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Class 11 Business Studies Chapter 10 Internal Trade
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Internal Trade
Chapter: 10
VERY SHORT TYPE QUESTIONS ANSWERS (1 MARK EACH)
A. Short and Long Answers:
1. What is meant by internal trade?
Ans: Trade means exchange of goods and services for a consideration with an objective of earning profit. Trade therefore, means buying and selling of goods and services so as earn some profit. When the trade is carried on within the territorial limits or border of a country it is known as internal or domestic or home trade.
2. Specify the characteristics of fixed shop retails
Ans: Following are the characteristics of fixed shop retails-
(i) The fixed shop retails have more resources and operation as compared to the finerant traders.
(ii) There are different size groups of these fixed shop retail.
(iii) The fixed shop retails deal with both consumer durables as well as non-durables.
(iv) From customer point of view, this type of fixed shop retails have more credibility.
(v) These retails houses have greater services to the customers such as home delivery guarantees, repairs, credit, facilities, availability of spares, etc.
3. What purpose is served by wholesalers providing warehousing facilities?
Ans: Wholesalers also perform the function of warehousing by storing the goods. They purchase goods in large quantities. Till the goods are sold, these need to be stored and warehoused to preserve their utility. This reduce the burden of manufactures of providing for storage facilities for the finished products.
4. How does market information provided by the wholesalers benefit the manufactures?
Ans: Wholesalers provided feedback as to customer preference, tastes, desire, expectations, like and dislikes and aspirations through retailers and in turn update manufactures. This way manufactures plan their products and production as per consumer expectations and desires.
5. How does the wholesaler help the manufacturer in availing the economics of scale?
Ans: As Wholesalers purchase goods in bulk or large quantities. It relieves the manufactures of the worry of warehousing and slowing down production. Bulk buying by wholesalers encourage the manufactures to take up large-scale production. This leads to advantages by way of economies of large production to the manufactures. Wholesaler relieve the manufacturers of the problem of maintaining large stock of goods. Because the wholesalers buy in large quantities and stock the goods according to the demand,.
6. Distinguish between single line stores and speciality stores. Can you identify such stores in your locality.
Ans: Single line stores deal in a single product line, such as readymade garments, watches, textiles, shoes, automobiles tyres, computers, books and stationary. Single line stores provides variety of goods of the same line. Generally these stores are situated in the central location of a town as city.
On the other hand, speciality shops deals in products of specialise nature as line of specific products like jewellers, sweet shop, grocery, bakery, chemist, TVS, cycles motor part, etc. They set up their shops at busy shopping complexes or busy markets on a permanent basis.
7. How would you differentiate between street traders and street shops?
Ans : Street traders are the small retailers who sell goods at places where the large floating population gathers. example of such traders are traders near railway stations and bus stands, and traders of stationery items. Eatables, readymade garments, newspapers and magazines. These traders do not change their place time to time.
On the other hand, street shops are generally found at street crossing or other places where flow of traffic is heavy. These shops attract floating customers and deal mainly in goods of cheap variety like hosiery products, toys, cigarettes, soft drinks. etc.
8. Explain the services offered by wholesalers to manufacturers.
Ans: The following services are rendered by a wholesalers to the manufacturers :
(i) Wholesaler furnishes valuable information regarding consumers behaviour, the changes in tastes and fashion and also the latest demand of the consumers.
(ii) Wholesalers relieve the producer from the worthiness of keeping stock since they usually make forward dealings with producers.
(iii) Wholesalers enables a manufacturer to get the benefit of economics of large scale production by manufacturing on a large scale basis.
(iv) Wholesalers render financial assistance to manufacturers by providing long term soft loans to them.
(v) Wholesalers help in price stabilising since they stock goods in the slack season and sell them when the demand is in high.
(vi) Wholesalers enable the manufacturers to utilise their capital for production activities instead of blocking the capital in stock.
(vii) Wholesalers are an important link between the manufacturers and the retailers.
(viii) Wholesalers provide warehouse facilities for goods till they are required by the retailers.
(ix) Wholesalers take over the marketing functions from the manufacturers, thereby enabling them to concentrate on the production activities.
9. What are the service offered by retailers to wholesalers and consumers.
Ans: The services of retailers to the wholesalers and consumers are discussed below:
(a) For wholesalers:
(i) They supply valuable market information regarding tastes, fashion, needs and demand of the customers.
(ii) Retailers help wholesalers from difficulties to sell goods in small quantities to the consumers.
(iii) Retailer performs the intermediary services between the wholesalers and consumers.
(b) For consumers:
(i) They provide ready stock of goods for the Satisfaction of the consumers.
(ii) They provide consumers with a wide variety of choice.
(iii) The provide information to the consumers about the latest arrivals in the market.
(iv) They supply fresh goods to the consumers.
(v) The supply goods to the consumers according to their tastes and fashions.
(vi) They sell to consumers in quantities which suit their pockets.
(vii) They allow cash discounts on their sales.
(viii) They provide free home delivery services to the consumers.
(ix) They maintain personal contact with the consumers.
(x) They sell goods on credit to regular and established consumers.
(xi) They provide after sale service to consumers in some particular goods.
(xii) They carry out their trade near the customers place.
10. Itinerant traders have been an integral trade in India. Analyse the reasons for their survival in spite of competition form large scale retailers.
Ans: Following are the reasons of survival of Itinerant traders in spite of competition from large scale retailers-
(i) Itinerant retailers moving from one place to another carrying goods on their heads, shoulders on the back of animals or on wheelers for selling on small lots to the consumers, which can be provided by the large scale retailers.
(ii) Itinerant shops provide the goods at cheapest rate. It is possible because of the fact that their operating expenditure is there by low.
(iii) They provide the articles of common uses. So, All level of customers have the needs of those articles.
(iv) They generally deal in cheap and light articles which are easy to handle and carry like ready made garments, vegetable, ice-cream, carpets, toys, potteries, drapery etc. Because of this fact, they can provide the goods and service to all customers door to door.
(v) They can provide the goods and services everywhere. So, customers available in city, rural areas, hilly area, backward areas can get service of itinerant.
11. Discuss the features of a departmental store. How are they different from multiple shops or chain stores.
Ans: The following are the main characteristics of a departmental store:
(i) A departmental store is a large-scale retailer organisation.
(ii) It consists of a number of departments organised under one roof.
(iii) It is under one united control and management.
(iv) Each department specialises in a particular kind of trade.
(v) The basic principle of a departmental store is that it is easier to sell more goods to the same customers by providing a large variety of goods than to sell same kind of goods to many customers. Therefore, they provide a large variety of merchandise from pin to aeroplane and act as universal suppliers.
(vii) It provides quality goods and services to the customers.
(viii) It provides many amenities such as, restaurants, telephone facilities, reading room, recreation facilities to attract customers.
(viii) It is situated in the important central places of big cities.
(ix) A huge amount of capital is required to establish a departmental store.
(x) To attract the customers they have to make an extensive use of advertising.
(xi) The day-to-day running expenses of a departmental stores are very high.
The differences between departmental stores and multiple shops are mentioned below:
12. Why are consumer cooperative stores considered to be less expensive? What are its relative advantage over other large scale retailers?
Ans: It is to be mentioned that because of having some relative advantages over other large scale retailers the consumer cooperative stores are considered to be less expensive. So, the cause of less expensive and the relative advantages over other large scale retailers of consumer cooperative stores are the same.
The advantages and disadvantages of co-operative store are mentioned as follows:
Advantages:
(i) The co-operative stores purchases goods in bulk so the trade discount is allow to them.
(ii) The management and control of co-operative societies are done on democratic way hence no group can dominate the organisation.
(iii) The expense increased on advertisement are less.
(iv) The profit earned by the society is distributed among the members and spent on the welfare of the members.
(v) Members get fresh goods at cheaper rate from the stores.
(vi) It helps in developing managerial ability among the members.
Disadvantages:
(i) It eaters to the need of small and medium income groups of the society.
(ii) It suffers from low finances.
(iii) Due to low capital found it cannot engage professional managers for its management.
(iv) There are too much dependence on the honesty and loyalty of the workers.
13. Imagine life without your local market? What difficulties would a consumer face if there is no retail shop?
Ans: In internal trade, there are many intermediaries among which only the retail available in the local market can directly provides the goods and services to the consumer. So, no person can smooth by run his life without local market. There is a close relation between the demand of local people and the supply of local market. Because, depending upon the demand of local people the local market tries to supply the goods and service. Accordingly, depending upon the supply of local market, the local people try to consume and make the living style. So, without local market, no one can live comfortably.
The following are the difficulties, a consumer will face, if there is no retail shop:
(i) Every consumer is to face the problem of purchasing of the daily requirement, if other is no retail shop.
(ii) No consumer can maintain their minimum living standard without retail shop.
(iii) Availability of retail shop can provide multifarious taste, fashion and satisfaction, So, without the retail shop, no one can expect such type of variety of taste fashion in the living.
14. Explain the usefulness of mail orders house. What type of products are generally handled by them? Specify
Ans: Following are the usefulness of mail orders house:
(i) Moderate Capital: It can be started even with moderate capital. An inspiring young person with little capital can lunch upon such an enterprise and later extend it as his resources increase.
(ii) Economy in operation: It affects great economy in shop rent, salary of salesmen and others, book keeping charges etc.
(iii) No bad debts: As goods are sent against advance or VPP, hence there is no chance of bad debts.
(iv) Less time to process orders: Absence of any middleman\ reduces time of processing order for supplies.
(v) Fair price: Selling and distribution overhead are less, as such the price of goods remain low.
Generally the following types of products are handled by mail order house:
(i) Small sized: Goods small in size which are suitable to pack in small containers
(ii) Low weight: Goods of lighter weight
(iii) Non-perishable: Only durable and non-perishable goods.
(iv) Easy Handling: Goods which are easy to handle.
(v) Less costly goods: Low cost goods.
(vi) Standardised goods: Goods which are standardised as to quality, pricing etc.
ADDITIONAL QUESTIONS & ANSWERS
1. Discuss the features of wholesale trade?
Ans: Following are the features of wholesale trade :
(i) Large quantity buying: Wholesaler buys goods in large quantities from the manufactures or producers.
(ii) Sellers in small quantities: Wholesaler sells in small quantities to retailers or to other small merchants
(iii) No direct sales: Generally wholesaler does not make sales to the ultimate customer.
(iv) Link between manufacture/ Producer and retailers: Wholesaler servers as a link between manufacturer / producer and retailer. The serves as the first intermediary between manufacturer and retailer.
(v) Specialised purchases: A wholesaler is specialised in are line of trade and deals in one variety of goods/ products. He generally makes purchases as per his knowledge and skill.
(vi) High investment: Wholesaler makes large investment in his trade due to large quantities of purchase involved.
(vii) Law profit margin: The profit margin charged by the wholesaler is generally low.
(viii) High and quick turnover of stock: The stock turnover in terms of sale is fast and high in wholesale trade.
2. Explain the various functions of wholesalers?
Ans: Following are the functions performed by wholesalers:
(i) Collection and concentration: Different manufacturers produce different goods at different places, Wholesalers purchases different goods from different manufacturers, collect and concentrate various goods at one place.
(ii) Distribution: Wholesalers with the international to sell to retailers purchases and distribute those goods to the retailers in are scattered over a large area.
(iii) Warehousing: Wholesalers also perform the function of warehousing by storing the goods. They purchase goods in large quantities to the sold to the retailers in small quantities. Till the goods are sold, this need to be started and warehoused to preserve their need to he started and warehoused to preserve their utility.
(iv) Grading: Before warehousing, the wholesalers perform the function of grading so as to segregate goods quality goods and lower quality goods which help to supply the goods as per quality desired by the retailers.
(v) Transportation: Wholesalers facilitate sending goods through various means of transportation to the retailers who are generally scattered over a large area of the country.
3. Discuss the various features of retail trade.
Ans: Following are the features of retail trade:
(i) Sale in small lots: Retailers sell goods in small quantities or lots to consumers thereby helping them to buy goods as per their immediate requirements.
(ii) Small scale/size: The scale of operation or size of a retail trade organisation is generally tends to the quite small and it caters only to the local customers.
(iii) Offer wide choice: Retailers keep and maintain stock of variety of goods produced by various manufactures and required by customers. So, the customers have a wide choice to choose from the available variety of goods.
(iv) Grading/sorting: Retailers generally clean and grade the goods which they received from wholesalers.
(v) Personal services: Good behaviour and personal contact with the customers in the essence of retail trade.
(vi) Better location and decoration: Retailers pay more attention to better location and decoration of their shops to reach nearer the customers and to attract them.
(vii) Risk bearing: Retailers bear the risk that may arise due to theft, spillage leakage, breakage or expiry of products.
(viii) Credit grating: Retailers allow credit facility to regular and known customer.
4. Explain the features of multiple shops?
Ans: Following are the features of multiple shops:
(i) Specialization: These shops are specialised in only one or a few similar lines of products.
(ii) Cash sale and fixed price: No credit is permitted, sales, take place on cash basis. The prices of products are fixed as per price list. There is no scope of price manipulation and bargain on the part of customers.
(iii) Centralised management and Decentralised selling: Mostly these shops are set up managed and controlled under one single organisation and administration. But, selling is take place through different retail outlets located over large geographical area.
(iv) Uniform display and unified advertising: The decoration of shops and window display is uniform and similar in all the branches of these shops. The advertising and sales promotion measures are also similar and under taken at one level for all out lets.
(v) Suppliers of necessities nearest to customers: The articles sold in these stores are mainly necessities of standard qualities These stores provide convenience to the customers to sell these goods by establishing retail outlets near to the customers residence.
5. What is Super Market?
Ans: A super market is retailing business unit selling main food and grace items on the basis of low-margin appeal, wide varicula and assortments, self service land heavy emphasis on merchandising appeal.
6. Write three difference between wholesaler and retailer?
Ans: Difference between wholesaler and retailer:
7. Write five services of wholesalers to retailers?
Ans : The five services of wholesalers to retailers are :
(i) The wholesalers save the retailers from the trouble of searching out and assembling goods from several manufacturers.
(ii) The retailers can purchase different varieties of products in small lots from the wholesalers.
(iii) The wholesalers offer good to the retailers on credit basis. The retailer can make payment to the wholesalers subsequently.
(iv) The wholesalers assists retailers in selling the products by undertaking advertising and other promotional activities.
(v) The wholesaler provides for transport of goods to the shops of the retailers and saves times energy of retailers in transporting the goods.
8. Write a brief note on SIDBI?
Ans: SIDBI: The Small Industries Development Bank of India was set up by an Act parliament passed in 1989. It commenced its operations on April 2,1990 after taking over the SIDF and National Fund of the IDBI. The SIDBI has been assigned the role of the principal financial institution for promotion, financing and development of small and tiny enterprises and to coordinate the functioning of institutions engaged in promoting the small sector. Some of the activities of SIDBI include the following.
(i) Refinancing of term loans granted to small sector by commercial banks, state Financing corporation and state Industrial Development Corporation.
(ii) Discounting and rediscounting of bills arising out of sale of products of the small scale enterprise.
(iii) Extending technical and related support services to small enterprises.
(iv) Assistance for development of industrial areas with requisite infrastructure facilities.
(v) Providing assistance for development of marketing infrastructure, creating new marketing channels for the products of small scale units.
10 Discuss the different types of preference share?
Ans: Preference shares may be classified as follows:
(i) Cumulative and noncumulative preference share: The holders of cumulative preference shares are entitled to arrears of dividend on their shares to be paid out of the profits of subsequent years. But the dividend on noncumulative shares does not accumulate if the dividend is not paid in any year.
(ii) Convertible and non: convertible preference share: If the preference shareholders are given a right to convert their shares into equity shares within a given period of time, such shares will be known as /convertible preference shares. The shares which can not be converted into equity shares are known as non convertible share.
(iii) Participating and nonparticipating shares: The participating shares may be carry either both the following rights :
(a) Aright to participate in the surplus profit left after paying dividend to the equity shareholders. and
(b) A right to participate in the surplus assets left after the repayment of capital of the equity shareholders the winding up of the company.
But nonparticipating shares do not have these additional rights.
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