Commerce II(As per the Revised Syllabus of Mumbai University for B.Com., Semester II, 2016 -17)

Dr. Prashant BhagatM.Com. (Business Administration), M.A. (Economics) MBA (Finance), M.Phil. (Commerce), DPMIR,

SET, Ph.D. (Commerce and Management)Assistant Professor, Department of Commerce,

Chetana’s Hazarimal Somani College of Commerce and Economics,Smt. Kusumtai Chaudhari College of Arts, Bandra (E), Mumbai - 51.

Prof. Afrin Zahed Ahmed ShaikhM.Com., N.E.T. (Commerce), B.Ed,

N.C.T.V.T (Mechanical)Asst. Professor,

Sanpada College of Commerce and Technology,Navi Mumbai.

Dr. Satinder GujralM.Com, B.Ed., Ph.D., MBA

I/C Principal, Reena Mehta College of Commerce& Management Studies,

Bhayander (West).

Mrs. Jaiswal Soni BalbhadraM.Com., M.Phil., N.E.T., Pursuing Ph.D.

Assistant Professor, Faculty of Commerce,Laxman Devram Sonawane College,

Kalyan.

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First Edition : 2017

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PREFACE

It gives us immense pleasure to present the first Edition of Commerce IIText book for F.Y.B.Com. (Semester - II) as per the new syllabus prescribed bythe University of Mumbai. We hope that the book will meet the requirements ofthe students and teachers’ community.

I like to thanks Dr. Maheshchandr Joshi, Principal, Chetana College, Bandra(E) and all those teachers including my colleagues in the Department ofCommerce who always inspire me for academic development.

I would also like to record my sense of gratitude to co-authors and publisher,Himalaya Publishing House Pvt. Ltd. for talking very keen interest in publishingthis book.

Any suggestions for improvement of book can be mailed atprashantbhagat1209@gmail.com. All qualitative suggestions will be appreciatedwith high sense of gratitude.

Authors

SYLLABUSRevised Syllabus of Courses of B.Com. Programme at Semester II with Effect from

the Academic Year 2016-2017Elective Courses (EC)-

Discipline-Related Elective (DRE) CoursesCommerce II

Modules at a GlanceSr. No. Modules No. of

Lectures1 Concept of Services 122 Retailing 123 Recent Trends in Service Sector 104 E-Commerce 11

Total 45

Sr. No. Modules/Units1 Concept of Services

Introduction: Meaning, Characteristics, Scope and Classification of Services –Importance of Service Sector in the IndianMarketing Mix Services: Consumer Expectations, Services Mix, - Product, Place, Price,Promotion, Process of Services Delivery, Physical Evidence and PeopleService Strategies: Market Research and Service Development Cycle, ManagingDemand and Capacity, Opportunities and Challenges in Service Sector.

2 RetailingIntroduction: Concept of Organized and Unorganized Retailing, Trends in Retailing,growth of organized retailing in India, Survival strategies for unorganized Retailers.Retail Format: Store Format, Non-store Planning, Design and LayoutRetail Scenario: Retail Scenario in India and Global Context – Prospects andChallenges in India. Mall Management – Retail Franchising. FDI in Retailing, Careers inRetailing.

3 Recent Trends in Service SectorITES Sector: Concept and Scope of BPO, KPO, LPO and ERP.Banking and Insurance Sector: ATM, Debit and Credit Cards, Internet Banking –Opening of Insurance Sector for Private Players, FDI and its Impact on Banking andInsurance Sector in India.Logistics: Networking – Importance – Challenges.

4 E-CommerceIntroduction: Meaning, Features, Functions and Scope of E-Commerce, Importance andLimitations of E-Commerce.Types of E-Commerce: Basic Ideas and Major Activities of B2C, B2B, C2C.Present Status of E-Commerce in India: Transition to E-Commerce in India,E-Transition Challenges for Indian Corporates; Online Marketing Research.

PAPER PATTERN

Maximum Marks: 100Questions to be set: 06Duration: 03 Hrs.

Sr. No Questions Marks

Q.1 Objective Questions 20

(A) Sub-Questions to be asked 12 and to be answered any 10(B) Sub-Questions to be asked 12 and to be answered any 10(*Multiple Choice/True or False/Match the Columns/Fill in the Blanks)

Q.2 Full Length Practical Question 15

OR

Q.2 Full Length Practical Question 15

Q.3 Full Length Practical Question 15

OR

Q.3 Full Length Practical Question 15

Q.4 Full Length Practical Question 15

OR

Q.4 Full Length Practical Question 15

Q.5 Full Length Practical Question 15

OR

Q.5 Full Length Practical Question 15

Q.6 (A) Theory Questions 10

(B) Theory Questions 10

OR

Q.6 Short NotesTo be asked (06)To be answered (04)

20

CONTENTS

Sr. No. MODULE I Page Nos.

1 INTRODUCTION TO SERVICES 3 – 10

2 SERVICES: MARKETING MIX AND STRATEGIES 11 – 23

MODULE II

3 INTRODUCTION TO RETAILING 27 – 46

4 RETAIL SCENARIO IN INDIA 47 – 66

MODULE III

5 RECENT TRENDS IN SERVICE SECTOR PART - I 69 – 79

6 RECENT TRENDS IN SERVICE SECTOR PART - II 80 – 96

MODULE IV

7 INTRODUCTION TO E-COMMERCE 99 – 110

8 E-COMMERCE IN INDIA 111 – 118

MeaningIndian Economy has changed significantly due to the steady rise in the

contribution of the service sector, which is an important parameter ofdevelopment. It provides employment opportunities to skilled and unskilledpeople and improves export performance into the country.

Service sector covers a wide range of activities from the advance capitalintensive based activities to the labour intensive based activities. Services areconsidered as intangible goods which may contain transport, banking, insurance,warehousing, trade, retail, information technology etc. Generally, services areeconomic activities that create value and provide benefits to service providersand service users.

Definition of ServicesAccording to American Marketing Association, “Services are the

activities, benefits or satisfactions which are offered for sale or are provided inconnection with the sale of goods.”

According to Philip Kotler and Bloom, “A services is any activity orbenefit that one party can offer to another that is essentially intangible and doesnot result into ownership of anything.”

According to William J. Stanton, “Services are separately identifiable,intangible activities which provide want satisfaction when marketed toconsumers and/or industrial users and which are not necessarily tied to the sale ofa product or another service.”

INTRODUCTION TOSERVICES

CHAPTER

1

4 COMMERCE II

Characteristics of a ServiceThe main characteristics of services are as follows:

1. Intangibility: Services are intangible in nature because they do not have material form. Theycannot be touched, held, tasted or smell. This feature highly differentiates the service from theproduct. Intangibility in services creates the difficulties in the demonstration of servicesbefore purchasing the services.

2. Heterogeneity: The heterogeneity of services makes it very difficult to establish standards. Incase of services, each service offering is unique and cannot be exactly repeated even by thesame service provider. e.g., Ice cream of a particular flavor at an Ice cream Parlor is almostidentical. However, the same is not true of the service rendered by the same Parlor staffconsecutively to two customers.

3. Perishability: Services cannot be stored, saved, returned or resold once they have been used.Once rendered to a customer the service is completely consumed and cannot be delivered toanother customer, e.g.: A customer dissatisfied with the services of a doctor, cannot return theservice of the doctor that was rendered to him. At the most he may decide not to visit thatparticular hospital in future.

4. Inseparability: services are not separable. It is very difficult to separate a service from theservice providers like musician, dancer, lawyer, teacher, etc. Physical presence of a serviceprovider and service user is required at the time of delivery of services, therefore services andservice providers are the same like dancer and dancing which cannot be separated.

5. Lack of ownership: One cannot own a service and one cannot store a service like a productis stored. Services are used or hired for a period of time. For example, when you buy an aeroflight ticket to fly to Dubai, you are buying a service which will start at the beginning of theflight and finish at the end of the flight. One cannot take the flight home with you.

6. Nature of demand: Services are fluctuating in nature. During peak season there is increase inthe demand of services and during off season there is decrease in the demand of services.Therefore, it is difficult to ignore the nature of demand while identifying the salient featuresof services. For example, tourists visit hill station in the month of summer season and also dueto this there is increase in demand of hotel industry and transportation industry.

7. Simultaneity: Services have limited geographical area. Services cannot move throughchannels of distributions. Either the provider has to come to user or the user has to visit theprovider for providing services. e.g. Post office cannot be brought to customer’s house.

8. Quality measurement: Service quality cannot be measured easily as it needs separate toolsfor quality measurement. It is very difficult to measure the quality of services. e.g. we mayquantify about the food served by the restaurant but the behavior of the hotel staff cannot beignored while providing food to the customers.

9. Difficulty in Valuation: Valuation of goods is easy but Valuation of service is difficult dueto the flexibility in cost of service depends upon the service provider. e.g. Valuation of aSinger is difficult.

INTRODUCTION TO SERVICES 5

Scope of ServicesThe following are the various areas of the service sector:

1. Education: Educational services are rapidly increasing in India because many foreignuniversities have entered India. We have a great exposure to higher education involving IITs,IIMs and Research organizations.

2. Health Care: It is required by all sections of the society. We have government as well asPrivate Hospitals which provide medical and healthcare services to people.

3. Information Technology: India is one of the leading IT exporting countries in the world.This sector opens the door for many jobs in the country and earns valuable foreign exchange.WIPRO, INFOSYS are the world known Indian IT companies.

4. Financial Services: Financial services are required by the business organizations andindividuals. Such services are needed for raising capital and reconstruction of business.

5. Banking: Banks provide different services to the individuals and corporate sector. Itprimarily facilitates the deposits and lendings. Now a days bank provide ATM, E-Bankingand so on services to the customers.

6. Insurance: Insurance is basically covering risk which can be life or general insurance.Human life is full with risk and uncertainties. To cover this risk and uncertainties lifeinsurance provides many policies. In case of general insurance we may observe fire insuranceand marine insurance services.

7. Tourism: Tourism sector also comes under the scope of services as it provides services totourists like food, accommodation, hotels etc. In recent times many forms of tourism arepopular like Historical Tourism, Medical Tourism, Spiritual Tourism, Adventure Tourism etc.

8. Transport: A Transport service creates place utility. It covers Road, Rail, Air and WaterTransport which makes the movement of goods and people possible from one place to another.

9. Consultancy: Professional experts for different consultancy are available in India. There ishigh demand for legal, managerial, technical, engineering, financial consultancy.

10. Courier: Courier service is for transportation of letters, parcels, medicine, currency noteswithin and outside India. It is extensively used by individuals, Corporates, Institutions etc.

11. Other Services:● Event Management ● Catering● Public Relations ● Retail● Real Estate ● Media● Telecommunications ● Entertainment● Defence ● Public Administration● Social Welfare ● others

6 COMMERCE II

Classification of ServicesThere are a number of ways in which services can be classified. Some of them are mentioned

below.

1. On the basis of the End User:● Consumer: Leisure, Hairdressing, personal finance, haircut, Holiday Packages, etc.● Business to Business: Advertising Agencies, Printing, Accountancy, Consultancy● Industrial: Plant Maintenance, Repair and Services, Installation and Project

Management.

2. On the basis of Tangibility:● Highly tangible: Telecommunications, Mobile Services, car Rental, Vending Machines,

ATM Machines etc.● Service linked to tangible goods: Repairs of domestic appliances, Air-Conditioning

Services, Computer Maintenance, car Service, etc.● Highly intangible: Psychotherapy, Consultancy, Legal Services etc.

3. On the basis of People and Equipment:● People-based services: Restaurants and Medical Services, High contact : Education,

Dental Care, etc.● Equipment-based: Launderette, Vending Machine, Cinema, Low contact: Automatic

Car Wash, etc.

4. On the basis of The Expertise and Skills:● Professional: Medical Services, Legal Services, Accountancy, Tutoring, Lawyers etc.● Non-professional: Babysitting, Day care taking, Casual Labour, etc.

5. On the basis of Profit:● Not for profit: The Scouts Association, charitable trusts, and public sector units etc.● For profit: Commercial Banks, Airlines, Tour operators, Hotel Industries, Sole Trading

firms, Joint Stock Companies, etc.

Importance of Service Sector in India1. Higher Sectoral growth: In India service sector is the highest growing sector as compared to

agriculture and secondary sectors. There is rapid diversification in the growth of services likereal estate, banking, hotel, insurance, telecommunication etc. In short, growing growth rate inservice sector indicates the development of Indian Economy.

2. Contribution to GDP: Service sector is the largest contributor to India’s GDP i.e. 58%.Since 1951, the contribution of service sector to the GDP has doubled due to liberalization,professionalism and growing urbanization in India.

INTRODUCTION TO SERVICES 7

3. Capital Formation: Sub-sectors of the service sector like banking and insurance encouragesavings on the part of people. The savings get converted into investments. The investment inturn leads to capital formation in the country.

4. Supports to Primary and secondary Sector: Without the support of service sector it wouldbe difficult for other sectors to function in the economy. Many services help primary andsecondary sectors like banking sector provides credit for working capital, insurance sectorprovides risk cover to industrialists, transport services provide proper movement of men,material and machine etc.

5. Employment Opportunities: since 1951, there has been an increase in the share ofemployment of the service sector. As per the study for every 1000 working forces, 147 peoplein rural areas and 582 people in urban areas are engaged in service sector.

6. Revenue to the Government: The service sector provides revenue to the government by wayof service tax. The service tax was introduced in 1994-95. Service tax contributesapproximately 18% contribution in total gross revenue of the central government.

7. Regional Development: The service sector helps the country to achieve regionaldevelopment by providing services like transport, banking, communication etc. in variousregions. After 1991, many states are economically developed due to the progressive growth ofservice sector.

8. Improves Efficiency: Efficiency is the ratio of returns to costs. An efficient organization canget higher returns at a lower cost. For improving efficiency, research and development,consultancy, education, training etc. are helpful.

9. Reduces Inequalities: By providing employment to millions of people across the country, theservices sector generates income for the employed, which helps to reduce income and wealthinequalities.

10. Social Development: Due to the service sector contribution in India people are sociallydeveloped in terms of literacy, life expectancy and family welfare.

Consumer ExpectationsIn the service sector, consumer expectations are given highest priority. Such expectations act as

the base for consumer satisfaction. Expectations can be different for different customers. Therefore,consumer expectation is important for service providers and service users. Growth and expansion ofany business depends upon fulfillment of customers’ expectations. This is necessary for serviceprovider to maintain cordial relationship with customers. Sometimes, even government authorities cantake legal objections for non-fulfillment of customer expectations.

Expectations of consumer change from time to time as per socio-economic changes. Serviceprovider should not neglect the customer expectations otherwise customer will try to shift to anotherservice provider.

The highest level of expectations can be called as desired services which are expected bycustomer from the service provider e.g. in case of a Hotel, a customer may expect ambience, quickservice, cleanliness, taste etc. sometimes it would be difficult to get desired service then customer can

8 COMMERCE II

think for at least minimum level of service are called adequate services, e.g., graduate from reputedinstitution can be ready for low paid job due to slowdown in economy.

Following are the Customer Expectations:

1. Service provider should provide essential and basic services.

2. Service provider should provide customer-centric services.

3. Service provider should provide safe and secure services.

4. Service provider should provide prompt services.

5. Service provider should develop good communication with customer.

6. Service provider should pay attention to customer complaints.

7. Service provider should provide proper compensation to customer, if there is any damage tolife or property.

SummaryThe era of economic liberalisation has a rapid change in the service industry. As a result, over the

years, India is witnessing a transition from agriculture-based economy to a knowledge-based economy.The service industry forms a backbone of social and economic development of a region. It is one ofthe largest and fastest-growing sectors in the world. In fact, its growth rate has been higher than that ofagriculture and manufacturing industry.

In the service sector, consumer expectations are given highest priority. Such expectations act asthe base for consumer satisfaction. Expectations can be different for different customers. This isnecessary for service provider to maintain cordial relationship with customer. Sometimes evengovernment authorities can take legal objections for non fulfilment of customer expectations.

Exercise

Choose the Correct Alternative and Rewrite the Statements1. Services are not ____________.

(a) tangible (b) intangible(c) perishable

2. Indian Economy has changed significantly due to the ____________ in the service sector.

(a) rise (b) decline(c) unchanged

3. Services create ____________ to service sector.

(a) value (b) price(c) standard

INTRODUCTION TO SERVICES 9

4. ____________ of services makes it very difficult to establish standards.

(a) Heterogeneity (b) Homogeneity(c) Diversity

5. Services have ____________ geographical area.

(a) limited (b) unlimited(c) rare

6. Valuation of service is ____________ .

(a) easy (b) difficult(c) not possible

Ans: (1. tangible, 2. rise, 3. value, 4. Heterogeneity, 5. limited, 6. Difficult)

State Whether the Following Statements are True or False1. Service quality can be measured easily.

2. It is very difficult to separate the service provider from services.

3. One can own the services.

4. Services do not have material form.

5. Services may contain banking and insurance sector.

Ans: (1. False, 2. True, 3. False, 4. True, 5. True)

Fill in the Blanks1. Services are _________________ in nature.

2. Services are _________________ in nature.

3. In case of services, consumer can be classified on the basis of _________________ .

4. _________________ is the main upcoming service industry in India.

5. _________________ is the main objective behind the services provided by the commercialbanks.

Ans. (1. Tangible, 2. Fluctuating, 3. End-User, 4. Media, 5. Profit)

10 COMMERCE II

Match the FollowingGroup ‘A’ Group ‘B’

1. Services (a) Fast growing2. Service Sector (b) Lack of physical form3. Intangibility (c) changes from time to time4. Consumer expectations (d) Quality improvement5. Efficiency (e) Perishable

(f) Agriculture

Ans: (1 – (e), 2 – (a), 3 – (b), 4 – (c), 5 – (d)

Questions for Practice1. What do you mean by ‘Service’? Explain the features of services.

2. Define Service and bring out its scope.

3. Briefly explain the classification of services.

4. Explain the meaning and types of services.

5. Explain the importance of service sector in Indian Context.

6. What is the role of service sector in Indian Economy?

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