E-commerce Features

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12:13 AM

 E-commerce has the following features:

1. Individual Communication

Communication is individualized and interaction is with carefully selected individual customer. E-name is used for this purpose.

2. Data Depository 

Internet is a central depository of huge amounts of data. It can be accessed all over the world through search engines. Websites contain information and they can be downloaded as needed.

3. E-mail and Electronic Platforms

E-mail and computer faxing is used for speedy transfer of messages to conduct business. Electronic platforms can be :

- EDI : Electronic data interchange for placing orders to suppliers. It is business to business exchange of data.

- ATM : Automatic teller machine to facilitate receiving digital cash. Smart cards are used to make payments.

- Computers : They receive orders from customers.

4. On-line Selling

E-commerce uses on-line selling. It has revolutionized selling through E-tailing, specially for:

- Airlines tickets and hotel bookings.

- Shares and financial services

- Cars and other vehicles 

- Computer hardware and software

- Books and music

- Consumer electronics

- Fashion goods

5. Relationship Marketing

E-commerce builds long-term mutually satisfying relations. This leads to life time loyal customers. The relations are based on superior customer value and satisfaction. Long term profits are made by lifetime customer loyalty.

Functions Of An Entrepreneur

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10:04 PM

Entrepreneurial qualities consist of vision, inspiration, creativity, risk taking and achievement orientation. An entrepreneur is a visionary individual who takes risks by starting a new venture through assembling and coordinating various resources for the sake of uncertain rewards.

Entrepreneurs perform several functions to carry out their activities. The important functions of an entrepreneur are as follows:

1. Planning

Planning is predetermining future which sets target to convert new idea into reality. By planning, entrepreneurs carry out the following functions:

Setting goals

Goals are set for new venture which can be in terms of growth, profit, leadership and services. Goals are set for long-term.

Developing business plan

Business plan is developed for the new venture which consists of action plans related to production, marketing and finance. Contingency plans are developed to cope with risks.

2. Organizing

Organizing establishes a structure for the new venture. Through organizing, entrepreneurs carry out the following functions:

Grouping of tasks

Tasks required to achieve goals are defined and they are grouped into positions. Authority and responsibility of each position is established.

Coordination

Coordination is the key to entrepreneurial success. So, mechanisms are established to achieve harmony of efforts.

3. Mobilizing resources

Entrepreneurs determine the required resources and mobilize them. Resources can be:

Financial resources

Financial resources can be existing resources of the entrepreneurs or can be mobilized from friends, relatives, banks or other sources.

Human resources

Entrepreneurs acquire the needed human resources to fill-up the positions provided in the organization structure.

Technology resources

Entrepreneurs deal with new technologies. They establish production facilities and procure machinery and equipment. They upgrade technology to keep up with technological changes.

4. Relationship Management

Entrepreneurs manage a variety of relationship which are as follows:

Exchange relationship

They are related with procurement of inputs and marketing of outputs. These relationships are mainly concerned with suppliers and customers. Exchange relationships are business oriented.

Professional relationship

Entrepreneurs manage professional relationship within the venture. This is essential to motivate employees for higher productivity. They provide leadership and tackle labor problems. Such relationships are with employees, bankers, insurance companies, accountants, lawyers and consultants.

Government relationship

Entrepreneurs manage relationship with government and regulatory agencies to get licences, facilities, financing and tax concessions. Dealing with public bureaucracy is an important function of entrepreneurs.

Social relationship

Membership in clubs, professional associations and relation with local community are used to manage social relationship.

5. Control

Control is measurement and correction of performance to achieve the foals of the new venture which is based on feedback.  Control can be :

Financial control

Entrepreneurs ensure proper allocation and utilization of financial resources which is needed to control cost and minimize wastage. 

Production control

Entrepreneurs achieve proper combination of inputs for production. Quality control is ensured and efficiency is improved.

Managerial control

Entrepreneurs ensure management control in the new venture. They make key decisions themselves to solve problems.

Characteristics Of Entrepreneurship

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12:01 AM

Entrepreneurship has the following characteristics:

1. Creating New Venture
Entrepreneurship is concerned with creation of new venture with new ideas. Such ventures starts as a small business to satisfy the unfulfilled needs in the market. These new ventures produce something new of value, create new market and new customers.

2. Hard Work And Commitment
Entrepreneurship requires hard work and commitment through devotion of time and efforts. Hard work with enthusiasm is needed to make new ideas, developing plan, determination of required resources. Entrepreneurs have deep sense of personal responsibility and high level of energy.

3. Risk Assumption
Entrepreneurship involves assumption of risks which implies possibility of loss. Probability estimates of the outcome of risk situations are made to calculate risk. Generally, new ventures tend to have high risk and high failure rate. Financial risk, career risk, social risk and psychic risk are involved in entrepreneurship.

4. Reaping Of Rewards
Entrepreneurship results in reaping of rewards. Rewards can be monetary benefits in terms of profit or non-monetary benefits in terms of personal satisfaction, self development, fame, reputation and independence in work. Monetary rewards serve as symbol of achievement and non-monetary rewards provide opportunities to make contribution toward social well-being and get social recognition.

Concept And Meaning Of Entrepreneurship

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1:48 AM

The process of discovering new venture with creativity and innovation is called entrepreneurship. Entrepreneurship requires assumption of risk and reaping of awards. It brings resources together and provides option for self-employment to an individual. Entrepreneurship also creates employment opportunity for others.

Entrepreneurship is a mind set of creativity and risk taking. It is a process of identifying opportunities and bringing together factors of production to exploit these opportunities.Entrepreneurship results in creation of new venture by planning, organizing, operating and assuming the risk. It always aims for innovation, profitability and growth.

The entrepreneurial spirit has appeared as the engine of economic development. Entrepreneurship has resulted in millions of new ventures in the world. Entrepreneurship has appeared as the driving force for industrial and economic development. Therefore, the interest in the concept of entrepreneurship is growing in today's world.

Concept And Meaning Of Investment

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11:42 PM

Generally, income and expenditure of an individual never equals.If current income exceeds current desires, people intend to save their surplus. With this surplus they plan to use the saving in another way. In this connections, individuals may have various alternatives. They can deposit the money in bank or purchase government or corporate bonds or invest in stocks or contribute the fund to a provident fund or purchase the real assets like land, building, plants etc. In this way what people think about the use of saving that is known as investment.

Investment refers to the sacrifice of present financial resources with the view to get additional benefit in future. Therefore, investment can be defined as a alternative or best use of the saving. Purchase of real or financial assets is considered as the investment. Such use takes place at present and almost certain. However, returns are generated in future and that are generally uncertain. Therefore, every investment involves some degree of risk which occurs due to several reasons.

Therefore, we conclude that, invest is a sacrifice of current fund or money or other resources for future benefits. It is the employment of saving or funds with the view of achieving additional income . It involves the commitment of resources that have been saved  from current consumption, in the hope that some benefit will produce in future. It involves long term commitment and waiting for a reward. The sacrifice takes place in the present and reward comes later and uncertain.

Limitations Of The Law Of Substitution

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11:46 PM

The law of substitution has several limitations as follows:

1. Ignorance Of Consumer

If the consumer is ignorant or blindly follows custom or fashion, he will make a wrong use of money. Due to his ignorance, he may not be aware of other more alternatives. In this case no substitution takes place and this law does not apply.

2. Commodities Indivisible

The law of substitution is based on the assumption that commodities are divisible and substituable. This is an unrealistic assumption. Though commodities may be divided according to the convenience of the consumer, it is not possible to divide all commodities in small units. There are certain commodities like fan or a radio which cannot be used in case of the indivisible commodities.

3. Utility Not Measurable

This principle of maximum satisfaction is based on the unrealistic assumption of the cardinal measurement of utility and the constancy of the marginal utility of money.

4. Customs And Fashion

Sometimes people are slave of customs or fashion and they are unable to become rational.Without being rational a consumer cannot substitute one thing for another. This is another limitation of this law.

5. Unlimited Resources

The law of substitution has no place when the resources are unlimited as in the case of free gift of nature. In such cases, there is no need to re-arrange expenditure because they can be used without any cost.

6. Choice Uncertain

The alternatives open to the consumer also assumed to be certain. But consumer choices are uncertain and even risky. In fact, it is expected utilities that determine consumer's choices of the various combinations he can buy with a given money income.

Significance Of The Law Of Substitution

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11:35 PM

The law of substitution is of great practical importance in economics which are given below:

1. Basis Of Consumption

Consumer is assumed to be rational. He always tries to maximize his utility subject to budget constraint. The law of substitution helps every consumer to maximize his utility by equalizing the marginal utilities obtained from different commodities.

2. Important In The Field Of Production

The law of substitution is also of great importance in the field of production. The producer has to use several factors of production in order to maximize net profit. For this purpose, he will substitutes one factor for another till their marginal productivity are  made the same. For example, if the marginal productivity of one factor say labor, is greater than that of capital, he may substitute labor for capital. In this way, he will be able to maximize his profit.

3. Important In The Field Of Exchange

This law of substitution also applies in exchange, because exchange is nothing but the principle of substitution itself. When we sell a commodity say, sugar, we get money. With this money we buy another commodity, say, wheat.Therefore, we have really substituted sugar for wheat. We continue to substitute one factor for the other till their marginal returns from all factors are equalized.

4. Importance In Distribution

In the distribution, we are concerned with the determination of rewards of the various factors of production, i.e. determination of rent, wages, interest and profit.The use of each factors of production is pushed by the firm to a point where marginal productivity of one factor is equal of other factor's marginal productivity. The law of substitute helps to equalize their marginal productivity.

5. Importance In Public Finance

The law of substitution is also applies in public finance. Government must try to maximize welfare of the community. For this, the government must down all wasteful expenditure where the return is not proportionate and instead divert the resources on more productive sector.

6. Price Determination

The principle of substitution is also applicable in the determination of prices when a commodity becomes scarce and its price becomes high. In order to bring its price down, we start substituting an abundant commodity for it, its scarcity will end.