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NCERT Class 11 Business Studies Chapter 10 Internal Trade
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Internal Trade
Chapter: 10
| PART – ⅠⅠ |
| EXERCISES |
Short Answer Questions:
1. What is meant by internal trade?
Ans: Buying and selling of goods and services within the boundaries of a nation are referred to as internal trade. Whether the products are purchased from a neighbourhood shop in a locality or a central market or a departmental store or a mall or even from any door-to-door salesperson or from an exhibition, all these are examples of internal trade as the goods are purchased from an individual or establishment within a country.
2. Specify the characteristics of fixed shop retailers.
Ans: The characteristics of fixed shop retailers are:
(a) Compared with the itinerant traders, normally they have greater resources and operate on a relatively large scale. However, there are different size groups of fixed shop retailers, varying from very small to very large.
(b) These retailers may be dealing in different products, including consumer durables as well as nondurables.
(c) This category of retailers has greater credibility in the minds of customers, and they are in a position to provide 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: The wholesale merchants deal in goods in their own name, take delivery of the goods and keep the goods purchased in large lots in their warehouses. In the process, they bear a variety of risks such as the risk of fall in prices, theft, pilferage, spoilage, fire, etc.
Wholesalers take delivery of goods when these are produced in factories and keep them in their godowns/warehouses. This reduces the burden of manufacturers of providing storage facilities for the finished products. They thus provide time utility.
4. How does market information provided by the wholesalers benefit the manufacturers?
Ans: As the wholesalers are in direct contact with the retailers, they are in a position to advise the manufacturers about various aspects including customer’s tastes and preferences, market conditions, competitive activities and the features preferred by the buyers. They serve as an important source of market information on these and related aspects.
5. How does the wholesaler help the manufacturer in availing the economies of scale?
Ans: Wholesalers collect small orders from a number of retailers and pass on the pool of such orders to the manufacturers and make purchases in bulk quantities. This enables the producers to undertake production on a large scale and take advantage of the economies of scale.
6. Distinguish between single line stores and speciality stores. Can you identify such stores in your locality?
Ans:
| Single line stores | Speciality shops |
| Single line stores deal in a single product line such as ready made garments, watches, shoes etc., and keep a variety of items of the same line and are situated at central location. | Speciality shops specialise in the sale of specific line of products such as children’s garments, men’s wear, ladies shoes, school uniform, college books or consumer electronic goods, etc. |
7. How would you differentiate between street traders and street shops?
Ans:
| Street traders | Street shops |
| Street traders are the small retailers who are commonly found at places where a huge floating population gathers. | These stores are located at street crossings, main roadways, and colony corners. Street stalls are another name for them. There are only a few spaces available in these shops. |
8. Explain the services offered by wholesalers to manufacturers.
Ans: The services provided by wholesalers to manufacturers include:
(i) Facilitating large scale production: Wholesalers collect small orders from a number of retailers and pass on the pool of such orders to the manufacturers and make purchases in bulk quantities.
(ii) Bearing risk: The wholesale merchants deal in goods in their own name, take delivery of the goods and keep the goods purchased in large lots in their warehouses.
(iii) Providing financial assistance: The wholesalers provide financial assistance to the manufacturers in the sense that they generally make cash payment for the goods purchased by them.
(iv) Expert advice: As the wholesalers are in direct contact with the retailers, they are in a position to advice the manufacturers about various aspects including customer’s tastes and preferences, market conditions, competitive activities and the features preferred by the buyers.
(v) Help in marketing function: The wholesalers take care of the distribution of goods to a number of retailers who, in turn, sell these goods to a large number of customers spread over a large geographical area.
(vi) Facilitating continuity: The wholesalers facilitate continuity of production activity throughout the year by purchasing the goods as and when these are produced and storing them till the time these are demanded by retailers or consumers in the market.
(vii) Storage: Wholesalers take delivery of goods when these are produced in factory and keep them in their godowns / warehouses. This reduces the burden of manufacturers of providing storage facilities for the finished products.
9. What are the services offered by retailers to wholesalers and consumers?
Ans: Retailers to wholesalers:
(i) Help in distribution of goods: A retailer’s most important service to the wholesalers and manufacturers is to provide help in the distribution of their products by making these available to the final consumers, who may be scattered over a large geographic area. They thus provide place utility.
(ii) Personal selling: In the process of sale of most consumer goods, some amount of personal selling effort is necessary. By undertaking personal selling efforts, the retailers relieve the producers of this activity and greatly help them in the process of actualising the sale of the products.
(iii) Enabling large-scale operations: On account of retailer’s services, the manufacturers and wholesalers are freed from the trouble of making individual sales to consumers in small quantities. This enables them to operate on, at relatively large scale, and thereby fully concentrate on their other activities.
(iv) Collecting market information: As retailers remain in direct and constant touch with the buyers, they serve as an important source of collecting market information about the tastes, preferences and attitudes of customers. Such information is considered very useful in taking important marketing decisions in an organisation.
(v) Help in promotion: From time-to-time, manufacturers and distributors have to carry on various promotional activities in order to increase the sale of their products.
Retailers to consumers services:
Some of the important services of retailers from the point of view of consumers are as follows:
(i) Regular availability of products: The most important service of a retailer to consumers is to maintain regular availability of various products produced by different manufacturers. This enables the buyers to buy products as and when needed.
(ii) New products information: By arranging for effective display of products and through their personal selling efforts, retailers provide important information about the arrival, special features, etc., of new products to the customers.
(iii) Convenience in buying: Retailers generally buy goods in large quantities and sell these in small quantities, according to the requirements of their customers. Also, they are normally situated very near to the residential areas and remain open for long hours.
(iv) Wide selection: Retailers generally keep stock of a variety of products of different manufacturers. This enables the consumers to make their choice out of a wide selection of goods.
(v) After-sales services: Retailers provide important after-sales services in the form of home delivery, supply of spare parts and attending to customers.
(vi) Provide credit facilities: The retailers sometimes provide credit facilities to their regular buyers. This enables the latter to increase their level of consumption and, thereby, their standard of living.
Long Answer Questions:
1. Itinerant traders have been an integral part of internal trade in India. Analyse the reasons for their survival in spite of competition from large scale retailers.
Ans: Itinerant retailers are traders who do not have a fixed place of business to operate from. They keep on moving with their wares from street to street or place to place, in search of customers. The main advantage of this form of retailing is the provision of convenient service to the consumers. However, one should be careful in dealing with them, as the products they deal in are not always reliable in terms of quality and price.
(a) They are small traders operating with limited resources.
(b) They normally deal in consumer products of daily use such as toiletry products, fruits and vegetables, and so on.
(c) The emphasis of such traders is on providing greater customer service by making the products available at the very doorstep of the customers.
(d) As they do not have any fixed business establishment to operate from, these retailers have to keep their limited inventory of merchandise either at home or at some other place.
Some of the most common types of itinerant retailers operating in India are as below:
(i) Peddlers and hawkers: Peddlers and hawkers are probably amongst the oldest form of retailers in the market place who have not lost their utility even during the modern times. They are small producers or petty traders who carry the products on a bicycle, a hand cart, a cycle-rickshaw or on their heads, and move from place to place to sell their merchandise at the doorstep of the customers.
(ii) Market traders: Market traders are the small retailers who open their shops at different places on fixed days or dates, such as every Saturday or alternate Saturdays, and so on. These traders may be dealing in one particular line of merchandise, say fabrics or ready-made garments, toys, or crockery, or alternatively, they may be general merchants. They are mainly catering to lower-income groups of customers and deal in low-priced consumer items of daily use.
(iii) Street traders (pavement vendors): Street traders are the small retailers who are commonly found at places where huge floating population gathers, for example, near railway stations and bus stands, and sell consumer items of common use, such as stationery items, eatables, ready-made garments, newspapers and magazines. They are different from market traders in the sense that they do not change their place of business so frequently.
(iv) Cheap jacks: Cheap jacks are petty retailers who have independent shops of a temporary nature in a business locality. They keep on changing their business from one locality to another, depending upon the potentiality of the area. However, the change of place is not as frequent as in the case of hawkers or market traders. They deal in consumer items as well as services such as repair of watches, shoes, buckets etc.
2. Discuss the features of a departmental store. How are they different from multiple shops or chain stores?
Ans: Some of the important features of a departmental store are as follows:
(a) A modern departmental store may provide all facilities such as a restaurant, travel and information bureau, telephone booth, restrooms, etc. As such they try to provide maximum service to a higher class of customers for whom price is of secondary importance.
(b) These stores are generally located at a central place in the heart of a city, which caters to a large number of customers.
(c) As the size of these stores is very large, they are generally formed as a joint stock company managed by a board of directors. There is a managing director assisted by a general manager and several department managers.
(d) A departmental store combines both the functions of retailing as well as warehousing. They purchase directly from manufacturers and operate separate warehouses. That way they help in eliminating undesirable middlemen between the producers and the customers.
(e) They have centralised purchasing arrangements. All the purchases in a department store are made centrally by the purchase department of the store, whereas sales are decentralised in different departments.
| Departmental store | Multiple shops or chain stores |
| A departmental store is a large establishment offering a wide variety of products, classified into well-defined departments, aimed at satisfying practically every customer’s need under one roof. It has a number of departments, each one confining its activities to one kind of product. For example, there may be separate departments for toiletries, medicines, furniture, groceries, electronics, clothing and dress material within a store. Thus, they satisfy diverse market segments with a wide variety of goods and services. | Chain stores or multiple shops are networks of retail shops that are owned and operated by manufacturers or intermediaries. Under this type of arrangement, a number of shops with similar appearance are established in localities, spread over different parts of the country. These different shops normally deal in standardised and branded consumer products, which have rapid sales turnover. |
3. Why are consumer cooperative stores considered to be less expensive? What are its relative advantages over other large scale retailers?
Ans: A consumer cooperative store is an organisation owned, managed and controlled by consumers themselves. The objective of such stores is to reduce the number of middlemen who increase the cost of produce, and thereby provide service to the members. The cooperative stores generally buy in large quantity, directly from manufacturers or wholesalers and sell them to the consumers at reasonable prices. Since the middleman are eliminated or reduced, the members get products of good quality at cheaper rates. The profits earned by consumer cooperative stores during a year are utilised for declaring bonus to members and for strengthening the general reserves and general welfare funds or similar funds for social and educational benefits of the members.
The major advantages of a consumer cooperative store are as follows:
(i) Ease information: It is easy to form a consumer cooperative society. Any ten people can come together to form a voluntary association and get themselves registered with the Registrar of Cooperative Societies by completing certain formalities.
(ii) Limited liability: The liability of the members in a cooperative store is limited to the extent of the capital contributed by them. Over and above that amount, they are not liable personally to pay for the debts of society, in case the liabilities are greater than its assets.
(iii) Democratic management: Cooperative societies are democratically managed through management committees which are elected by the members. Each member has one vote, irrespective of the number of shares held by him/her.
(iv) Lower prices: A cooperative store purchases goods directly from the manufacturers or wholesalers and sells them to members and others. Elimination of middlemen results in lower prices for the consumer goods to the members.
(v) Cash sales: The consumer cooperative stores normally sell goods on a cash basis. As a result, the requirement for working capital is reduced.
(vi) Convenient location: The consumer cooperative stores are generally opened at convenient public places where the members and others can easily buy the products as per their requirements.
4. Imagine life without your local market. What difficulties would a consumer face if there is no retail shop?
Ans: If there were no retail shops, consumers would face several challenges:
(i) Limited Access to Goods: Retail shops provide a wide range of products in one place. Without them, consumers might struggle to find essential items, as they’d need to locate each supplier individually.
(ii) Higher Prices: A price increase may result in a sales decrease, as customers opt for a substitute product or a halt to buying your product altogether.Without retail shops, consumers might need to pay higher prices directly to manufacturers or suppliers.
(iii) A retail shop supplies goods in the quantities which suit the pocket and needs of different consumers .In the absence of a retail shop, a consumer will have to approach a wholesaler or a manufacturer for a small quantity of goods.
(iv) In the absence of a retail shop, there will be a lot of inconvenience to the consumers. They will have to approach the wholesalers or manufacturers who will not be near consumers’ residences .
(v) Consumers will not be able to know the new products available in the market. Retail shops often sell goods on credit. In absence of retail shops, consumers will not be able to enjoy credit facilities.
5. Explain the usefulness of mail order houses. What type of products are generally handled by them? Specify.
Ans: Mail order houses are the retail outlets that sell their merchandise through mail. There is generally no direct personal contact between the buyers and the sellers in this type of trading. For obtaining orders, potential customers are approached through advertisements in newspapers or magazines, circulars, catalogues, samples and bills, and price lists sent to them by post. All the relevant information about the products such as the price, features, delivery terms, terms of payment, etc., are described in the advertisement.
In this arrangement there is no risk of bad debt, as the goods are handed over to the buyers only after he makes full payment. However, there is a need to ensure the buyers that the goods dispatched are in accordance with their specifications.
Only the goods that can be
(i) graded and standardised.
(ii) easily transported at low cost.
(iii) have ready demand in the market.
(iv) are available in large quantity throughout the year.
(v) involve least possible competition in the market. and
(vi) can be described through pictures etc.
are suitable for this type of trading. Another important point in this regard is that mail house business cannot be successfully carried out unless education is widespread. It is so because only the literate people can be reached through advertisements and other forms of written communication.
