1. 1.1 INTRODUCTIONYou must all have, at sometime or the other experienced the effectof business activities on your lives. Let us examine few examples ofbusiness activity i.e., purchasing ice cream, CD/cassette etc. what iscommon in all of them is that one is purchasing an item and otheris experiencing a service. But there is definitely a differencebetween the item or good and the service performed. For alayperson, service are essentially intangibles.Service are those separately identifiable, essentiallyintangible activities that provides satisfaction of wants, and are notnecessarily linked to the sale of a product or another service.A goods is a physical product capable of being delivered to apurchaser and involves the transfer of ownership from seller tocustomer. Goods are also generally used to refer to commodities oritem of all types, except service involved in trade or commerce.

2. 1.2 NATURE OF SERVICESThere are five basic features of services. These features alsodistinguish them from goods are known as the five Is of services.The are discussed as below:i. Intangibility: Services are intangible, i.e., they cannot be touched.They are experiential in nature. One cannot touch entertainment ora doctors treatment.ii. Inconsistency: The second important characteristic of services isinconsistency. Since there is no standard tangible product, servicehave to be performed exclusively each time.iii. Inseparability: Another important characteristic of services isthe simultaneous activity of production and consumption beingperformed. This makes the production and consumption of serviceseem to be inseparable. 3. iv. Inventory: Services have little or no tangible components and,therefore, cannot be stored for a future use. That is, services areperishable and providers can, at best, store some associate goodsbut not the service itself. This means that the demand and supplyneeds to be managed as the service has to be performed as andwhen the customer asks for it.v. Involvement: One of most important characteristics of services isthe participation of the customer in the service delivery process. Acustomer has the opportunity to get the services modifiedaccording to specific requirements. 4. 1.2.1 Difference between Services and GoodsForm the above, it is clear that the two main differentiatingcharacteristics of services and goods are non-transferability ofownership and presence of both provider as well as consumer.While goods are produced, services are performed. A service is anact which cannot be taken home. What we can take home is theeffect of the services. And as the services are sold at theconsumption point, there are no inventories. On the basis of abovefeatures, we can have following points of distinction betweengoods and service. 5. 1.3 TYPES OF SERVICESWhen speaking of service sector, services can be classified intothree broad categories, viz., business services, social services andpersonal services. Three have been explained in the followingpages.i. Business services: Business services are those services which areused by business enterprise for conduct of their activities.ii. Social services: Social services are those services that aregenerally provided voluntarily in pursuit of certain social goals.iii. Personal services: Personal services are those services which areexperienced differently by different customers. These servicescannot be consistent in nature. 6. 1.3.1 Business ServicesTodays world is of tough competition, where the survival of the fittest isthe rule. There is no room fro non-performance, and hence companiestend to stick to what they can do best. In order to be competitive,business enterprises, are becoming more and more dependant more andmore dependent on specialized business services. Business enterpriseslook towards bank for availability of funds; insurance companies forgetting their plant, machinery, goods, etc., insured; transport companiesfor transporting raw material; finished goods, and telecom and postalservices for being in touch with their vendors, suppliers and customers.Todays globalised world has ushered in a rapid change in the servicesindustry in India. India has been gaining a highly competitive edge overother countries when it comes to services to the developed economies ofthe world. Many foreign companies are looking to be performed a host ofbusiness services. They are even transferring a part of their businessoperation to be performed in India. 7. 1.4 BANKINGA bank stimulates economic activity in the markets by dealing inmoney. It mobilizes the saving of people and makes funds availableto business financing their capital and revenue expenditure. It alsodeals in financial instruments and provides financial services for aprice i.e., interest, discount, commission, etc. Banking can beclassified into the following:1. Commercial banks2. Cooperative banks3. Specialized banks4. Central banks 8. i. Commercial Banks: Commercial banks are institutions dealing inmoney. These are governed by Indian Banking Regulation Act 1949and according to it banking means accepting deposits of moneyfrom the public for the purpose of lending or investment. There aretwo types of commercial banks, public sector and private sectorbanks.ii. Cooperative Banks: Cooperative banks are governed by theprovisions of State Cooperative Societies Act and meant essentiallyfor providing cheap credit to their members. It is an importantsource of rural credit i.e., agricultural financing in India.iii. Specialized Banks: Specialized banks are foreign exchangebanks, industrial banks, development banks, export-import bankscatering to specific needs of these unique activities. These banksprovide financial aid to industries, heavy turnkey projects andforeign trade. 9. iv. Central Bank: The central bank of any country supervises,controls and regulates the activities of all the commercial banks ofthat country. It also acts as a government banker. It controls andcoordinates currency and credit policies of any country. The RBI isthe central bank of our country. 10. 1.4.2 Functions of Commercial BanksBanks perform a variety of functions. Some of them are the basic orprimary functions of a bank while others are agency or generalutility services in nature. The important functions are brieflydiscussed below:i. Acceptance of depositsii. Lending of fundsiii. Cheque facilityiv. Remittance of fundsv. Allied services 11. 1.4.3 e-BankingThe growth of Internet and e-commerce is dramatically changingeveryday life, with the world wide web and e-commercetransforming the world into a digit global village. The latest wave ininformation technology is internet banking . It is a part of virtualbanking and another delivery channel for customers.Benefitsi. e-banking provided 24 hours, 365 days a year services to thecustomers of the bank.ii. Customers can make some of the permitted transactions fromoffice or house or while travelling via mobile telephone.iii. It inculcates a sense of financial discipline by recording each andevery transaction. 12. 1.5 INSURANCEInsurance is a device by which the loss likely to be caused by anuncertain event is spread over a no. of persons who are exposed toit and who prepare to insure themselves against such an event. It isa contract or agreement under which one party agrees in return fora consideration to pay an agrees amount of money to anotherparty to make a loss, damage or injury to something of value inwhich the insured has a pecuniary interest as a result of someuncertain event. The agreement/contract is put in writing and isknown as policy. The person whose risk is insured is calledinsured and the firm which insures the risk of loss is known asinsurer/assurance underwriter. 13. 1.5.2 Functions of Insurancei. Providing certaintyii. Protectioniii. Risk sharingiv. Assist in capital formation 14. 1.5.3 Principles of Insurancei. Utmost good faith: A contract of insurance is a contract ofuberrimae fidei i.e., a contract found on utmost good faith. Boththe insurer and the insured should display good faith towards eachother in regard to the contract.ii. Insurable Interest: The insured must have an insurable interest inthe subject matter of insurance. One fundamental fact of thisprinciple is that it is not the house, ship, machinery, potentialliability of life that is insured, but it is the pecuniary interest of theinsured in them, which is insured. iii. Indemnity: The insurer undertakes to compensate the insuredfor the loss caused to him/her due to damage or destruction ofproperty insured. 15. iv. Proximate Cause: According to this principle, an insurance policyis designed to provide compensation only for such losses as arecaused by the policy.v. Subrogation: It refers to the right of the insurer to stand in theplace of the insured, after settlement of a claim, as far as the rightof insured in respect of recovery from an alternative source isinvolved.vi. Contribution: As per this principle it is the right of an insurerwho has paid claim under an insurance, to call upon other liableinsurers to contribute for the loss of payment.vii. Mitigation: This principle states that it is the duty of the insuredof the insured to take reasonable steps to minimize the loss ordamage to the insured property. 16. 1.5.4 Types of InsuranceLIFE INSURANCELife insurance may be defined as a contract in which the insurer inconsideration of a certain premium, either in a lump sum or beother periodic payments, agrees to pay to the assured, or to theperson for whose benefit the policy is taken, the assured sum ofmoney, on the happening of a specified event contingent on thehuman life or at the expiry of certain period.A life insurance policy was introduced as a protectionagainst the uncertainty of life. But gradually its scope has widenedand there are various types of insurance policies available to suitthe requirements of an individual. For example, disability insurance,health/medical insurance, annuity insurance and life insuranceproper. 17. Types of life insurance policiesi. Whole life policy: The amount payable to the insured will not bepaid before the death of the assured. The sum then becomespayable only to the beneficiaries or their of the deceased.ii. Endowment life assurance policy: The insurer undertakes to paya specified sum when the insured attains a particular age or on hisdeath which ever is earlier. The sum is payable to his legal heir/s ornominee named therein in case of death of the assured.iii. Joint life policy: This policy is taken up by two more persons.The premium is paid jointly or by either of them in installment orlump sum. The assured sum or policy money is payable upon thedeath of any one person to the other survivor or survivors.iv. Annuity policy: Under this policy, the assured sum or policymoney is payable after in monthly, quarterly, half yearly or annualinstallments. 18. v. Childrens endowment policy: This policy is taken by a person forhis/her children to meet the expenses of their education ormarriage. The agreement states that a certain sum will be paid bythe insurer when the children attain a particular age.FIRE INSURANCEFire insurance is a contract whereby the insure, in consideration ofthe premium paid, undertakes to make goods any loss or damagecaused by fire during a specified in the policy. Normally, the fireinsurance policy is for a period of one year after which it is to berenewed from time to time. The premium may be paid either inlump sum or installments. 19. MARINE INSURANCEA marine insurance contract in an agreement whereby the insurerundertakes to indemnify the insured in the manner and to theextent thereby agreed against marine losses. Marine insuranceprovides protection against loss by marine perils are collision ofship attacked by the enemies, fire and captured by pirates andactions of the captains and crew of the ship. These perils causedamage, destruction or disappearance of the ship and cargo andnon-payment of freight. So, marine insurance insures ship hull,cargo and freight. Thus, it is a device wherein the insurerundertakes to compensate the owner of the ship or cargo forcomplete or partial loss at sea. The insurer guarantees to makegood the losses due to damage to the ship or cargo arising out ofthe risks incident to sea voyages. The insurer in this case is knownas the underwriter and a certain sum of money is paid by theinsured in consideration for the guarantee/protection he gets.Marine insurance is slightly different from other types. 20. There are three things involved i.e., ship or hull, cargo or goods andfreight.i. Ship or hull insurance: Since the ship is exposed to many dangersa sea, the insurance policy is for indemnifying the insured for lossescaused by damage to the ship.ii. Cargo insurance: The cargo while being transported by ship issubject to many risks. These may be at port i.e., risk of theft, lostgoods or on voyage etc. thus, an insurance policy can be issued tocover against such risks to cargo.iii. Freight insurance: If the cargo does not reach the destinationdue to damage or loss in transit, the shipping company is not paidfreight charges. Freight insurance is for reimbursing the loss offreight to the shipping company i.e., the insured. 21. Difference between life, fire and marine insuranceSl.No Basis of difference Life insurance Fire insurance Marine insurance1 Subject matter The subject matter ofinsurance is human life.The subject matter is anyphysical property or assets.The subject matter is theship, cargo or freight.2 Element It has the elements ofprotection and investment orboth.It has only the element ofprotection and not the elementof investment.It has only the element ofprotection.3 Insurable interest Insurable interest must bepresent at the time of affectingthe policy but need not benecessary at the time whenthe claim fails due.Insurable interest on thesubject matter must be presentboth at the time of affectingpolicy as well as when the claimfails due.Insurable interest must bepresent at the time whenclaim fails due or at the timeof loss only.4 Duration Life insurance policy usuallyexceed a year and is taken forlonger periods ranging from 5to 30 years or whole life.Fire insurance policy usuallydoes not exceed a year.Marine insurance policy is forone or period of voyage ormixed. 22. 5 Indemnity Life insurance is not based onthe principle of indemnity. Thesum assured is paid either onthe happening of certain eventof on maturity of the policy.Fire insurance is a contract ofindemnity. The insured canclaim only the actual amountof loss from the insurer. Theloss due to the fire isindemnified subject to themaximum limit of the policy.Marine insurance is a contractof indemnity. The insured canclaim the market value of theship and cost of goodsdestroyed at sea and the losswill be indemnified.6 Loss measurement Loss is not measurable. Loss is measurable. Loss is measurable.7 Surrender value orpaid up valueLife insurance policy has asurrender value or paid upvalue.Fire insurance does not haveany surrender value or paid upvalue.Marine insurance does nothave any surrender value orpaid up value.8 Policy amount One can insure for any amountin life insurance.In fire insurance, the amountof the policy cannot be morethan the value of the subjectmatter.In marine insurance theamount of the policy can bethe ship or cargo.9 Contingency There is an element ofcertainty. The event i.e., deathof maturity or policy is boundto happen. Therefore a claimwill be present.The event i.e., destruction byfire may not happen. There isan element of uncertainty andthere may be no claim.The event i.e., loss at sea maynot occur and there may beno claim. There is an elementof uncertainty. 23. 1.6 COMMUNICATION SERVICESCommunication services are helpful to the business for establishinglinks with the outside world viz., suppliers, customers, competitors etc.business does exist in isolation, it has to communicate with others fortransmission of ideas and information. Communication services needto be very efficient accurate and fast for them to be effective.Postal servicesIndian post and telegraph department provides various postal servicesacross India. For providing these services the whole country has beendivided into 22 postal circles. These circles manage the day-to-dayfunctioning of the various head post offices, sub-post offices andbranch post office. Through their regional and divisional levelarrangements the various facilities provided by postal departmentalare broadly categorized into:i. Financial facilitiesii. Mail facilities 24. Telecom servicesWorld class telecommunications infrastructure is the key to rapideconomic and social development of the country. It is in fact thebackbone of every business activity. In todays world the dream ofdoing business across continents will remain a dream in the absence oftelecom infrastructure. There have been far reaching developments inconvergence of telecom, IT, consumer electronics and media industriesworldwide. New telecom policy framework 1999 an broadband policy2004 were developed by the government of India. Through thisframework the government intends to provide both universal servicesto all uncovered areas and high-level services for meeting the needs ofthe countrys economy. 25. There various types of telecom services are:i. Cellular mobile servicesii. Radio paging servicesiii. Fixed line servicesiv. Cable servicesv. VSAT servicesvi. DTH services 26. 1.7 TRANSPORTATIONTransportation companies freight services together with supportingand auxiliary services by all modes of transportation i.e., rail, road,air and sea for the movement of goods and international carriageof passengers.WarehousingThe warehouse was initially viewed as a static unit for keeping andstoring goods in a scientific and systematic manner so as tomaintain their original quality value and usefulness. The typicalwarehouse received merchandise by rail, truck or bullock cart. Theitems were moved manually to a storage within the warehouse andhand piled in stacks on the floor. They are used by manufacturers,importers, exporters, wholesalers, transport, business, customsetc., in India. 27. Types ofWarehousesi. Private warehouses: Private warehouses are operated, owned orleased by a company handling their own goods, such as retail chainstores or multi-brand multi-product companies.ii. Public warehouses: Public warehouses can be used for usage forstorage of goods by traders, manufacturers or any member of thepublic after the payment of a storage fee or changes. Thegovernment regulates the operation of these warehouses byissuing licenses for them to private parties.iii. Bonded warehouses: Bonded warehouses are licensed by thegovernment to accept imported goods prior to payment of tax andcustoms duty. These are goods which are imported from othercountries. Importers are not permitted to remove goods from thedocks or the airport till customs duty is paid. 28. iv. Government warehouses: These warehouses are fully ownedand managed by the government. The government manages themthrough organizations set up in the public sector. For example, FoodCorporation, and Central Warehousing Corporation.v. Cooperative warehouses: Some marketing cooperative societiesor agricultural cooperative societies have set up their ownwarehouses for members of their cooperative society.Functions of warehousinga) Consolidation: In this function the warehouse receives andconsolidates, materials/goods from different production plants anddispatches the same to a particular customer on a singletransportation shipment. 29. b) Break the bulk: The warehouse performs the function of dividingthe bulk quantity of goods received from the production plants intosmaller quantities. These smaller quantities are then transportedaccording to the requirements of clients to their places of business.c) Stock pilling: The next function of warehousing is the seasonalstorage of goods to select businesses. Goods or raw materialswhich are not required immediately for sale or manufacturing arestored in warehouses.d) Value added services: Certain value added services are alsoprovided by the warehouses, such as in transit mixing, packagingand labeling.e) Price stabilization: By adjusting the supply of goods with thedemand situation, warehousing performs the function of stabilizingprices. 30. f) Financing: Warehouse owners advance money to the owners onsecurity of goods and further supply goods on credit terms tocustomers. 31. High Order Thinking Skills Questions(HOTS)Q1. Which concern provide DTH services?Ans. Cellular companies.Q2. Which of the contract is not applicable in life insurancecontract?Ans. Indemnity contract.Q3. What is the full form of CWC?Ans. Central Warehousing Corporation.Q4. Name the warehouse where imported goods are kept?Ans. Bonded warehouse. 32. Short Answer Question (SAQ)Q1. Define services and goods.Ans. Service are those separately identifiable, essentially intangible activities thatprovides satisfaction of wants, and are not necessarily linked to the sale of a productor another service.A goods is a physical product capable of being delivered to a purchaser andinvolves the transfer of ownership from seller to customer. Goods are also generallyused to refer to commodities or item of all types, except service involved in trade orcommerce.Q2. What is e-banking? What are the advantages of e-banking?Ans. 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 digit globalvillage. The latest wave in information technology is internet banking . It is a part ofvirtual banking and another delivery channel for customers.Benefitsi. e-banking provided 24 hours, 365 days a year services to the customers of the bank.ii. Customers can make some of the permitted transactions from office or house orwhile travelling via mobile telephone.iii. It inculcates a sense of financial discipline by recording each and every transaction. 33. Q3. Write a note on various telecom services available forenhancing business.Ans.i. Cellular mobile services: These are all types of mobile telecomservices including voice and non-voice messages, data services andPCO services utilizing ant type of network equipment within theirservice area.ii. Radio paging services: Radio Paging Service is an affordablemeans of transmitting to persons even when they are mobile. It is aone-way information broadcasting solution, and has spread itsreach far and wide.iii. Fixed line services: These are all types including voice and non-voicemessages and data services to establish linkages for longdistance traffic. 34. iv. Cable services: These are linkages and switched services withina licensed area of operation to operate media services, which areessentially one way entertainment related services. The two waycommunication including voice, data and information services.v. VSAT services: VSAT is a satellite-based communications service.It offers businesses and government agencies a highly flexible andreliable communication solution in both urban and rural areas.Compared to land-based services, VSAT offers the assurance ofreliable and uninterrupted service that is equal to or better thanland-based services.vi. DTH services: DTH is again a satellite based media servicesprovided by cellular companies. One can receive media servicesdirectly through a satellite with the help of small dish antenna anda set top box. The services provider of DTH services provides abouquet of multiple channels. 35. Q4. Explain warehousing and its functions.Ans. The warehouse was initially viewed as a static unit for keepingand storing goods in a scientific and systematic manner so as tomaintain their original quality value and usefulness. The typicalwarehouse received merchandise by rail, truck or bullock cart. Theitems were moved manually to a storage within the warehouse andhand piled in stacks on the floor. They are used by manufacturers,importers, exporters, wholesalers, transport, business, customsetc., in India.Functions of warehousinga) Consolidation: In this function the warehouse receives andconsolidates, materials/goods from different production plants anddispatches the same to a particular customer on a singletransportation shipment. 36. b) Break the bulk: The warehouse performs the function of dividingthe bulk quantity of goods received from the production plants intosmaller quantities. These smaller quantities are then transportedaccording to the requirements of clients to their places of business.c) Stock pilling: The next function of warehousing is the seasonalstorage of goods to select businesses. Goods or raw materialswhich are not required immediately for sale or manufacturing arestored in warehouses.d) Value added services: Certain value added services are alsoprovided by the warehouses, such as in transit mixing, packagingand labeling.e) Price stabilization: By adjusting the supply of goods with thedemand situation, warehousing performs the function of stabilizingprices. 37. Long Answer Question (LAQ)Q1. What are services? Explain their distinct characteristics?Ans. Service are those separately identifiable, essentially intangibleactivities that provides satisfaction of wants, and are not necessarilylinked to the sale of a product or another service.Characteristicsi. Intangibility: Services are intangible, i.e., they cannot be touched. Theyare experiential in nature. One cannot touch entertainment or a doctorstreatment.ii. Inconsistency: The second important characteristic of services isinconsistency. Since there is no standard tangible product, service have tobe performed exclusively each time.iii. Inseparability: Another important characteristic of services is thesimultaneous activity of production and consumption being performed.This makes the production and consumption of service seem to beinseparable. 38. iv. Inventory: Services have little or no tangible components and,therefore, cannot be stored for a future use. That is, services areperishable and providers can, at best, store some associate goodsbut not the service itself. This means that the demand and supplyneeds to be managed as the service has to be performed as andwhen the customer asks for it.v. Involvement: One of most important characteristics of services isthe participation of the customer in the service delivery process. Acustomer has the opportunity to get the services modifiedaccording to specific requirements. 39. Q2. What is insurance. State the function of insurance.Ans. Insurance is a device by which the loss likely to be caused byan uncertain event is spread over a no. of persons who are exposedto it and who prepare to insure themselves against such an event. Itis a contract or agreement under which one party agrees in returnfor a consideration to pay an agrees amount of money to anotherparty to make a loss, damage or injury to something of value inwhich the insured has a pecuniary interest as a result of someuncertain event. The agreement/contract is put in writing and isknown as policy. The person whose risk is insured is calledinsured and the firm which insures the risk of loss is known asinsurer/assurance underwriter. 40. Functions of Insurancei. Providing certaintyii. Protectioniii. Risk sharingiv. Assist in capital formation