Commerce

In this category, articles related to commerce (general topics) will be available

Concepts and Elements of Business Environment

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Introduction of Business Environment

The business environment literally means all those aspects that have a bearing on the business. In other words, the factors or elements that affect business decisions, plans, and operations. The factors or elements may be internal and external. 

The business environment plays a key role in shaping the strategies and decisions of a firm, as the opportunities and threats mainly come from the external environment, which includes external factors like economic, political, international, technological, and social. In the same way, strength and weakness come from the internal environment, which includes internal factors like managerial capabilities, efficiency in utilization of resources, organizational structure, etc.

Important Definitions:

According to Keith Davis, “Business environment is an aggregate of all conditions, events, and influences that surround and affect the business.”

Bayord O. Wheeler defines business environment as the total of all the things, external to a business firm, which affect the organization and its operations.”. 

According to William Gluck and Jauch, “Environment contains the external factors that create opportunities and threats to the business. This includes socio-economic conditions, technology and political conditions.”

Characteristics of the business environment

The characteristics of the business environment are as follows:

  1. The environment is complex: it is complex because it continues to reveal countless challenges like technological disruptions, global competition, leadership change, shifting of economic, social, and regulatory conditions, etc. 
  2. The environment is uncertain: the factors of the business environment keep on evolving rapidly, so it is difficult to predict what will happen in the business environment because the factors always change.
  3. The environment is dynamic. Both the internal and external environments of business are dynamic due to the following:
    • Customer’s preferences [taste, fashion, choice].
    • Entry of new competitors in the market.
    • New resources.
    • New marketing channels & new policies.
    • Changing demography.
    • Trends and technology.
  4. Interrelatedness: Factors of the business environment are correlated. Changes is one factor of business environment can affect other factors. For example, suppose there are changes in the import-export policy with the coming of a new government. Here are political and economic changes, respectively. Thus, a change in one factor affects the other factor. 
  5. Relativity: the business environment is connected with the local conditions, and this is the reason why the business environment happens to be different in various nations and even in the same countries in different places. 
  6. Internal and External: The business environment includes both internal and external factors.

Significance/Importance of Business Environment

  1. It helps in identifying opportunities and making first-mover advantages:- The environment provides various opportunities, and it is necessary to identify the opportunities to improve the performance of a business. Early identification gives an opportunity to an enterprise to be the first to identify opportunity instead of losing them to competitors.
    • Example: ‘Airtel’ identified the need for fast internet and took first-mover advantage by providing 4G speed to its users, followed by Vodafone and Idea.
  2. It Helps the Firm Identify Threats and Early Warning Signals: The business environment helps in understanding the threats that are likely to happen in the future. Environmental awareness can help managers identify various threats on time and serve as an early warning signal.
    • Example, Patanjali products have become a warning signal to the rest of the FMCG
    • Chinese mobile phones have become a threat for Indian mobile phone manufacturers.
  3. It Helps in Assisting in Planning and Policy Formulation: Awareness of the business environment helps in planning and policy formulation. 
  4. It Helps in Coping With Rapid Changes: It helps in coping with the changes like less brand loyalty, divisions of markets, changes in fashions, more demanding customers, and global competition. 
  5. It helps in utilizing useful resources: the environment provides various resources like men, material, money, machines, power, water, etc.
  6. It helps in growth and Performance: With the help of environmental analysis, enterprises can monitor and adopt the suitable practices that help in the growth and better performance of business. 

Components of Business Environment

The business environment has two components, i.e., the internal environment and the external environment.

Internal Environment

Internal Environment: refers to the environment within the organization. The internal strength represents its internal environment. It consists of internal factors of the business that can be controllable to a certain extent because the company can modify or change these factors to improve its efficiency. 

The internal environment includes the 5 M’s, i.e., men, material, machine, money, and management.

However, the firm may not be able to transform all the factors. The various internal factors are:

  1. Value System: The value system of an organization means ethical beliefs that guide the organization in achieving its mission and objectives. It also determines its behavior towards employees, customers, and society at large.
    • The value system of a business organization makes an important contribution to its success and its prestige in the world of business. 
    • Infosys Technologies, which won the first national corporate governance award in 1999, attributes its success to its high-value system, which guides its corporate culture. 
  2. Mission and Objectives: The business domain of the company, direction of development, business philosophy, etc., are guided by the mission and objective of the company.
    • The objective of all firms is assumed to be maximization of profit.
    • Mission is defined as the overall purpose or reason for its existence, which guides and influences its business decisions and economic activities. 
  3. Organization Structure: The organizational structure, the composition of the board of directors, the professionalism of management, etc., are important factors influencing business decisions.
  4. Corporate culture: Corporate culture and style of functioning of top managers is an important factor for determining the internal environment of a company.
Internal Environment…………………………………….

5. Human resources: The quality of employees that is of human resources of a firm is an important factor of the internal environment of a firm. The characteristics of the human resources, like skill, quality, capabilities, attitude and commitment of its employees, etc., could contribute to the strengths and weaknesses of an organization.

6. Labour Unions: Labor unions collectively bargain with the managers for better wages and better working conditions for the different categories of workers, etc. For the smooth working of a business firm, good relations between management and labor unions are required.

7. Miscellaneous Factors:

Physical resources and technological capabilities: Physical resources, such as plant and equipment, and technological capabilities of a firm determine its competitive strength, which is an important factor for determining its efficiency and unit cost of production.

R&D Capabilities: Research and development capabilities determine its ability to introduce innovations that enhance the productivity of workers.

External Environment

The external environment consists of all those factors that affect a business enterprise from outside its boundaries. These factors are uncontrollable, and firms have to adapt to the components of this environment. These factors provide opportunities or pose threats to the firm. 

The External environment can be classified into Micro environment and Macro environment.

Micro Environment:

The micro environment of a company consists of elements that directly affect the company. It includes suppliers, customers, market intermediaries, competitors, the public, etc. 

  1. Suppliers: Suppliers are those from whom a company buys raw materials; if the supplier is reliable, then business will run smoothly. Due to a lack of reliable suppliers, high inventories have to be maintained. 
  2. Customers: The customer is the king of the market, and the success of a business depends upon customers. If a product is manufactured according to the taste and needs of customers, then the company achieves success. To attract new customers, companies conduct consumer research, provide after-sale services, etc. 
  3. Market Intermediaries: market intermediaries assist to deliver the goods and services from producers to end users. They act as a link between company and consumer. Examples of market intermediaries are wholesalers, dealers, retailers, agents, marketing services agencies, and physical distribution companies. 
  4. Competitors: Competitors are those who produce similar or identical products or very close substitutes for products. 
  5. Publics: The public as a group has potential interest in businesses that also affect businesses. 
  6. Media: media also affect the business and its reputation. It includes newspapers, magazines, journals, etc. 
Macro Environment

The macro environment means the general environment of the business. These factors are uncontrollable and create opportunities and threats to the business.

It includes:

Economic Environment: It includes all those factors that have an economic impact on business. Accordingly, the total economic environment consist of agriculture, industrial production, infrastructure and planning, basic economy philosophy, stages of economic development, trade cycles, national income, per capita income, savings, money supply, price level, fiscal and monetary policies and population.

Important economic factors are:

Degree of Economic Development: factors like nature and size of demand , government policies affecting business etc. derive from the level of economic development off the nation. Economies can be classified as low income, middle income and high income countries based on degree of development.

Structure of the Economy: The structure of the economy encompasses factors such as contribution of different sectors like primary, secondary and territory.

Economic Policies: Economic policies like industrial policy, trade policy, monetary policy, fiscal policy, fiscal policy and foreign investment and technology policy etc. can exert high influence on business operations

Economic Conditions: economic conditions refer to the state of the economy in a country.

Political Environment: Three political institutions namely, legislature, executive and judiciary which play a useful role in shaping directing, developing and controlling business activities.

Increase or decrease in tax level in one of the important factor in political environment and decision related to this will affect the business. In addition to government interferences, a shift in interest rate can have an effect on the demand patterns of the company. major political factors that affect business are:

  1. Corruption level.
  2. Tariffs.
  3. Trade control.
  4. Competition regulation.
  5. Tax policy.
  6. Government involvement in trade unions.
  7. Import restrictions
  8. Intellectual property law.
  9. Consumer protection
  10. E-commerce, health and safety law, freedom of the press, bureaucracy etc.
Legal Environment: This includes a set of laws and regulations that influence the business and their operation. Business law relates to the standard of products, packaging protection of the environment and ecological balance, and the ban on advertisement of (alcohol & medicines) advertisement of certain products with statutory warning (cigarettes), etc. Laws also exist to prevent restrictive trade practices & monopolies.
The important legislations are as follows:

Essential Commodities Act, 2002

Companies Act, 2013

The Factories Act, 1948.

Foreign Exchange Management Act, 1999.

Industrial Disputes Act, 1972.

Payment of Gratuity Act, 1972.

Prevention of Food Adulteration Act, 1954.

Industrial (Development and Regulation) Act, 1951.

In addition to the above, stipulations of the constitution and judicial decisions are also part of the legal environment.

Social Environment: The social environment consists of social values, concern for social problems like the protection of the environment against pollution, providing employment opportunities, and health care for the aged and old ones; consumerism to satisfy human wants. In short, the social factors include customs, traditions, beliefs, poverty, literacy, life expectancy rate, etc.

Natural Environment: It refers to geographical and ecological factors that are uncontrollable for the business enterprise. It includes natural resources, weather, climate conditions, weather conditions, rainfall, etc. These affect the location of certain industries to a certain extent.

Demographic Environment: This environment also affects the business from outside, and this differs from country to country and from place to place. Demographic factors include size of population and population growth, age composition, size of family, sex composition, area (urban & rural), education level, etc.

Technological Environment: Technology implies systematic application of scientific or other organized knowledge to practical tasks or activities. It includes innovation too.

Global Environment: It is important for the business industries that deal with imports and exports. Ups and downs in foreign markets may create hindrances for some industries that depend on exports. Liberalization also affects industries.

Cultural Environment: It represents values & beliefs, norms & ethics of the society. The purchasing habits, capacities to buy, preferences, and many other factors are based on the cultural environment.

Derivatives | Cash Vs Derivative Market | Forward Vs Futures Contract

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What is derivative?

Derivative is a product whose value is derived from underlying assets, index or reference rate.

Examples of underlying assets: – Equity, commodity and Forex.

Users of Derivatives: –

  • Individual Investors.
  • Dealers
  • Institutional investor.
  • Corporation

Cash Vs Derivative Market

CashDerivative
Tangible assets are traded.Contract based on tangible or intangibles.
Can purchase even one share.Minimum lots are fixed
Risky Risk is limited
for investmentfor hedging, speculation
Requires trading account with depository participantsrequires future trading account.
Purchase shares of the company and get ownership.does not happen as in cash market.

Difference between Forward and Future Contract

Sr. NoForwardFuture
1. A forward contract is an agreement between two parties [buyer & a seller] that obligates the seller to deliver a specified asset of specified quality and quantity to the buyer on a specified date at a specified place and buyer as well, in turn, to pay a pre negotiated price at the time of delivery. A future contract is an agreement between two parties in which both parties agree to buy and sell a particular underlying financial instrument [stock, bond or currency] or commodity [gold or natural gas] at a predetermined price at a future date.
2. Example: -A and B agree to do a trade in 50 tolas of gold on 31.12.2023 at 15000/tola [forward price] here the buyer A is in long position and the seller B is in short position.Example: – Buyer A and B enter into a 2500 kgs Corn future contract at 4 per kg.
3. Forward contracts are traded on personal telephonic basis or otherwise.Future contracts are traded in a competitive arena.
4.Forward contracts have no standard size.Future contracts are standardized in terms of quantity or amount.
5. Forward contracts are traded in an over the counter market. Future contracts are traded on exchanges with a physical location.
6Settlement takes place on agreement date.Settlements are on daily basis.
7Actual Delivery.There is no actual delivery.
8Forward contracts is based on bid-asked spread.Future contracts entails brakeage fees.
9Margins are not required.Margins are required.
10.Credit riskNo credit risk.

National Income | Circular Flow of National Income | Methods of Measuring National Income

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Meaning of National Income: – Value of all final goods and services that are produced by residents in the country within an accounting year.

Example: – Value of final goods such as mobile, LED + value of final services such has telecom, health, insurance.

Note:- National income shows the performance of our economy and growth of our nation.

Circular flow of National Income

Mainly, the business sector and household sector play a vital role in the flow of national income.

The business sector produces goods and services by using the factors of production i.e., land, labour, capital and entrepreneurship.

Thereafter, provides these goods and services to the household sector for consumption.

Household sector receives the factor payment in the form of rent, wages, interest and profit and spend on consumption and investment.

Again payment for consumption goes to business sector.

Different Concepts of National Income

Gross Domestic Product (GDP) or GDPMP : -GDP is the value of final goods and services produced within the domestic territory of a country during an accounting year.

GDPMP : – Value of final goods + value of final services [value = market price].

GDPMP : -GNPMP – Net Factor Income from Abroad [NFIA].

NFIA :- NFIA is the difference between the aggregate amount that a country’s citizen and company earn from abroad – aggregate amount that foreign citizens and overseas companies earn in that country.

In other words: – factor income earned by domestic factors of production from abroad – factor income earned by factors of production of abroad.

Note: – The basis of difference between gross and net is depreciation or consumption of fixed capital.

Note: -The basis of difference between market price and factor cost is net indirect taxes [indirect taxes – subsidies].

Gross Domestic Product at Factor Cost (GDPFC)

GDPFC : – GDPMP – Net Indirect Taxes

Net Indirect Taxes : – Indirect Taxes – Subsidies

Factor Cost : – Market Price – Indirect taxes + Subsidies

Market price : – Factor Cost + Indirect taxes – Subsidies

Gross National product or GNPMP :- GNP is the market value of all final goods and services produced within the domestic territory of a country by normal residents during an accounting year including net factor income from abroad (NFIA).

GNPMP : – GDPMP + Net factor Income from Abroad

Note: – If Net Factor Income from Abroad (NFIA) is positive, then GNPMP will be greater than GDPMP

Net National Product at Market Prices or NNPMP : -NNPMP is the net market value of all final goods and services produced within the domestic territory of a country by normal residents during an accounting year including net factor income from abroad (NFIA) excluding depreciation.

In other words,

NNPMP : – GNPMP – Depreciation

NNPMP : – NDPMP + Net factor Income from Abroad (NFIA).

NNPMP : – GDPMP + Net factor Income from Abroad (NFIA) – Depreciation

Further,

Net Domestic Product at Factor Cost or NDPFC : – NDPFC is the net market value of all final goods and services produced within the domestic territory of a country by normal residents during an accounting year excluding net factor income from abroad (NFIA) and depreciation.

or It is sum of domestic factor incomes excluding depreciation.

NDPFC = GDPMP – Net Indirect taxes – Depreciation

NDPFC = NDPMP – Net Indirect taxes

Net National Product at Factor Cost or NNPFC  : –

NNPFC is the net market value of all final goods and services produced within the domestic territory of a country by normal residents during an accounting year.

or It is sum of domestic factor income and net factor income from abroad .

NNPFC = National Income = factor income earned in domestic territory + NFIA

In addition to,

Note: – Per Capita Income : – National income/total population

Note: – Personal Income = income earned by factor of production or income received by household sector.

Further,

Methods of Measuring National Income: –

  1. Value Added Method or Product method: – Under this method, we calculate the aggregate annual value of goods and services.
    • In other words, Value addition means net contribution made by enterprise
    • Value addition : – value of production of the enterprise – value of intermediate goods used by the enterprise.

Example: –

ParticularFarmerBaker
Total production200400
Intermediate goods used0100
Value added200300
Furthermore, all the producing enterprises fall under 3 main category i.e., primary sector, secondary sector, service sector.

In addition,

2. Income Method : – production sector makes payment to factors for their services. National income is the sum total of factor incomes .

production unit pays rent for land, wages and salaried for labour, interest for capital and lastly, profit for entrepreneurship.

3. Expenditure Method: – National income is the aggregate final expenditure in an economy during an accounting year.

Enterprise can make final expenditure on the following accounts: –

  1. final consumption expenditure on the goods and services produced.
  2. final investment expenditure
  3. expenditure that the government makes on the final goods and services produced.
  4. export revenues that enterprise earns by selling its goods and services abroad.

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Why Commerce is better than Science

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Why Commerce is better than Science:-

It is important to note that the comparison between commerce and science depends on individual interests, skills, and career goals. Both fields offer unique opportunities and have their own advantages. Here are a few reasons why some individuals may consider commerce to be a better fit for them:

  1. Business and Financial Skills: Commerce education focuses on developing business acumen, financial literacy, and managerial skills. It equips individuals with knowledge in areas such as accounting, finance, marketing, and economics, which are highly valued in the business world.
  2. Career Opportunities: Commerce graduates often have a wide range of job opportunities in various industries, including finance, banking, consulting, marketing, human resources, and entrepreneurship. The business world offers a diverse array of roles and the potential for career growth.
  3. Practical and Applicable Knowledge: Commerce education emphasizes practical skills and real-world applications. Students learn about business operations, financial management, and decision-making processes, which can be directly applied in professional settings.
  4. Potential for Higher Salaries: Commerce graduates, particularly those in finance, accounting, and consulting, have the potential to earn higher salaries compared to some science fields. This is due to the demand for specialized business skills and the financial nature of many commerce-related roles.

However, it is essential to recognize that science also has its own merits and advantages. Science education fosters critical thinking, problem-solving, and analytical skills. It opens doors to careers in research, healthcare, technology, environmental science, and other scientific fields. Science-driven advancements contribute to innovations and discoveries that shape our world.

Ultimately, the choice between commerce and science depends on an individual’s interests, strengths, and long-term career aspirations. It is important to consider personal preferences, aptitude, and passion when deciding which path to pursue.

E-commerce -opportunities for Small Businesses

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Opportunities for Small Businesses:-

How e-commerce has provided new opportunities for small businesses and entrepreneurs to reach a global market and compete with established brands?

E-commerce has undoubtedly opened up new avenues and opportunities for small businesses and entrepreneurs to expand their reach and compete on a global scale. Here’s an exploration of how e-commerce has empowered small businesses and entrepreneurs:-

  1. Global Market Access: E-commerce eliminates geographical barriers and allows small businesses to tap into a global customer base. Through online platforms, entrepreneurs can showcase their products or services to potential customers worldwide, overcoming the limitations of physical stores and local markets. This expanded reach offers immense growth potential and exposure to diverse audiences.
  2. Lower Entry Barriers: Traditional retail often involves high upfront costs, such as setting up a physical store, inventory management, and overhead expenses. E-commerce significantly lowers these barriers to entry. Setting up an online store is relatively more affordable, requiring minimal investment in comparison. This affordability enables small businesses and entrepreneurs to establish an online presence quickly and start selling their products or services with reduced financial risks.
  3. Cost-Effective Marketing: Digital marketing channels associated with e-commerce, such as social media advertising, search engine optimization (SEO), and email marketing, are generally more cost-effective than traditional marketing methods. Small businesses and entrepreneurs can leverage these tools to reach a wider audience, drive traffic to their online stores, and build brand awareness without breaking the bank. Strategic marketing campaigns can effectively position small businesses alongside established brands and help them gain recognition.
  4. Level Playing Field: E-commerce provides a level playing field for small businesses and entrepreneurs to compete with established brands. Online platforms give equal visibility to all sellers, regardless of their size or brand recognition. This means that a small business with a well-designed website, quality products, and a compelling value proposition can attract customers and compete with larger competitors based on the merits of their offerings rather than sheer financial resources.

Niche Targeting: E-commerce enables small businesses to target specific niches and cater to specialized customer segments. By focusing on unique products or services that cater to specific interests or needs, small businesses can differentiate themselves from larger competitors. E-commerce platforms facilitate niche targeting by providing tools for precise audience segmentation, allowing businesses to tailor their offerings and marketing efforts to a specific group of customers.

  • Flexibility and Scalability: E-commerce offers flexibility and scalability to small businesses and entrepreneurs. Online platforms allow them to easily update product catalogs, adjust pricing, and experiment with different marketing strategies in real-time. Additionally, as their businesses grow, e-commerce platforms provide the necessary infrastructure to scale operations seamlessly, whether it’s managing increased order volumes, expanding product lines, or streamlining logistics.
  • Direct Customer Engagement: E-commerce facilitates direct engagement and interaction with customers. Through features like live chat, email support, or social media interactions, small businesses and entrepreneurs can build relationships with their customers, address queries, and gather feedback. This direct engagement fosters customer loyalty, trust, and repeat business, creating a competitive advantage over larger brands that may struggle to offer the same personalized attention.

In last, E–commerce has revolutionized the playing field for small businesses and entrepreneurs, providing them with the tools and opportunities to compete globally. With a well-executed online strategy, a focus on quality products or services, and a customer-centric approach, small businesses can establish their presence, reach a wide audience, and thrive in the competitive e-commerce landscape.

Changing Consumer Behavior

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Changing Consumer Behavior:-With the rise of e-commerce, consumer preferences and shopping habits have undergone significant shifts. Several factors have contributed to this transformation, including convenience, price comparison, and personalized experiences.

Let’s explore these in more detail:-

  • Convenience: E-commerce offers unparalleled convenience to consumers. They can shop anytime, anywhere, without the limitations of physical store hours. Online platforms allow customers to browse through a wide range of products, place orders with a few clicks, and have them delivered to their doorstep. This convenience factor has revolutionized the way people shop, eliminating the need for travel, parking, and long queues.
  • Price Comparison: E-commerce has facilitated easy price comparison for consumers. With a few searches and clicks, shoppers can compare prices of products across different online retailers. This transparency empowers consumers to find the best deals and discounts, ensuring that they get value for their money. Price comparison websites and browser extensions have further simplified this process, making it effortless to find the most cost-effective options.
  • Wider Product Selection: E-commerce platforms offer an extensive selection of products compared to physical stores. Consumers can explore a vast array of choices across various categories and brands, all in one place. This wider product selection allows shoppers to find specific items, discover new products, and access niche or specialized goods that may not be readily available in local stores.
  • Personalized Experiences: E-commerce has enabled personalized shopping experiences tailored to individual preferences. Online retailers leverage data analytics and customer profiling to understand consumer behavior and provide personalized recommendations and offers. Features such as “Recommended for You” or “Customers who bought this also bought” provide shoppers with targeted suggestions, enhancing their overall shopping experience.
  • Personalized Experiences: E-commerce has enabled personalized shopping experiences tailored to individual preferences. Online retailers leverage data analytics and customer profiling to understand consumer behavior and provide personalized recommendations and offers. Features such as “Recommended for You” or “Customers who bought this also bought” provide shoppers with targeted suggestions, enhancing their overall shopping.
  • Social Influences: The rise of social media has greatly influenced consumer shopping habits. People often seek recommendations from their social networks or influencers they follow before making a purchase. Social media platforms provide a space for product discovery, user-generated content, and discussions, enabling consumers to gather opinions and insights before committing to a purchase.

Seamless Multi-channel Experience: Consumers now expect a seamless experience across multiple channels. E-commerce retailers often integrate their online platforms with physical stores, offering options like click-and-collect (BOPIS) or returning online purchases in-store. This integrated approach provides flexibility to consumers, allowing them to choose the most convenient channels for browsing, purchasing, and receiving products.

These shifts in consumer preferences and shopping habits have significantly shaped the e-commerce landscape. Businesses that understand and adapt to these changes can better cater to consumer needs, foster customer loyalty, and stay competitive in the ever-evolving e-commerce market.

E-commerce Growth

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E-commerce Growth:- The exponential growth of e-commerce in recent years has been a remarkable phenomenon, transforming the way people shop and conduct business.

Here are some key statistics and trends that highlight the magnitude of this growth:-

  1. Global E-commerce Sales: According to Statista, global e-commerce sales reached $4.28 trillion in 2020 and are projected to surpass $6.38 trillion by 2024.
  2. Mobile Commerce: The proliferation of smartphones has fueled the growth of mobile commerce (m-commerce). Statista reported that in 2020, mobile e-commerce accounted for 67.2% of total e-commerce sales worldwide.
  3. E-commerce Penetration: E-commerce penetration, defined as the percentage of online shoppers in a given market, has been steadily increasing. In 2020, the global average e-commerce penetration was around 21.3%, indicating substantial room for further growth.
  4. Cross-border E-commerce: Cross-border e-commerce refers to online shopping across international borders. It has gained significant traction, with consumers increasingly purchasing products from overseas retailers. A report by eShopWorld stated that cross-border e-commerce is projected to reach $627 billion by 2022.
  5. Marketplaces and Aggregators: Online marketplaces such as Amazon, Alibaba, eBay, and Flipkart have played a crucial role in driving e-commerce growth. These platforms connect buyers and sellers, offering a wide range of products and services. They provide convenience, competitive pricing, and a trusted shopping environment.

Omnichannel Retailing: Omnichannel retailing is the integration of online and offline channels, providing a seamless shopping experience for consumers. Businesses that adopt an omnichannel approach, such as offering buy-online-pick-up-in-store (BOPIS) options, have witnessed increased customer satisfaction and sales.

Social Commerce: Social media platforms have increasingly become influential in driving e-commerce. Social commerce leverages the power of social networks, allowing users to discover and purchase products directly from social media platforms. This trend is expected to continue growing as platforms like Instagram and Facebook expand their e-commerce capabilities.

Emerging Technologies: Technological advancements like artificial intelligence, machine learning, augmented reality, and virtual reality are reshaping the e-commerce landscape. These technologies enhance personalization, customer engagement, and provide immersive shopping experiences.

Sustainability and Ethical Shopping: Consumers are increasingly prioritizing sustainability and ethical practices in their purchase decisions. E-commerce businesses that embrace sustainable practices and transparent supply chains have gained a competitive edge.

The exponential growth of e-commerce in recent years is driven by factors such as convenience, accessibility, wider product selection, competitive pricing, and advancements in technology. As this trend continues, businesses must adapt to the evolving landscape and leverage digital strategies to stay competitive in the e-commerce market.

Money Laundering

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What is Money Laundering?

It is a process by which black or illegal money are converted into white or legal money.

For prevention of such type of activities, Prevention of Money Laundering Act, 2002 has been introduced.

This Act prevents money laundering & provide confiscation of property derived from or involved in money laundering and matters connected therewith.

There are various methods through which black money is made. Some of them are as follows:-

  • Cash deposited in Swiss Bank A/c
  • Buy a land and sell for legal profit.
  • Booking of false incomes.
  • Hawala
  • Bribery and corruption.
  • Kidnapping and extortion.

Stages/Process

  1. Placement :-
    • This is the initial stage, in this stage, black money is injected into the financial system. Here, launderer purchases and sells of investment instruments by decomposing money.
  2. Layering :-
    • In this stage, after injecting the money into financial system, the launderer channelizes the funds or spread over various transactions in different countries and through various bank accounts at various banks across many countries.
  3. Integration :-
    • after completion of above two stages, here, funds re-enter the legitimate economy, the launderer tries to remove the original connection with crime by which it can be used as clean money.

Note:- Hawala

Under hawala system, money is transferred via a network of hawala agents or hawaladars [here, money transfer without money movement].

Example:- Mr. Ram in country X wants to transfer some money to Mr. Shyam in country Y.

Steps to be followed:-

  • Mr. Ram gives money that is to be transferred to the hawala broker in country X.
  • The hawala agent accept the money from Mr. Ram and calls another hawala agent in country Y.
  • The broker gives the money to Mr. Shyam in country Y in currency of that country.
  • Password is shared among each other for completion of Transaction.

Factoring

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Factoring:-

Factoring is one type of financial service in which the business enterprise sells its trade receivables to another party at a discount to meet its working capital requirements.

Parties involved in Factoring:-

  1. The Seller [Client] who sells the goods on credit and raise invoice.
  2. The another party i.e. outside agency called factor.
  3. The buyer who buys the goods.

Note:- Client, customers and factor.

Important Points:-

  1. Seller sells the book debts to outside agency to meet its working capital requirement.
  2. The factor pays the amount after deducting some amount [called commission] to seller.
  3. The factor receives the full bills’ amount from customer.

In India, factoring service are provided by the following bank subsidiaries:-

  • Canbank Factors Ltd.
  • SBI Global Factors Ltd.

Sequence of activities in factoring:-

  • Client [seller] sells the goods to customers on the basis of order.
  • Client deliver the goods to customer with invoice.
  • Client assigns the invoice to factor for payment of invoice at discount.
  • The factor makes payment after deducting discount [commission] to client.
  • The factor recovers the invoice amount from buyer after expiration of credit period and buyer makes payment to factor.

Capital and Revenue Receipts

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Capital and Revenue Receipts and Difference between Capital and Revenue Receipts

Capital Receipts:- Capital receipts are those receipts which are obtained by an entity in other than normal course of business.

Examples:-

  1. Receipts from sale of fixed assets.
  2. Issue of fresh shares.
  3. Sale of Investment.
  4. Capital contribution etc.

Revenue Receipts:- Revenue receipts are those receipts which are obtained in normal course of business.

Examples:-

  1. Receipts from sale of goods and services.
  2. Interest/fees received in the normal course of business.
  3. Revenue earned by any waste or scrap material etc.
  4. Recovery from bad debts.

Difference between Capital and Revenue Receipts

BasisCapital ReceiptsRevenue Receipts
Meaning Receipts which are obtained in other than normal course of business.Receipts which are obtained in normal course of business.
NatureNon-recurring.Recurring.
RecognitionRecognize as not income.Recognize as income.
Affect the operating profitNo.Yes.
Resultcreates liability.doesn’t create liability.
Course of businessOther than normal or regularNormal or regular.
Reflection In Balance Sheet.Income Statement.
ExamplesReceipts from sale of fixed assets, Issue of fresh shares, Sale of Investment. Capital contribution etc.Receipts from sale of goods and services, Interest/fees received in the normal course of business, Revenue earned by any waste or scrap material etc. Recovery from bad debts.