Class 11-commerce NCERT Solutions Business Studies Chapter 4: Business Services

Services are intangible economic activities which are consumed at the point of sale. These activities provide satisfaction of wants but may not necessarily involve sale of product. Also, such activities cannot be kept in stock. Examples of services include the services of a lawyer and doctor.

Goods are products which can be felt physically (tangible). These are products which are delivered from the seller to the purchaser. They involve transferring of ownership from one person to another. They are used to refer to commodities or items of various types. Examples of goods include any kind of physical product such as a pen and a chair.

E-banking is a system wherein various bank services are processed through the Internet. These services include transferring money, checking accounts, opening fixed deposit, applying for loans and paying bills.

Advantages of E-Banking:

• Provides round the clock services to customers
• Transactions can be made by consumers from any place like from their house and office through a smartphone
• Gives security and freedom to consumers by letting them travel cashless
• Provides a sense of financial satisfaction to consumers as the details of all the transactions are available to them at their finger tips 

Various telecom services available for enhancing businesses:

1. Cellular Mobile Services include all forms of telecom mobile services, i.e. call (voice), messages (non-voice), Internet services and landline facilities. They also use any form of network equipment within the serviceable area.
2. Radio Paging Service transmits information from one person to another at a reasonable rate even when the person is mobile. These services include tone, numeric and alpha/numeric paging.
3. Fixed Line Services are used for long-distance calls. They include call (voice), messages (non-voice) and data services. Unlike cellular mobile services, these services use any form of network equipment which is laid down across the country.
4. Cable Service is a one-way entertainment service which transmits media-related information in a specific area.
5. VSAT Services or very small aperture terminal services uses satellite to transmit information or data. Such services are very useful to the government and businesses and are considered reliable and flexible in urban and rural areas. VSAT service is also an uninterrupted form of communication compared to other forms.
6. DTH Service or Direct to Home service is again a satellite-based one-way service which transmits media-related information. Here, information is received from the satellite through a small dish antenna and a set top box. 

Principles of insurance:

1. Utmost good faith: The contract of insurance is based on utmost good faith. According to this principle, both insurer and insured should have complete faith in each other and should disclose all the material facts to each other relating to the contract.

Example: If the assured party hides any important material fact from the insurer, then the insurer can deny compensation to the assured party in case of misfortune to the assured party because of the hidden fact.

2. Insurable Interest: This principle states that the insured should have some kind of interest in the thing or person for which the insurance is taken. This is a necessary condition as without this it would become a fraudulent activity and not acceptable under law.

Example: Insurance can be taken for a close family member such as spouse or child; however, taking insurance for an unknown person is not acceptable.

3. Indemnity: The insurer should compensate the insured for the entire loss so that there is no difference between the insurer's financial position before and after the loss. This principle is not applicable to life insurance because it is not possible to estimate the amount of loss incurred due to death of the person.

Example: If an individual has taken a policy worth Rs 1 lakh but suffered a loss of Rs 75,000, then the insurance company will compensate Rs 75,000 only and not Rs 1 lakh.

4. Subrogation: This principle states that once the person claims the compensation for the loss, the ownership of that specific thing/property shifts to the insurer. This is because the insured has already received the amount for the loss, and thus, he is not allowed to sell the damaged property to make profit.

Example: A person who has damaged car parts in a car accident is entitled to receive compensation for those parts and the ownership of the damaged parts will be given to the insurer.

5. Contribution: Many a times a person takes more than one policy to cover the same risk which is known as double insurance. Thus, at the time of compensation, all the insurers will compensate the insured with the amount equal to the actual loss. The insured cannot claim the total loss amount separately from each insurer. Furthermore, if one insurer has paid the whole amount to the insured, then the remaining insurers will pay their part to the insurer who has compensated the insured for the loss.

Example: The insured has taken a policy from three insurers. On suffering loss, Rs 90,000 as a compensation needs to be given to the insured. All the insurers will equally distribute the amount among them, i.e. Rs 30,000 each, and compensate the insured.

6. Mitigation: This principle states that the insured should take care of the property after taking the insurance also. He needs to be careful about the risk even after taking the insurance.

Example: If a person has taken insurance for his vehicle, then he needs to take all possible measures to reduce any kind of damage to the vehicle.

7. Causa Proxima Principle: As per this principle, an insured can be awarded compensation only for losses stated in the contract. Also, when there is more than one cause, the proximate cause i.e. the cause that is forthright/direct is taken into consideration by the insurance company for compensation.  

Example: A person has taken fire insurance to insure goods in case of fire. However, his goods are ruined by the heat of fire at another location. The insurer would not be liable to pay the insured any compensation. 

Warehousing refers to a storage unit which is used to store various goods in an orderly manner so as to preserve their worth and quality. It not only provides storage space but also logistics services which tend to be profitable and economical.

Functions of warehousing:

1. Consolidation: It receives products from various places. It helps in consolidation of all the materials received and then sends it across as a single product package to the desired location. 
2. Bulk division: It also helps in separating bulk quantities and sending it in smaller packages to specific locations. 
3. Piling up of stocks: Many a times, packages received at the storehouse are not required immediately. So, these products are then stored at the warehouse and sent to the desired locations as and when required. 

Services are intangible economic activities which are consumed at the point of sale. These activities provide satisfaction of wants but may not necessarily involve sale of product. Also, these kinds of activities cannot be kept in stock.

Characteristics of services:

1. Intangible: Services cannot be touched and seen but are felt and experienced. The quality of the service cannot be judged before buying/experiencing the service. Thus, it becomes essential for the service provider to offer an optimal service experience which satisfies customers.
2. Inconsistency: Needs of customers are different. Hence, services provided to each customer require customisation. Thus, services offered vary for different customers. This results in inconsistency of services which becomes an important characteristic of the service.
3. Inventory: One of the important features of a service is that it cannot be kept aside to be consumed in the future. The need for maintaining an inventory does not exist. Hence, if the service is not used at the right time, then it results in the loss of that service.
4. Inseparability: Service is an activity whose production and consumption happen at the same place. Thus, they are inseparable in nature.
5. Involvement: Involvement of the service user and service provider is a must to consume or provide a service. 

Functions of commercial banks:

1. Accepting deposits: Banks play an essential role in the economy as they borrow money from the public in the form of deposits and pay interest and they lend money to the public or investors and get interest. They accept various types of deposits from the public through current accounts, fixed accounts and savings accounts.
2. Lending funds: Banks use the deposited money by providing loans and advances to the people or investors who are in need of money. The advances can be in various forms such as overdrafts, cash credits, term loans and trade bills. The amount to be lent depends on the amount of money deposited in the bank.
3. Cheque facility: A cheque is an inexpensive means wherein a bank is directed to pay a certain amount of money from a person's account to another. Cheques are of two types which are bearer cheques and crossed cheques. This is an essential service provided by banks to the public.
4. Remittance of funds: This function involves transferring of funds from one bank to another. This can be done using pay orders, bank drafts or mail transfers.
5. Allied services: Banks also provide various other services which are known as allied services. These include bill payments, locker facilities, helping customers in the share market, underwriting services, dividend collection and insurance premium payment. 

Indian Postal Department provides a variety of services all over the country. In this regard, the country has been divided into 22 postal circles. These circles manage the working of various head post offices, sub-post offices and branch offices.

Facilities offered by Indian Postal Department:

1. Financial Facilities: The post office provides financial facilities through its various saving schemes such as

• Public Provident Fund (PPF)
• National Saving Certificates
• Kisan Vikas Patra

They also provide facilities such as retail banking for savings accounts, recurring deposits or monthly income schemes.

2. Mail facilities: This service involves transmitting articles/goods/products from one place to another. It also provides registration facility and insurance for goods during its period of transmission to provide security to the goods and save the products from any risk.
3. Allied Facilities: There are various such services:

• Greeting Post: It has various greeting cards for every occasion.
• Media Post: This service is used by Indian cooperatives to advertise their brand in a novel and effective manner-a postcard, envelope or aerogramme.
• Direct Post: This service is used to advertise directly to both addressed and unaddressed.
• International Money Transfer: Money can be transferred from 185 countries to India.
• Passport Facilities: Because of a partnership with the Ministry of External Affairs, the process of passport application has been facilitated.
• Speed Post: This facility covers over 1000 destinations in the country to transmit mails. It also has links with more than 97 countries across the globe.
• e-Bill Post: It is the latest addition to the postal services. It collects payments for BSNL and Bharti Airtel services from consumers across the country. 

Various types of insurance:

1. Life insurance: Life insurance is the contract between the insurer and the insured wherein the insurer has the responsibility to pay a certain fixed amount to the insured at the time of the death of the assured or at the maturity of the insurance policy whichever is early. This insurance is also taken for the investment purpose or to keep oneself economically independent even in old age.

In this insurance, the person applying for insurance is supposed to pay a fixed amount which is known as premium. In exchange, the insurance company promises to pay a specified sum of money.

Main elements of life insurance:

• It should have all the essentials of a valid contract.
• It should be a contract which is made in utmost faith.
• Insurer needs to have insurable interest in the life of the assured.
• It does not follow the principle of indemnity.

2. Fire Insurance: This contract is made by an insured when he needs to safeguard his things from fire. In this insurance, the insurer agrees to pay an amount (specified in the contract) to the insured which he faces due to damage caused by fire. Fire insurance is mainly valid for a year which can be extended from time to time. Fire insurance contract covers the risk/damage only if the loss is actual and the fire is accidental and unintentional.

Main elements of fire insurance:

• Insured must have insurable interest in the assured things.
• It follows the principle of indemnity.
• There should be utmost good faith in the fire insurance contract.
• The insured will be compensated only when fire is the proximate cause of loss.

3. Marine Insurance: This insurance involves a contract between an insurer and insured for marine-related loss. Marine losses involve ship collision with rocks, enemy attack on ship and pirate attack on ship.

Main elements of marine insurance:

• It follows the principle of indemnity.
• This contract is made with utmost faith.
• The principle of causa proxima applies in this contract.
• The insured must have insurable interest at the time of loss. 

Warehousing services:

1. Consolidation: It receives products from various places. It helps in consolidation of all the materials received and then sends it across as a single product package to the desired location. 
2. Bulk division: It helps in separating bulk quantities and sending it in smaller packages to specific locations. 
3. Piling up of stocks: Many a times, the packages received at the storehouse are not required immediately. So, these products are then stored at the warehouse and sent to the desired locations as and when required. 
4. Value-added services: Apart from storage, it also provides other facilities such as mixing of content while in transit, packaging and labelling. 
5. Price stabilisation: As the products are kept in warehouses, it sometimes carries out the function of stabilising prices. Prices are stabilised by controlling the supply according to the demand situation. 
6. Financing: Owners of warehouses lend money to product owners for the security of goods. They may supply money to customers on a credit basis.