Emerging Service Business of India Exercise Solutions | KalviGavani

Emerging Service Business of India: Exercise Solutions

How to Use This Page

Read the Samacheer Kalvi textbook chapter first. Then use this page to revise: attempt the textbook questions on your own, then compare with the model answers below. Pay special attention to the Common Mistakes section and the Exam Checklist before your test.

Key Concepts (Quick Recap)

I. Choose the Correct Answer (MCQ)

Q1. A continuing relationship which provides a licence privileges to do business and provides training, merchandising for a consideration is called (a) Franchising ✓ (b) Factoring (c) Outsourcing (d) Logistics

Q2. A condition where a factor agrees to provide complete set of services like financing, debt collection, and consultancy is called (a) Recourse factoring (b) Maturity factoring (c) Full service Factoring ✓ (d) Bulk factoring

Q3. Buying and selling of goods through electronic network is known as (a) E-commerce ✓ (b) E-business (c) BPO (d) KPO

Q4. An organization carrying out activities to move goods from producer to consumer is (a) Transport (b) Logistics ✓ (c) Warehousing (d) Franchising

Q5. The role of government in logistics management is through (a) Franchising (b) BPO (c) KPO (d) Distribution ✓

Q6. The main benefit of Logistics is (a) Time Minimisation (b) Cost Minimisation ✓ (c) Profit Maximisation (d) Risk Minimisation

Q7. What aims for an effective management response over the longer run (a) Logistics ✓ (b) Supply Chain Management (c) BPO (d) KPO

Q8. The model that identifies alternatives, criteria for decision making and analyse alternatives to arrive at the best choice is (a) Strategic Model (b) Scheduling Model ✓ (c) Operational Model (d) Tactical Model

Q9. A company under outsourcing transfers activities which are (a) Core (b) Non-core ✓ (c) Important (d) Priority

Q10. Business units can reduce expenditure by outsourcing front office work like (a) Customer support (b) File work ✓ (c) Data entry (d) Call centre

Q11. Outsourcing job is given to developing countries specifically for (a) Cheap labour ✓ (b) Skilled labour (c) Semi-skilled labour (d) Unskilled labour

Q12. Outsourcing is carried out for the benefit of (a) Time (b) Money (c) Quality (d) Time and Money ✓

Q13 (Additional). There are ……… parties to a franchising agreement. (a) Two ✓ (b) Three (c) Four (d) Five

Q14 (Additional). The Factoring Regulation act was established in the year ……… (a) 2009 (b) 2010 (c) 2011 ✓ (d) 2012

Q15 (Additional). Factoring means ……… (a) to make or do ✓ (b) to sell (c) to buy (d) to outsource

Q16 (Additional). 'Facere' means (a) to make or do ✓ (b) to sell (c) to buy (d) to outsource

II. Fill in the Blanks

1. Franchising involves two parties — the franchisor and the franchisee. 2. The Latin word 'Facere' means to make or do. 3. The Factoring Regulation Act was established in 2011. 4. Logistics aims for cost minimisation, while SCM focuses on profit maximisation. 5. Outsourcing transfers non-core activities to external agencies. 6. BPO stands for Business Process Outsourcing. 7. KPO stands for Knowledge Process Outsourcing. 8. E-commerce means buying and selling through electronic networks like the internet. 9. The main benefit of logistics is cost minimisation. 10. There are two types of franchising — product/trade name franchising and business format franchising.

III. True or False (with corrections)

1. Franchising involves three parties — franchisor, franchisee, and middleman. False. Franchising involves only two parties — the franchisor and the franchisee.

2. Outsourcing transfers core activities to external agencies. False. Outsourcing transfers non-core activities to external agencies. Core activities remain in-house.

3. Logistics aims for profit maximisation. False. Logistics aims for cost minimisation. Supply Chain Management (SCM) focuses on profit maximisation.

4. BPO requires knowledge expertise and judgment-based decisions. False. BPO is rule-based and requires process expertise. KPO requires knowledge expertise and judgment-based decisions.

5. Factoring Regulation Act was established in 2009. False. The Factoring Regulation Act was established in 2011.

6. Full service factoring provides only financing. False. Full service factoring provides financing, debt collection, and consultancy — all three services.

IV. Match the Following

V. Answer Briefly

Q1. Who is a franchisee? The individual who acquires the right to operate the business or use the trademark of the seller is known as the franchisee.

Q2. State two disadvantages of franchising: 1. Reduced risk — the franchisee acquires the right of running an already established business, eliminating the risk of starting a new one. 2. Operational support — the franchisee receives assistance in obtaining finance, deciding business location, decor/design, staff training, and handling day-to-day operations.

Q3. Who is a factor? The factor is an agent who buys the accounts receivables (Debtors and Bills Receivables) of a firm and provides finance to a firm to meet its working capital requirements.

Q4. Define outsourcing: Outsourcing is a business practice used by companies to reduce costs or improve efficiency by shifting tasks, operations, jobs, or processes to an external contracted third party for a significant period of time.

Q5. What is the need for outsourcing? 1. To focus on a key function 2. Benefit of specialization/efficiency 3. Cost-cutting 4. Economic growth and development 5. Increasing profit 6. Catering to the dynamic demand

Q6. State the importance of BPO: BPO refers to outsourcing in all fields. It administers and manages a particular commercial enterprise process for the employer. It is an important component of the business strategy of major organizations worldwide. It helps in cost reduction, productivity growth, and innovative capabilities.

Q7. What are the benefits of KPO? KPO firms get knowledge-related, information-related work done from outside firms and it involves high-value work carried out by highly skilled staff.

Q8. Define Logistics: Logistics is the logical extension of transportation and related areas to achieve an efficient and effective goods distribution system. Per the council of supply chain management professionals, it is "the process of planning, implementing and controlling procedures for the efficient and effective transportation of the products."

Q9. What is the need for Logistics? Logistics Management is defined as design and operation of the physical, managerial, and informational systems needed to allow goods to overcome time and space (from the producer to the consumer).

Q10. Write about the importance of Logistics: It has the control and supervision of the movement of the goods; it helps in improving customer service; it increases the revenue; it helps in reducing overall transportation costs; it helps in improving the operating cost structure.

Q11. What are the types of Logistics Applications? Logistics Management can be classified on the basis of applications from various dimensions: Decision-wise, Inbound logistics, Actor-wise, Outbound logistics.

Q12. What do you mean by e-commerce? E-commerce or Electronic commerce is the buying and selling of goods and services through electronic networks like the internet.

Q13 (Additional). What is E-Business? E-Business is a broader term which includes internal and external transactions of an organization across the internet.

Q14 (Additional). What do you mean by Maturity factoring? The factor agrees to finance the firm only after collecting the amount on maturity from debtors.

Q15 (Additional). Mention any two advantages of franchising: 1. Reduces risk 2. Business expansion

VI. Answer in Detail

Q1. Enumerate the characteristics of franchising: 1. A franchise relationship is based on an agreement which lays down the terms and conditions. 2. The term of the franchise may be for 5 years or more. The agreement may be renewed with the mutual consent of the parties. 3. The franchisee undertakes not to carry any other competing business during the term, and the franchiser undertakes not to terminate the agreement before its expiry except under situations that may justify termination. 4. The franchisee agrees to pay specified royalty to the franchiser, as per the terms of the franchise agreement. 5. Franchise means selling the same product and maintaining a similar type of shop decor, for which the franchiser provides assistance in organizing, merchandising, and management.

Q2. Elucidate the features of factoring: (a) Maintenance of book-debts: A factor takes the responsibility of maintaining the accounts of debtors. (b) Credit coverage: The factor accepts the risk burden of loss of bad debts, leaving the seller to concentrate on his core business. (c) Cash advances: Around eighty percent of the total amount of accounts receivables is paid as advance cash to the client. (d) Collection service: Issuing reminders, receiving part-payments, collecting cheques form part of the factoring service. (e) Advice to clients: From the past history of debtors, the factor can provide advice regarding the creditworthiness of customers, perception of customers about the products of the client, etc.

Q3. Describe the benefits of Outsourcing: 1. Focusing on Core Activities: Companies can focus on their core competence. Non-core activities can be outsourced to outside agencies. 2. To Fillip Economic Development: Outsourcing stimulates entrepreneurship, encourages employment opportunities, expands exports, and enables tremendous growth of the economy. 3. Encourages Employment Opportunities: Companies outsourcing non-core activities provide chances for other small business units, paving the way for more job opportunities. 4. Reduction in Investment: Companies through outsourcing avail the services of outsiders which reduces investment requirements. 5. Quest for Excellence: Outsourcing enables firms to pursue excellence in two ways — excelling themselves in the activities they do, and excelling outsiders by extending their capabilities through contracting out.

Q4. Explain the points of differences between BPO and KPO: BPO refers to the outsourcing of non-primary activities to an external organization to minimize cost and increase efficiency. KPO is another kind of outsourcing whereby functions related to knowledge and information are outsourced. Differences: (a) BPO is based on rules; KPO is based on judgment. (b) BPO is less complex; KPO is highly complex. (c) BPO requires process expertise; KPO requires knowledge expertise. (d) BPO relies on cost arbitrage; KPO relies on knowledge arbitrage. (e) BPO is volume driven; KPO is insights driven. (f) BPO has low collaboration and coordination; KPO has comparatively high. (g) BPO requires good communication skills; KPO requires professionally qualified workers. (h) BPO focuses on low-level process; KPO focuses on high-level process.

Q5. Write a note on e-commerce models: 1. Business to Customers (B2C): Business concerns sell directly to consumers. 2. Business to Business (B2B): Business concerns transact with one another through the internet. Examples: Snapdeal, Flipkart, Alibaba, Indiamart. 3. Consumer to Consumer (C2C): Customers sell directly to other customers through online classified advertisements, auctions, mobile, or marketplaces. Examples: Kraftly App, OLX, eBay. 4. Customer to Business (C2B): Products are traded by customers through websites. Examples: Naukri.com, Monster.com. 5. Business to Government (B2G): Selling products and services by business consumers to Government organizations. Example: TCS operates the passport application process for the Government of India.

Q6 (Additional). Briefly explain the advantages of Franchising: 1. Reduced risk: The franchisee acquires the right of running an already established business. 2. Business expansion: Franchising provides an opportunity to expand business at regional, national, and global levels without incurring additional expenditure. 3. Cost of advertising: The cost of advertising for the franchisor will be reduced since this cost will be shared by the franchisee. 4. Operational support: The franchisee is provided assistance in obtaining finance, deciding business location, decor/design, staff training, and handling day-to-day operations.

Q7 (Additional). What are the disadvantages of franchising? 1. Franchising fees: The initial franchising fee and subsequent renewal fees can be very high. 2. Fixed royalty payment: The franchisee has to make payment of royalty to the franchiser on a regular basis, which considerably reduces the income of the franchisee. 3. Danger of image tarnishing: If the franchisee does not maintain standards of quality and service, there is a danger that the goodwill and image of the reputed franchiser will be adversely affected. 4. Lack of freedom: The franchisee does not have the freedom to run the business independently. 5. Limitation on range of products: The franchisee cannot introduce new product lines into the business except those permitted by the franchiser.

Q8 (Additional). Compare Factoring with Forfeiting: (a) Basis of financing: Factoring is dependent on the exporter's credit standing; Forfeiting is dependent on the availing bank's financial standing. (b) Cost: In Factoring, cost is borne by the seller; in Forfeiting, cost is borne by the overseas buyer. (c) Suitability: Factoring is for transactions of short-term maturity period; Forfeiting is for transactions of medium-term maturity period. (d) Extent of financing: In Factoring, only a certain percent of receivables factored is advanced; in Forfeiting, full finance is available. (e) Risk: In Factoring, risk can be transferred to the seller; in Forfeiting, all risks are borne by the forfeiting agency.

Q9 (Additional). Explain the features of Outsourcing: 1. Transferring Non-Core Activities to Outsiders: Companies can outsource non-core activities like maintenance, housekeeping, gardening, etc. 2. Outsourcing Involves Contracting: Outside agencies enter into an agreement with the company to perform routine activities on a contractual basis. 3. Operational Efficiency through Outsourcing: Companies specialize in their business system as the time available can be utilized for core activities, leading to efficiency and improved product quality. 4. Improved Customer Satisfaction: The number of customers can be increased through timely delivery and high-quality services. 5. Cost Reduction: Division of labour and specialization along with good quality products reduces cost.

Common Mistakes to Avoid

1. Franchising = licence + training + merchandising — Not just selling products. It's a continuing relationship with support. 2. Full service factoring = complete services — Financing + debt collection + consultancy. Not recourse or maturity factoring. 3. Logistics aims for COST minimisation — Not profit maximization (that's SCM). Not time minimization. 4. Outsourcing transfers NON-CORE activities — Not core activities. Core stays in-house. 5. BPO is rule-based; KPO is judgment-based — This is the key distinction. 6. Factoring Regulation Act = 2011 — Not 2009, 2010, or 2012. 7. 'Facere' means 'to make or do' — The Latin origin of "factoring." 8. Two parties to a franchising agreement — Not three, four, or five.

Exam Checklist

• [ ] Can define franchising and list its characteristics (5 points)
• [ ] Can explain types of franchising (product/trade name vs business format)
• [ ] Know advantages (4) and disadvantages (5) of franchising
• [ ] Can explain features of factoring (5 features)
• [ ] Know factoring process steps (5 steps)
• [ ] Can compare factoring vs forfeiting (5 differences)
• [ ] Can explain BPO vs KPO (8 differences)
• [ ] Know e-commerce models (B2C, B2B, C2C, C2B, B2G)
• [ ] Can list benefits of outsourcing (5 points)
• [ ] Can explain logistics vs SCM differences
• [ ] Know elements of logistics cost