Business Services class 11 chapter 4 (Business Studies )

Class 11 Business Services chapter 4 Introduction to Business services -Business Services [Business studies ]

Topics-Business Services
  1. what is Business services
  2. Introduction
  3. Nature of Services
  4. Different between Services and goods
  5. Types of Services
  6. An Introduction to the GATS
  7. Role of Services an Economy
  8. Business Services
  9. Banking
  10. Types of banks
  11. Functions of commercial banks
  12. E-banking
  13. Benefits of E-banking
  14. Functions of Insurance
  15. Principles of Insurance
  16. postal Service
  17. Different between Life, fire and Marine Insurance
  18. General Insurance

1.what is Business Services

what is Business Services

All of us have been petrol pump have your ever thought how a petrol pump owner does his business in a Village? how he gets the petrol and diesel to the Villages in the interior? how he gets the money to Purchase large quantities of petrol and diesel ? how he Communicates to petrol depots for requirement and also to customers ? how he Safeguards himself from various risks associated with this business ? the answer to all the above question lies in the understanding of business services the transportation petrol and diesel from oil refineries to petrol pumps is carried out by train and takers

( transport Services ) they are then stored at various depots of oil Companies situated in all major towns across Indian (warehousing Services ) Petrol pump owners use postal mail and telephone facilitates to be in touch with customers banks and the depots for the availability of their requirements on regular basis (Communication services ) as oil companies always sell the petrol and diesel on advance payment the owners have to take loan and advances from banks to fund their purchases

(banking services ) petrol and diesel being highly risky products the owners have to safeguard themselves from various risks by getting the business the products the life of people working there etc, Insure (Insurance services ) thus we see that a single business of providing petrol and diesel at a petrol pump is actually a collective outcome of various business services these services are being utilised in the entire process of shipment of petrol and diesel from oil refineries to the point of sale at petrol pumps spread across the length and breath of india,

Business Services class 11



you must all have at some time or the other experienced the effect of businesses activities on your lives let us examine few examples of business activity purchasing ice cream from a store and eating ice cream in a restaurant watching a movie in a cinema hall or purchasing a video cassette purchasing a school bus and leasing it from a Transporter if you analyse all these activities you will observe that there is a difference between purchasing and eating purchasing and watching and purchasing and leasing what is common in all of them is that one is purchasing and item and the other is

a good is a physical product capable of being delivered to a purchaser and involves the transfer of ownership from seller to customer goods are also generally used to refer to commodities or item of all types expect services involved in trade or commerce

experiencing a service but there is definitely a differences between the item or good and the service performed for a layperson service are essentially intangible their purchase does not result in the ownership of anything physical for example you can only seek advice from the doctor you cannot purchase him services are all these economic activities that are intangible and Imply and interaction to be realised between the service provider and the consumer

Happening for example In the case of Mobile services

3.Nature of Services

Nature of Services

there are five basic features of services these features also distinguish them from goods and are know as the five is of services these are discussed as below

  1. Intangibility:” Services are intangible “i”e they cannot be touched they are experiential in nature one cannot taste a Doctor treatment or touch entertainment one can only experience it an importance implication of this is that quality of the offer can often not be determined before consumption and therefore purchase it is therefore important for the service provider that they Consciously work on creating a desired service so that the customer undergoes a favourable experience for example treatment by a doctor should be a favourable experience
  2. Inconsistency:” the second important characteristics of services is consistency Since there is no standard tangible product services have to be performed exclusively each time different customers have different demands and Expectations service provider need to have an opportunity to alert their offer to closely meet the requirement of the customers this is
  3. Inseparability:” another important characteristics of services is the simultaneous activity of production and consumption being performed this makes the production and consumption of services seem to be inseparable while we can manufacture a car today and sell it after say a month” this is often not possible with services that have to be consumed as and when they are produced service provider may Desire in a substitution for the person by using appropriate Technology but the interaction with the customer remains a key feature of services automated teller machines (ATMs) may replace the banking clerk for the front office activities like cash withdrawal and cheque deposit but at the same time the presence of the customer is required and his /her interaction with the process has to be managed
  4. Inventory (less) :” services have little or no tangible components and therefore cannot be Stored for a future use that is services are Perishable and providers can at best stores for some associated goods but not the service itself this means the demand and supply needs to be managed as the service has to be performed as and when the customer asks for it they cannot be performed earlier to be consumed at a later date for example a railway ticket can be stored but the railway journey will be experienced only when the railway providers it at the consumption point there are no Inventories On the basis of above features, we can have following points of distinction between goods and services
  5. Involvement:” One of the most Important Characteristics of services is the participation of the customers in the service delivery Process A Customer has the opportunity to get the services modified according to specific requirements

Business Services class 11

4.Difference between Services and Goods

Difference between Services and Goods

From the above it is clear that the two main differentiating characteristics of Services and goods are non-transferability of ownership and Presence of both provider as well as consumer while goods are product services are performed A services is an act which cannot be taken home what we can take home is the effect of the services and as the services are sold

Basis Services Goods
Nature An activity or process i”e watching a movie in a cinema hall A physical object e:g video cassette of movie
Type Heterogeneous Homogenous
Intangibility Intangibility e”g doctor treatment Tangible e:g medicine
Inconsistency Different customers having different demands e:g mobile services Different customers getting standardised demand Fulfilled e:g mobile phones
Inseparability Simultaneous production and consumption e:g eating ice-cream in a restaurant Separation of production and consumption e:g Purchasing ice cream from a store
Inventory Cannot be kept in stock e:g experience of a train journey can be kept in stock e:g train journey ticket
Involvement Participation of customers at the time of service delivery e:g self-service in a fast food joint Involvement at the time of delivery not possible e:g manufacturing a vehicle
Difference between Services and Goods

5.Types of Services

Types of Services

When speaking of the service sector service can be classified into three broad categories viz, business service social service and personal service these have been explained in the following pages,

  1. Business Service” Business services are those service which are used by business enterprises for the conduct of their activities for example” banking insurance transportation warehousing and communication service
  2. Social services” social services are those services that are generally provided voluntarily in Pursuit of certain social goals these social goals may be to improve the standard of living for weaker sections of society to provide educational services to their Children or to provide health care and hygienic conditions in slum areas voluntarily but for some consideration to cover their costs for Example” health care and education services provided by certain Non-government Organisations (NGOs) and government agencies
  3. Personal services: Personal services differently services which are experienced differently by different customers these services cannot be consistent in nature they will differ depending upon the service provider they will also depend upon customer’s preferences and demands for Example” tourism recreational services restaurants , In the context of better understanding of the business world we will be limiting our further discussions to the first category of the service sector i:e business services

Business Services class 11

6.An Introduction to the GATS

An Introduction to the GATS

The agreement on trade in service reached in the Uruguay Round is perhaps the most important single development in the Multilateral trading system the new general agreement on trade in service (GAST) for the first time framed internationally agreed rules and commitments broadly comparable with these of the general agreement on Tarrif and trade (GATT) the most important element of GATS is the classification of services used in making commitments the GASTS schedule largely follows a classification which identifies 11 basic service sector ( plus a twelfth category for miscellaneous service )these sector are subdivided into some 160 subsector or separate service activities as an example” the tourism category breaks down into subsector for hotel and restaurants

Business Services class 11

The Twelve sector are:

  1. Business service (including professional and computer )
  2. Communication service
  3. Construction service
  4. Distribution service
  5. Educational service
  6. Environmental service
  7. Financial service (Insurance and banking)
  8. Health related and social service
  9. Tourism and travel related service
  10. Recreational cultural and sporting service
  11. Transport service and
  12. Other service not included elsewhere

7.Role of Services an Economy

Role of Services an Economy
  • the service sector including power Telecom and transport account for 60 – 65 per cent of the economy in the most OECD (organisation for economic cooperation and development )countries while that may be surprising even developing countries have significant proportion of their GDP coming from the service sector
  • Sustained high and broad-based growth is essential for economic development and poverty alleviation what is needed for such growth is in increase in the investment in the economy there are encouraging sings on both the growth and investment fronts in recent years India is the second largest country in the world measured by a population of purchasing power parity it ranks among the top 5 economies of the world and expects to become the third largest economy in the world by 2025
  • as with any growing economy the sectoral composition of GDP has been changing with the services showing an increased share of about 50% and that of agriculture declining to 25% the services sector continued to be the The mainstay of the expansion during 2003-04 contributing 57.6 % to real GDP growth leading the upsurge was trade hotels transport and communication this was in consonance with the improved performance of the commodity producing sectors the strong expansion in the cargo handled at Major ports as well as the rise in freight and passenger traffic of the Railways boosted the performance of the transport sector
  • according to the latest estimates services account for about 63 % of the world economy industry accounts 32% and Agriculture just 5% nearly 70% of the labour force in developed economies is employed in the service sector

Business Services class 11

8.Business Services

Business Services

today’s world is of tough competition where the survival of the fittest is the rule there is no room for non performance and hence companies tend of stick to what they can do best in order to be competitive business Enterprises are becoming more and more dependent on specialised business services Enterprises look towards banks for availability of funds insurance companies for getting their plant machinery goods etc insured Transport companies for transporting raw material and finished

goods and Telecom and Postal service for being in touch with their vendors suppliers and customers today’s globalised world has unshared in a rapid change in the service industry in the India India has been gaining a highly competitive edge over other countries when it comes to providing services to the developed Economies of the world many foreign companies are looking to India for performing a host of business services they are even transferring a part of their business operations to be performed in India will discuss these in detail in the next chapter Banks can be classified into the following”

  1. Commercial banks
  2. Cooperative banks
  3. Specialised banks
  4. Central bank



commercial banks are an important Institution of the economiy for providing in Institutional credit to its customers a banking company in India is the one which transact the business of Banking which means accepting for the purpose of lending and investment of deposit of money from the public repayble on demand or otherwise and withdrawals by Cheques draft order or otherwise in simple terms a bank accept money on deposit repayable on demand and also earns a margin of profit by lending money a bank

Stimulates economic activity in the market by dealing in money its mobilises the savings of people and make s funds available to Business Finance their capital and revenue expenditure it also deals in financial instruments and provides Financial Service for a price i:e interest discount Commission etc

10.Types of banks “

Types of banks “

The focus of banking is varied the needs diverse and methods different thus we need distinctive kinds of banks to cater to the above -mentioned Complexities

  1. Commercial banks”: commercial banks are institution dealing in money these are governed by Indian Banking Regulation Act 1949 and according to it banking means accepting deposits of money from the public for the purpose of lending or investment there are two types of commercial banks public sector and private sector bank public sectors banks are these in which the government has a major stake and they usually need to emphasise on social objectives than on profitability private sector banks are owned managed and controlled by private promoters and they are free to operate as per market forces there are 20 nationalised public sector banks like SBI’ PNB’ IOB’ etc and other private sector banks represented by HDFC bank ICICI bank kotak mahindra bank and Jammu and Kashmir bank
  2. Cooperative banks:” Cooperative banks are governed by the provisions of state cooperative Societies act and meant essentially for providing cheap credit to their members it is an important source of rural credit, i:e agricultural financing In india,
  3. Specialised banks:” specialised banks are foreign exchange banks industrial banks development banks export-import banks catering to specific needs of these unique activities these banks provide financial aid to industries heavy turnkey projects and foreign trade,
  4. Central bank:” the central bank of any country supervises controls and regulates the activities of all the commercial banks of that country it also acts as a government banker it controls and coordinates currency and credit policies of any country the Reserve bank of India is the central bank of our country”

11.Functions of commercial Banks

Functions of commercial Banks

Banks perform a variety of functions some of them are the basic or primary functions of a bank while others are agency or general utility services in nature the important functions are briefly discussed below:

  1. Acceptance of Deposits:” deposits are the basis of the loan operations since banks are both borrowers and lenders of money as borrowers they pay interest and as lenders they grant loans and get interest these deposit are generally taken through current account saving account and fixed (b) crossed cheques which are to be deposited only in the payees account
  2. Lending of Funds:” second major activity of commercial banks is to be provide loans and advances out of the money received through deposits these advances can be made in the form of overdraft cash credits discounting trade bill term loans consumer credits and other miscellaneous advances the Funds lend out by banks contribute a great deal to trade industry transport and other business activities
  3. Cheque Facility:” Banks render a very important service to their customers by collecting their cheques is drawn on other banks the cheque is the most developed credit instrument a unique features and function of banks for the withdrawal of deposits it is the most convenient and an inexpensive medium of exchange there are two types of cheques mainly (a) bearer cheques which are encashable immediately at bank counters and the Bank’s services there is no human operator to respond to the needs of the customer the bank has a centralised data base that is web enabled all the services that the bank has permitted on the Internet are displayed on a menu any service can be selected and further interaction is dictated by the nature of service
  4. Remittance of funds:” another silent function of Commercial Bank is of providing the facility of fund transfer from one place to another on account of the interconnectivity of branches the transfer of funds is administered by using Bank drafts pay order on mail transfer on nominal Commission charges the bank issues a draft for the amount on its own branches at other places or other Banks at these places the payee can present the draft on the drawee Bank at his place and collect the amount
  5. Allied Services” in addition to above functions banks also provide allied services such as bill payments locker facilities underwriting services they also perform other services like buying and selling of shares and debentures on instruction and other personal services like payment of insurance premium collection of dividend etc



the growth of Internet and e-commerce is dramatically changing everyday life with the world wide web and e-commerce transforming the world into a digital Global Village the related latest wave in information technology is internet banking it is a part of ritual banking and another delivery channel for customers

in simple terms internet banking means any user with a PC and a browser can get connected to the Bank’s website to perform any of the virtual banking functions and avail of any

13.benefits of e-banking

benefits of e-banking

There are various benefits of e-banking provided to customers which are ”

  1. E-banking provides 24 hours 365 days a year services to the customers of the bank
  2. E-banking provides unlimited network to the bank and is not limited to the number of branches any PC connected to a modern and a telephone having an internet connection can provides cash withdrawl needs of the customers
  3. Load on branches can be considerably reduced by establishing centralised data base and by taking over some of the accounting functions

14.Functions of Insurance

Functions of Insurance

The various functions of insurance are as follows:”

  1. Providing certainly:” Insurance provides certainly of payment for the risk of loss there are uncertainties of happenings of time and amount of loss insurance remove these uncertainties and the assured receives payment of loss the insurer charges premium for providing the certainity
  2. Protection:” The second main function of insurance is to provide protection from probable chances of loss insurance cannot stop the happening of a risk or event but can compensate for losses arising out iof it
  3. Risk sharing :” On the happening of a risk event the loss is shared by all the persons exposed to it the share is obtained from every insured member by way of premiums
  4. Assist in capital formation:” The accumulated funds of the insurer received by way of premium payments made by the insured are invested in various income generating schemes

15.Principles of Insurance

Principles of Insurance

The Principles of insurance are the rules of action or conduct adopted by the stakeholders involved in the insurance business the specific principles of utmost significance to a valid insurance contract consists of the following”

  1. Utmost good faith:” A contract of insurance is a contract of uberrimae fidei” i:e is a contract found on utmost good faith both the insurer and the insured should display good faith towards each other in regard to the contract It is the duty of the insured to voluntarily make full accurate disclosure of all facts material to the risk being proposed and the insurer to make clear all the terms and conditions in the insurance contract thus it is binding on the proposer to disclose all material facts about the subject matter of the proposed insurance any fact ,
  2. Insurance Internet:” The insured must have an insurable interest in the subject matter of insurance one fundamental fact of this principle is that it is not the house ship machinery potential liability of life that is insured but it is the pecuniary interest of the insured in them which is insured insurable interest in the subject matter of the insured in the subject matter of the insurance contract the insured must have an interest in the preservation of the thing or life insured so that he/ she will suffer financially on the happening of the event against which he / she is insured In case of insurance of property insurable interest of the insured in the subject matter of the insurance must exist at the time of happening of the event,
  3. Indemnity:” all insurance contract of fire or marine insurance are contract of indemnity according to it the insurer undertakes to put the insured in the event of loss in the same position that he occupied immediately before the happening of the event insured against In other words the insurer undertakes to compensate the insurer undertakes to compensate the insured for the loss caused to him / her due to damage or destruction of property insured the compensation payable and the loss suffered are to be measured in term of money the principle of indemnity is not applicable to life insurance
  4. Proximate cause” According to this principle an insurance policy is designed to provide compensation only for such losses as are caused by the perils which are stated in the policy when the loss is the result of two or more causes the proximate cause means the direct the most dominant and most effective cause of which the loss is the natural consequence In case of loss proximate cause of the mishap should be taken into consideration
  5. Contribution” As per this principle it is the right of an insurer who has paid claim under an insurance to call upon other liable insurers to contribute for the loss of payment it implies that in case of double insurance the insurers are to share the losses in proportion to the amount assured by each of them In case there is a loss when there is more than one policy on the same to recover more than the full amount of his actual loss if the full amount is obtain further payment from the other Insurer will cease

16.Postal Service

Postal Service

Indian post and telegraph department provides various postal services across India for providing these service the whole country has been divided into 22 postal circles these circles manage the day to day functioning of the various head post offices sub-post offices and branches post offices through their regional and divisional level arrangement the various facilities provided by postal department are broadly categorised into”

  1. Financial facilities:” These facilities are provided through the post office’s savings schemes like public provident fund (PPF) Kisan vikas patra and National saving certificates in addition to normal retail banking functions of monthly income schemes recurring deposits savings account time deposits and money order facility ,
  2. Mail facilities:” Mail services consist of parcel facilities that is trans -mission of articles from one place to another registration facility to provide security of the transmitted articles and insurance facility to provide insurance cover for all risks in the course of transmission by post ,

Postal department also offers allied facilities of the following: types

  1. Greeting post — A range of delightful greeting cards for every occasion
  2. Media post — An innovative and effective vehicle for Indian corporates to advertise their brand through postcards envelopes aerograms tele grams and also through letterboxes

17.Different between Life, fire and Marine Insurance

Different between Life, fire and Marine Insurance
Series Basis of Difference Life Insurance Fire Insurance Marine Insurance
1Subject matter The subject matter of insurance is human life The subject matter is any physical property or assets The subject matter is a ship cargo or freight
2Element Life insurance has the element of protection and investment or both Fire insurance has only the element of protection and not the element of investment Marine insurance has only the element protection
3Insurable interest Insurable interest must be present at the time of effecting the policy but need not be necessary at the time when the claim falls due Insurable interest on the subject matter must be present both at the time of effecting policy as well as when the claim falls due Insurable interest must be present at the time when claim falls due or at the time of loss only
4Duration Life insurance policy usually exceeds a year and is taken for longer periods ranging from 5 to 30 years of whole life Fire insurance policy usually does not exceed a year Marine insurance policy is for one or mixed
5Indemnity Life insurance is not based on the principle of indemnity the sum assured is paid either on the happening of certain event or on maturity of the policy Fire insurance is a contract of Indemnity the insured can claim only the actual amount of loss from the insurer the loss due to the fire is indemnified subject to the maximum limit of the policy amount Marine insurance policy is for one or period of Voyage or mixed
6Loss Measurement Loss is not Measurable Loss is Measurable Loss is measurable
7Surrender value or paid up value Life Insurance policy has a surrender value or paid up value Fire insurance does not have any surrender value or paid up value Marine insurance does not have any surrender value or paid up value
8 Policy amount One can insure for any amount in life insurance In fire Insurance the amount of the policy cannot be more than the value of the subject matter In Marine insurance the amount of the policy can be the market value of the ship or cargo
9 Contingency of risk There is an element of certainty the event I:e death of maturity or policy is bound to happen therefore a claim will be present The event i:e destruction by fire may not happen there is an element of uncertainty and there may be no claim the event i”e loss at sea may not occur and there may be no claim there is an Uncertainty
Different between Life, fire and Marine Insurance

18.General Insurance

General Insurance
  1. Health Insurance:” Health Insurance is a safeguard against rising medical cost a health insurance policy is a contract between an insurer and an individual or group in which the insurer agrees to provide specified health insurance at an agreed-upon price (the premium) depending upon the policy premium may be payable either in a lump sum or in installments health insurance unusual provides either direct payment or reimbursement or expense associated with illness and injuries the cost and range of protection provided by Health Insurance depends on the provider and the policy purchased in India presently the health insurance exists Primarily in the form of mediclaim policy offered to an individual or to any group Association or corporate bodies
  2. Motor Vehicle Insurance:” Motor vehicle insurance falls under the classification of general insurance this insurance is becoming very popular and its importance increasing day by day In motor insurance through negligence of the motorists or drivers is passed on the insurance company the rate of premium under motor insurance is standardised
  3. Burglary Insurance” Burglary Insurance falls under the classification of insurance of property In case of Burglary policy the loss of damages of household goods and properties and personal effects due to theft larceny burglary house-breaking and acts of such nature are covered the actual loss is compensated (i) Insurance interest must exist at the time of loss but not necessarily at the time when the policy was taken (ii) The principle of causa Proxima will apply to it the insurance company will be liable to pay only that particular or nearest cause that is covered by the policy for Example” if a loss is caused by several reason then the nearest cause of loss will be considered
  4. Cattle Insurance:” A contract of cattle insurance is a contract whereby a sum of money is secured to the assured in the event of death of animals like bulls buffaloes cows and heifers it is a contract against death resulting from accident disease or pregnant condition as the case may be the insurer usually undertakes to pay the excess in the event of loss
  5. Crop Insurance:” A contract of crop insurance is a contract to provide a measure of financial support of farmers in the event of a crop failure due to drought or flood this insurance covers against all risks of loss or damages relating to production of rice wheat millets oil seeds and pulses etc,
  6. Sports Insurance:” This policy assures a comprehensive cover available to amateur sportsmen covering their sporting equipment personal effects legal liability and personal accidents risks if desired the cover can also be made available in respect of the named member of insured’s family residing with him this cover is not available to professional sports angling badminton cricket golf lawn tennis squash use of sporting guns
  7. Amartya Sen siksha Yojana :” This policy offered by the general insurance company secures the education of depends children if the insured parent/ legal guardian sustains any bodily injury resulting solely and directly from an accident caused by external violent and visible means and if such injury shall within twelve calendar months of its Occurrence be the sole and direct cause of his/ her death or permanent total disablement the insurer shall Indemnify the insured student In respect of all covered expenses to be incurred from the date of Occurrence of such accident till the expiry date of policy or completion of the duration of covered course whichever Occurs first and such Indemnity shall not exceed the sum Insured as stated in the policy schedule
  8. Rajeswari Mahila Kalyan Bima Yajana:” This policy has been designed to provide relief to the family members of insured women in case of their death or disablement arising due to all kinds of accidents and /or death and / or disablement arising out problems incidental to women only

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