Introduction To Com - Bonda 2017
Introduction To Com - Bonda 2017
Meaning of commerce
Commerce means trade and all services that make trade possible. It is concerned with the distribution of goods and services in order to
satisfy human needs and wants.
Needs are things that we need in order to survive, we cannot live without them, they are the basic necessities of life.
E.g.
food, - shelter - health care
clothing, - water
Wants are things that we need to make our lives more enjoyable but we can survive without them.
E.g.
cell phones - radio -entertainment
TV’s - bed - pen
PRODUCTION
Production refers to all the activities which bring about goods and services [1] to satisfy human needs and wants [1]
It includes;
-the extraction of natural resources/ raw materials
-changing of raw materials into more useful goods
-transferring finished goods from factory to the consumer
TYPES OF PRODUCTION
1. Direct production; production of goods for one’s own use or family consumption.
e.g.
A man building his own house
A farmer growing only enough crops for his family consumption.
STAGES OF PRODUCTION
a) Primary production
b) Secondary production
c) Tertiary production
a. PRIMARY PRODUCTION
This is the first stage of production were natural resources are the extraction from nature. The resources are extracted either by:
Mining
farming
fishing
quarrying
forestry.
b. SECONDARY PRODUCTION
This is the second stage of production where raw materials are transformed into finished goods or semi-finished goods. It consists of
manufacturing and construction industries. E.g.
making of shoes
Baking bread
milling
building of houses
construction of roads and bridges.
c. TERTIARY PRODUCTION
This is the last stage of production which involves the provision of services which help in the transfer of the finished products from
the factory to the consumer. It consists of :
i. Commercial Services- services that help in the buying and selling of products.
These services are transport, advertising, banking finance, warehousing, insurance, communication
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ii) Direct Services- these are intangible services that people directly provide as a contribution to production rather than to the actual
making of an item
E.g. services of doctors, nurses and surgeons make people healthy, strong and ready to work. They directly help them to work more
productively.
CHAIN OF PRODUCTION
It refers to how the various processes are involved in the making of a product are linked up.
E.g. chain of Production of bread
FACTORS OF PRODUCTION: These are the resources needed for the production of any goods or services.
These are: land
Labour
Capital
Enterprise
a) Land –refers to all the resources provided by nature such as soil, fields, vegetation, animals, minerals, rocks etc, it includes the
earth and oceans and everything that lives or grows in them.
Nothing can be produced without land.
a fisherman needs the water from which to catch the fish
a miner extracts minerals from below the surface of the land
a manufacturing industry needs land to build the factory
Reward for land is rent
b) Labour- is the human effort or energy used in the production of goods and services. It can be physical or mental energy. It includes
services provided by such people as domestic workers, doctors, teachers etc
Reward for labour is wages/salaries
c) Capital- consists of money and all the man made assets used in the production of goods and services. Money is needed to pay
workers, bills and buying machinery.
Reward for capital is interest
d) Entrepreneur – a person who makes the decision and bearing the risks of bringing resources together to produce goods and
services with an aim of making profit e.g. a fruit farmer will use his expertise to combine his land, capital and labour to produce fruits
he will be able to sell.
Reward is profit
STRUCTURE OF COMMERCE
COMMERCE
WHOLESALE RETAIL
TRADE TRADE
EXPORT IMPORT
TRADE TRADE
KEY: W- WAREHOUSING
A- ADVERTISING
B- BANKING
T- TRANSPORT
I- INSURANCE
C- COMMUNICATION
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1. TRADE: it is the buying and selling of goods and services with the aim of making profit.
TYPES OF TRADE
a. Home trade: it is the buying and selling of goods within the country. It consists of retail trade and wholesale trade
Retail trade; selling of goods in small quantities
Wholesale trade; selling of goods in large quantities.
b. Foreign trade: the buying and selling of goods between countries. It consists of import trade and export trade
Import trade: buying of goods from outside the country
Export trade: selling of goods to someone outside the country.
2. AIDS TO TRADE/ COMMERCIAL SERVICES: these are services that help to make the buying and selling of goods/services
possible. They are
Warehousing
Advertising
Banking
Transport
Insurance
Communication
WAREHOUSING
Provides the place for the safe keeping of raw materials, equipment and finished goods to protect them from harsh weather
condition.
It helps to ensure that there is steady supply of raw materials for production to go on smoothly so as to keep stock ready to
meet customer demands.
It allows the business to buy stock/raw materials in large quantise hence enjoy trade discounts.
ADVERTISING
Helps businesses to inform and remind customers about the availability of goods/ services so as to come and buy.
Helps businesses in persuading customers to buy more of their products hence increase in sales.
Helps businesses to obtain information regarding raw materials supply sources and other inputs so able to compare prices
and quality and choose the best supplier.
BANKING
Helps by providing finance (loans & overdrafts) required to set up a factory and running the business.
Provides safe place for businesses to keep their money so as to avoid losses to due to thieves.
Provides the use of current account to enable the business to receive payment from customers and also to make payments.
TRANSPORT
Helps to move the equipments and raw-materials to the factory for processing well on time
Helps move workers to and from the factory so as to start production well on time.
To move products to the consumers for sale when ready.
INSURANCE
Facilitates production and trade by absorbing some of the risks involved in businesses e.g. fire, motor accident, theft,
accidental damage.
It creates an atmosphere of confidence to the producer so that s/he can freely invest her money, produce and sell the goods.
COMMUNICATION
Enable businesses to contact both the suppliers of raw materials and customers through telephone, letters, E-mail and can
place order through faxes.
Helps businesses to widen his/her market by contacting foreign customers by phones and internet (e-mail)
CHAIN OF DISTRIBUTION
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This is the process that shows the different routes which goods pass through before reaching the final consumer. In the process the
goods are handled by various people and organisations.
Route 1: PRODUCER—WHOLESALER—RETAILER--CONSUMER
Wholesalers buy goods in bulk from producers and sell them to retailers in small quantities and the retailers sell to the consumers in
suitable quantities.
SPECIALISATION
DEF: Specialisation is a process whereby a company/person concentrates on producing only one product or doing only one task.
DIVISION OF LABOUR
It is the breaking down of work into individual tasks for individual workers to specialise.
E.g. in a car assembly plant, each worker performs a single task along the production line. One person may install the engine, one
may fit the wheels and one put on window glasses.
FORMS/LEVELS OF SPECIALISATION
Specialisation by individual. -When individuals become professionals such as teachers, dentist, accountants.
Specialisation by product- When a company specialises in manufacturing a certain products e.g., Toyota manufactures cars,
Specialisation by process- It is the division of labour whereby a group of people producing a certain product are divided on
individual jobs which make up part of the work involved in making the final product.
Specialisation by region-Occurs when a particular region concentrate in producing a few major products/ services because of the
richness of natural resources in that region.
Specialisation by nation- Occurs when a certain country concentrate in producing certain products which it exports to other
countries. E.g. Botswana produces diamond and beef for export.
If workers keep on doing the same task/job each and every time their skills and speed increase (1) therefore more goods are
produced (1) but this can be boring to workers leading to fewer goods produced.(1)
Time is saved (1) because workers do not have to move from one operation to another. (1) but production may be stopped
if one worker is absent or sick (1)
Specialisation allows the use of machinery (1) which leads to further savings in efforts and time (1) but machines are
expensive to buy.
Doing the same work everyday becomes boring and it leads to low productivity.
Use of machines leads to loss of individual crafts and skills.
Production may be disturbed if one worker falls sick or if the other section is not working.
Products are all the same so this means consumer’s choice of goods becomes limited.
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CHAPTER 2: RETAIL TRADE
RETAILER: A person of organisation who buys goods in bulk and sells them to consumers in small quantities.
FUNCTIONS OF RETAILERS
Provide variety of goods to consumers
Provides goods at convenient times
Some offer credit to the consumers
Offer delivery for some goods
Offer after sales and pre sales service.
TYPES OF RETAILERS
1. Small scale retailers
2. large scale retailers
HAWKER: a licensed trader who sell goods by walking from one house to another.
MOBILE SHOPS: traders who sell their goods by moving from door to door using a mode of transport, either a van or a
bicycle.
STREET/ROADSIDE TRADERS: Unlicensed traders who sell their goods sitting under a tree along the road.
ITINERANT TRADER: Unlicensed traders who walk from house to house carrying a handful of things for sale.
MARKET STALL TRADERS: Traders who sell their goods from stall areas provided by town councils usually in busy
areas like bus ranks.
INDEPENDENT RETAILERS: A licensed retailer who operates from a fixed shop on a small scale. They are commonly
known as general dealers.
Affected by bad weather conditions like rain [1] which can disturb them from selling hence low sales[1]
Can be attacked by thieves [1] who could take all their money and goods leading to loss [1]
Face competition from large retailers who offer variety of goods at cheaper prices [1] therefore lose customers [1]
HOW A SMALL RETAILER CAN MAKE HIS/HER BUSINESS SUCCESSFUL i.e. how to increase sales
Competition from large scale retailers who offer goods at lower prices [1] therefore lose customers [1]
Offer limited range of goods and services [1] so customers rarely buy there [1]
Lack of advertising [1] which lead to low sales [1]
Poor management [1] as some traders take the business money for personal use.
Poor locations [1] most are located on the outskirts of towns where there are few customers. [1]
WHY SOME SMALL SCALE RETAILERS ARE STILL SURVIVING/ CONTINUE TO TRADE SUCCESFULLY
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They offer a wider range of goods and services [1] so this attracts customers to buy in large numbers [1]
They offer delivery and credit services [1] which makes customers enjoy to buy from them [1]
They open for long hours [1] which caters for late shoppers hence increase in sales [1]
They offer good customer service [1] which appeals to more customers [1]
They offer quality goods at competitive prices [1] which makes customers to be loyal [1]
These are retailers that operate on a large scale offering a wide range of goods and services to the customers.
1. SUPERMARKET
These are large self service stores with about 200 sq metres of selling space and have trhee or more cash tills at the exit
E.G. - Choppies supermarket
-Spar
- Pick n Pay
FEATURES OF SUPERMARKETS
Sell mainly groceries and house hold items
Use self service method of selling
Have a trading space of about 200 sq metres.
They sell branded and pre-packaged goods.
2. HYPERMARKETS
This is a large self service store whith a trading space of over 500 sq meters, selling groceries, household items, furniture and other
items
FEATURES OF HYPERMARKETS
Have a selling space of over 500 square metres
Use self service method of selling
Usually charge lower prices
Goods are sold on cash and carry basis except furniture which is sold on credit
Offer wider range of goods than supermarkets
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Buy stock direct from producers at factory prices [1] therefore able to charge lower prices [1] which attract customers
hence increase in sales [1] however lack of personal attention may lesd to some customers not buying [1]
Self service is used[1]which lead to low wage bills as few shop assistants are needed hence more profits [1] however
shoplifting more likely which may reduce profits [1]
Impulse buying is more likely [1] which increases sales and possibly profits [1] however they are to expensive to set up
and need much land which may lower profits [1]
DISADVANTAGES
Expensive to set up and need too much which may lower profits
Shoplifting is common
Self service is provided [1] which makes customer to shop at their own paced without being rushed [1] however impuse
buying is more likely which may lead to financial difficulties [1]
Usually provide long opening hours [1] enabling late shoppers to buy [1] however they are destroying small local shops
which are conveniently located closer to consumers. [1]
DISADVANTAGES
Too big to find some items
Too large and impersonal
Destroying small local shops conveniently located near customers
These are a group of shops owned by same company with branches all over the country and in other countries selling identical and
usually limited range of goods under centralised ownership and control
FEATURES
Consist of number of branches scattered all over the country and in other countries
Stock can be moved between branches
All branches sell the same line of goods, use the same name and have similar shop fronts
Branches are controlled from the head office
Each branch is headed by a branch manager
The uniformity of the sores save on architectural costs [1] as the same building plan will be when a new branch is being built
[1] however large capital is needed to set up and run the business [1]
Able to employ highly qualified workers[1] which brings greater efficiency and help reduce costs [1]however the qualified
workers may need to be paid high wages which increases wage bill [1]
The advertising, accounting and purchasing are done from the head office [1] which saves overheads and lead to low costs per
branch [1] however centralised control from head office leaves the branch manager with no power to change anything to
suit the local needs of the area leading to low sales [1]
REASONS WHY MULTIPLE STORES OFTEN HAVE A LARGER SHARE OF THE MARKET
Sell on credit and offer delivery [1] which attract many customers to buy [1]
Have branches all over the country [1] so have easily accessible to many consumers [1]
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Carry out national advertising [1] which can persuade many customers to buy [1]
Offer competitive prices [1] which attracts many customers to buy [1]
4. DEPARTMENT STORES
These are stores divided into a number of independent departments each stocking only one kind of good.
e.g Game Stores
These are stores which sell their goods through the post office. It is suitable for selling high value, light and low volume goods such as
jewellery, household utensils and clothes.
E.G. Home Choice, Tupperware
These are stores formed and run by a group of consumers on the cooperative principle of ownership, cooperation and distribution of
profits.
FEATURES
The members/owners are people who hold shares in the society and are also the main customers.
Profits are divided as dividends in relation to the amount of goods the member bought from the store.
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They offer special benefits such as scholarships, funeral benefits to the community
They are run by a committee elected by the members