obtaining the right quality and quantity of materials at the
right ti me.
5. Warehousing: It refers to storage of finished goods until
they are delivered in the market. Warehousing is an important
element in logistics. It is directly linked to the firm's ability to deliver
the desired level of customer requirements. Major decisions in
warehousing are:
* Location of warehousing facilities
* Size and number of warehouses.
* Design and layout of warehouses.
* Ownership of warehouses -company owned or hired.
6. Transportation: Transportation is the most basic
component of log istics. It facilitates the movement of goods from
supplier to the buyer. The physical movement of goods can take
place through various transportation modes such as air, road, rail,
water, and pipeline (for gas). The mode of transportation depends
on certai n factors such as:
* Cost of transportation.
* Urgency of the product to customers.
* Nature of goods.
* Location of the customer.
7. Material Handling: The speed of the inventory movement
across the supply chain depends on the material handling methods.
Mechanization and automation in material handling enhance the
logistics system productivity. Improper method of material handlingmunotes.in
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will add to the product damages and delays in deliveries and
incidental overheads. Considerations for selection of material
handling system include the volumes to be handled, the speed
required for material movement and the level of service to be
offered to the customer.
8. Logistical Packaging: It is an important element of physical
distribution of a product. It differs from product packagin g, which is
based on marketing objectives. Logistical packaging facilitates
protection to the product during transit. Certain decisions have to
be taken in respect of logistical packaging such as:
* Materials used for packaging.
* Cost of packaging.
* Design of packaging.
* Marking and labelling.
9.3INTRODUCTION TO NETWORKING
Business networking is leveraging the business and
personal connections to bring a regular supply of new business.
Many businesspeople contend business netwo rking is a
more cost -effective method of generating new business than
advertising or public relations efforts. This is because business
networking is a low -cost activity that involves more personal
commitment than company money.
Business networking can be conducted in a local business
community, or on a larger scale via the Internet. Business
networking websites have grown over recent years due to the
Internet's ability to connect people from all over the world. Internet
companies often set up business lea ds for sale to bigger
corporations and companies looking for data sources.
9.4IMPORTANCE OF NETWORKING
Studies have shown that 27% of new hires at companies
often happen as a result of referrals and people believe that 80% of
these jobs are the result o f some form of networking. Networking
can be the simple exchange of information between people at a
restaurant or coffee shop, or it can just as easily take place when
somebody posts an announcement about a job on a website.
Following is the importance of Networking:
1. Shared Knowledge
Being a part of a network and sharing ideas leads to shared
knowledge. There is usually more than one way of accomplishing1
a goal and receiving feedback and discussing other points of viewmunotes.in
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really expands your knowledge bas e and allows you to see things
from a broader perspective.
2. Opportunities
Networking always results in the creation of opportunities,
the thing is, you have no idea when or where they may materialize,
which is why it's important to be an action taker, r eady to seize on a
beneficial opportunity when it does come along.
3. Connections
People within a network of friends will have connections with
many other people they have encountered in their own lives. When
someone they know has a need and can benefit f rom products and
services offered by someone within the network, that person will
likely get the call.
4. Promotion
From blog post to product launches, you have people who
will assist you in the promotion of goods and services. This saves
you time and rem oves the risk of over promoting your own content
and products. There is also the benefit of additional traffic to your
site and an increase in subscribers and sales.
5. Online business expansion
Social networking sites like Twitter and Face book are
teemi ng with people and opportunities to connect with others who
are traveling a similar path.
Visit their blogs and interact with them, becoming a part of a
few communities. This will enhance your flow of traffic and expand
your overall online presence
6. Information
Information is an outcome of networking. When you go to
network parties you are almost guaranteed to gain information. This
will give you business leads.
7. Skills
Developing skills is a benefit of networking. Networking is a
skill in itself. Th e more you network, the better you do and the more
chances there are that you will grow.
8. Raising your profile
Being visible and getting noticed is a big benefit of
networking. You. can then help to build your reputation as a
knowledgeable, reliable and supportive person by offering useful
information or tips to people who need it. You are also more likely
to get more leads and referrals.munotes.in
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9. Positive Influence
The people that you hang around with and talk to do
influence who you are and what you do, so it is important to be
surrounding yourself with positive, uplifting people that help you to
grow and thrive as a business owner.
Networking is great for this, as business owners that are
using networking are usually people that are really going for it,
positive and uplifting.
10. Increased confidence
By regularly networking, and pushing yourself to talk to
people you don't know, you will get increased confidence the more
you do this. This is really important as a business owner, because
your business gro wth is dependent on talking to people and making
connections.
9.5CHALLENGES OF NETWORKING
Following are the challenges of Networking :
1. Staying ahead
The business world in no way stops advancing and neither
should you. Listen to everybody that has kno wledge inside the
marketplace and keep and eye out for brand new or approaching
modifications in technology. Network marketing is really a rapidly
shifting world and you have to be able to stay ahead of the curve
for the most financial gain possible.
2. Collaborating with community forums
It is necessary to sign up for and collaborate with network
marketing community forums. Executives need to use these
discussion boards and provide suggestions to genuine problems
people might be encountering.
3. Develop ing your personality
Improving your business starts with improving yourself. Work
on your mindset along with the way you present yourself to your
consumers. In network marketing, people don't purchase items
from an organization but from an individual. Pay attention to your
physical appearance, the way in which you sound on the phone or
your style when you compose e -mails.
4. Convincing people
Find ways to connect with the people you might be trying to
network with. If they sense that you are simply looking to build your
own business, they are not going to be going interested in the
opportunity. However, if you show them that networking is going tomunotes.in
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be mutually beneficial then they are more likely to say yes to your
proposals.
5. Building credibility
Network ing isn't about selling your company from the time
you meet. It's about building a sense of credibility about you and
then cultivating a relationship. And building credibility requires more
than an exchange of business cards and adding one another as
conne ctions on Linkedln.
6. Online & offline
Going online is a great way to make initial contact, but
contact is not enough to create an optimal relationship. Building
successful relationships is possible through online networking
alone, but face -to-face netwo rking or follow -up tends to work better.
7. Ongoing Process
It is of absolute important to remember that networking is an
ongoing process. Meeting somebody once does not quite make for
an instant solid relationship. You will need to make the continuous
effort to re -connect with them..
9.6LOGISTICS SECTOR IN INDIA
The Indian logistics sector faces a number of challenges.
The challenges are mainly on account of infrastructural problems.
However, there are other issues that pose a challenge to the
logistic sector:
1. The infrastructural bottlenecks:
Infrastructure is one of the biggest challenges faced by the
Indian logistics sector and has been a major deterrent to its growth.
Infrastr uctural problems like bad road conditions, poor
connectivity, inadeq uate air and sea port capacities and lack of
development of modes of transports like railways and alternates
like inland water transport and domestic aviation have been
constant irritants. Due to the infrast ructural bottlenecks costs per
transaction in Ind ian logistics sector is very much high compared to
those in the developed markets.
Transport by road forms an important component of freight
moveme nts within India, with a large chunk of goods, over 65
percent, being moved by road. The poor infrastructure has severely
crippled the smooth functioning of logistics operations. With narrow
and congested highways, poor surface quality of roads and 40
percent of villages not having access to all -weather roads, the
efficiency of the transport system is severely affected.munotes.in
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Pathetic road conditions combined with the fact that India is
perhaps one of the least connected regions in the world constitute a
major impediment. Poor connecti vity via roads and railways to
ports, warehouses and logistics hubs is major infras tructural
bottleneck. Movement of goods within the country is fraught with
delays and risks.
The bulk of Indian foreign trade is carried by sea routes and
the existing port infrastructure is insufficient to handle trade flows
effectively. The current capa city a t major ports is overstretched and
their infrastructural upgrades are being made at very slowl y pace.
While Shanghai's ports can turnaround a container ship in 8 hours,
the same ship in Mumbai takes 3 days.
The Indian government has started paying attention to the
problems being faced by the logistics sector and has initiated
several infrastructural projects to mitigate their woes. Projects like
rail freight corridors and development of the inland waterways as a
means of developing alternative modes of transport are being
planned. Some important steps are being taken in augmenting the
rural infrastructure like connecting majority of the habitations with
all weather roads, construction of new roads and upgrading of
existing ones etc. New port and a la rge container handling facilities
are on the cards. But all these are still not sufficient to cater to
the growing needs of the economy.
2. Delays and Spoilage:
Huge traffic jams and a large number of documentation have
resulted in delays and spoilage of certain goods. In contrast to
this, vehicles in western parts of the world move much faster and
have swifter and easier documentation. It is to be noted that
vehicles in the western parts of the world run at three times the
speed of vehicles in India.
3. Inter -State Check Posts:
Inter-state check posts, surprise checks and unauthorized
hold ups on highways (some due to security reasons while others
are to establish the authenticity of the cargo as declared) create
problems.
4. Problems of Warehousing :
In India, warehousing has also been typically dominated by
small players with small capacities and poor deployment of
handling, stacking and monitoring technologies. While it has had
detrimental effect on almost all sectors, the food sector has been
theone that has suffered the most due to low investment in cold
storage chains and allied machinery. Erratic power supply have
also meant low dependence on technology and a more manual
operation.munotes.in
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5. Problem of Unorganised Sector:
In India, a major part of t ransportation is handled by the
unorganised sector. It is estimated that about 85% of the road
transport facilities are provided by unorganised sector. Due to the
unorganised sector presence, there is poor handling and delays in
delivery of goods. This is because; the unorganised sector does not
adopt professional approach towards their operations.
9.7SUMM ARY
Logistics is the management of the flow of resources,
between the point of origin and the point of destination in order to
meet some requirement s.
Facil ity Location and Network Design, Information,
Customers order processing, Inventory management,
Warehousing, Transportation, Material handling, Logistical
packaging are the elements of Logistics.
Business networking is leveraging the business and
personal connections to bring a regular supply of new business.
Networking is important as it leads to shared knowledge,
creates opportunities, connects people, promotes goods and
services, enhances online business, gains information, develops
skills, builds reputation, helps to grow and thrive as a business
owner, and increases confidence.
The challenges of Networking are staying ahead,
collaborating with community forums, developing personality,
convincing people, building credibility, going onlin e and offline,
ongoing process.
The Indian logistics secto r is facing a number of challenges
such as: The infrastructural bottleneck, Delays and spoilages,
Interstate check posts, problems of warehousing, problems of
unorganized sector.
9.8QUESTIONS
1. What is logistics?
2. What is business networking? Explain its importance.
3. Explain the guidelines for successful networking.
4. What are the challenges of networking?
5. Write a note of Element of Logistics.munotes.in
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6. State Whether following statement are True of Fal se.
a. Logistics is the management of the flow of resource s,
between the point of origin and the point of destination in
order to meet some requirements.
b. Networking is about selling your company from the time you
meet people.
7. Fill in the Blanks.
a. ______ is the science of planning, organizing and ma naging
activities that provide goods or services.
b. Business ________ is leveraging your business and
personal connections to bring you a regular supply of
new business.
munotes.in
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Unit-10
INTRODUCTION TO E -COMMERCE
Unit Structure :
10.0Objectives
10.1Introduction
10.2Meaning & Definition
10.3Objectives of E-Commerce
10.4Features / Natures of E -Commerce
10.5Functions of E-Commerce
10.6Scope o f E–Commerce
10.7Impor tance of E -Commerce
10.8Limitations of E -Commerce
10.9Summary
10.10Questions
10.0OBJECTIVES
After studying the unit students will be able to:
Understand the meaning and definition of E -Commerce.
Explain the features of E -commerce.
Elaborate the fu nctions of E -commerce.
Know the scope of E -commerce.
Explain the importance of E -commerce.
Know the limitations of E -commerce.
10.1 INTRODUCTION
Change is the rule of nature and commerce cannot be an
exception for it. Literary speaking commerce is trade andaids to
trade. In other words buying and selling of goods and services and
for the purpose of doing these two activities softly and smoothly,
other activities such as transportation, insurance, warehousing,
finance, labeling, branding, marketing, advert ising etc. are required.
The involvement of all these in the process of buying and selling is
called commerce.munotes.in
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In fact itis a very old concept and it dates back to human
civilization. Since then it started developing from one form to
another form (i.e. from barter stage up to the world economy stage)
but it hard steady and gradual change which is known as
commerce evolution.
At the initial stage of 21stcentury there was introduction of
liberalization, globalization andprivatization (LPG concept.) it was
the drastic change in commerce scenario. Due to this the market
became boundary less; the whole world became a single market.
Being distances reduce between two countries there was dare
need to have speedy and quick communication system with which
transact ion between two countries or among the countries can
easily take place. From the view point of whatever developed
technology is used for the purpose of information and transaction is
electronic mode information. This change in business system for
informati on is known as E -commerce. That is Electronic commerce.
It is revolutionizing way of business and consumer transact across
the globe through this way. It is expected that it will grow to a
greatest extent in a near future and lots of people connected
throu gh.
IT industry has become the most robust industry in the
worlds is a part and parcel of economic aspect. It increases
productivity, particularly in the developed countries and therefore it
is a key driver of global economic growth.
The Information Techn ology in the business solution are
available and affordable for businesses which is both large and
small. The adopting it businesses can reduce the product cost,
commercial cost, communication cost and services cost. The Indian
Information Technology indus try is playing very important role in
putting India on the globe map. Further, it leads sectors to grow
from 4% to 7% during 2009 -10 and expected to grow up to 10% in
near future. It is also useful for customer relationship. That is why
E-commerce has beco me the need of the time now a days.
10.2 MEANING AND DEFINITION.
E-commerce is said to bring about a paradigm shift in the
world of trading. It cuts down the channels of intermediaries
between the producer and the customer. It reduces the cost of
marketin g and bring customer closer and closer to the business
with the help of ICT i.e. Information, Communications and
Technology.
E-commerce is nothing but it is buying and selling of goods
and services on the internet, complements traditional trade.munotes.in
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E-commer ce can best be described as buying and selling of
goods andservices over the internet. This includes both B2B and
B2C transactions. It is very flexible and keeping pace with the
changing world.
It is also known as electronic shopping. It includes doing
business online or buying product and services through web store
fronts. The product may be trading of any physical product such as
car, tractor etc. the services may be distance education, online
medical consultation with ahospital outside the country or
arranging excursion etc. E -commerce is a business conducted
exclusively through an electronic format. It is also a particular type
of E-business focusing around individual business transactions that
use the net as a medium of exchange. E -commerce is purch asing
and selling, perusing and servicing, transferring goods and making
payment of products, service and information over the internet,
intranets, extranets and other network between and internetworked
enabled enterprises and its prospects, customers, sup pliers and
other business partners. Therefore E -commerce can be considered
as a system, as a sales approach, as a strategy, as a technology or
a separate business.
“Formulating commercial transaction at a site remote from
the trading partner and than usin g electronic communication to
execute that transaction.”
“David Whitely”
“The seamless applications of information and
communication technology from its point of origin to its end points
along the entire value chain of business processes conduc ted
electronically and design to enable accomplishment of business
goal”
“Wigand”
E-commerce can be broadly defined as any form of business
transactions in which the parties interact electronically rather than
by physical exchange of documents or direct meeting amongst
officials.
It is also defined as a modern business methodology that
addresses the desires of firms, consumers and management to cut
cost while improving the quality of goods and increasing the speed
of services.
In simple we can de fine E -Commerce as the sharing of
business information, maintaining business relationship and
conducting business transaction by means of network.munotes.in
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10.3 OBJECTIVES OF E -COMMERCE
1.To employ professionally qualified personnel to design the
websites, Write the soft ware, create the contents, operate and
maintain the site.
2.To improve customer service and increase customer
satisfaction.
3.To build websites to develops brands or increase exiting
marketing program.
4.To provide product servicing at affordable price.
5.Tocontrol hardware and software costs.
6.To reduced supply costs, improve quality and fastest delivery
of ordered goods.
10.4 FEATURES / NATURES OF E -COMMERCE.
Feature means discussing that particular concept with all
aspect. It includes its functions, impo rtance, scope etc. With the
help of above noted discussions and definition we can conclude the
following features of E -commerce.
1.UBIQUITY
Ubiquity means comprehensiveness or it makes anything
available anywhere or at anytime. Online shops never close. No
doubt online shopping has given setback to traditional businesses
in some ways but helped it in other ways. The most favorable thing
is clicks -and get the things. You can order online and pick it up at
the shop .due to E -commerce business are compelled to adopt
online system or vanish from business scenario. Another negative
point is that small families are not benefited by this as traditional
businesses were serving. But now no companies can made
compulsory to the stores a quota for sell as they use made earlier.
2GLOBAL REACH
It is a great feature of e -commerce. Its meaning is by sitting
at one place you can make purchase from anywhere in the world.
This is an opportunity given to businesses to reach other markets
and to billions of potential customers. In case of traditional business
advertisements were given through different means like radios,
televisions’ etc and reaches at the customer’s door. But now the
web is created and has opened another world for business and
advertising. Traditional businesses now advertising on online that is
more affordable and reaches to maximum consumers than
television or radio. There are some Sites like Google and other
which are giving advertising where customer can reach at a click
and huge expenses are saved by busines ses.munotes.in
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3 UNIVERSAL STANDARDS
Universal Standards means standard accepted by universe
or worldwide. This is a revolutionary stage accepted by every
country throughout the world that they use identical technical
standard which help to maintain uniformity of tra nsaction relating to
information sharing, e -payment, e -learning etc. It gives us all the
ability to connect at the same level and it provides network
externalities that will benefit everyone. Universal standards are a
part of global reach; so it is one big marketplace, where lower entry
costs and minimal search costs as compared to traditional
commerce are occurring. So this how e -commerce has benefited to
traditional businesses' into improving on their customer service.
Anywhere. If Staples does have somet hing you need in stock will
actually order it for you and personally deliver it to your door.
4 RICHNESS
Richness is the intricacy and satisfaction giving part of the
message. And it exists when we think about marketing and other
sales premises. In fact at the time of marketing and selling product
there is need of inculcating inner feelings which is possible with
physical sales. There customer can see product and pay personal
attention and feel happy themselves. But now the web and e -
commerce has made it po ssible to deliver the same kind of "feeling"
or message without the face to face interaction. And I thought that
this has made possible by traditional businesses through greater
improvement in their customer service so they can make a
traditional shopping experience richer than ever before. The store
like Areopostale, DEB and Wal -Mart appoints shopping helpers to
enhance customers shopping experience.
5 INTERACTIVITY
Interactivity means seller engage customers online without
an actual face -to-face communic ation or experiences but like face
to face interactions. This kind of interactivity of e -commerce is quite
suitable and beneficial as business interacts on a much large scale.
E-commerce can collect information from consumers more easily
and efficiently w ith forms and surveys. There are some businesses
which have conducted surveys with all their receipts and offer a
discount to the customers in next shopping trip for filling it out.
6 INFORMATION DENSITY
Information density gives consumers better quality
information and more about customer’s .I felt it is part of
interactivity. Because most of the companies use to offer buy at
best price by giving comparison between two companies prices .as
we know that e -commerce prices are more transparent so
traditional business are also trying to compete with e -commerce by
making traditional shopping more easier with the help of customers
informationmunotes.in
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7 PERSONALIZATION AND CUSTOMIZATION
Personalization and customization means giving message
as per customers likes preferenc es, choices, and their needs and
wants. There are some websites which designs their homepage
with full information of selected products &customers. They also
advertise the some products which are matching with customers’
needs and requirements. Personaliza tion and customization is very
much hard to traditional business to do because it is like richness
(complexity and content of message)here traditional businesses
must have to set up some specialty shops to satisfy the customers
and e -commerce helps to thes e business to survive and grow in
today’s business environment by providing personalization and
customization facility.
10.5FUNCTIONS OF E -COMMERCE
Following are the functions of E -commerce:
1. GLOBAL SOURCING:
It is one of the important features of E -commerce that it has
global reach. It means the users of internet are spread out through
over the world. With the help of the e -commerce technology has
allowed transactions to across national boundaries. It mostly
employs temporary workers across all level s such as IT workers,
legal services, public relations, and media personnel.
2. CUSTOMER SATISFACTIONS:
For any business, customer’s happiness is important. They
cannot be lured. They much aware of. E -commerce gives top
priority to customer’s satisfaction by delivering products and
services fast. No doubt customer’s desires are unpredictable but
important to analysis. E -commerce through online research tries to
understand the needs and wants of customers and accordingly
prepares the business.
3. FACILITY OF E -MAIL: -
E-mail continues to be the leading driver of E -commerce. It
is commonly used in online communication. Therefore email has
emerged as an effective communication medium and marketing
device large number of transactions in e -commerce is conducted
throu gh email.
4. ELECTRONIC DATA INTERCHANGE (EDI): -
it is one of the functions of e -commerce to facilitate the
working of an information system called EDI. This information
system links a company, with which it has some kind of
transactions and enables the dat a to be transmitted and received
without rekeying. It is different from email in the sense that itmunotes.in
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transmits actual transaction such as transaction date, amount,
senders name, receivers name etc. EDI takes place when a
business transmits computer -readable data in a standard format to
another business.
5. SAFETY AND SECURED TRANSACTION: -
E-commerce provides safety and security to business
transactions. Nobody should have easy access to the transactions
done on the NET. Good amount of privacy is maintained to avoid
forging transaction. Confidentiality of transaction is the main
element of ecommerce to make it successful.
6. MOTIVATING BUSINESSMEN: -
Now a day’s most of the businessmen are planning to put
their business online. No doubt some research is to be under taken
to find out opportunities on online business and select a business
which will help him to achieve his target. If he doesn’t have
experience then he can use soft ware packages, which are user -
friendly and are easily available. With the help this he le ads his
business to a greater extent and will be able to motivate to
customer to buy product and services.
7. FACILITATES E -BANKING:
An important aspect of E -commerce is fast growing e -
banking. Under e -banking services are provided to customers
electronica lly, which are of two types a) online banking transactions
and b) electronic fund transfer.
Online banking means customer can withdraw amount from
his account without writing cheque.
Electronic funds transfer means transmission of financial
transactions , both debit and credit, between banks and customers
or banks and companies.
8. FACILITATES E -SHARE TRADING:
In India, physical share trading was existing. In the year
1994 National Stock Exchange introduced electronic share trading.
Here, process of trading remains same for both, physical and
electronic. The difference is in communication. Under electronic
trading transmission of data is from earth station to satellite and
back to broker’s office and again in reverse direction. So
Ecommerce has gaine d a lot through this prompt and reliable
technology.
9. OTHER FUNCTIONS:munotes.in
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Ecommerce performs certain functions like e -shopping,
providing After Sale Service, e -journals etc. all these functions are
giving comfort, convenience and easiness to the customers and
business units.
10.6SCOPE OF E –COMMERCE
Scope of E commerce means where E -commerce is
implemented or utilized in a field. Now a day it has very vast scope,
it is applicable to various functions of day to day activities, for
example email, barcodes , World Wide Web or electronic data
interchange. To know scope of E -Commerce following points can
be discussed.
1. ONLINE RETAILING: -
E-Commerce helps to grow online retailing. Online retailers
exploit opportunities and do fast business with lower marginal profit.
It gives high customers satisfaction and helps to increases total
sales. Online transaction lead to increase trust and comfort with
ethical business therefore every shoppers trying to opt for online
transaction as familiar brand, simplified orderin g and return
processes availability all the times of goods and services.
2. ONLINE RESEARCH: -
Online research is becoming main part of the E -commerce.
Paper questionnaire is given on web page and result are
automatically posted to a data base, this kind of s urvey is
economical and speedy. These research can be used more visuals
and video, such type of collecting information develops interactivity.
Online research is reliable and cost effective.
3. FACILITATES E -PROCUREMENT: -
Procurements means to fill up or rec ruit. In a business,
business needs two types of materials known as direct and indirect
materials. Direct materials are basic to the production and it
decides or determines features and capabilities of firm products. It
includes Raw materials and machineri es. Indirect materials
supports the business, it is needed for operations affecting cost. It
includes office supplies and spare parts of machineries.
E-commerce facilitates procuring these materials electronically
4. SERVICES OF AGENT :
the use of agents in E -Commerce has become necessary to
provide user friendly E -Commerce solution to customers. For
example now a days in such a growing online marketing situation
customer needs certain tools to help them to short down the
choices of the products. There are certain tools or software
programs which called as agent are taking note of it an accordinglymunotes.in
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as per users preferences matching their choice against the
available products which gives maximum satisfaction to the
customers.
Check Your Progress
1.“Now a day E-commerce is applicable to various functions of
day to day activities”. Explain.
2.Enlist the functions of E -commerce.
3.“E-Commerce isthe sharing of business information,
maintaining business relationship and conducting business
transac tion by means of network ”.Discuss.
10.7IMPORTANCE OF E -COMMERCE
In today’s technological era, E-Commerce plays very
important roles as it gives maximum satisfaction in marketing,
production, advertising or communication system of business and
helps to both customer as well as business man. Besides this there
are other functions or benefit given by the E -Commerce is as
under.
4.Connecting all:
E-Commerce is not an independent but relied on network
connectivity. Therefore business unit can expand beyond i ts
geographical location and can be transacted to any part of the
world. It has global market therefore there is a increase sales
turnover, for example amzon.com is purely internet based book
store has developed more than any established book stores.
5.Locate the product quickly :
Locate the product quickly ,the title itself indicate its meaning
that for finding product immediately there are some search boxes,
customer by clicking only once find out the desired or expected
product and met his/her needs. Thi s is one of important function of
E-Commerce helps customer.
6.Lower cost
In a marketing people considers cost as a sensitive parts. E -
Commerce lowers the cost. It’s effects is customers are able to get
products with a discounted price. Here some of the ways wi th what
E-Commerce reduces cost are:
A. Advertising and marketing: -these activities will be
undertaken on search engine, paper click and som e social media
traffic which incurs less cost.munotes.in
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B. Less personnel : -it means there is a no need of a men to
deal with check out, billing, payment or inventory management,
therefore there is a cost saving. There is no need of physical assets
for a purpose of running business activity like prominent physical
location etc..
7.New customers :
With the help of E -Commerce new customers can be easily
established, it is not necessary that seller need to built brandy and
relationship as in the case of physical relatio nship. It is driven by
traffic from search engine.
8.Large scale operations :
E-Commerce enjoys the benefit of large scale operations.
Economies of large scale mean savings by undertaking large
transaction. Under E -Commerce there is a lower co -ordination co st
which compels seller to sale goods at low price. The sellers than to
earn good profit because of large volume transaction and this is
possible because of e -Commerce.
9.Boost to economy
E-Commerce giving support to economy to develop at a
greater exten t by reducing search cost. It’s effects is buyers is able
to find out best suppliers and seller is also getting needy buyers.
Therefore large transaction is going to take place with which
economic can develop.
7.Provide niche marketing :
Because of the E -Commerce it is possible to a buyer as well
as seller to locate niche product. Online it is only matter of the
customer for the products in the search engine.
8.Remain open all the time :
Store timing are now 24/7/365. E -Commerce websites can
run all the ti me. From the marketer’s point of view, this increases
the number of order they receive. From the customer’s point of
view, an “always open” store is more convenient.
10.8LIMITATIONS OF E -COMMERCE
Electronic commerce is also characterized by some technol ogical
and inherent limitation, because of this number of people are
unable to use such a develop system. It will be clearer with the help
of following points.munotes.in
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1. LACK OF INSPECTION :
while purchasing on net or online shopping, goods cannot be
inspect the refore people don’t have the confidence to purchase
product online. They go far away from the type of transactions.
2. LOW COVERAGE :
it is one of the major disadvantages of E -Commerce that it
has low coverage because steel internet facility is not widely sp read
out in every part of the country therefore very few people are able
to take advantages of it. Most of the people are not having personal
computer, for that this kind of facilities is very unknown.
3. UNCERTAIN DELIVERY :
the time period required for del ivery physical product can
also be a quit significant in case of E -Commerce. Lot of phone calls
and E -Mails may be required till you receive your desired products,
further retailing the product and getting the refund can be more
difficult and time consumin g than physical purchasing.
4. NOT SUITABLE FOR ALL PRODUCTS : -
E Commerce purchasing is not suitable to the perishable
goods, Jewelries and antiques.
5. INSECURITIES : -
Customers are afraid to send their credit card number or the
internet, they are having t he fear in the mind that the number will be
misuse, they feel uncomfortable viewing merchandise on computer
screen or other than inspecting in person.
6. OUTDATED LAWS: -
The legal environment, in which the E -Commerce is
conducted, is in full off unclear and conflicting laws. Moreover laws
have not been updated to deal with cyber crime. Therefore there is
a need to address technical issues to built up customers trust
otherwise the life of the E -Commerce is in dangerous.
10.9SUMM ARY
E-commerce means any form of business transactions in which
the parties interact electronically rather than by physical exchange
of documents or direct meeting amongst officials.
Ubiquity , Global reaches, Universal standards, Richness,
Interactivity, Information density, Personal ization and customization
etc. are the main features of E -commerce.
The functions of E -commerce are Global sourcing, Customers
satisfactions, facility of e -mail, electronic data interaction, safetymunotes.in
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and secured transactions, motivating businessmen, facilita tee-
banking and e -share trading etc.
Online relating, Online research, e -procurement, Services of
agents etc. are the areas where e -commerce is implemented.
In today’s technological era, E-Commerce is giving maximum
satisfaction in marketing, producti on, advertising or communication
system of business as it is connecting all, locates the product
quickly, lowers the cost, easily establishes new customers, enjoys
the benefit of large scale operations, boosts to economy, provides
niche marketing, remain open all time.
Some techno logical and inherent limitation sare there such as: lack
of inspection, low coverage, uncertain delivery, limited suitability,
insecurities, outdated laws etc.
10.10QUESTION S
1.What is E -Commerce? State its main objectives.
2.Define E -Commerce. Discuss its features.
3.Explain in details in functions of E -Commerce.
4.State the Importance of E -Commerce in today’s changing
business.
5.What is the scope of E -Commerce? Explain in details.
6.What are the advantages and limitations of E -Commerc e?
7.How is E -Commerce different from traditional commerce?
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Unit-11
PRESENT STATUS OF
E-COMMERCE IN INDIA
Unit Structure :
11.0Objectives
11.1Introduction
11.2Electronic Commerce Activities
11.3B2B-Business to Business
11.4Business t o Consumers E -Commerce (B2C)
11.5Consumers to Consumers E -Commerce (C2C)
11.6Present Status o f E-Commerce inIndia
11.7The Factors Responsible forthe N of E-Commerce
11.8E-Commerce Transition Challenges inIndia
11.9Reasons for Poor Response of E-Commerce inIndia
11.10Online Marketing Research
11.11Summary
11.12Questions
11.0OBJECTIVES
After studying the unit students will be able to:
Understand the E-commerce activities
Explain the types of E -commerce.
Explain factors responsible for the growth of E-commerce in
India.
Elaborate the present status of E -commerce .
Understand transition to E -commerce in India.
Explain the E -transition challenges for Indian corporate.
Understand the concept nline marketing research.munotes.in
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11.1 INTRODUCTION:
In the previous chapter we have studied e -commerce and its
basic knowledge and became aware of or well versed with e -
commerce. In this chapter we proposed to study its type and
present position in India.
The present marketing is in a revolutionary form. The reason
behind it is fastest growing information technology (IT), specifical ly
to the business it is e -commerce. E -commerce has tremendous
potentials to influence businesses. New business have no choice
but must have to sow the seeds of e -commerce and stream role
themselves in changing business environment to reap the fruits of
e-commerce and develop at high level. E -commerce activity has
well supported by rising internet and World Wide Web (www) sites
through the transformation of global commerce.
No doubt e -commerce is growing substantially on the
internet. In nearest future mi llions of companies and individuals will
be bidding, buying, selling, brokering, advertising or collaborating
on daily basis as the internet merger with the other branches of
information highway. It may gives lower cost of implementation and
maintain a pro curement infrastructure. It also supports or helps to
those who will see the opportunities, understand the medium and
creatively put it to work for them, will definitely succeed in the digital
economic of tomorrow.
E-commerce has no hard or fast meaning or its definitions’.
Some experts have seen it from their perception and have given
meaning; say for example common people have understood this
term as buying and selling of goods or services electronically or on
line. The people who are related to communi cation say it is
transmission of information, products or services or payment
through telephone network or any other media. From the
businessmen point of view e -commerce is the use of technology to
automate business transaction and work -flow, where as the
customers stand point is product displayed in and online store, read
information about the product and see the websites for purchase
the product. Here we can conclude that e -commerce has not only
among some group but it may be between many groups. Therefor e
it is necessary to study the different type of e -commerce. Before
studding the different type let us see the activities involved in e -
commerce
11.2 ELECTRONIC COMMERCE ACTIVITIES
E-commerce is a range of online business activities that
includes explai ning products or services and providing mechanismsmunotes.in
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for customer to buy those products and services from web sites . It
encompasses online shopping and online purchasing. There are
four major sequential activities related to the potenti al customers.
They are as under:
1 Product or service search : -
The prospective customer searches for the expected or
desired products or services on internet. The search process can
be simple short for the products.
2 Price search.
Once the appropriate product or service is sear ched, then
the customer turns towards price of the products or services. They
search for price offerings on the required product over the net.
While Searching price customer may get the desired price product
only when if the product is for common customer or low customer
involvement for purchasing. There is a less scope for branded
product or preferences of the products are very strong.
3 Actual purchase: -
After the appropriate product or service is found, then the
price search end and customer makes actual purchase either in the
physical world or over the internet.
4 Payment: -
Making payment of the products or services is the final step
in e-commerce. Here customer makes payment either in physical
world or over the internet.
11.3 B2B -BUSINESS TO BUSINESS
Following are the different type of e -commerce, they are as under.
1 B2B -Business To Business
2 B2C –Business To Customers
3 C2B –Consumer To Business
4 C2C –Consumer To Consumer
5 P2P–Peer To Peer
11.3.1B2B -BUSINESS TO BUSINESS: -
In traditional firm, t he process of dealing with suppliers or
distributers involves lots of paper works and it was costly as well as
delayed process. In modern businesses net has eliminated all
these and automated the processes, gave solution to cost and
delayed problems. It is also possible to companies to offers better
services to each other and improves their efficiency.munotes.in
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At present most of the businesses are adopting the B2B e -
commerce to get service work done, to link suppliers, factories,
distributors and retailers direct ly. This type of e -commerce is relates
to a company buying or selling online. In short it is an automated
exchange of information between different organization. In this type
business invoices are received, orders place and payments are
made using internet connections. Details of businesses are
received through their websites. This type of business has large
volume transaction.
At present B2B represent much larger fractions of total internet
marketing. Businesses adopt technology faster than the con sumers
and gaining important in reengineering their business processes
and developing or expanding globally.
11.3.2BENEFITS OF B2B TRANSACTIONS
Following are some of the benefits enjoyed by a business
firm on account of B2B transactions.
I.Less cost of d istribution: -
B2B transactions reduce the cost of marketing and selling of the
business unit. For the sale of the product business need not
maintain selling staff or need not to advertise products frequently to
attract the customer.
II.Minimized inventory level: -
Here business used to utilize the just -in-time method of
maintaining inventory. Business need not to, maintained large
inventory in anticipation of demand. Because under this system,
seller can maintain inventory level as per order received online and
buyer also no need to buy large amount of inventory but can order
only when it is required.
III. Increase productivity : -
There may be increase in productivity of an employee of the
buying firm as the firm need not to maintain inventory and getting
raw mat erial on time without any gap or delay.
IV. Wide coverage: -
Online services are available round the clock i.e. 24x 7
schedules. Therefore the buyers from anywhere in the country or
world can easily and as per their convenience accesses and
complete the transa ctions.
V. Customers loyalty: -
The seller can maintain good loyalty, when the customers
are made to feel some special and are provided with quick and
quality services. If consumers once developed the bond or loyalty,munotes.in
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then it is very difficult to shift it fr om one business to another
business.
11.3.3TOOLS AND TECHNIQUES FOR B2B ENTERPRISE.
While doing B2B transactions between firms, they use
different marketing strategies which were not easily possible to
traditional businesses. Some of the common tools ar e given below.
I. Pricing model: -
Under this, buyers are given substantial discounts and
incentives. This discounts and incentives provide to distributers or
other elements in distribution chain are often passed on to the
customers. In addition businesses qu otes free items on the net.
II. Service model: -
Some business, specifically those who are dealing in
software are offering their packages through net. They put critical
data on web which can be used easily anywhere in the world with
very minimum charges.
III. Personalized model: -
There are number of webs which are providing personalize
services to its users, right from the selection, placing order,
execution of order to after sale service.
IV. Comparison model: -
E-commerce has made it possible that users can see
number of webs and can locate the cheapest products to suit their
personal specification.
11.4 BUSINESS TO CONSUMERS E -COMMERCE
(B2C)
11.4.1MEANING
Thistype of e -commerce deals with companies selling
products to the customers through net. It is direct selling to
customers through internet. This type of transactions are rapidly
increasingly as there is increased computer literacy, personal
computer, laptops and internet connectivity as increased and
became common. This type of e -commerce is used when bu siness
is a suppliers and customer is a purchaser. This is the retailing
transaction with individual’s shoppers. The basic concept behind
this is that the online retailers and marketers can sell their products
to the online customers by using crystal clear data which is made
available via various online marketing tools. For example onlinemunotes.in
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pharmacy giving free of charge medical consultation and selling
medicine to patients. This is known as B2C.
Generally these businesses offer catalog and online
shopping cart and business is able to accept payment through its
websites. The consumer then has immediate access to the service
online or the product is shift to consumer directly. The main
intention behind this is to remove intermediaries and established
direct customer relationship.
11.4.2ADVANTAGES OF B2C E -COMMERCE
There are certain advantages gained on the part of B2C e -
commerce by the parties involved in. some advantages are given
below.
a) Shopping can be faster.
b) It is more convenient.
c) Offerings and prices can change instantaneously.
d) Call centers can be integrated with websites.
11.4.3 SCOPE OF B2C
Internet is the magic, with one click or press we can reach
anywhere in the world. That is why it is called as VIRTUAL
WORLD. Therefore businesses are using it for their marketing
ideas and reaching across the world. The scope of the B2C means
who and where e -commerce is used or its uses are. This will be
made clear with the help of following points.
I. Demographic segments: -
Now days, there is a big portion of th e society which are
easily accessing to the internet facilities. This trend is not only
increasing in India but also in the whole world. And this is not only
used by a specific income group but diversified income group
people.
II. Websites for kids/ children ’s.:-
With a rapid development, internet marketers have identified
opportunities in different class of the people specifically they have
chosen the children or teenage as this are using more internet and
computer facilities. These groups are technology fri endly so they
can force to their parents to purchase this facilities.
III. Number of elderly buyers: -
The people above 50 years are fastly becoming internet
savvy. This peoples are using these facilities for different purposes
like Investment, travel sites or financial services. Their needs and
youngsters need are totally different.munotes.in
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IV. New marketing approaches; -
Earlier customers where very passive audience. The
purchases the product with available information but now peoples
aregetting ample and correct infor mation through net. Therefore
marketers by recognizing the significance of internet and people
trend to use it, they make their web sites are more attractive and
informative so that people can easily persued.
11.5 CONSUMERS TO CONSUMERS E -COMMERCE
(C2C)
11.5.1 MEANING
The introductions of new economic has helped to create
individualistic and independent society. C2C model of e -commerce
is the example of it. In this type individuals consumers preparing
their own websites and entering into online transacti ons with others
consumers.
For example eBay’s transactions. Here eBay’s is online
market makers and provides platform to the customers without any
intermediaries on daily basis. Olx.com and quicker.com are also
examples of C2C.
In this business auction s of personal possession are very
common such as painting, old music records, antiques furniture etc.
here prices are determined by market force and these transactions
non-business entities complete the process by using the websites.
C2C is conducted throu gh classified advertisement, auctions and
collectible shows. In Mumbai residential properties are sold with
the help of C2C models. The payment is made on line where
people can send and receive money online with convenient and
safety.
InIndia , C2C is u sed in limited scale because consumers
anticipate cheating and danger of unethical transactions. Therefore
there is a need to enact new laws to give security to the customers .
While undertaking C2C model tractions some basic activities are
required which a re as follows
11.5.2 THE ACTIVITY INVOLVED IN C2C PROCESS: -
a) Registration : -
The consumers who wants to sell and the consumer who
wants to buy have to register with the site.munotes.in
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b) Auctions: -
The auctions take place at the sites. The different buyers
quote the rates for buying the products offered by the seller.
c) Sale: -
The highest bidder will be eligible for to purchase the
product. He has a right to denie the product before making the final
payment.
d) Payment; -
The buyer makes the payment through credit ca rd or debit
card by following virtual sites process. The payment is remitting to
the buyers after deducting service charges.
Check Your Progress
1.Define the following terms:
a.E-commerce
b.B2B
c.B2C
d.C2B
e.C2C
f.P2P
2.Fill in the blanks:
a.Olx.com and quicker.com a retheexamples of--------------- .
b.eBay’s is ---------------------- makers .
c.---------------------- it is called as VIRTUAL WORLD.
d.-------------------------- is direct selling to customers through
internet.
e.------------------- encompasses online shopping and online
purchasing.
f.Under the--------------- model buyers are given substantial
discounts and incentives.
g.------------------ model includes providing personalize services
to its users, right from the selection, placing order, execution
of order to after sa le service.
h.--------------------- type of e -commerce is relates to a company
buying or selling online.
i.------------------------ is an automated exchange of information
between different organization.
3.Enlist the activities involved in C2C process.munotes.in
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11.6PRESENT STATUS OF E -COMMERCE IN INDIA
Over the years e -commerce has grown significantly in India,
Specifically the B2B e -commerce. No doubt e -commerce had a
slow start but of late it has picked in a great form. It has very bright
future in India because of low cost of personal computer, increase
in internet service provider and peoples approaches towards
shopping online. Recent report indicates that online retailers have
registered an average 18% growth, and the coming year seems to
be surprise for online s hopping. There are increased users of
internet the report shows that the number of internet users has
touched the hundred million and will continue to grow substantially.
Online shopping initiatives are tremendously increasing pursuing
working profession al’s, women and children. The growth rate of
online shoppers does not include the users of mobile phone and
public computer who have brought products from mobile shopping
applications.
Bay India has stated that launching a product online helps to
reach ev en to the remote part of the country. With the advent of 3G
and hi speed connectivity in India, demand even in small cities has
recorded noticeable. There is a huge untapped opportunities online
as over 100 million people in India access the internet.
E-shopping in India has been integrated with social media. A
report by Nielsen state that about 13 million Indians check product
review online. Out of these 6 millions used social media sites for
the purpose.
Online channels are playing an important role of connecting
people with unexploded market. There are certain segments like
apparel and luxuries products have registered unprecedented
growth in 2011, jewellery, electronic appliances and hardware
products have shown promising growth trends as well .
Pricing importance increasing in shoppers of the coupon
sites indicate that pricing is playing the role of catalyst in bringing
more and more shoppers online. Many of these shoppers have
shown affinity towards affordable online goods, which was prices
lesser th an the market price. Some of the largest retails
subcategories revealed that coupons category was the largest with
7.6 million visitors as consumers rapidly adopt daily deals sites.
Consumer’s electronics ranked next with 7.1 million visitors,
growing at 1 2 percent over the previous year, while 5.8 million
online users visited comparison shopping sites, an increase of 25
percent from the previous year.munotes.in
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11.7THE FACTORS RESPONSIBLE FOR THE N OF
E-COMMERCE
Following are the factors responsible for the grow th of e -
commerce in India.
i.Growth of internet users; -
The internet users have rapidly growth in India. The internet
users include internet subscriber and others who are using internet
from other sources. If we look at the numbers increased rapidly
then we come to know the necessity of internet to the India. In the
year of 2000 internet users were nearly 20 lakhs where as 2012 it
reaches 150 lakhs.
ii.Awareness of E -commerce: -
There is growing awareness of e -commerce in India. If we
look at B2B e -commerce even the small and medium scale
enterprises are using net facilities. There is also growing
awareness among the end customers because of advertisements
by online shopping sites.
iii.Growth of middle class : -
The size of middle class is rapidly increasing in India. The
growth of it is resulted in increase in income level of people. Its
overall result, the numbers of users of internet for online shopping
are increasing significantly.
iv.Computer education: -
The computer education has increased considerably in I ndia.
Most of the schools, especially in urban areas impart computer
education. Therefore teenagers and youngsters find it easier and
convenient to browse the internet, this helps to search the
information and place the order.
v. Growth of service sectors; -
There has been a good growth of service sectors like
banking, insurance, telecom, airlines, etc. the service sectors are
increasingly resorting to advanced technology for business
transactions. For example in India, Over 95% of the bank branches
have been computerized. So it is possible for bank to offer internet
facilities to its customers. Also airlines, insurance firms and other
have opened websites to offer information about their services. The
customers can log in to the site and may transact business online
with the service firms.
vi.Impact of western life styles: -
In India, especially youth in the urban areas are influenced
by western culture to some extent. The Indian youth would like tomunotes.in
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enjoy the taste of latest design and fashions therefore they may use
online shopping sites.
vii.Growing competitions : -
There is a growing competitions in India among Indian
businesses and between Indian and foreign firms. There are
number of foreign brands available in Indian markets. Therefore
business units make every possible effort to induce customers to
buy their products. Then it may be physically or through online.
11.8 E-COMMERCE TRANSITION CHALLENGES IN
INDIA
India has growing digitals consumers, majorly it includes
young, male and children’s playing games and reading news
online. The average transactions on the very busy Indian railway
sites are quite noticeable while the popular online book store flip
karthas recorded growth in 2011. Online media on mobile is also
fast catching up.
E-commerce, in India, off ers both big promise and many challenges
for future. Some of the challenges are given below.
1.Challenges preparing in web advertising.
Web is the medium of information in today’s developed
world. Most of the firm are using online web advertising and reapi ng
the profit. A firm can advertise through its own web sites or buy
banner ads on other web sites. Up to this time only few peoples
were using web ads but now it is the growing fast and almost all
brands are given on their own web sites. Maintaining web a ddress
ads is the prestige and image of the company so every business is
trying to prepare high involvement and interactive media that is
web.
2.Challenges in maintaining security: -
E-commerce is mainly based on internet and internet is
unregulated and unc ontrolled. It has easy access and global
communication therefore It provides wide range of risk and threats
to the systems operating on it. The challenges before E -commerce
is guarantee security through maintaining confidentiality of
information, integrity through authentication, providing resources to
authorized parties and keeping records of operations and
transactions.
3.Challenges in implementing cyber law: -
Criminal natures activity are very common own internet.
Cyber law is important because it touche s almost all aspects of the
transaction and activities relating to the internet. E -commerce mustmunotes.in
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learn to operate their business within the framework of the law
which will install confidence and trust among online customers.
4.Challenges in online trading: -
Online trading is one more important shopping, which
provides easy access to the brands which are not available in a
particular term specifically outsides metro cities. Their customers by
using e -commerce fill -up the gap between distribution systems.
Moreover internet gives them control over the buying process
therefore Indian corporate sector must gear up to the development
and operate e -commerce satisfactorily to both customers and
intermediaries.
5.Challenges in popularizing M -commerce: -
M-commerce mea ns any activity conducted over the
wireless network through mobile devices. It includes cellular
phones pager devices laptops and personal digital assistant. It is
possible to identify the location of the person using hand held
devices. The location identi fiable connectivity offered by m -
commerce has increased the coverage of e -commerce. The 24
hours service makes M -commerce readily patronized by customers.
These kinds of services offered by m -commerce are attracting to
the corporate in India.
6.Challenges d ueLack of trust of customers; -
In India most of the customers doubt the quality, delivery
price and after sale service relating to the goods purchased online
therefore online marketers need to create good amount of
confidence in the mind of potentials cu stomers.
7.Challenges due to Price wars: -
E-commerce may lead to commerce war. Because online
marketers offering heavy discounts to the customers to attract them
towards their product and services. This activity may adversely
affect to the bottom line of t he online firms. So online marketers
need to cautious and accordingly make the offers. However such
type of arisen price war is temporary in nature and it does not affect
to the efficient firms in long run.
11.9REASONS FOR POOR RESPONSE OF E -
COMMERCE IN INDIA
Following are the reasons for poor response of E -commerce in
India:
1.Manipulation : -
Commercial bulletin boards allow individuals to post
massages. So it is not possible to anyone to identify the truemunotes.in
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identity of the individual behind the massage. T here is a possibility
for manipulation by an individual or a company.
2.Scams and frauds: -
There are many scams and frauds took place in cyber place.
For dealing with internet there is a no need that one is to be expert
in computer. So companies, by giving highly attractive scheme on
bulletin boards stimulate people to make quick and easy money
here novices are trapped.
3.Misconduct: -
There are many unlicensed broker who wants to make quick
money. Here brokers may give much exaggerated claim to
influence the potential investors.
4.Regular irritation; -
Marketers offer very high claims. This high claims sometime
irritates the customers.
11.10ONLINE MARKETING REASERCH
11.10.1 MEANING
Marketing research is an important tool for any organization
trying to expl ore commercial opportunities. It provides market
intelligence and increases competitiveness of the business and the
maximize the profit. Marketing research is systematic study of a
particular problem where in the problem related data in collected
recorded and classified analyzed and interpreted so that solution
will be given to the problem.
Online marketing research is collecting primary data online
through internet surveys, online focus groups, and web based
experiments or tracking consumer’s online beha vior. Here the
respondent may be requested to fill up questionnaire made
available on the internet. It helps a company to learn more about its
target audience in regards of their buying behavior or other
aspects.
11.10.2 TYPES OF ONLINE MARKETING RESEARC H:-
Following are the types of online marketing research.
1) Web survey: -
Under these companies prepares a questionnaire and post it
on its website. Here companies by offering attractive incentives ask
to answer the questions. It includes e -mail, web link, and web pop -
ups.munotes.in
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2) Quantitative research:
Under this type of research companies tries to measures
consumers’ response precisely. It is applicable to phenomena that
can be expressed in terms of quantity. It is economical to
companies to conduct marketing sur veys on line.
3) Online focus groups :
Under this type a small group of people gather online with a
trained moderator to chat about a product, service or organization.
With the help of moderator customers attitude and behavior can be
judged. Here custome r requires laptop or web connection
participation or to log in. this is suitable to rich class people who
has time problem and wanted to avoid travelling.
4) Online data bases: -
This type of online research provides secondary data. It is
stored on disks or CD-ROM. It is updated regularly and network
links allows the sharing of this data. For example consultancy
services have such type of data relating to their business line which
can be readily accessed.
Online marketing research has certain advantages an d
limitations which are given below.
11.10.3 ADVANTAGES OF ONLINE MARKETING RESEARCH
1) Wide geographical coverage: -
Online marketing research enables the marketers to collect
information from different area’s customers. This is not possible
under field mar keting research. Here the researcher can easily
reach to national or international audience to collect information
relating to the customers problems or choices, references etc. and
accordingly the data can be used for appropriate marketing mix
decisions.
2) Cost effective: -
Online marketing research is cost effective as it is collected
with the help of internet. There is a no expenses incurred on an
account of postage. The data is transmitted instantly as and when
the respondents complete the online quest ionnaire.
3) Easy accessibility: -
Online marketing research can get in touch with any and
every person then it may be business executives or big business
men who are rarely available. Even high -tech professional can find
it convenient to reply online questio nnaire.munotes.in
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4) Accuracy : -
Online marketing research make a researcher able to easily
access to information collected from large sample audience. In
general it is stated larger the sample size greater the accuracy of
the data. Simultaneously this method does n ot appoint field
surveyor therefore the buyers free information is collected. In
simple word this method is accurate data is researcher.
5) Good co -ordination among respondent : -
In this method good customer relationship is exists. So
whenever customers as k to provide quick feedback on a particular
issue they do it fast. On this basis company can make changes in
marketing mix and accordingly take new decision to increase the
save of the company.
11.10.4 LIMITATIONS OF ONLINE MARKETING RESEARCH
1) Lack of r esponse: -
Some time it happens that some customers are not willing to
answering the questionnaire. In this case the researcher may be
unable to get response from required number of people.
2) Limited use: -
Though online marketing research covers wide area b ut it
suffers from restricted use that it does not have face to face
interaction. Here the researcher who is in need of face to face
interaction it is restricted.
3) Termination: -
Online respondent can suddenly terminate the answering of
questionnaire withou t explanation. They may shift to other site.
Some time they may answer question as per their convenient.
4) Problem of technology: -
Online marketing research is totally technology based
activity. Sometimes the responded may be facing the problems of
outdate d computers or problems on internet connections. For
example at the time of downloading questionnaire, if it takes more
time then customers get frustrated and sometimes he may
shutdown his computer, it affects the quality of research work.
5) Not suitable fo r certain products: -
Online marketing research is not suitable for certain product
like laundry product which is targeted to middle lower or lower
income groups. Here the real customers for such products are
housewives of middle lower or lower income group s but these
housewives are not having internet facility to provide response or
they may not having the computer knowledge to respond.munotes.in
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11.11 SUMM ARY
.
E-commerce is a range of online business activities that
includes explaining products or services and pro viding mechanisms
for customer to buy those products and services from web sites .
The major sequential activities related to the potenti al customers
are: Product or service search, Price search, Actual purchase and
payment.
The different types of e -comme rce are:
1.B2B -Business To Business
2.B2C –Business To Customer
3.C2B –Consumer To Business
4.C2C –Consumer To Consumer
5.P2P–Peer To Peer
Over the years e -commerce h as grown significantly in India.
Growth of internet users, Awareness of E -commerce, Growth of
middle class, Computer education, Growth of service sector, I mpact
of western life style, Growing competition etc are the reasons of
growth of e -commerce in India.
E-commerce, in India is offering m any challenges for future.
Some of the challenges are : preparing in web advertising,
maintaining security, online trading, popularizing M -commerce,
challenges due to lack of customers, challenges due to price wars.
Online marketing research is collecting primary data online
through internet surveys, online focus groups, and web based
experiments or tracking consumer’s online behavior.
The typ es of online marketing research are: Web survey,
Quantitative research, Online focus groups and Online data bases.
Wide geographical coverage, cost effectiveness, e asy
accessibility, accuracy, good co -ordination among respondent are
some of benefits of online marketing research.
The limitations of Online marketing research are: Lack of
response, limited use, termination of answers, problem of
technology etc.
11.12QUESTIONS
1)What are the different types of e -commerce? Explain B2C.
2)Why is B2B most popular form of e -commerce?
3)What are the tools and techniques of B2B enterprises? Explain.
4)What is the scope of B2C?munotes.in
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5)Write a note on C2C model.
6)What are the challenges i nvolved in e -transition for Indian
corporate?
7)What is online marketing research? Explain the different types
of online marketing research.
8)Explain the advantages and limitations of online marketing
research.
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