Month: May 2020

Management Notes

Credit Card Services

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A credit card is a payment card issued to users (cardholders) to enable the cardholder to pay a merchant for goods and services based on the cardholder’s promise to the card issuer to pay them for the amounts plus the other agreed charges. The card issuer (usually a bank) creates a revolving account and grants a line of credit to the cardholder, from which the cardholder can borrow money for payment to a merchant or as a cash advance.

A credit card is different from a charge card, which requires the balance to be repaid in full each month. In contrast, credit cards allow the consumers to build a continuing balance of debt, subject to interest being charged. A credit card also differs from a cash card, which can be used like currency by the owner of the card. A credit card differs from a charge card also in that a credit card typically involves a third-party entity that pays the seller and is reimbursed by the buyer, whereas a charge card simply defers payment by the buyer until a later date.

The credit company provider may also grant a line of credit (LOC) to cardholders, enabling them to borrow money in the form of cash advances. Issuers customarily pre-set borrowing limits, based on an individual’s credit rating. A vast majority of businesses let the customer make purchases with credit cards, which remain one of today’s most popular payment methodologies for buying consumer goods and services.

Credit cards feature higher annual percentage rates (APRs) than other forms of consumer loans. Interest charges on the unpaid balance charged to the card are typically imposed one month after a purchase is made.

By law, credit card issuers must offer a grace period of at least 21 days before interest on purchases can begin to accrue. That’s why paying off balances before the grace period expires is a good practice when possible. It is also important to understand whether your issuer accrues interest daily or monthly, as the former translates into higher interest charges for as long as the balance is not paid.

Types of Credit Cards

Most major credit cards, which include Visa, MasterCard, Discover, and American Express, are issued by banks, credit unions, or other financial institutions. Many credit cards attract customers by offering incentives such as airline miles, hotel room rentals, gift certificates to major retailers and cash back on purchases. These types of credit cards are generally referred to as rewards credit cards.

To generate customer loyalty, many retail establishments issue branded versions of major credit cards, with the store’s name emblazoned on the face of the cards. Although it’s typically easier for consumers to qualify for a store credit card than for a major credit card, store cards may only be used to make purchases from the issuing retailers, which may offer cardholders perks such as special discounts, promotional notices, or special sales.

Secured credit cards are a type of credit card where the cardholder secures the card with a security deposit. Such cards offer limited lines of credit that are equal in value to the security deposits, which are refunded after cardholders demonstrate repeated and responsible card usage. Also known as “prepaid” and “semi-secured” credit cards, these cards are frequently sought by individuals with poor credit histories.

Similar to a secured credit card, a prepaid debit card is a type of secured payment card, where the available funds match the money someone already has parked in a linked bank account. By contrast, unsecured credit cards do not require security deposits or collateral. These cards tend to offer higher lines of credit and lower interest rates on unpaid balances.

Transaction steps

  1. Authorization

The cardholder presents the card as payment to the merchant and the merchant submits the transaction to the acquirer (acquiring bank). The acquirer verifies the credit card number, the transaction type and the amount with the issuer (card-issuing bank) and reserves that amount of the cardholder’s credit limit for the merchant. An authorization will generate an approval code, which the merchant stores with the transaction.

  1. Batching

Authorized transactions are stored in “batches”, which are sent to the acquirer. Batches are typically submitted once per day at the end of the business day. If a transaction is not submitted in the batch, the authorization will stay valid for a period determined by the issuer, after which the held amount will be returned to the cardholder’s available credit (see authorization hold). Some transactions may be submitted in the batch without prior authorizations; these are either transactions falling under the merchant’s floor limit or ones where the authorization was unsuccessful but the merchant still attempts to force the transaction through. (Such may be the case when the cardholder is not present but owes the merchant additional money, such as extending a hotel stay or car rental.)

  1. Clearing and Settlement

The acquirer sends the batch transactions through the credit card association, which debits the issuers for payment and credits the acquirer. Essentially, the issuer pays the acquirer for the transaction.

  1. Funding

Once the acquirer has been paid, the acquirer pays the merchant. The merchant receives the amount totaling the funds in the batch minus either the “discount rate”, “mid-qualified rate”, or “non-qualified rate” which are tiers of fees the merchant pays the acquirer for processing the transactions.

  1. Chargebacks

A chargeback is an event in which money in a merchant account is held due to a dispute relating to the transaction. Chargebacks are typically initiated by the cardholder. In the event of a chargeback, the issuer returns the transaction to the acquirer for resolution. The acquirer then forwards the chargeback to the merchant, who must either accept the chargeback or contest it.

Management Notes

Merchant Banking and advisory services

indiafreenotesby indiafreenotes2

Merchant Banking is a combination of Banking and consultancy services. It provides consultancy to its clients for financial, marketing, managerial and legal matters. Consultancy means to provide advice, guidance and service for a fee. It helps a businessman to start a business. It helps to raise (collect) finance. It helps to expand and modernize the business. It helps in restructuring of a business. It helps to revive sick business units. It also helps companies to register, buy and sell shares at the stock exchange.

Functions of Merchant Banking

The functions of merchant banking are listed as follows:

  1. Raising Finance for Clients

Merchant Banking helps its clients to raise finance through issue of shares, debentures, bank loans, etc. It helps its clients to raise finance from the domestic and international market. This finance is used for starting a new business or project or for modernization or expansion of the business.

  1. Broker in Stock Exchange

Merchant bankers act as brokers in the stock exchange. They buy and sell shares on behalf of their clients. They conduct research on equity shares. They also advise their clients about which shares to buy, when to buy, how much to buy and when to sell. Large brokers, Mutual Funds, Venture capital companies and Investment Banks offer merchant banking services.

  1. Project Management

Merchant bankers help their clients in the many ways. For e.g. Advising about location of a project, preparing a project report, conducting feasibility studies, making a plan for financing the project, finding out sources of finance, advising about concessions and incentives from the government.

  1. Advice on Expansion and Modernization

Merchant bankers give advice for expansion and modernization of the business units. They give expert advice on mergers and amalgamations, acquisition and takeovers, diversification of business, foreign collaborations and joint-ventures, technology up-gradation, etc.

  1. Managing Public Issue of Companies

Merchant bank advice and manage the public issue of companies. They provide following services:

  • Advise on the timing of the public issue.
  • Advise on the size and price of the issue.
  • Acting as manager to the issue, and helping in accepting applications and allotment of securities.
  • Help in appointing underwriters and brokers to the issue.
  • Listing of shares on the stock exchange, etc.
  1. Handling Government Consent for Industrial Projects

A businessman has to get government permission for starting of the project. Similarly, a company requires permission for expansion or modernization activities. For this, many formalities have to be completed. Merchant banks do all this work for their clients.

  1. Special Assistance to Small Companies and Entrepreneurs

Merchant banks advise small companies about business opportunities, government policies, incentives and concessions available. It also helps them to take advantage of these opportunities, concessions, etc.

  1. Services to Public Sector Units

Merchant banks offer many services to public sector units and public utilities. They help in raising long-term capital, marketing of securities, foreign collaborations and arranging long-term finance from term lending institutions.

  1. Revival of Sick Industrial Units

Merchant banks help to revive (cure) sick industrial units. It negotiates with different agencies like banks, term lending institutions, and BIFR (Board for Industrial and Financial Reconstruction). It also plans and executes the full revival package.

  1. Portfolio Management

A merchant bank manages the portfolios (investments) of its clients. This makes investments safe, liquid and profitable for the client. It offers expert guidance to its clients for taking investment decisions.

  1. Corporate Restructuring

It includes mergers or acquisitions of existing business units, sale of existing unit or disinvestment. This requires proper negotiations, preparation of documents and completion of legal formalities. Merchant bankers offer all these services to their clients.

  1. Money Market Operation

Merchant bankers deal with and underwrite short-term money market instruments, such as:

  • Government Bonds.
  • Certificate of deposit issued by banks and financial institutions.
  • Commercial paper issued by large corporate firms.
  • Treasury bills issued by the Government (Here in India by RBI).
  1. Leasing Services

Merchant bankers also help in leasing services. Lease is a contract between the lessor and lessee, whereby the lessor allows the use of his specific asset such as equipment by the lessee for a certain period. The lessor charges a fee called rentals.

  1. Management of Interest and Dividend

Merchant bankers help their clients in the management of interest on debentures / loans, and dividend on shares. They also advise their client about the timing (interim / yearly) and rate of dividend.

Services offered by Merchant Banks

Merchant Banks offers a range of financial and consultancy services, to the customers, which are related to:

  • Marketing and underwriting of the new issue.
  • Merger and acquisition related services.
  • Advisory services, for raising funds.
  • Management of customer security.
  • Project promotion and project finance.
  • Investment banking
  • Portfolio Services
  • Insurance Services.

Merchant Banker

Any person, indulged in issue management business by making arrangements with respect to trade and subscription of securities or by playing the role of manager/consultant or by providing advisory services, is known as a merchant banker. The activities carried out by merchant bankers are:

  • Private placement of securities.
  • Managing public issue of securities
  • Satellite dealership of government securities
  • Management of international offerings like Depository Receipts, bonds, etc.
  • Syndication of rupee term loans
  • Stock broking
  • International financial advisory services.

Objectives

Provide funds to companies: This usually includes loans for startup companies. They decide how much money a company needs to function through proposals created by these companies. They also help their clients raise funds through the stock exchange and other activities. Merchant banks act as a foundation for small scale companies in terms of their finances.

Underwriting: This is like insurance where banks sign into documents that agree to provide financial payment to their clients in case of any damage or losses. This is very important for clients to ensure that the bank will help them gain more income. If not, in case they would incur losses, the bank will pay them for the losses.

Manage their portfolios: The bank will look into the companies’ assets and will do the computation of their credits and debits to ensure they are not incurring any losses. They also provide other kinds of services to check on the liquidation of assets to track the income made by these companies and study how they can make it better.

Offering corporate advisory: They offer advises specially to starting companies and those that would want to expand. This advice involves financial aid to ensure that the company will be successful and will not have any problems along the way.

Managing corporate issues: Help incorporate securities management; they also serve as an intermediary bank in transferring capitals.

Qualities of A Good Merchant Bankers

  • Ability to analyse
  • Abundant knowledge
  • Ability to build up relationship
  • Innovative approach
  • Integrity
  • Capital Market facilities
  • Liaisoning ability
  • Cooperation and friendliness
  • contacts
  • Attitude toward problem Solving
Management Notes

Advisory Services

indiafreenotesby indiafreenotes0

In this competitive era of vast modernization, maintaining your existence in the business industry is a tough task. In every vertical whether it be services, education, legal or business; there is an arduous competition. Every organization is trying to step on its rivals to move ahead and stay at the curve. In this world of prodigious opportunities and complexities, business organizations are looking forward to establish new connections and are finding new ways for innovation.

Advisory services are provided with the goal to support undertakings and overcome weakness in specific areas like finance, business, legal etc. A range of business advisors are bestowing best-in-class services to help organizations perform up to the ballpark and become a sovereign. Nowadays, start-ups are showing rapid growth in the industry, but the thing they lack is advisory service. Proper advisory services are required by every organization out there to leave a blemish on the audiences mind and the stakeholders too.

There are a plethora of advisory services like business advisory services, finance advisory services, legal advisory services, investment advisory services, corporate advisory services and much more.

Importance of Advisory services for your business

Advisory services are the keys to unlock your success.

Are you aware where your business is going? Are you aware who your target customers are? If you said no, it’s high time. You should definitely look for advisory consultants in order to save your sinking boat.

These days it’s arduous to talk about accounting profession without incorporating the words “business advisory services”. Advisory services are a huge need for every business organization out there. No mater you are a corporate giant or a just born start-up, you need advisory services at every step towards your success.

We’ve listed up some major factors that show how advisory services can help your organization to perform next level.

  1. Advice on Financial aspects

Financial aspects are the backbone of every business organization. Whether you want to invest in your previous infrastructure or looking to expand your venture, you need proper financial strategies to remain at the top. Some financial advisors are offering services like investment advisory services, accounting advisory services and numerous others.

  1. Increase the profit

If your organization’s profits were good but are suddenly facing downfall, it’s good time to get assistance from business advisories. Business advisors will re-imagine your business structure and with their strong ideation they’ll help you to manage and re-organize strategies to thrust your business like never before.

  1. Structure and effective business plan

Business Advisory services will help you to prevent some crucial mistakes that your company often makes while trying to expand its venture. Expanding your venture is a major decision. In some cases, the urge to increase profits forces business owners to take early decisions which in-return brings huge losses and destruction. A proper planning is indispensable before taking such huge steps.

  1. Identifying market growth

For business possessors it can be very fruitful, when their business thrive and they’re able to expand their business. But they lack somehow in identifying the market growth. The rigorous pace of growing market is really volatile and business owners face difficulties to cope up with the changing needs and requirements. A reliable business advisory firm can help business organizations with formulated techniques and strategies to conquer the difficulties.

  1. Technology-driven Solutions

Technologies are revolutionizing every sector with its fast pace of evolution. Some businesses fail to take the advantages of technology and start losing their customers to others, who are more technologically advanced. Business advisors not only help you to cope with financial difficulties but also muster you for technological advancements to again hold the grasp and rule the market.

Having a reliable advisory firm at your side is a plus point. There are several companies offering best-in-class financial advisory services in Delhi and other regions and you should definitely avail one to charge up your business.

Management Notes

Initial Public Offering (IPO), Terms, Process, Advantages, Disadvantages

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An Initial Public Offering (IPO) is the process by which a private company becomes publicly traded by offering its shares to investors for the first time on a stock exchange. This allows the company to raise capital for expansion, debt repayment, or other financial needs. The IPO process involves regulatory approvals, pricing, and underwriting by investment banks. Once listed, the company’s shares are freely traded in the stock market. IPOs provide investors with an opportunity to own equity in a growing company while enabling businesses to access public funding and enhance their market visibility and credibility.

General Terms involved in an initial public offering (IPO):

  1. Issuer: The company that offers its shares to the public through an IPO to raise capital. It transitions from private to public ownership.

  2. Underwriter: Investment banks or financial institutions that manage and facilitate the IPO process, including pricing, marketing, and share allocation.

  3. Prospectus: A legal document providing detailed information about the company’s financials, business model, risks, and IPO details, helping investors make informed decisions.

  4. Offer Price: The price at which shares are initially issued to investors. It is determined through book-building or fixed price methods.

  5. Book Building: A price discovery process where investors place bids within a price range, and the final issue price is determined based on demand.

  6. Fixed Price Issue: The company sets a pre-determined price for its shares, and investors subscribe at that price. Demand is known only after the issue closes.

  7. Lot Size: The minimum number of shares an investor can apply for in an IPO, defined by the issuing company.

  8. Subscription: The demand for IPO shares. If demand exceeds supply, the IPO is oversubscribed; otherwise, it is undersubscribed.

  9. Allotment: The process of distributing shares to investors based on their IPO applications. If oversubscribed, shares are allotted via a lottery system.

  10. Listing: The process where IPO shares get listed on a stock exchange (NSE, BSE), enabling public trading of the company’s stock.

Process involved in an initial public offering (IPO)

  1. Underwriting

IPO is done through the process called underwriting. Underwriting is the process of raising money through debt or equity.

The first step towards doing an IPO is to appoint an investment banker. Although theoretically a company can sell its shares on its own, on realistic terms, the investment bank is the prime requisite. The underwriters are the middlemen between the company and the public. There is a deal negotiated between the two.

E.g. of underwriters: Goldman Sachs, Credit Suisse and Morgan Stanley to mention a few.

The different factors that are considered with the investment bankers include:

  • The amount of money the company will raise
  • The type of securities to be issued
  • Other negotiating details in the underwriting agreement

The deal could be a firm commitment where the underwriter guarantees that a certain amount will be raised by buying the entire offer and then reselling to the public, or best efforts agreement, where the underwriter sells securities for the company but doesn’t guarantee the amount raised. Also to off shoulder the risk in the offering, there is a syndicate of underwriters that is formed led by one and the others in the syndicate sell a part of the issue.

  1. Filing with the Sebi

Once the deal is agreed upon, the investment bank puts together a registration statement to be filed with the SEBI. This document contains information about the offering as well as company information such as financial statements, management background, any legal problems, where the money is to be used etc. The SEBI then requires cooling off period, in which they investigate and make sure all material information has been disclosed. Once the SEBI approves the offering, a date (the effective date) is set when the stock will be offered to the public.

  1. Red Herring

During the cooling off period, the underwriter puts together there herring. This is an initial prospectus that contains all the information about the company except for the offer price and the effective date. With the red herring in hand, the underwriter and company attempt to hype and build up interest for the issue. With the red herring, efforts are made where the big institutional investors are targeted (also called the dog and pony show).

As the effective date approaches, the underwriter and the company decide on the price of the issue. This depends on the company, the success of the various promotional activities and most importantly the current market conditions. The crux is to get the maximum in the interest of both parties.

Finally, the securities are sold on the stock market and the money is collected from investors.

Advantages of coming up with an IPO:

  • Access to Capital for Growth

An Initial Public Offering (IPO) enables a company to raise substantial capital from public investors. This funding can be used for business expansion, research and development, acquisitions, debt repayment, and infrastructure growth. Unlike bank loans or private equity, IPO funds do not require repayment, reducing financial burdens. With more capital, companies can invest in innovation, expand into new markets, and increase operational capacity, ensuring long-term sustainability and competitiveness in their industry.

  • Increased Public Awareness and Market Credibility

Going public enhances a company’s brand visibility and credibility in the market. Being listed on a stock exchange like NSE or BSE attracts media attention, analysts, and institutional investors, boosting the company’s reputation. This credibility helps in gaining customer trust, attracting new business opportunities, and securing strategic partnerships. A public company is perceived as more transparent and financially stable, which strengthens investor confidence and improves long-term business prospects.

  • Liquidity and Exit Opportunity for Early Investors

An IPO provides an exit strategy for early investors, founders, and venture capitalists who seek to realize returns on their investments. Unlike private funding, where selling shares can be complex, a public listing allows shareholders to sell their stakes in the open market. This liquidity increases investor interest in the company, making it easier to attract future investments. Employees with stock options (ESOPs) also benefit by monetizing their shares post-listing.

  • Ability to Use Stock as Currency

Publicly listed companies can use their shares as non-cash currency for mergers, acquisitions, and employee compensation. This means that instead of paying cash for acquisitions, they can issue new shares, preserving liquidity while expanding their business. Additionally, offering stock-based incentives to employees improves retention and motivation, aligning employee interests with company performance. This flexibility makes IPOs an attractive option for companies looking to grow strategically without heavy financial burdens.

  • Improved Corporate Governance and Transparency

Going public requires companies to adhere to stricter regulations and disclosure norms, improving corporate governance. Listed companies must publish financial reports, undergo audits, and follow SEBI guidelines, ensuring transparency and accountability. This structured governance framework enhances investor confidence, reduces operational risks, and leads to better decision-making. Improved governance also helps in securing further investments from institutional investors, ensuring long-term sustainability and trust in the financial markets.

Disadvantages of Coming up with an IPO:

  • High Costs and Expenses

Launching an IPO involves significant costs, including underwriting fees, legal expenses, regulatory compliance costs, and marketing expenses. Companies must hire investment banks, auditors, and legal advisors, making the IPO process expensive. Additionally, after listing, ongoing costs for financial reporting, compliance, and shareholder communication increase the financial burden. These costs may outweigh the benefits, especially for smaller firms with limited capital, making IPOs a less viable option compared to other funding sources.

  • Loss of Control and Ownership Dilution

When a company goes public, founders and existing shareholders lose a portion of their ownership as shares are distributed among public investors. This dilution can lead to a loss of control, especially if institutional investors or activist shareholders acquire a significant stake. Public companies must also consider shareholder interests in decision-making, which can limit flexibility and independence in business operations. Major decisions may require board approval, reducing management’s autonomy in strategic planning.

  • Regulatory and Compliance Burden

Public companies must adhere to strict regulations imposed by SEBI (Securities and Exchange Board of India) and stock exchanges. They are required to disclose financial statements, conduct regular audits, and follow corporate governance norms. Any failure to comply can result in penalties, legal actions, or delisting. The increased scrutiny demands transparency in operations, making it difficult for companies to keep certain strategic or financial information confidential, which could impact their competitive edge.

  • Market Volatility and Stock Price Fluctuations

Once listed, a company’s stock price is subject to market conditions, investor sentiment, and economic factors. External events such as economic downturns, political instability, or industry trends can lead to extreme fluctuations in share prices, affecting the company’s valuation. A declining stock price may create negative investor perception, reducing the company’s ability to raise additional funds. Management may also face pressure to meet short-term earnings expectations rather than focusing on long-term growth strategies.

  • Increased Public and Investor Pressure

A public company is accountable to shareholders, analysts, and regulators, which increases pressure on management to deliver consistent financial performance. Investors expect regular profits, dividends, and stock price growth, forcing companies to prioritize short-term performance over long-term strategies. Additionally, the risk of hostile takeovers increases as external investors accumulate shares. Management must spend significant time handling shareholder concerns, investor relations, and public disclosures, which can divert attention from core business operations.

  • Risk of Underperformance and Delisting

Not all IPOs succeed. If a company fails to meet investor expectations or generates lower-than-expected profits, its stock price may decline. Poor market conditions, weak financials, or mismanagement can lead to low demand for shares, resulting in poor post-IPO performance. In extreme cases, if a company fails to maintain compliance standards or sustains financial losses, it may face delisting from stock exchanges, leading to a loss of investor confidence and reputation damage.

Management Notes

E-Business, Features, Players, Challenges

indiafreenotesby indiafreenotes7

E-business, or electronic business, refers to the practice of conducting business processes over the internet. It encompasses a wide range of activities, including buying and selling products or services, serving customers, collaborating with business partners, and conducting electronic transactions. e-business involves the entire business ecosystem, integrating internal and external processes.

E-business leverages digital technologies to enhance productivity, efficiency, and the customer experience. It covers a broad spectrum of applications such as supply chain management, customer relationship management (CRM), enterprise resource planning (ERP), online marketing, and more. The adoption of e-business allows companies to operate globally, reduce operational costs, and improve market responsiveness.

Features of E-Business

  • Global Reach

One of the most significant advantages of e-business is its ability to reach a global audience. With the internet as its primary medium, businesses can expand beyond geographic boundaries and tap into international markets without the need for a physical presence. This helps businesses increase their customer base and revenue potential.

  • Cost Efficiency

E-business reduces operational costs by minimizing the need for physical infrastructure, reducing paperwork, and automating business processes. For example, online platforms eliminate the need for physical stores, which significantly lowers overhead costs. Additionally, automated systems streamline inventory management, order processing, and customer support.

  • 24/7 Availability

e-business operates around the clock. Customers can browse, place orders, and make inquiries at any time, increasing customer convenience and satisfaction. This continuous availability provides a competitive edge in terms of customer service and responsiveness.

  • Personalization and Customization

E-business platforms can use data analytics and artificial intelligence to offer personalized experiences to customers. By tracking user behavior and preferences, businesses can recommend relevant products, customize marketing messages, and enhance customer engagement.

  • Interactivity

E-business fosters direct interaction between businesses and customers. Through online channels such as websites, social media, chatbots, and email, businesses can engage with customers in real-time. This interactive capability helps build stronger relationships and improves customer loyalty.

  • Integration with Business Processes

E-business is not limited to front-end operations; it integrates seamlessly with back-end processes, including supply chain management, finance, and human resources. By digitizing these processes, businesses can improve coordination, reduce errors, and enhance decision-making.

  • Scalability

E-business models are highly scalable. Companies can easily increase or decrease their operations to meet market demand. Whether it’s expanding product offerings, adding new features, or reaching new markets, e-business allows for quick and cost-effective scalability.

Key Players in E-Business

  • E-Retailers (B2C Players)

E-retailers are businesses that sell products or services directly to consumers through online platforms. Popular examples include Amazon, Flipkart, Alibaba, and eBay. These platforms offer a wide range of products, competitive pricing, and customer-friendly return policies, making them highly popular among consumers.

  • B2B Platforms

Business-to-business (B2B) platforms facilitate transactions between businesses. These platforms help companies source products, find suppliers, and manage bulk orders efficiently. Alibaba and IndiaMART are prominent examples of B2B platforms that enable businesses to connect and transact.

  • Service Providers

Service providers in the e-business ecosystem offer services such as web hosting, payment gateways, cloud storage, and logistics. Examples include PayPal and Stripe for online payments, AWS (Amazon Web Services) for cloud services, and FedEx for logistics and shipping.

  • Technology Enablers

Technology enablers are companies that provide the infrastructure and software necessary for e-business operations. This includes firms offering e-commerce platforms, website development tools, and digital marketing solutions. Shopify, WooCommerce, and Google (with its suite of advertising and analytics tools) are leading players in this category.

  • Social Media Platforms

Social media platforms play a crucial role in marketing, customer engagement, and brand building for e-businesses. Platforms like Facebook, Instagram, LinkedIn, and Twitter allow businesses to reach a large audience, interact with customers, and drive traffic to their websites.

  • Search Engines

Search engines such as Google, Bing, and Yahoo are integral to e-business success. They drive organic traffic to business websites through search engine optimization (SEO) and paid advertising. By appearing in top search results, businesses can increase visibility and attract more customers.

  • Consumers

Consumers are at the core of the e-business ecosystem. They play a dual role as buyers and promoters. Satisfied customers often share their positive experiences through reviews and social media, contributing to word-of-mouth marketing. In addition, their feedback helps businesses improve products and services.

Challenges of E-Business

  • Cybersecurity Threats

One of the most significant challenges for e-businesses is ensuring the security of customer data and online transactions. E-business platforms are prime targets for cyberattacks, such as hacking, phishing, and ransomware. Ensuring robust cybersecurity measures, such as encryption, firewalls, and secure payment gateways, is essential but costly. A single breach can damage a company’s reputation and result in legal penalties.

  • Lack of Personal Touch

Unlike traditional businesses where face-to-face interactions build trust, e-businesses operate in a digital environment where personal touch is minimal. This lack of direct interaction may lead to lower customer trust and loyalty, especially for high-value purchases or services that require personalized assistance.

  • Technical issues and Downtime

E-business operations are heavily reliant on technology, including websites, apps, and servers. Technical glitches, server crashes, or slow load times can disrupt business operations and negatively affect customer experience. Regular maintenance, software updates, and ensuring high uptime are critical but require significant investment.

  • Logistics and Delivery issues

For e-businesses that deal with physical products, efficient logistics and timely delivery are crucial. However, ensuring reliable shipping across various regions, managing inventory, and handling returns pose significant challenges. Factors such as delays, lost packages, and damaged goods can lead to customer dissatisfaction and increased operational costs.

  • High Competition

The online business environment is highly competitive, with numerous players vying for customer attention. Large players like Amazon and Alibaba dominate the market, making it difficult for smaller businesses to compete on price, delivery speed, and product variety. Standing out in such a competitive space requires innovative marketing strategies and exceptional service.

  • Legal and Regulatory Compliance

E-businesses must comply with various local and international regulations, such as data privacy laws (e.g., GDPR), taxation rules, and consumer protection acts. Navigating the complex legal landscape can be challenging, especially for businesses operating in multiple countries with differing regulations.

  • Digital Divide and Accessibility issues

While internet penetration is increasing, there is still a significant digital divide in many parts of the world. Limited internet access and lack of digital literacy among certain populations restrict market reach. Moreover, ensuring that e-business platforms are accessible to users with disabilities requires additional investment in technology and design.

Management Notes

Environmental Forces Affecting Planning and Practice of E-Business

indiafreenotesby indiafreenotes1

The Ecommerce industry has seen immense growth in the recent years and apart from some fluctuations in the global economy like demonetization in India, the situation has remained favorable for its growth. China and US are the largest of the e-markets. However, growth rate is expected to be even higher than US in the Asia Pacific region this year. The US e-retail market is among the largest ones in the world.  Apart from Amazon, Ebay and Alibaba, there are a number of important players in the market like Fipkart, Walmart, Coles and Best Buy. The technological factors have also supported the growth of the Ecommerce industry. Growth in the use of mobile gadgets has also pushed the ecommerce sales high. A larger number of people are now shopping using their mobile phones.  There are several factors apart from economic and political that affect the global ecommerce industry.  This is a PESTEL analysis of the ecommerce industry that analyzes how these various forces can affect the ecommerce industry and how deep can their impact be on it.

Political factors

While the threats may not be the same before the e-retailers as the physical retailers, still there are several political hurdles before them. There are several risk factors affecting the e-businesses. For example for the global leaders like Amazon and E-bay growth in Asia pacific region can be made difficult by the Red tape. Several news reports highlight how Red Tape in India can become major difficulty in the way of new businesses trying to extend their presence there. The political and regulatory challenges before the e-businesses have kept rising.  The growth of Ecommerce in EU has also been challenged by political factors. EU has kept targeting technology giants from US. Google and Amazon have already been targeted by EU. Such issues can be a threat to the growth of ecommerce in Europe and it is why several sources predict that the growth rate of ecommerce in Europe is going to be low. Political issues are not limited to just those discussed above but there are many more. Political stability in most regions of the world leads to economic stability. Political chaos can result .to disruption of business both online and physical. Overall, political issues can have a significant impact on ecommerce and its growth.

Economic factors

Economic factors are very significant in terms of business. Whether it is an online business or physical, economic factors can have a significant effect on it. It is because economic factors are directly related to business and their effect is also direct on business revenue and profits.  During the period of recession, spending had decreased. People had adopted cost cutting measures as the level of economic activity and employment had gone down. During such periods when economic activity has gone down, the profits and revenue of businesses can go down. E-businesses too cannot remain unaffected. Economic fluctuations since the recession have also kept affecting businesses from time to time since the recession. In several economies like Russia, Brazil and India, these economic fluctuations affected both global and local businesses. Now that the recession has passed and economic activity has returned on track, the ecommerce industry has flourished in the recent years. Higher economic activity means faster growth and higher revenue for the Ecommerce industry whereas lower economic activity means just its opposite. In this way, economic factors can have a direct and deep impact in the ecommerce industry.

Social factors

Socio cultural factors too have a deep impact in ecommerce industry. Most importantly e-retail brands find it the easiest to flourish locally. Growth in foreign markets can be full of challenges. Changing trends can also have an impact on businesses. The growing use of mobile technology has affected ecommerce. In most societies the mobile technology has been very popular and a larger number of people worldwide are now using mobile gadgets for shopping and other purposes. Socio cultural factors affect businesses in other ways too. Cultural factors have an impact on how these ecommerce businesses market themselves. In several societies of the world ecommerce is still seen as a sign of Westernization due to which it has seen low growth in these areas.

Technological factors

Technological factors are very important in the context of the ecommerce industry.  It is because the industry relies heavily on technology. Everything is based on technology in e-retail from sales to customer service. All the ecommerce brands are in a race to be technologically ahead of their competitors. From Amazon to E-bay and Flipkart, every brand is investing a lot in technology to find faster growth. Technology decides several things in the ecommerce world from popularity to profits. The reason that Amazon is ahead of the others is because it is technologically ahead of the others. It has managed its customer experience so well that its popularity is very high.  In this way, technology is a major influence on businesses and in case of ecommerce technological factors acquire a very special importance.

Environmental factors

Environmental factors too have a special importance in the context of Ecommerce industry. While the direct environmental impact of this industry is very low and nearly zero, it still focuses heavily on sustainability. Brands like Amazon have invested heavily in technology. Even in Ecommerce there are several areas where investing in sustainability can be highly productive. From sustainable packaging to waste reduction and renewable energy there are several areas where the e-retailers can invest in sustainability. Amazon has invested in renewable energy to gain freedom from the use of non-renewable energy resources.

Legal

Legal compliance is just as important for the businesses globally. Any tussle with the law can be a costly affair and even the e-retail brands can become a target unless they take care of compliance. It is why the big E-retail brands have separate teams to take care of the legal issues. Non compliance can result in financial losses as well as loss of image and reputation. From labor laws to sustainability laws, there are several areas where the e-retail brands have to be careful regarding compliance. Moreover, these laws differ from nation to nation and market to market and compliance in every area is important. So, in case of the companies operating internationally law can lead to major pressures and an increase in operational costs. The e-retail brands also have to be careful about the applicable laws and compliance.

Management Notes

Ethical Issues of e-Commerce

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In the Information Age, technology evolves fast and data travels even faster. It can be difficult for the law to keep up with new technologies and inventive ways to conduct e-business. Because of this, the law often lags behind, and lawmakers end up drafting laws to clean up Internet messes instead of preventing them. Take digital file sharing dubbed piracy for example, laws were not created to prevent digital piracy until millions of albums were stolen and the music industry was crippled. The lag in laws mean that e-business executives must rely on ethics as they move forward in e-commerce.

  1. Client Privacy

Internet businesses have a legal obligation to protect the private information of their customers. E-commerce activity often involves collecting secure data such as names and phone numbers associated with email addresses. Many e-business activities also involve transactions, so customer banking or credit card information also ends up stored online. Legally, it is up to the e-business to store and protect or dispose of this sensitive data. The Children’s Online Privacy Protection Act, for example, protects the online privacy rights of children. Under this law, parents have control of what personal information their children can give to e-businesses.

  1. Advertising Online

Several online marketing issues spring from the inherent anonymity of the Internet. It is often difficult to know the real identity of an e-business owner. A few online businesses take advantage of this in unethical or illegal ways. Some e-businesses track the online activity of their customers so that they can show advertisements based on the customer’s behavior. Behavioral advertising is not illegal, and it is not illegal to refrain from disclosing that an e-businesses tracks activity, although many people consider this nondisclosure unethical.

  1. Copyright Infringements

Due to the Internet’s free flow of information, plagiarism and copyright infringement is a continual problem. The Digital Millennium Copyright Act addresses plagiarism and copyright infringement in the specific context of the Internet and e-business. Under this law, it is illegal to use online technology to copy and distribute legally copyrighted material, such as photography, articles or books, music or videos.

  1. Net Neutrality

Net neutrality is the hotly debated idea that Internet users should have equal access to all websites. Most computers retrieve websites at the same speed, depending on the user’s Internet account settings or service, no matter if the site is a multibillion-dollar company or a neighbor’s blog. But some Internet providers have the capability to deliver different websites at different speeds. This is an issue because some websites could pay providers to deliver their content at faster speeds, while smaller business with less capital might not be able to afford the faster processing, and the Internet would lose its free-access-for-all feel. The Federal Communications Commission currently supports net neutrality and bans providers from participating in any program that offers extra pay for higher speed access to any websites.

  1. Disintermediation and Reintermediation

 Intermediation is one of the most important and interesting e-commerce issue related to loss of jobs. The services provided by intermediaries are-

(i) Matching and providing information.

(ii) Value added services such as consulting.

The first type of service (matching and providing information) can be fully automated, and this service is likely to be in e-marketplaces and portals that provide free services. The value added service requires expertise and this can only be partially automated.  The phenomenon by which Intermediaries, who provide mainly matching and providing information services are eliminated is called Disintermediation.

The brokers who provide value added services or who manage electronic intermediation (also known as infomediation), are not only surviving but may actually prosper, this phenomenon is called Reintermediation.

The traditional sales channel will be negatively affected by disintermediation. The services required to support or complement e-commerce are provided by the web as new opportunities for reintermediation. The factors that should be considered here are the enormous number of participants, extensive information processing, delicate negotiations, etc. They need a computer mediator to be more predictable.

Management Notes

Legal Issues of E-Commerce

indiafreenotesby indiafreenotes0

With the advanced and increased use of online media, online business is becoming a fast emerging trend. Every five in eight companies are operating online, conducting e-commerce business. But being functional online doesn’t mean you can escape legal matters.

There are various legal issues associated with eCommerce businesses as well. And if these issues are not taken care of in time, they can lead to serious problems for your business.

Described below are some of the common legal issues an e-commerce business faces.

  1. Incorporation Problem

If you are a company operated merely via a website, not being incorporated is a crucial problem. Any purchase and selling activity related to your products will be considered illegal and you can’t claim your right in case of any fraud and corruption. Without incorporation, your business has no shelter.

  1. Trademark Security Problem

Not getting your trademark protected is one of the main legal issues in the field of e-commerce. Since trademark is your company’s logo and symbol, the representation of your business all over the web, it must be protected. If you don’t secure it, it won’t take long before you’ll realize your trademark is being infringed upon. This is very common legal issue and can become a deadly threat to your e-business.

With the hackers on loose and cybercrime so common, trademark infringement of your business or by your business can be a serious legal matter and may hinder your business’s progress.

  1. Copyright Protection Issue

While publishing content for your e-commerce website, using content of any other company can be a severe legal problem. This might mark an end to your e-business. There are many sites online which are royalty free and allow you to access their content and images. You may use those sites for creating web content for your business site.

Even if you unintentionally used copyrighted content, the other party can easily sue your business.

  1. Transaction Issues

The Australian Consumer Law (ACL) governs all e-commerce transactions in Australia. Therefore, if you do not abide by the rules, you can get into serious law violation problems.

If your business fails to provide clear and complete description of the product, cost and purchase details, information about delivery i.e. when the customer will receive products and other information related to exchange and refunds, the ACL can impose penalties on your business.

  1. Privacy Issues

When it comes to online businesses, privacy is the major issue that can create problems both for the business and customers. Consumers share information with businesses online and they expect the sellers to keep their information confidential. By just one minor mistake and leakage of valuable information of a customer, you’ll not only lose your potential customer but your image and reputation will become a question mark. Moreover, you’ll be subjected to serious legal problems according to Australian privacy laws.

If e-commerce businesses lead to exposure and advantages for businesses online, then it certainly has given rise to some legal issues too that can be avoided by keeping in mind the rules and laws framed by Australian Government.

Management Notes

Social Issues of E-Commerce

indiafreenotesby indiafreenotes0

Nowadays, the internet has created a fresh function called e-commerce. E-commerce is commonly known as electric commerce and today already turn into a virtual main road of the world. It really is essentially cover all the activities on internet and stimulate the customer to buy the product online. Thus, it is another way to jogging their own business over the internet and it used to selling and buying the product over the internet with other business man and customer on other condition. E-Commerce is an excellent way to do their business since it can enlarge their business to entire world so that they can do their business bigger and makes more money in future. Besides that, it can also let more folks know more about their product by discovering the picture of product that they upload and the details of the merchandise that they list out on internet. Apart from buying and selling product online on e-commerce, it likewise have another function on e-commerce called supply chain management, digital data interchange (EDI), electric funds copy, inventory management, online deal handling, and data collection systems to make it simpler for business man for reselling their product.

I choose this at the mercy of discuss their issues because e-commerce is typically the most popular on the internet and it has been become a digital main streets of the world. Besides that, it also offers many issues for all of us to discuss therefore i decide to choose this subject to discuss. First, I’ll discuss the problems for e-commerce is security & privacy. It is the most important issues for e-commerce because without security & privacy, the customer will frightened get cheated by the seller. For example, the customer will scared owner products whether is good or bad because they just saw the picture of the merchandise online so the customer have no idea whether the product are good or bad so they terrified the seller will post up an awful thing to sell at internet. Another example is frightened after the customer transfer the money to the seller then they won’t send the product to the customer. Other than this 2 example, there still have another example is the customer don’t know the real price at marketing and the seller just simply setup the price and did not follow the marketing price to gain their profit more than market price such as dual or triple from the marketplace price. These 3 samples will be the impacts of world because if owner fraud the customer then the contemporary society will become lower standard. Moreover, the impacts of IT industry is the buyer will not go to the web-sites again to buy their products such that it will influence IT division said that e-commerce is bad in use on internet to do business because the customer get cheat by the seller plus they won’t online to buy the products again plus they would rather choose the products on marketing by finding the products themselves.

Besides that, there still have other issues of e-commerce. The second issues that I’ll discuss are transport issues. Shipping issues means that when the buyer will buy a product from the seller and the seller is from other state then they should use transport to send the products to the customer such that it can arrive to the place of buyer stay. In shipment, there have to have a good data management means that owner need to manage the data firmly such as addresses of buyer, titles of buyer, visa or mastercard information of the buyer, and contact information of the buyer. They have to have a good management upon this because if owner never manage the info of the buyer securely and simply just write it down only then when they need to send the merchandise to buyer after confirm all the exchange then only believe that some information already lost because of the newspaper that list out the buyer details can’t think it is out then it’ll become a transport issues because without the info of the buyer then they cannot send the product to the customer so when the buyer did not obtain any products that they assure before with the particular date that the product will turn up to the customer then your buyer will feel that they get cheat by owner. It is rather important because if the buyer feels they get cheat by seller then they won’t go compared to that websites again to get the merchandise. Besides that, for transport price, it is calculate with the weight of the products so after determine the purchase price out for shipment charge then it still need to include up the price of the products so it will become an extremely high cost for the products compare with marketing price so it will definitely cost highly if want to acquire the product over the internet and the seller are not stay in your country. These issues will have an impact on the population become low standard if the buyer fell they get cheat by owner and the customer will think that mostly of owner that stay at that country also same with him/her so their country can be low standard. Besides that, these issues will have an effect on IT industry because the customer will fell that although using internet to get a product is more easy but need to pay dual or triple of the marketing price and they’ll they better buy themselves and not purchase though the internet so that it can saves additional money compare with purchase online then your buyer won’t use the internet again to purchase product so that it can be less people used for sale products.

Other than 2 issues above, there still have another issues called complexity of process. This means when the customer want to get that such products they need to check out their step to buy a products from them such as register as a member of this website, fill up the arrangement form, type in all your personal details, type in your credit greeting card number etc. There have many step to follow if want to acquire a products online. Although some step to do before choose the products is for the best security & privacy however the buyer will believe that the process of buying the products over the internet are complexity equate to buy a products outdoors. These issues also will be the same impacts to modern culture and IT industry like the society can be low standard and cannot improvement to be better, and IT industry also will become not many people to utilize it to purchase the products online.

Conclusion

After we discuss all of these the issues for e-commerce, we know that what’s the impact of this all issues to population and IT industry so we have to learn from the problems so that we can make it better and increase the efficiency for e-commerce. First, we have to increase the security & privacy such as build-up a good impression for your website which is do not fraudulence people and so forth so the buyer can trust your website when they want to purchase products. When the customer trust your website then our population will become more high standard because nowadays they are employing ecommerce to purchase products. Secondly, we need to decrease to transport issue such as have a good data management so that the data won’t get lost. Moreover, we also need to determine the cost-effective ways to ensure that your products will appear to the buyer with enough time that you guarantee before and the delivery fee won’t cost highly so that the buyer will continue to keep purchase products online. When the customer feel that shipment cost and product cost is a good cost and not cost highly then the buyer will keep purchase the products from your website so it can improve our world and and yes it industry. Lastly, we have to decrease the step before purchase products such as we just ask the customer to fill his/her details that can contact his/her then uses email to verify again their details and then only send out the products to the buyer so that the buyer won’t feel the process of buy a product complexity plus they also will always use internet to purchase the product so our population may become high standard and IT industry will have a good opinions from customer. After discuss how to reduce the issues of e-commerce, I believe e-commerce can be more users friendly and can become a virtual main road of the world to allow them to purchase any products that they want online.

Management Notes

Developing e-Business Framework

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E-Business framework is related to software frameworks for e-commerce applications. They offer an environment for building e-commerce applications quickly.

E-Business frameworks are flexible enough to adapt them to your specific requirements. As result, they are suitable for building virtually all kinds of online shops and e-commerce related (web) applications.

Features of e-business

Configuration, Product management, Marketing & Design, Technology & Storefront, Internationalization, PayPal Extensibility, manufacturer support, extendable via plugins, product Streams.

They provide an overall structure for e-commerce related applications.

An e-business framework must

  • Allow replacing all parts of the framework code
  • Forbid changes in the framework code itself
  • Contain bootstrap code to start the application
  • Be extensible by user-written code

E-business frameworks should

  • Define the general program flow
  • Consist of reusable components
  • Be organized in functional domains

Examples of e-business frameworks are

  • Aimers (Laravel, Symphony, Typo3, Flow)
  • Spyker (Symfony only)
  • Sylius (Symfony only)

The key framework feature which are vital for e-businesses are:

  1. Quality Search Functionality

This is one of the functions which play a very big role in the market with search functions that helps in conversion rates. Basically this function is kind of filtering which processes keywords and helps you to get precise effect over search and into your sales too.

  1. Content Management System (CMS)

It is the system which makes your website unique in searches across the global markets. This is one of the features which highly impact over the website as speed key to efficiency.

  1. Multi-channel Functionality

In current retail market and environment, it is highly considered that your business is spread all across global and though it is possible to get done through managing products, listings and orders in a multi-channel environment.

  1. Mobile Supported E-commerce

The fact is that everyone is looking forward to have easy browsing on mobile than to go for getting an efficacious platform, which will surely help to grow user and customer’s attraction.

  1. Third Party Systems and Plug-ins

It must have ability to use the third party plug-ins which is meant to provide adaptability, customization and innovation. These features can be used while developing a website and though some may not be the part of the standard package.

  1. Business Intelligence

When it comes to managing the data, it is mandatory to get precise and accurate details over the data. The tempo should be maintained while managing the data, business intelligence helps to get that done on your website because only through the tempo and flow, which you will be able to analyze the depth of transaction and then take advantages of the opportunities that comes up.

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