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A Practical Approach
to

Commerce
Form 2

Ivy Dombo David Mandikuwaza

 CONTENTS

Chapter 1: Production.................................................................................................. 1

Unit 1.1 Forms of production..................................................................................................................... 1

Unit 1.2 Division of labour and specialisation...................................................................................... 3
Unit 1.3 Chain of distribution..................................................................................................................... 5

Chapter 2: Trade............................................................................................................ 9

Unit 2.1 Retail trade........................................................................................................................................ 9

Unit 2.2 Hire purchase and deferred payments................................................................................... 16
Unit 2.3 Discounts........................................................................................................................................... 18
Unit 2.4 Documents used in home trade............................................................................................... 19

Chapter 3: Consumer Protection................................................................................. 25

Unit 3.1 Consumer protection................................................................................................................... 25

Chapter 4: Business Organisations.............................................................................. 31

Unit 4.1 Unincorporated business units................................................................................................. 31

Chapter 5: Enterprise.................................................................................................... 41

Unit 5.1 Management functions............................................................................................................... 41

Unit 5.2 Business ethics................................................................................................................................ 43

Chapter 6: Finance........................................................................................................ 46

Unit 6.1 Managing personal finance........................................................................................................ 46

Unit 6.2 Taxation............................................................................................................................................. 49

Examination 1 ..................................................................................................................... 53

Chapter 7: Banking....................................................................................................... 57

Unit 7.1 Banking system............................................................................................................................... 57

Unit 7.2 Financial institutions..................................................................................................................... 60

Chapter 8: Insurance and Assurance........................................................................... 64

Unit 8.1 Principles of insurance................................................................................................................. 64

Unit 8.2 Documents used in insurance and assurance..................................................................... 66
Unit 8.3 Insurance procedures................................................................................................................... 69

Chapter 9: Business Communication.......................................................................... 75

Unit 9.1 Postal services................................................................................................................................. 75

Unit 9.2 Effective communication............................................................................................................ 80
Chapter 10: Transport..................................................................................................... 85

Unit 10.1 Choice of transport........................................................................................................................ 85

Unit 10.2 Documents used in transport.................................................................................................... 87
Unit 10.3 Port authorities............................................................................................................................... 89

Chapter 11: Warehousing............................................................................................... 93

Unit 11.1 Importance of warehousing....................................................................................................... 93

Chapter 12: Marketing.................................................................................................... 98

Unit 12.1 Market segmentation................................................................................................................... 98

Unit 12.2 Marketing approaches................................................................................................................ 100

Examination 2 ..................................................................................................................... 105

 Chapter PRODUCTION

1
Chapter objectives
At the end of this chapter, you should be able to:
• explain direct and indirect production.
• differentiate direct and indirect production.
• describe mass production.
• explain the advantages of division of labour and specialisation.
• state ways in which goods are distributed from producers to consumers.
• identify factors considered when selecting channels of distribution.

Introduction
Production is a process or method used to transform inputs, raw materials semi-finished goods and
intangible inputs ideas into goods or services. Production is also the creation of utility or the provision
of goods and services by adding value so as to satisfy human needs and wants the putting together of
materials and financial resources as well as to bring out the required goods and services for a targeted
market.

UNIT 1.1 FORMS OF PRODUCTION

Direct production
This is producing goods and services for the producer’s own consumption. The producer is also the consumer
of the products, there is no trade. For example, when a small-scale farmer grows vegetables for his own use
or a man builds his own house or makes his own furniture. Direct production is for subsistence purposes
and simple tools are used.
Advantages
• Goods are produced in small quantities.
• Goods are produced to own taste that is people produce exactly what they want.
• It leads to self-satisfaction.
• The scarce resources are fully utilised.
• Profits are increased due to reduced labour costs.
• Simple tools are used.

1
Disadvantages
• Due to limited workers it takes a long time to complete the job.
• Lack of variety of goods and services.
• Poor quality goods are produced due to lack of resources and expertise.
• Lack of multi-skills.
• Does not produce some of the basic needs.
• Production of few items is more expensive than mass production.
Indirect production
This is production of surplus goods and the provision of services at a large scale for sale to other people. It
is when one produces goods and services for selling. More advanced machinery is used in the production
process (for example, book printing at Longman). The producer is not the consumer of the goods produced,
even though in some cases one may consume an insignificant amount of that output. Indirect production
is also an economic term that refers to the process of producing something in an indirect manner. This may
be achieved through the use of another item for the production of the final good, or it may be achieved
through the production of something to be used as a means to obtaining another item. In either case, the
item that is produced is merely used as a means for the production or gaining of the final item.
Advantages
• It leads to a wide variety of goods and services which will satisfy human needs and wants.
• Goods are produced in large quantities due to use of machinery (capital intensive) which reduces
cost of production.
• Quality goods are produced since the producer becomes an expert in his/her line of production
which improves people’s living standard.
• It results in surplus goods being produced.
• It leads to specialisation, standardisation and simplification due to use of complex machinery.
Disadvantages
• Craftsmanship is lost because of dependency among workers.
• The worker will lose the skill to make a complete product on his/her own.
• There are high costs of operation.
• Increased unemployment rate since machines result in job losses.
• Production is not customised, that is according to customer taste and preference and consumers are
forced to buy what is available.
Table 1.1 Differences between direct and indirect production

Direct production Indirect production

There is no trade There is trade
There is high cost of production There is low cost of production
There is no surplus There is surplus
There is no specialisation There is specialization
There is use of simple tools There is use of specialised machinery
There is low productivity rate There is high productivity rate
Producing goods to own taste Producing standardised goods
This is called subsistence farming This is called commercial farming

2
Fewer human needs and wants are satisfied More human needs and wants are satisfied
No variety of goods and services There is variety of goods and services
Poor standard of living High standard of living

Activity 1.1 Group work

In groups of two, identify a business entity that deal with direct and indirect production and ask them the
advantages and disadvantages of venturing into such business. Make a comparison of the two.

Exercise 1.1
1. Why do producers produce food and clothes?
2. What is the difference between goods and services?
3. Differentiate between direct and indirect production.

UNIT 1.2 DIVISION OF LABOUR AND SPECIALISATION

Indirect production has two concepts that have greatly enabled production which are division of labour
and specialisation.
Division of labour
Division of labour is when the production process is shared among the workers and each worker is assigned
a specific task that is unique from that being done by the other worker. The task performed at each stage
is a continuation, improvement or adding value of the one preceding it. For example, in a dress making
company some will be cutting designs, some will be sewing, while some will be over-locking and some
ironing.
Advantages of division of labour
• Leads to lower cost of production which will result in low prices.
• Goods are produced at a faster rate due to mechanisation and automation.
• Leads to trade.
• More goods are produced for many markets.
• Prompted the interdependence of workers which builds team work there by motivating the workers.
• Employment rate is increased due to large scale production.
Disadvantages of division of labour
• Tasks become repetitive and boring.
• Due to interdependence of workers any disruption in the line of production will affect the whole
production process.
• Lack of job satisfaction.
• Too much mechanisation and automation will lead to unemployment.
Specialisation
This is when a worker, company, region or country concentrate on doing things those they are best at for
example, if Zimbabwe is well known for maize farming it will concentrate on farming maize only. Division
of labour leads to specialisation where workers become experts at the work, they will be performing due to
repeating the same process over and over again.

3
Advantages of specialisation
• Individual workers can concentrate on the work that they are most suited for.
• Workers acquire specific skills faster.
• Workers become more efficient and productive in their area of specialisation.
• Surplus goods are produced.
• Increase in output results in lower costs for the consumers.
• This also results in the need to exchange the surplus in one area with that of another area.
• Specialisation leads to less breakages and damages resulting in less wastage.
Disadvantages of specialisation
• Each department depends on the other departments. If there is a break down in one department,
then the whole industry may get affected.
• There are chances of boredom as the workers are doing the same work hundreds of times a day.
• As machinery becomes more elaborate it replaces labour causing unemployment.
• Specialist workers will over-protect themselves resulting in workers not sharing ideas and skills.
• Results in immobility of labour.
• Leads to limited choice of goods.
• Retraining of specialist workers is expensive.
• Repetitive tasks become boring to workers.
• Leads to a decline in craftsmanship.
Mass production
Mass production is the production or manufacture of goods in large quantities, especially by machinery.
This involves specialisation in a particular type of work. For example, a man specialises in ensuring that the
quality of a product is standardised. There is division of labour which leads to specialisation.
Advantages
• Making goods in large quantities and provision of services on a large scale.
• Leads to specialisation of workers.
• Goods are always available no shortages.
• Leads to simplification of processes.
• Improves the standard of living.
• Low prices due to low production costs.
• Leads to automation or mechanisation.
• Leads to standardisation of products.
• Reduces initial capital outlay.
• Easy to trace faulty products.
• Reduces risks of mixing ups.
• Improved customers’ services.
• Increased market base-share global reach.
• Improved quality of goods and services because of global interactions.
Activity 1.2 Field rip
Visit a company of choice that shows division of labour, companies that specialise and companies that are
into mass production. Prepare a list of questions that you will ask them with help of your teacher. Write a
report from the field trip.

4
Exercise 1.2
1. Define the term division of labour.
2. List any three advantages of division of labour.
3. List any three advantages of specialisation.

UNIT 1.3 CHAIN OF DISTRIBUTION

This is the way in which goods are delivered from producer to the consumer. Channel of distribution ends
when goods are delivered to the point of consumption and the form of goods is changed.
Different chains of distribution
1. Producer/manufacturer to consumer (Direct chain)
This is a form of direct selling whereby the producer sells his/her goods directly to the consumer without
going through other intermediaries.
• Goods that producers sell directly to their consumers include expensive, technical, perishable, and
those products exclusively made for one customer. Examples includes farmers and fishermen. Muozi
Farm in Nyanga grows potatoes and sell them to the nearby markets.
2. Producer/Manufacturer to retailer to
consumer A B C D

• This channel is when goods are sold to the Producer Producer Producer Producer
retailer and the retailer then sells them to the
consumer.
Agents or
• This may be so because the producer might brokers
not be able to reach so many places at once,
hence he/she finds an intermediary who is Wholesalers Wholesalers
near the reach of the consumer.
• An example is a producer who produces
Retailers Retailers Retailers
chickens. This producer can then sell his
chicken to large scale retailers such as TM
and OK supermarkets. This then spreads
his reach of chickens nationwide because Consumers Consumers Consumers Consumers
TM and OK are not only known and trusted
supermarkets but are also found in nearly all
parts of the country. Fig 1.1 Chains of production
3. Producer/manufacturer to wholesalers to retailers to consumer
• In this channel, consumers can buy products directly from the wholesaler in  bulk. Buying in
bulk reduces the prices of the products. This is because the wholesaler takes away extra costs, such
as service costs such as delivery, that customers usually pay when buying from retail. 
• The consumer at some point will have to go through a retailer if they do not need to buy bulk goods
from the wholesaler.
• It suits standardised, consumer items, low value, and high shelf life, suitable when demands of
product are seasonal or the production is seasonal.
•

5
4. Producer/manufacturer to agent to wholesalers to retailer to consumer
• Only in case of international trade.
• Overseas producers appoint agents in home market for example when importing cars and cosmetics.
Factors affecting choice of channel of distribution
1. Type of customer

Buyers can be of two types; general buyers and industrial buyers. If the more buyers belong to general
category that is buying products for general use then there can be more middlemen. But in case of industrial
buyers that is buying for industrial purposes there can be less middlemen.
2. Size of order

It is useful for the manufacturer to rely on the services of middlemen if the goods are bought in smaller
quantity. When the product is very costly it is best to use small distribution channel. For example, industrial
machinery or gold ornaments are very costly products that are why for their distribution small distribution
channel is used. On the other hand, for less costly products long distribution channel is used.
3. Nature of product

A manufacturer should choose minimum or no middlemen as channel of distribution for such an item or
product which is of highly perishable nature. On the contrary, a long distribution channel can be selected
for durable goods.
4. Value of product

The producer also has to consider the value of a product when choosing a distribution channel. Expensive
products, like gold, jewelry, are distributed using direct or short channels of distribution. This is done so as
to minimize risk of theft. Hence, the security of these products is of paramount importance. And with that
said the producers uses a small channel for the distribution of such products.
5. Size of market

If the market area of the product is scattered fairly, then the producer must take the help of middlemen.
Consider if the market is small hence you can take a small channel or if the market is large you can take a
long channel.
6. Economic conditions
Country’s economic condition affects the producer’s profits. In economically poor countries, short or direct
channels are used to sell product at low price. For example in Zimbabwe Grain Marketing Board sell maize
and meali-meal direct to the citizens. In developing and developed countries, indirect channels are used to
distribute products.
Activity 1.3 Research
Go on the internet and watch a video on YouTube about the different chains of production and report back
in class how each player in the chain influence or add value to the production chain.

Exercise 1.3
1. Explain briefly the factors that affect the choice of channels of distribution.
2. Explain how each player in the production chain add values.
3. With an aid of diagrams explain the different chains of production.

6
Interesting facts
Manufacturing is pushing for an increase in STEM education careers to create a more competitive workforce.
Summary of the chapter
• Production is a process or method used to transform inputs, raw materials semi-finished goods and
intangible inputs ideas into goods or services.
• Direct production is the producing of goods and services for the producer’s own consumption whilst
indirect production is the production of surplus goods and the provision of services at a large scale
for sale to other people.
• Division of labour is when the production process is shared among the workers and each worker is
assigned a specific task that is unique from that being done by the other worker.
• Division of labour leads to specialisation which is when a worker, company, region or country
concentrate on doing things those they are best at.
• There are different chains of production and the producer gets to choose a chain based on the
factors that will affect his channel of distribution.
Glossary of terms
Production – making finished goods from raw materials.
Direct production – making goods or farming for personal consumption.
Indirect production – making goods or farming intensively with the help of workers.
Mass production – making goods or farming at a very large scale.
Specialisation – limiting one’s study to a particular thing or subject.
Producers – are people or companies that produces goods, foods or materials.
Consumers – people who buy goods or services.
Distribution channel – is a passage or chain through which goods pass through until it reaches the
consumer or end user.

Revision Exercises
Multiple Choice Questions
1. Of the following, identify an example of direct production.
A. Canning factory. B. Clothing manufacturer.
C. Subsistence farmer. D. Commercial farmer.
2. What is a disadvantage of specialisation?
A. Full utilisation of equipment. B. Increased productivity rate.
C. Interdependence of workers. D. Promotes division of labour.
3. Making of goods for one’s own consumption is ___________.
A. direct production B. indirection production
C. secondary production D. tertiary production
4. Which of the following is an advantage of direct production?
A. Goods are produced in large quantities. B. Goods produced are of high quality.
C. Goods are produced to cater for own taste. D. A wide variety of goods is produced.
5. Why is standardisation important in the production of goods?
A. To improve quality of goods. B. To improve standard of living.
C. To make goods identical to each other. D. To split work into simpler tasks.
6. The making of goods for sale to other people is known as ___________.
A. direct production B. indirect production
C. subsistence production D. tertiary production

7
7. Simplification in production means ___________.
A. doing a job in which one is talented at B. making a task easier to perform
C. making goods in large quantities D. making goods of the same type
8. Which is a disadvantage of specialisation?
A. Division of labour. B. Improved techniques.
C. Increased skill. D. Interdependence.
9. Which of the following is involved in direct production?
A. Canning factory. B. Clothes manufacturer.
C. Subsistence farmer. D. Commercial farmer.
10. What is standardisation?
A. Doing a job which one likes best. B. Doing a simple task.
C. Making of identical goods. D. Making goods in large quantities.
Structured Questions

1. (a) Briefly explain between direct and indirect production. [4]

(b) Explain mass production. [2]
(c ) List four advantages of mass production. [4]
2. (a) Outline three advantages and three disadvantages of division of labour. [6]
(b) Define division of labour. [2]
3. (a) Define specialisation. [2]
(b) List merits and demerits of mass production. [8]

Essay Questions

1. Divide the following jobs into at least 3 tasks that are performed incrementally in making the products
to show division of labour, mass production and specialisation. Arrange the tasks into work stages and
suggest what machines can be used at each stage.
(a) Maize production.
(b) Procurement of goods and services.
(c) Coca cola plants. [20]
2. With an aid of real-life examples give difference between direct and indirect production. [20]
3. For any agricultural product of your choice discuss the factors which have to be considered in the choice
of a channel of distribution. [20]

8
 Chapter
TRADE

2
Chapter objectives
At the end of this chapter, you should be able to:
• explain the functions of retailers.
• distinguish between large- and small-scale retailers.
• describe the characteristics and organisation of different types of retailers.
• describe the factors that must be considered when establishing a retailer outlet.
• discuss the impact of each trend in retailing.
• discuss the reasons for the survival of the small-scale retailer.
• explain the main features of hire purchase and deferred payments.
• compare hire purchase and deferred payments.
• identify the sources of financing hire purchase and credit sale transactions.
Introduction
The chapter will look at retail trade, its functions, types of retail trade, factors to consider when establishing
an outlet, trends in retailing and the survival of the small-scale retailer. Hire purchase and deferred payments
will also be discussed. The chapter will look at the nature and purpose of trade and cash discounts. Lastly,
documents in home trade were looked into as well.

UNIT 2.1 RETAIL TRADE

All activities involved in selling goods or services directly to final consumers for their personal, and business
use is referred to as retailing. Businesses whose sales come primarily from retailing. Retail means “cut a
piece off” or break. A retailer is person or a business that sells goods in small quantities rather than for sale.
Examples of retailers are Edgars, OK supermarket, TM supermarket and Spar.
Functions of retailers
• Promoting goods – get goods known.
• Information gathering – new goods or goods in demand.
• Breaking bulk – sell in small quantities.
• Convenience – location.
• Variety of goods – from wholesalers or producers.
• Giving advice – use of goods availability.
• Delivery services – transporting to users.
• Credit facilities – trustworthy customers or consumers.

9
 • Open for longer hours and during holidays.
• Catering individual tastes.
Functions of retailers to the manufacturers or wholesalers
• Buys goods from manufacturing and wholesalers.
• Provides ready markets for manufacturers and wholesalers.
• Buys goods in bulk.
• Clears manufacturers’ production lines.
• Advertise goods on behalf of manufacturers.
• Stores goods.
Types of retailers
Retailers are divided into two groups which are small and large retailers.
1. Small scale retailers
They are usually owned by individuals and are found in the private sector. Few legal formalities are required
to establish them.
In Zimbabwe, the owners need daily or monthly
licenses from town councils. Examples includes;
road sides traders. These locate themselves where a
lot of people pass through and display their goods
on movable stores and cardboard boxes. They sell
fast moving goods like sweets or roasted maize.
They only need short term licenses to operate line
rant traders like hawker, peddlers who move door
to door selling goods or foods on bicycle or push
carts product. For example, in Zimbabwe through
the ZIMASSET we have small scale miners who were
licensed to do the mining and also many youths Fig. 2.1 Flea market
were given loans to start their small scale business
through youth empowerment.
Major types of small-scale retailers
• Independent stores – general dealers, bottle
stores.
• Market stallholders.
• Hawkers.
• Peddlers.
• Superrettes.
• Roadside vendors.
Fig. 2.2 Roadside vendors
(a) Flea markets
• Sells goods which are old or used which are second hand goods.
• Sells a variety of goods.
• Situated on open or closed shops.

10
 Chapter
ENTERPRISE
5
Chapter objectives
At the end of this chapter, you should be able to:
• explain various management functions.
• execute various management functions.
• explain the importance of management functions.
• identify ethical considerations in business.
• explain the role of ethics in business and society.
• describe the importance of ethics in business.

Introduction
Controlling a complex organisation so as to achieve desired goals resulted in the evolution of the concept of
management. Management includes all those people who are concerned with managing an organisation.
It is a sum of organised activities by a group of people. Management involves decision making at various
levels of organisation for getting things done by others. Management has been described as a social process
involving responsibility for economical and effective planning and regulation of operation of an enterprise
in the fulfilment of given purposes. It is an active process consisting of various elements and activities.

UNIT 5.1 MANAGEMENT FUNCTIONS

There are four fundamental functions of management that is planning, organising, actuating and controlling.
Each function blends into the other and each affects the performance of others.
Functions of management
1. Planning
It is the basic function of management. It deals with chalking out a future course of action and deciding
in advance the most appropriate course of actions for achievement of pre-determined goals. Planning is
deciding in advance on what to do, when to do it and how to do it. It bridges the gap from where we are
and where we want to be.
A plan is a future course of actions. It is an exercise in problem solving and decision making. Planning is
determination of courses of action to achieve anticipated goals. Thus, planning is a methodical thinking
about ways and means for accomplishment of pre-determined goals.

41
2. Organising
It is the process of bringing together physical,
financial and human resources and developing
productive relationship amongst them for
achievement of organisational goals. To organise a
business is to provide it with everything useful or
its functioning that is raw material, tools, capital
and personnel’s. To organise a business involves
determining and providing human and non-
human resources to the organisational structure.
Organising as a process involves;
• identification of activities.
• classification of grouping of activities. Fig. 5.1 Functions of management
• assignment of duties.
• delegation of authority and creation of responsibility.
• coordinating authority and responsibility relationships.
3. Directing
It is that part of managerial function which actuates the organizational methods to work efficiently for
achievement of organisational purposes. It is considered life-spark of the enterprise which sets it in motion
the action of people because planning, organising and staffing are the mere preparations for doing the
work. Direction is that inert-personnel aspect of management which deals directly with influencing, guiding,
supervising, motivating sub-ordinate for the achievement of organisational goals. Directing has following
elements:
(a) Supervision – implies overseeing the work of subordinates by their superiors. It is the act of watching
and directing work and workers.
(b) Motivation – management makes sure that they use human and financial resources to achieve goals
of the organisation, which imply that employees need to be motivated to accomplish
set goals.
(c) Leadership – leadership is the art of motivating a group of people to act towards achieving a
common goal. In a business setting, this can mean directing workers and colleagues
with a strategy to meet the company’s needs.
(d) Communication – m
 anagement is there to communicate with subordinates so that set goals are
accomplished.
4. Controlling
It suggests size of achievement against the standards and correction of deviation if any to ensure achievement
of organisational goals. The purpose of controlling is to ensure that everything occurs in conformities with
the standards. An efficient system of control helps to forecast deviations before they actually occur.
Controlling is the process of checking whether or not proper progress is being made towards the objectives
and goals and acting if necessary, to correct any deviation. Controlling is the measurement and correction
of performance activities of subordinates in order to make sure that the enterprise objectives and plans
desired to obtain them as being accomplished. Therefore, controlling has the following steps:
• establishment of standard performance. • measurement of actual performance.

42
 Activity 5.1 Educational tour
1. Draw the management cycle.
2. Go to a company of your choice and observe their management functions. Present your findings in class.

Exercise 5.1
1. List four fundamental functions of management?
2. What is the basic function of management?
3. What does the organising process involve?
4. What are the elements of directing?

UNIT 5.2 BUSINESS ETHICS

Business ethics is the study of proper business policies and practices regarding potentially controversial
issues such as corporate governance, insider trading, bribery, discrimination, corporate social responsibility
and judiciary responsibilities.
• Law often guides business ethics, while other times business ethics provide a basic framework that
businesses may follow to gain public acceptance.
• Ethics is the branch of philosophy that deals
with values relating to human conduct.
• Specifically, that human conduct that deals
with the rightness and wrongness of certain
actions and the goodness and badness of
the motives and outcomes of such actions.
• Business ethics ensure that a certain required
level of trust exists between consumers and
various forms of market participants with
businesses.
• For example, a portfolio manager must give
the same consideration to the portfolios
of family members and small individual Fig. 5.2 Business ethics
investors.
• Business ethics goes beyond just a moral code of right and wrong; it attempts to reconcile what
companies must do legally versus maintaining a competitive advantage over other businesses. Firms
display business ethics in several ways.

Activity 5.2 Research

Research and report back in class on ethical and unethical considerations that take place in businesses.

Exercise 5.2
1. Define business ethics.
2. What are the advantages of being ethical to a business enterprise?
3. List the importance of business ethics.

Interesting facts

1. Ethics are general norms and values acceptable in a particular environment.

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 Chapter
WAREHOUSING

11
Chapter objectives
At the end of this chapter, you should be able to:
• discuss importance of warehousing.
• explain the functions of warehouses.

Introduction
Warehousing is the storage and distribution of raw materials, manufactured goods and personal goods
until they are wanted for use. A warehouse is a commercial building for the storage of goods. They are
usually large, plain buildings in industrial areas of cities, towns, and villages, also farmers in rural areas use
them to store farming produce or the materials needed in the production process. Warehouses are used
by producers, manufacturers, importers, exporters, wholesalers and transport businesses. It involves the
safekeeping of goods in good condition until they are needed by buyers in industry, manufacturing and
retailing.

UNIT 11.1 IMPORTANCE OF WAREHOUSING

Allows mass production
• Manufacturers keep their raw materials,
consumables and finished goods
in warehouses. This facilitates mass
production.
Nature of commodities
• Perishable goods are preserved for long
periods in refrigerated cold rooms.
• Flammable fuels are kept in tanks for safety.
Enables keeping of seasonal products
• Crops, vegetables and fruits are kept in Fig. 11.1 A warehouse
warehouses to extend the availability of
these products to when they are not in use.

93
Proximity to production centres
• Goods required for production are kept in warehouses near production centres so that the production
factories can get their supplies quickly.
Minimising price fluctuations
• A constant and regular supply of particular goods reduces a shortage of those goods keeping prices
from fluctuating.
Surplus goods
• Instead of flooding the market with goods, the surplus is removed from the market and kept in
warehouse for future supply.
Improved security issues
• Warehouses reduce the theft of goods from places that are open to workers.
Allows displaying of goods
• Some goods such as electronic goods are kept in warehouses and only examples of such goods are
displayed in the store.
Assist international trade
• Some imported goods are kept in a warehouse before customs duty is paid on them.
Allows buffer stocks to be maintained
• Warehouses are used to hold minimum stocks level of certain items to protect them from shortages
that might occur.
Allows preparation for sale
• Traders can sort, pack and label goods before selling them to customers.
Improving some goods,
• Some goods such as cheese, tobacco and wine are kept in warehouses until their quality or taste
improve.
Functions of warehouses
1. Stability of prices of goods
• Prices of goods in the market are stabilized because supply is regulated to meet demand.
• This is possible because goods stored in the warehouse can be released whenever there is a shortage
of goods to meet the excess demand, and in times of glut, the excess supply can be stored in the
warehouse.
2. Aids in production
• With the distribution and warehousing functions taken over by specialists, the producer can
concentrate on the production of goods without having to worry whether his goods would be sold
or not.
• The producer can also engage in large-scale production of goods so as to enjoy economies of scale.
• A good example of how warehouse aids production is the car assembly industry.

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 • During periods of low demand for cars, warehouse allows the manufacturer of car components to
continue with production in order to build up stocks that are required to meet the higher level of
production during periods of rising demand.
3. An opportunity for saving on transportation costs
• Saving on transportation costs can be made as there is bulk distribution of goods from the factories
to the warehouse which in turn distribute them in smaller quantities to the various customers.
• The warehouse is conveniently located near the markets so that the goods can be delivered promptly
and at low transport cost.
4. Cost savings passed on to the consumers
• Some wholesalers have turned warehouses into retail outlets where their customers can purchase
goods directly from them.
• The savings in costs by the wholesalers (for example, lower overheads, no transport costs, bulk
purchases and cash sales) are passed onto the consumers in the form of lower-priced goods, for
example, cash-and-carry warehouses and hypermarkets.
5. Facilitation of foreign trade
• Exporters have their goods ready in the warehouse near the port to await the arrival of ships to take
them abroad.
• Large shipments of goods from abroad may await collection in the warehouse by importers.
• For the above reasons, warehouses are usually located near the harbour, airport or railway terminals.
• Where goods are processed immediately upon arrival, warehousing facilities ensure a continuous
flow through the conveyors.
• Bonded warehouses are important to the importers who need to pay duty on their imports only
when they are removed from the warehouse.
• Importers can process and pack their goods while they are in the bonded warehouse.
Importance of warehousing
• Allows mass production.
• Enables keeping of seasonal products.
• Minimising price fluctuations.
• Surplus goods can be stored.
• Improved security issues.
• Allows displaying of goods.
• Assist international trade.
• Allows buffer stocks to be maintained.
• Allows preparation for sale.
• Improving some goods.
Functions of warehouses
• Stability of prices of goods.
• Aids in production.
• An opportunity for saving on transportation costs.
• Cost savings passed on to the consumers.
• Facilitation of foreign trade.

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 Activity 11.1 Group discussion
Goods are stored in warehouses at various stages of production that is from primary production to
manufacturing in the secondary stage and tertiary distribution to retailers. Discuss in groups the importance
of warehousing in commerce.

Exercise 11.1
Anashe Mandikuwaza is a fruit and potato farmer at Bende. She sells fruits, vegetables and potatoes to local
shops and markets. State with reasons why a specialized warehouse is important to her. Whenever goods
are bought in bulk, these goods are stored in a warehouse. Why may some of these goods be stored in a
warehouse?

Interesting facts
Did you know that any country like Zimbabwe that imports and exports goods on large scale makes use of
warehousing for the storage of goods in bulk?
Summary of the chapter
1. Warehousing is the storage and distribution of raw materials, manufactured goods and personal goods
until they are wanted for use.
2. A warehouse is a commercial building for the storage of goods.
Glossary of terms
Warehousing – is the storage and distribution of raw materials, manufactured goods and
personal goods until they are wanted for use.
Warehouse – is a commercial building for the storage of goods.
Mass production – is the provision of goods and services in large quantities.
Surplus – s when more than the required quantity of goods is produced.
International trade – is the buying and selling of goods and services with countries abroad that is
internationally.
Production – is the provision of goods and services to satisfy consumer wants and needs.
Bonded warehouses – are owned by government and are under the control of custom authorities
which can enable grading, blending, packing and branding of goods.

Revision Exercises
Multiple Choice Questions
1. Which process is not done in a bonded warehouse?
A. Blending. B. Branding.
C. Grading. D. Processing.
2. What is an advantage of warehousing to the consumer?
A. Clearing production lines. B. Protecting goods against fire.
C. Protecting goods against theft. D. Stabilising prices of goods.
3. Which is not allowed in a bonded warehouse?
A. Branding goods. B. Exporting goods.
C. Manufacturing goods. D. Selling goods.

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4. Which type of warehouse is located near customers?
A. Bonded warehouse. B. Manufacture’s warehouse.
C. Retailer’s warehouse. D. Wholesaler’s warehouse.
5. Which statement is true of a bonded warehouse?
A. Stores non dutiable goods.
B. Is controlled by airport authorities.
C. Enables goods to be sold and removed in small quantities.
D. Allows the manufacturing and packaging of goods.
6. Which product would be stored long-term in a warehouse?
A. Bread B. Eggs
C. Soap D. Tomatoes
7. What is not considered when siting a warehouse?
A. Rentals of the area. B. Accessibility in terms of transport.
C. Seasonal goods. D. Availability of labour.
8. One of the benefits of warehousing is that it __________.
A. increase shortages B. evens out supply for goods
C. creates demand for goods D. covers goods against transit risks
9. _________ benefit from long storage periods.
A. Bread B. Vegetables
C. Wine D. Milk
10. Storage is necessary because production and demand ________.
A. are always seasonal B. determine the type of customer
C. are constantly the same D. patterns rarely match
Structured Questions
1. Explain the following terms:
(a) Warehousing [2]
(b) Warehouse [2]
2. List five importance of warehousing. [5]
3. Outline the functions of warehouses. [5]
4. List and explain any two types of warehouses. [4]
Essay Questions
1. Discuss the importance of warehousing. [20]
2. Explain the functions of warehouses. [20]
3. (a) Outline the importance of warehousing to a poultry producer. [10]
(b) State the factors to be considered when siting a warehouse. [10]
4. Describe the types of warehouses. [20]

97
 Chapter
MARKETING
12
Chapter objectives
At the end of this chapter, you should be able to:
• explain market segmentation.
• identify bases of market segmentation.
• outline reasons for market segmentation.
• explain mass and niche marketing.

Introduction
Groups of customers with similar characteristics can be divided into separate groups known as segments.
It is useful for marketers to identify groups with similar buying patterns. Companies can then target their
products, promotions and advertising. Market segmentation is the subdivision of the total (or aggregate)
heterogeneous market into smaller homogeneous submarkets according to consumer needs and wants
and not according to product features. Market segment is a part of the market for a product made up
of consumers sharing common characteristics for example, age, sex, income; this segment can then be
targeted with appropriate marketing strategies.

UNIT 12.1 MARKET SEGMENTATION

Market segmentation
It is a marketing strategy that involves the; division of a broad market into different subjects or segments
of consumers with similar characteristics. This is done using criteria such as age, sex and income. A market
segment is therefore a sub group of people or organisations sharing one or more characteristics that cause
them to have similar products needs. Market segmentation results in each segment being investigated in
detail to find out the specific product features, advertising appeal and pricing strategies required for each
segment.
Advantages of market segmentation
• It defines the market in terms of consumer needs and this improves organisational understanding of
the consumer buying behaviours and motives.
• Having understood the consumer needs, management is in a better position to direct marketing
programmes that will appeal to and satisfy those needs.
• Differentiated marketing strategies can be focused on the target market groups hence, efficient
allocation resources.

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 • It is beneficial for small firms to concentrate their effort on, and specialise on one or two market
segments.
• A continuous programme of market segmentation strengthens management’s capabilities of
meeting changing market demand (products tailored to match demand).
• Segmentation can lead to precise marketing objectives where targets are defined operationally and
performance can be evaluated later.
• Facilitates identification of market opportunities as preferences and attitudes towards specific goods
and brands can be easily determined.
• Price discrimination can be used to increase revenue and profits.
• Small firms unable to compete in the whole market are able to specialise in one or two segments.
Disadvantages of market segmentation
• Increased R and D costs to develop product variations.
• Increased production costs for product variations for example, shorter production runs.
• Higher stockholding costs.
• Higher promotional costs as different strategies will be required for different segments.
• By focusing on one or two segments there is a danger that excessive specialisation could lead to
problems if consumers in those segments change their habits significantly.
• Extensive market research is needed.
Criteria for market segmentation
The criteria are also known as bases of segmentation. Each segment has its own requirements and therefore
needs a different mix of resources.
Bases in market segmentation
• Geographic segmentation.
• Demographic segmentation.
• Psychographic segmentation.
• Behavioral segmentations.
1. Geographic segmentation
• This involves dividing the market using geographic factors such as cities, countries, regions or states.
• Consumer tastes may vary between different geographical areas.
• Segmentation can be done by climatic regions, economic regions, densities and communities.
• People in different geographical locations may have different buying behaviours thus; a consideration
for different marketing strategies or techniques should always be taken into account in different
markets.
2. Demographic segmentation
• The market can be segmented on demographic factors such as age, sex, income, race, occupation,
education, social class, family size, language, ethnic background.
• Normally these factors determine the tastes, values and norms of the market.
• When a company decides to segment a market using sex it might decide to sell only clothing of men.
3. Psychographic segmentation
• Has to do with social class (which is closely related to income), lifestyles and personality characteristics.
• An individual’s social class may have great impact on one’s expenditure patterns – lifestyle often
relates to activities undertaken, interests and opinions.

99
EXAMINATION 2
Paper 1: Multiple Choice Questions
Time: 1hr 15 mins [40 Marks]
Answer all the questions in this section.
1. How does recorded delivery differ from registered mail?
A. It must be handed over the counter when posting.
B. There is no compensation if an article is lost in transit.
C. There is proof of posting and proof of delivery.
D. It is used for sending and receiving valuable items.
2. What method of payment is used for mail order goods delivered through the Post office?
A. Cable transfer B. Cash-on-delivery
C. Credit transfer D. Electronic commerce
3. Which devices are used in detal communication?
A. Computer and telephone. B. Photocopier and telephone.
C. Teleprinter and modems. D. Satellite dish and television.
4. Which postal service leaves an impression on letters to indicate prepayment of postage?
A. Franking machines B. Free post
C. Prestel D. View data
5. In which postal service is there both proof of postage and proof of receipt?
A. Free post B. Business reply
C. Poste resante D. Recorded delivery
6. Which services allows fast and accurate transmission of diagrams?
A. Datel B. Facsimile
C. Radio paging D. Telex
7. A manufacturer needs to order spare parts urgently. Which communication service is most suitable?
A. Air mail B. Facsimile
C. Letter post D. Telegram
8. Which postal service allows the addressee to respond without having to pay for the postage?
A. Business reply B. Poste restante
C. Recorded delivery D. Registered mail
9. Which group contains telecommunication services only?
A. Confravision datel, and freepost. B. Datapost, telex and cash on delivery.
C. Radiopaging, datel and facsimile. D. Telex, confravision and post restante.
10. What is the advantage, to a farmer of making orders through a cellphone rather than a telephone?
A. There is dialogue between the farmer and the supplier.
B. The supplier can be reached anytime and anyway.
C. It is fast in sending and receiving information.
D. Calls can be made locally and internationally.
11. A company insured goods in a warehouse against fire. A strong wind blew the warehouse down and
goods were stolen. Which principle prevents the company from receiving compensation for the stolen
goods?
A. Indemnity B. Insurable interest
C. Proximate cause D. Utmost good faith
12. Mr David insures a car valued at $30 000 with Econet for $30 000 and with Old Mutual for $30 000. How
much will he received from Econet, when the car is declared a write off after an accident?
A. $15 000 B. $30 000
C. $60 000 D. $90 000

105
13. Which of the following prevents the insured from making profit through under-insurance?
A. Average clause B. Contribution
C. Pooling of risk D. Subrogation
14. What role is performed by an underwriter in insurance?
A. Advises on how losses can be avoided. B. Assesses details on the claim form
C. Assesses details on the proposed form. D. Collects and analyses statistics of risks
15. Mr Mutsenhure insures a car valued at $10 000 for $8 000 against accidents. An accident occurs and
the cost of repairing the car is $5 000. How much will the insurance company pay Mutsenhure as
compensation?
A. $4 000 B. $5 000
C. $8 000 D. $10 000
16. Which principle requires that the insured and insurer disclose all detail?
A. Indemnity B. Insurable interest
C. Proximate cause D. Utmost good faith
17. Experts who calculate probabilities of risks occurring are called __________.
A. actuaries B. assessors
C. jobbers D. underwriters
18. What is the function of an insurance broker?
A. To accept insurance risks. B. To act as the principals for underwriters.
C. To find clients for insurance companies. D. To calculate risks and premiums.
19. Mr D. Mandikuwaza insures his shop against fire but the shop is later destroyed by a storm. Which
doctrine makes it impossible for the trader to get compensation?
A. Subrogation B. Proximate cause
C. Contribution D. Average clause
20. What steps are taken to obtain motor vehicle insurance?
A. Contact broker, obtain cover note, fill proposal form.
B. Contact broker, fill proposal form, obtain cover note.
C. Fill proposal form, contact broker, obtain cover note.
D. Obtain cover note, fill proposal form, contact broker.
21. Which document is a contract of insurance?
A. Claim form B. Policy
C. Proposal form D. Quotation
22. Which of the following is a responsibility of a port authority?
A. Collecting customs duties. B. Hiring out ships.
C. Providing re-fuelling facilities. D. Supervising bonded warehouses.
23. Why is sea transport still used widely for the carriage of goods?
A. Insurance charges are low.
B. Little packaging is required.
C. Low value cargo can I bear the transport charges.
D. Theft and damage are prevented.
24. Which of the following is a major cost of road transport, but not of rail transport?
A. Driver’s wages B. Fuel
C. Insurance D. Vehicle tax
25. Which types of goods are most suited to air transports?
A. Heavy and bulky goods. B. Heavy goods of low value.
C. Light goods of high value. D. Light goods of low value.
26. What is an advantage of sea transport over air transport?
A. Greater safety. B. Greater speed.
C. Lower carriage costs for bulk cargoes. D. Lower insurance charges.

106
27. Which factor is not considered when choosing a method of transport?
A. How urgently the goods are needed. B. The documents accompanying the goods.
C. The nature of the goods. D. Size and weight of the goods.
28. Which document is not a contract of carriage?
A. Bill of lading. B. Consignment note.
C. Airway bill. D. Delivery note.
29. A port authority is not responsible for ___________.
A. collecting customs duties. B. ensuring adequate security.
C. maintaining repair yards. D. providing office space.
30. Which goods are least likely to be carried by air?
A. Flowers B. Jewellery
C. Mineral ores D. Newspapers
31. While goods are in bond, they___________.
A. may not be removed in lots B. cannot be blended
C. can be withdrawn before duty is paid D. can be sold
32. A suitable way of preserving beef would be ___________.
A. putting it into an elevator B. storing it in a water storage tank
C. storing it in a cold storage D. pumping it into pipes
33. Which product improves in quality with seasoning?
A. Wine B. Maize
C. Cotton D. None of these
34. One of the advantages of warehousing is that it _________.
A. allows goods to be removed from warehouses without paying duty
B. helps to overload a country’s transport system
C. stabilises prices of commodities
D. does not facilitate the mass handling of goods
35. In its warehouse, the Pig industry board stores _____________.
A. beef B. pork
C. fresh milk D. vegetables
36. In deciding where to locate a warehouse the trader must consider ___________.
A. the name of the area B. the landlord’s tastes
C. the product’s brand names D. the availability of parking lots
37. Which of the following is not a type of a market?
A. Mass market. B. Physical market.
C. Niche market. D. Business market.
38. The objective of marketing includes the following except _________.
A. making profit B. obtain loans
C. increase market share D. growth
39. _________ is a criterion for segmenting a market.
A. Product B. Technology
C. Language D. Life style
40. There are many bases to segment a market one of them is _________.
A. biblical B. demographic
C. periodical D. equality

107
Paper 2
Section A: Structured Questions [40 Marks]
Time: 2 Hours
Answer all questions in this section.
1. Explain the following terms:
(a) Market segmentation. [2]
(b) Market segment. [2]
2. (a) Distinguish between niche and mass marketing. [4]
(b) List five reasons why communication is crucial in trade and commerce. [5]
(c) What is effective communication? [2]
(d) Outline the contents of a proposal form in insurance. [4]
3. (a) Explain three reasons why some businesses are using sea transport instead of sending their goods by
air transport. [3]
(b) Flowers and newspapers are often carried by air transport. Explain why air transport is the most
suitable method for carrying these goods. [3]
(c) State four general factors affecting the choice of freight transport to be used by businesses. [4]
4. (a) Define the word warehouse. [2]
(b) List four importance of warehousing. [4]
(c) Outline the contents of a proposal form in insurance. [4]

Section : Essay Questions [60 Marks]

Answer all the questions in this section.

5. (a) What are the factors to consider when segmenting a market? [5]
(b) Describe market segmentation. [15
6. Describe the following postal communication services:
(a) Recorded delivery. [5]
(b) Business reply service. [5]
(c) Cash on delivery. [5]
(d) Poste restante. [5]
(e) Franking machine. [5]
7. (a) Describe the procedures followed when making an insurance claim. [10]
(b) Describe the importance of communication. [10]
8. (a) What role is played by warehousing in trade? [10]
(b) Explain the principles of insurance. [10]
9. Explain the documents used in insurance and assurance. [20]
10. (a) Outline the responsibilities of Port Authorities. [10]
(b) Explain the documents used in transport. [10]

108
N Sole proprietor 31, 37, 54, 55
Specialisation 3, 4, 5,7, 8, 53, 99
Needs 1,2, 3, 25, 29, 42, 53, 74, 75, 76, 77, 96,
Specialist 4, 11, 70, 72, 94, 101
98, 99, 100, 101, 102, 104, 105
Standardisation 4, 7, 8
O Stock exchange 31, 34, 36, 37, 39, 54, 55, 81
Order 6, 11, 14, 15, 20, 22, 23, 42, 47, 48, 53, Subsistence 1, 2,7, 8
59, 60, 62, 65, 69, 72, 74, 76, 79, 80, Surplus 2, 4, 7, 47, 50, 51, 94, 95, 96
82, 83, 84, 95, 106
T
Organisation 9, 13, 14, 26, 29, 33, 35, 37, 41, 44, 45,
55, 58, 62, 63, 80, 81, 83, 84, 98, 102 Tax 31, 33, 37, 39, 46, 49, 50, 51, 58, 59, 62, 106
Organizing 43, 44 Taxation 49
Overdraft 48, 49, 50, 51, 54, 60,61, 62 Tele-banking 14, 57
Ownership 16, 22, 33, 35, 36, 37, 65 Tertiary 7, 8, 54, 90,97
Transactions 9, 19, 21, 80
P Transport 11, 14, 21, 47, 56, 78, 85, 86, 87, 88,
Partnership 31, 33, 34, 37, 38, 54, 55 89, 90, 91, 92, 93, 96, 106, 108, 109
Perishable 5, 6, 12, 85, 86, 93 Turnover 12, 13, 18
Planning 41, 42, 44, 45 U
Postage 76, 77, 78, 79, 83, 105
Postal 53, 59, 75, 79, 82, 84, 105 Underwriter 58, 62, 64, 67, 70, 71, 72, 73, 106
Premiums 65, 69, 70, 71, 72, 73 Unemployment 2, 4
Private sector 10, 32, 33, 37, 39 Unincorporated 31, 34, 35, 37, 38, 39, 40, 54, 56
Procurement 8
Production 1, 2, 3, 4, 5, 6, 7, 8, 10, 25, 26, 35, 54,
W
56, 86, 90, 93, 94, 95, 96, 97, 99, 101, Warehousing 91, 92, 93, 94, 95, 96, 97, 107, 108
102 Wholesalers 5, 9, 10, 14, 16, 23, 56, 57, 93, 95
Profits 1, 6, 16, 23, 32, 33, 34, 35, 37, 38, 47,
49, 50, 55, 81, 99, 100, 102
Public sector 31, 32, 37,39, 99
Purchasing 13, 24, 55

Q
Quotation 20, 22, 23, 69, 70, 73, 106

R
Receipt 19, 21, 23, 36, 78, 79, 83, 88, 88, 89,
Research 6, 21, 37, 43, 69, 76, 83, 84, 89, 99,
103
Resources 1, 2, 42, 45, 98, 99
Retailer 5, 9, 10, 11, 12, 14, 15, 16, 17, 18, 22, 23, 27, 28,
29, 30, 55, 56, 96, 97

S
Scarce 1
Segmentation 98, 99, 100, 102, 103, 104, 108

Self-service 11, 12

110
 A Practical Approach to Commerce | Form 1 - 4 Series
A Practical Approach

Updated Curriculum
Updated Curriculum A Practical Approach
FORM FORM
to to

Commerce 1 Commerce 2
e
ner centred comprehensive book which gives learners an effective
g of the learning area. It constitutes of the following features:
.
structured content as outlined in the syllabus from known to unknown.
nesting facts about the subject that motivate and stimulate interest in

A Practical Approach to Commerce | Form 2

A Practical Approach to Commerce | Form 1

earning of Commerce.
gities that require learners to actively participate in their learning process.
ent that helps learners to understand, interpret business related
depts.
ps learners with practical enterprise skills and business related
d
petences.
le language to enhance understanding.
ctive illustrations that reinforce concepts being taught.
ough revision exercises at the end of every unit, chapter and follow
wxaminations meant to evaluate the extent to which taught skills and
d
wledge have been understood.

the Ministry of Primary and Secondary Education

David Mandikuwaza Ivy Dombo David Mandikuwaza

A Practical Approach A Practical Approach

Updated Curriculum
Updated Curriculum

FORM FORM
to to

learner centred comprehensive book which gives learners an effective

Commerce 3 Commerce 4
A Practical Approach to Commerce | Form 4

nding of the learning area. It constitutes of the following features:

well-structured content as outlined in the syllabus from known to unknown.
A Practical Approach to Commerce | Form 3

nteresting facts about the subject that motivate and stimulate interest in the
earning of Commerce.
activities that require learners to actively participate in their learning process.
content that helps learners to understand, interpret business related concepts.
equips learners with practical enterprise skills and business related
competences.
simple language to enhance understanding.
attractive illustrations that reinforce concepts being taught.
thorough revision exercises at the end of every unit, chapter and follow
up examinations meant to evaluate the extent to which taught skills and
knowledge have been understood.

d by the Ministry of Primary and Secondary Education

Tendai Ruombwa Gwiriri Oscar

All Approved by the Ministry of Primary and Secondary Education