Chapter 10 Flashcards
What is internal trade ?
Trade that takes place within a country is called internal trade
What is external trade ?
Trade between two or more countries is known as external trade
No customs or import duty is levied on what goods ?
goods that are part of domestic production and are meant for domestic consumption
What can internal trade be classified into ?
- Wholesale trade
- Retail trade
Define wholesale trade
purchase and sales of goods and services in large amounts for the purpose of resale or intermediate use is referred to as wholesale trade
Define retail trade ?
purchase and sales of goods in relatively small quantities, generally to the ultimate consumers is referred to as retail trade
Who do wholesalers provide services to
- to manufacturers
- to retailers
What are the services to manufacturers by wholesalers (7)
- Facilitate large scale production
- Bearing risks
- Financial assistance
- Expert advice
- Help in marketing function
- Facilitate production continuity
- Storage
Explain the function : (wholesalers to manufacturers) ; facilitate large scale production
Wholesalers collect small orders from retailers pool them and then help manufacturers produce in whole and let them take advantage of economies of scale
Explain the function : (wholesalers to manufacturers) ; Bearing risks
Wholesalers store the goods in their own warehouses therefore bearing the risk of theft, fire and etc…
Explain the function : (wholesalers to manufacturers) ; Financial assistance
Wholesalers provide financial assistance by buying in cash payment which means manufacturers will have more working capital to keep producing goods
Explain the function : (wholesalers to manufacturers) ; Expert advice
Since the wholesalers are in direct contact with the retailers who know market demand and informations, wholesalers educate the manufacturers about the consumer preferences
Explain the function : (wholesalers to manufacturers) ; facilitate production continuity
Wholesalers help in production continuity by one making cash purchases and also by making them he time they are done producing and store them in their own warehouses helping manufacturers to continue producing
Explain the function : (wholesalers to manufacturers) ; help in marketing function
Wholesalers take care of the distribution of the goods that manufacturers make in wide geographical areas allowing marketing of their goods in various places
Explain the function : (wholesalers to manufacturers) ; Storage
Wholesalers store the goods on their own warehouses and reduce the manufacturers burden of providing a space to store them
What are the services to retailers by wholesalers (5)
- Availability of goods
- Marketing support
- Grant of credit
- Specialised knowledge
- Risk sharing
Explain the function : (wholesalers to Retailers ) ; Availability of goods
Wholesalers keep goods ready for the use of retailers so that the retailers can re stock them any time they need it
Explain the function : (wholesalers to Retailers ) ; Marketing support
The wholesalers carry out various marketing activities which help gain popularity of the product and help the retailers sell these products
Explain the function : (wholesalers to Retailers ) ; Grant of credit
Wholesalers grant credit to retailers allowing them to pay slower and have more cash in flow
Explain the function : (wholesalers to Retailers ) ; Specialised knowledge
Wholesalers have specialised knowledge about the various goods in a line of product and they can inform retailers on how to decorate it and sell it
Explain the function : (wholesalers to Retailers ) ; Risk sharing
Wholesalers buy in bulk but they sell in small quantities so retailers can avoid the risks of storage and those associated to it like theft risk, fire risk and etc…
Who represent the final stage of distribution
Retailers as they get the goods transferred from the manufacturers to the ultimate consumer
What are the services to manufacturers/ wholesalers by retailers (5)
- Help in distribution of goods
- Personal selling
- Enabling large scale production
- collecting market information
- Help in promotion
Explain the function : (Retailers to wholesalers/ manufacturers) ; Help in distribution of goods
Retailers make the produced goods available to the consumers by selling them in small quantities in various geographical locations
Explain the function : (Retailers to wholesalers/ manufacturers) ; Collecting market information
Retailers are at direct contact with the consumers so they collect market information and provide them to the manufacturers and the manufacturers will know what to produce according to likings
Explain the function : (Retailers to wholesalers/ manufacturers) ; Personal selling
The reatailers do too take some actions to market and sell the goods and not just depend on the wholesalers , which relieve the manufacturers and wholesalers of some work
Explain the function : (Retailers to wholesalers/ manufacturers) ; Help in promotion
Manufacturers at time promote their goods with coupon and free gift, retailers help the consumers reach these incentives and make the product popular amongst them
Explain the function : (Retailers to wholesalers/ manufacturers) ; Enabling large scale production
Since retailers reach out to the customers and sell the goods in small quantities to many people manufacturers can focus on large scale production and forget about the distribution
What are the services to consumers by retailers (6)
- Regular availability of products
- New product information
- Convinience in buying
- Wide selection
- After - sales services
- Provide credit facilities
Explain the function : (Retailers to consumers) ; Regular availability of products
Retailers keeps all products of all brands available at any time so that consumers can buy them when they need it
Explain the function : (Retailers to consumers) ;New products information
By effective display of products and personal selling efforts, new goods are introduced and sold to consumers
Explain the function : (Retailers to consumers) ; wide selection
Retailers keep in stock various goods from various manufacturers that keep a variety for the consumers
Explain the function : (Retailers to consumers) ;After sales services
retailers provide important services like after sales services to help the consumer use the product better and be satisfied with the product
Explain the function : (Retailers to consumers) ; Convinience in buying
Retailers though they buy in large quantities they sell in smaller quantities that fit the needs of the consumer
Explain the function : (Retailers to consumers) ; Provide credit facilities
Retailers sometimes provide credit facilities to known buyers, which helps consumers by getting the good immediately without the need of money in case of urgence
What are the different types of retail trade differentiated by(4)
- size of business
- type of ownership
- merchandise handled
- a fixed place of business
What are the two types of retailing trade
- itinerant traders
- Fixed shop retailers
Characteristics of itinerant traders (4)
- Small traders with limitted redources
- Deal with consumer products
- Provide greater customer service like (door to door service )
- They have limitted inventory as they do not have a fixed place
What is meant by itinerant traders
Itinerant traders are those who do not have a fixed place to operate their business from they keep moving their goods
what are the types of itinerant traders (4)
- peddlers and hawkers
- Market traders
- street traders
- cheap jacks
Explain peddlers and hawkers
The types of people carry their goods in a cycle or rickshaw and move from place to place selling their goods
Explain market traders
They are people who sell the same product but in different outlets in different days (one outlet on sundays and modays and other outlets at other days
Explain street traders / pavement vendors
They do not change their location often but they carry their goods and sell them where consumer flow is large like railway stations and temple festivals
What is meant by fixed shop retailers
They do not move from place to place and have a fixed, certain location
Explain cheap jacks
They keep changing their location of business according to needs , but not change as much as hawkers or market traders. They have independant shops of temparory nature
What are the characteristics of fixed shop retailers(3)
- Compared to itinerant traders they have greater resources
- They deal in more products
- Have greater credibility amongst consumers and they provide more services like home delivery
What are the types of fixed shop retailers
- Fixed small shop retailers
- Fixed large retailers
Explain general stores
Remain in localities (easy access) have a variety of products consumers need day to day and are opened for longer time . Owner can mingle with consumers and have an image an raport with the consumers
What are the types of fixed shop small retailers (4)
- General stores
- Speciality shop
- Street stall holders
- Second hand goods shop
Explain speciality shops (3)
- Famous in urban areas
- Located in central places
- only sell one line of products ( only womens wear and not mens or children)
Explain street stall holders
Commonly found in street traffics where there is floating crowds and attract them to buy their goods, they sell small items like toys
Explain second hand goods shop
These shops sell at a lower price anything that is in a decent manner even after usage by someone else
Explain departmental stores with features (5)
- Wide variety
- Well defined departments
- Everything in one roof
Features : - May provide other facilities like restaurant and telephone booths
- Located in the heart of the city
- They are normally formed as joint stock companies
- They do both wholesaling and retailing work as they purchase from the manufacturers and store them in their warehouses
- They have centralised purchasing arrangements
Merits of departmental stores (5)
- Attract large number of customers
- Convinience in buying
- Attractive services
- Economy of large scale operations
- Promotion of sales
Explain merits of departmental stores - attract large numbers of customers
These stores are located in the central so they attract large number of customers
Explain merits of departmental stores - convinience in buying
All varieties of all items are under one roof so customers do not have to run from place to place to buy everything and can buy all at one stop
Explain merits of departmental stores - attractive services
Departmental stores also provide services to the customers on top of just sales for example home delivery of goods
Explain merits of departmental stores - promotion of sales
Departmental stores can spend money to promote goods and stuff to improve sale
Explain merits of departmental stores - economy of large scale operations
As they operate in large scale they buy in bulk and other things that helps them make advantage of economies of operations
De merits of departmental stores (4)
- Lack of personal attention
- High operating costs
- High possibility costs
- Inconvinient locations
Explain de merits of departmental stores - lack of personal attention
It is hard to provide personalised attention to all the customers in the store as they operate on a large scale
Explain de merits of departmental stores - high operating costs
Since these stores also aim to provide services their operating costs also tend to be high (free after sales service etc…)
Explain de merits of departmental stores - High possibility of loss
They buy in bulk and if suddenly customer preference changes they have to throw away their bulk purchase of the outdated product and big stores also mean more expenses which can lead to loses
Explain de merits of departmental stores - Inconvinient location
Since these are located in central areas, goods needed in a short notice cannot be purchased from there
Explain chain stores or multiple stores with features (6)
- owned or operated by manufacturers or intermiddierries
- There will be many branches of these shops throughout the country
Features ; - try to be near consumers and serve them while being near to them and not have the customers go out of their way to purchase from the stores
- The goods are dispatched from the head office to all the branches according to the different demand items in different stores
- Each branch is head by a branch manager
- All branches are supremely head by the head office
- mostly cash sales , cash depositted into bank for each outlet and report is given to the head office (price of goods are fixed too)
- There will be inspectors who inspect the quality of goods etc everyday
Explain merits of chain stores or multiple stores - Economies of scale
Since there is central procurement the shops enjoy economies of scale
Merits of chain stores or multiple stores (7)
- Economies of scale
- Elimination of middleman
- No bad debts
- Transfer of goods
- Diffusion of risk
- Low cost
- Flexibility
Explain merits of chain stores or multiple stores - Elimination of middle man
Since the goods produced by manufacturers are sold directly to the consumers middlemen are eliminated
Explain merits of chain stores or multiple stores - No bad debts
Since only cash sales bad debts can be avoided
Explain merits of chain stores or multiple stores - Transfer of goods
Goods not in great demand at a particular locality can be transferred to another store where its demand is greater
Explain merits of chain stores or multiple stores - Diffusion of risk
The losses incurred in one outlet can be managed with the profits of another outlet
Explain merits of chain stores or multiple stores - Low cost
Because of elimination of middlemen, making use of economies of scale and etc… the cost incurred in operation is low
Explain merits of chain stores or multiple stores - flexibility
If one branch is not working out well it does not have to be closed down but it can just be changed location and the previous losses and new outlet expenses can be borne with the profits of other stores
Demerits of chain stores or multiple stores (4)
- Limitted selection of goods
- Lack of personal touch
- Difficult to change demand
- Lack of initiative
Explain de merits of chain stores or multiple stores - Limitted selection of goods
some stores only sell the goods produced by the manufacturers and not other brands which leave customers with very less choices
Explain de merits of chain stores or multiple stores - Lack of personal touch
Lack of initiative of employees lead to lack of personal touch between them
Explain de merits of chain stores or multiple stores - Difficult to change demand
If the demand of a good deplets suddenly then the stores have to bear a huge loss as their mass stock is not going to be sold
Explain de merits of chain stores or multiple stores - Lack of initiative
The staff have to head to the instruction of the head office which may make them too dependant and only listen to the head office instruction and not take any other action to improve the outlet or store
Difference between departmental shops and multiple shops (points) (7)
- Location
- Range of products
- Services offered
- Pricing
- Class of customers
- Credit facilities
- Flexibility
explain Difference between departmental shops and multiple shops - Location
Departmental stores ; Located at a central place and customers are attracted to it
Multiple stores ; Located at multiple places near residential areas to be attracted by the customers
explain Difference between departmental shops and multiple shops - Range of products
Departmental stores ; They contain all sorts of products under one roof , all varieties and types
Multiple stores ; satisfy customer but only by a specific range of their products only
explain Difference between departmental shops and multiple shops - services offered
Departmental stores ; Focus a lot on services to customer eg. free stitching of hands in garments
Multiple stores ; Very less services to consumers and only do services in case of damaged goods
explain Difference between departmental shops and multiple shops - Pricing
Departmental stores ; not uniformed price and have discounts and stuff regularly
Multiple stores ; Have fixed prices
explain Difference between departmental shops and multiple shops - Class of customers
Departmental stores ; Rendered to high class people who give services as much importance as goods
Multiple stores ; Cater to low income customers too and help them get quality products cheaply
explain Difference between departmental shops and multiple shops - Credit facilities
Departmental stores ; May provide credit
Multiple stores ; only cash
explain Difference between departmental shops and multiple shops - Flexibility
Departmental stores ; Have all variety of goods thus providing a flexibility in choice
Multiple stores ; Not much flexibility in the types and varieties of goods
Explain mail order houses
You place the order and the seller ships it to your house through mail. payment can be done in three ways, make cash payment, value payable post where the good is only given when cash is paid, or sent through bank were goods are only handed over when payment is done
Merits of mail order houses (points) (5)
- limitted capital requirement
- elimination of middleman
- Absence of bad debts
- wide reach
- convinience
Explain merits of mail order houses - limitted capital
Does not require heavy capital for a outlet or a building as it can be done from home too
Explain merits of mail order houses - elimination of middleman
since producers reach the customers directly they don need a middleman which makes goods cheaper for the customers too
Explain merits of mail order houses - absence of bad debts
Mail order houses do not extend credit so it removes the risk of bad debts
Explain merits of mail order houses - wide reach
since it is delivered through mail it can be delivered to any corner of the world and thus having a global reach
Explain merits of mail order houses -convenience
Since the goods are literally delivered to the doorstep of the customers it is very convinient for them to shop from home and recieve at home too
Demerits of mail order houses (points) (7)
- lack of personal touch
- High promotion cost
- no after sales service
- no credit facilities
- delayed delivery
- possibility of abuse
- high dependant on postal services
Explain de merits of mail order houses - lack of personal contact
since there is no personal contact sellers cant reach out that personally to the needs of consumers which may cause misunderstandings between them
Explain de merits of mail order houses - high promotion cost
Mail order houses rely heavily on advertisements to gain popularity and orders so they will have to spend a lot on that
Explain de merits of mail order houses - no after sales service
Sellers and consumers may be located very far away as they have a global reach and thus after sales service is impossible
Explain de merits of mail order houses - no credit facilities
Mail order houses do not have credit facilities so the customer has to pay the full amount
Explain de merits of mail order houses - delayed delivery
Delivery process may take time which can cause dissatisfaction amongst cusotmers
Explain de merits of mail order houses - possibility of abuse
some owners may try to cheat the customers by not sending the package after getting the money and so on to abuse their powers
Explain de merits of mail order houses - high dependance on postal services
mail order houses depend on the mail and postal services and their efficiency and not every place of india has good and efficient mail services
Explain consumer cooperative stores
At least 10 people come together and pool the capital and one of them buy the goods directly from the manufacturers and sell it amongst themselves at the lesser price
Merits of consumer cooperative stores (points) (6)
- Ease of information
- limitted liability
- democratic management
- lower prices
- cash sales
- convinient location
Explain merits consumer cooperative stores - ease of information
it is easy to form the cooperative store they just need 10 people on the volunteery base and get registers with the cooperative societies act
Explain merits consumer cooperative stores - limitted liability
the members liabilities are limitted to the capital contributed by them, they dont need to personally clear the debts of the store
Explain merits consumer cooperative stores - democratic management
each member has one vote and not one hsare one vote all decisions are taken by the mangement which was democratically voted
Explain merits consumer cooperative stores - lower prices
they buy directly from manufacturers who sell at wholesale prices so the prices of goods is cheaper
Explain merits consumer cooperative stores - cash sales
they only sell on cash basis and no credit basis so the requirement for working capital is reduced
Explain merits consumer cooperative stores - convinient location
they are normally opened at common places so that the members can meet up and purchase the products
Demerits of consumer cooperative stores (points) (4)
- lack of initiative
- lack of shortage of funds
- lack of patronage
- lack of business training
Explain de merits of consumer cooperative stores - lack of initiative
people there work on honanrary basis too so since they dont get paid for it they just do the basic work an not take any initiative
Explain de merits of consumer cooperative stores - shortage of funds
the only source of funds is the capital contributed by the members and this can be problem as here is only a limitted amount members in the society
Explain de merits of consumer cooperative stores - Lack of patronage
The members do not patronise themselves regularly as a result the stores are not able to operate properly
Explain de merits of consumer cooperative stores - lack of business training
Since people there also work on honarary basis they may not have all the management and business skills required
Explain supermarkets with characteristics (6)
Generally specialise in foods and groceries and are located in main malls, divided by departments but they do not offer as much services as departmental stores like free home delivery
Characteristics:
- generally contains food items
- consumers can buy various products and once in one roof
- operated on self service so the operation cost is lesser
- prices tend to be cheaper
- sold only on cash basis
- located at central places
Merits of supermarkets (points) (5)
- one roof , low cost
- central location
- wide selection
- no bad debts
- benefits of being large scale
Explain merits of supermarkets - one roof , low cost
they provide all types of goods for a low cost due to their bulk purchases
Explain merits of supermarkets - central location
usually located in central places so many people can come and buy the goods
Explain merits of supermarkets - wide selection
supermarkets keep a variety of products available for the customers to chose between
Explain merits of supermarkets -no bad debts
there are only cash sales in supermarkets so they can avoid bad debts
Demerits of supermarkets (points) (5)
- no credit
- no personal attention
- mishandling of goods
- high overhead expenses
- huge capital requirement
Explain merits of supermarkets - benefits of being large scale
it enjoys all the benefits of large scale production like chaper prices when bulk purchasing etc therefore making use of economies of scale
Explain de merits of supermarket - no credit
supermarkets only do cash basis and not credit basis which is inconvinient for consumers who want the goods immediately on urgence
Explain de merits of supermarket - no personal attention
supermarkets are on self basis moto so not every customer can be personally attended to.
Explain de merits of supermarket - mishandling of goods
since it is self service some customers may mishandle the goods which will cause losses for the supermarket
Explain de merits of supermarket - high overhead expenses
supermarkets incur high overhead expenses which may increase the price of goods
Explain de merits of supermarket - huge capital requirement
having an outlet and getting wide variety of goods may cost a lot which will need a lot of capital
Explain vending machines with characteristics (3)
ATM is also a type of vending machine and it has completely changed the concept of banks.
Characteristics:
- Consumers cannot touch or feel the products before buying
- installing and maintenance of the vending machines is expensive
- can only normally sell pre packaged goods
Features about GST (4)
- It is influential throughout the country
- Based on destination based consumption tax against the present principle of origin based taxation
- Different types like IGST (with two states ) , SGST and CGST (within the state)
- 4 tax slabs , 5%, 12%, 18% and 24%
Points about GST (6)
- aims to condense many taxes into 1
- With GSt luxury goods have become costlier and normal consumption goods have become cheaper
- From july 1 2017
- makes the state accountible to the tax payers
- has replaced 17 indirect tax
- Charged at each stage of value addition
Role of commerce and industry association in promotion of internal trade (points) (8)
- interstate movement of goods
- octroi and other local levies
- harmonisation of sales tax and value added tax
- marketing of agro products
- measures to prevent duplication of brands
- excise duty
- promoting sound infrastructure
- labour legislation
Explain Role of commerce and industry association in promotion of internal trade - Interstate movement of goods
These organisations help in moving of goods within states by getting registration of the vehicles and surface transport policies and also building new highways
Explain Role of commerce and industry association in promotion of internal trade - Octroi and other local levies
The organisations make sure that the tax collected by vehicles moving interstates are not taxed too much for what they are doing
Explain Role of commerce and industry association in promotion of internal trade - Harmonisation of sales tax and value added tax
play an important role by discussing with the government to harmonise and uniformise the sales tax between different sales tax in different states and also come up with value added tax to prevent overlapping tax effect
Explain Role of commerce and industry association in promotion of internal trade - Marketing of agro products
Streamlining of local subsidies and marketing policies of organisations selling agro products and something these organisations are aimed at
Explain Role of commerce and industry association in promotion of internal trade - Excise duty
The trade associations interat with the government to make sure excise duties are manageable for all business people in all sectors
Explain Role of commerce and industry association in promotion of internal trade - promoting sound infrastructure
A good port , shipment dock and etc… are needed for a good trade so these organisations talk to the government for the building and improvisation of these infrastructures
Explain Role of commerce and industry association in promotion of internal trade - measures to prevent duplication of brands
Laws regarding duplication of brands are necessary to help sales of the original company , so these organisations have a talk with the government to enforce such rules and punish anyone violating it
Explain Role of commerce and industry association in promotion of internal trade - labour legislation
Constantly interacting on issues like labour laws and etc.. for the welfare of labours and to keep helping them for their welfare
