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NIOS Class 12 Business Studies Chapter 18 Internal Trade
Also, you can read the NIOS book online in these sections Solutions by Expert Teachers as per National Institute of Open Schooling (NIOS) Book guidelines. These solutions are part of NIOS All Subject Solutions. Here we have given NIOS Class 12 Business Studies Chapter 18 Internal Trade, NIOS Senior Secondary Course Business Studies for All Chapter, You can practice these here.
Internal Trade
Chapter: 18
Module – 5 Trade
INTEXT QUESTIONS 18.1
1. State any two features of ‘internal trade’.
Ans: Features of Internal Trade:
(a) The buying and selling of goods takes place within the boundaries of the home (domestic) country.
(b) Payment for goods and services is made in the currency of the home country.
2. Identify the following and write ‘WT’ for wholesale trade and ‘RT’ for retail trade.
(a) Dealing in limited variety of products.
Ans: WT.
(b) Goods purchased from wholesalers for resale.
Ans: RT.
(c) Providing facilities like grading and packaging.
Ans: WT.
(d) Buying of goods in bulk from the manufacturers.
Ans: WT.
(e) Trading activities carried on near the residential areas.
Ans: RT.
INTEXT QUESTIONS 18.2
1. The middlemen should be eliminated. Do you agree? Give one reason.
Ans: Yes, Some middlemen indulge in unfair trade practices like hoarding and adulteration to increase their gains from the business. They, at times, promote the sale of inferior quality goods and exploit the consumers to get a high profit margin for themselves. The middlemen do not bear risk such as loss due to strikes, lockouts, changes in fashion and consumption habits.
2. Correct the following sentences:
(a) A wholesaler has direct link with the consumers.
Ans: A retailer has a direct link with the consumers.
(b) The amount of capital required is less in case of wholesale trade.
Ans: The amount of capital is less in case of retail trade.
(c) Producer is a middleman in the chain of distribution.
Ans: Wholesaler/Retailer is a middleman in the chain of distribution.
(d) Presence of too many middlemen increases the price of the product.
Ans: No change.
(e) The wholesaler purchases goods from the retailer.
Ans: The retailer purchases goods from the wholesaler.
INTEXT QUESTIONS 18.3
1. What is meant by ‘Itinerant Retailing’?
Ans: Itinerant retailing is a type of small-scale retail trade in which retailers move around and sell a variety of items directly to the consumers.
2. Identify the types of retailing business.
(a) Stores dealing with a particular line of good like books, toys etc.
Ans: Single line store.
(b) Stores dealing with a variety of goods of a particular brand.
Ans: Specialty store.
(c) Stores dealing with a variety of goods of daily use.
Ans: General store or variety store.
(d) Selling goods on the pavement of a city.
Ans: Itinerant retailing.
(e) Stores selling used books or garments at cheaper price.
Ans: Second hand-goods shop.
INTEXT QUESTIONS 18.4
1. The decoration, display, signs boards etc. of the multiple shops are built alike. Why? Give reason.
Ans: (a) Same ownership.
(b) Easy to recognise.
2. Answer the following:
(a) Who owns the departmental stores?
Ans: Big businessman (Individual or group).
(b) Who owns the multiple shops?
Ans: Big manufacturers or producers.
(c) Which stores deal with variety of goods under one roof?
Ans: Departmental store.
(d) Who manages the day to day affairs of the multiple shops?
Ans: Branch manager or anybody appointed by the owner.
INTEXT QUESTIONS 18.5
1. List five items of daily necessity that are available in super markets.
Ans: (a) Food items.
(b) Vegetables.
(c) Fruits.
(d) Groceries.
(e) Utensils.
2. Rewrite the following sentences making necessary corrections:
(a) Consumer cooperative stores are generally located at far off places from the residential area.
Ans: Consumer Cooperative Stores are generally located near the residential areas.
(b) The presence of sales person is very much required in super markets.
Ans: The presence of salesperson is not required in super markets.
(c) The profit earned by the consumer cooperative stores is distributed among the members.
Ans: No change.
(d) Professional managers are engaged in the consumer cooperative stores to manage the day-to-day affairs.
Ans: The Consumer Cooperative Stores are managed by the members who may not have professional expertise in business management.
INTEXT QUESTIONS 18.6
1. Name any five products that are suitable for mail order retailing.
Ans: (a) Medicine.
(b) Books.
(c) Toys.
(d) Cosmetics.
(e) Plant seeds.
2. Define the following terms.
(a) Franchise.
Ans: Franchise is a form of retailing where two parties enter into an agreement in which one party authorises the other to sell or produce and sell specified goods and services.
(b) Franchiser.
Ans: The party that develops a product/service or is the owner of an expertise who authorises other to sell or produce and sell a particular item.
(c) Franchisee.
Ans: The party that buys the rights to sell or produce and sell any item under the contract of franchise is known as franchisee.
INTEXT QUESTIONS 18.7
1. What is meant by ‘Shopping Mall’?
Ans: Shopping Mall are like a huge shopping complex, housed in a single building, generally offering services like parking space, recreational facilities like cinema halls, variety of food outlets/restaurants (food courts) apart from a number of shops selling different goods. They may include a departmental store spread over multiple storeys/ floors, apart from a number of other independent shops, all under the same roof.
2. Name the method of distribution in the following cases:
(a) The manufacturer approaches the customers directly.
Ans: Direct marketing.
(b) The marketing representative calls the customers over telephone.
Ans: Telemarketing.
(c) Sale of goods and service by using internet.
Ans: Internet Marketing.
(d) Sale of goods through machines without any human intervention.
Ans: Automatic vending machine.
| TERMINAL EXERCISE |
Very Short Answer Questions:
1. What is meant by ‘Internal Trade’?
Ans: When buying and selling of goods and services takes place within the geographical boundaries of a country, it is referred to as internal trade. It may take place between buyers and sellers in the same locality, village, town or city; or may be in different states, but definitely within the same country. Internal trade is also called domestic trade or home trade.
2. State the meaning of multiple shops.
Ans: A number of identical retail shops with similar appearance normally deal in standardised and branded consumer products established in different localities owned and operated by manufacturers or intermediaries are called Chain stores or Multiple shops.
3. Mention any two benefits of wholesaler.
Ans: Wholesalers render the following services to the manufacturers:
(a) Bulk Buying: Wholesalers collect orders from a large number of retailers and buy goods in large quantities from manufacturers.
(b) Warehousing Facility: Wholesalers relieve the manufacturers from storing function by holding large stock of goods in their own warehouse. Therefore, manufacturer is relieved of the function of warehousing.
4. Define the term ‘Franchise’.
Ans: Franchise is a form of retailing wherein two parties enter into an agreement in which one party authorises others to sell or produce and sell specified goods and services. The party that develops a product/service or is the owner of an expertise is called the ‘Franchiser’. Moreover, these shops are run independently by different people in different localities. This is made possible through a retail arrangement called ‘Franchise’.
5. Name any four types of large scale retailing business.
Ans: The grocery shops of your locality come under the category of small-scale fixed shop retailing. On the basis of the nature of goods they deal in, we can classify these retailing businesses as:
(i) General store or Variety store.
(ii) Single line store.
(iii) Specialty store.
(iv) Second-hand Goods shop.
| Short Answer Questions |
1. Explain the role of wholesaler in the distribution channel.
Ans: Role of Wholesalers: The wholesalers through their services offer a number of benefits to the producers and retailers. They save the time and effort of the producers and allow them to concentrate on production of the goods while distribution is taken care of by the wholesalers. They deal with goods in bulk and reap the benefit of economies of scale. They provide goods in relatively small quantities to the retailers and provide them with facility of credit purchase. They provide information to the producers about the consumers’ preferences, changing taste and fashion, market demand etc. Wholesalers also bear the risk involved in holding of stock of goods and their transportation.
2. State any four merits of departmental stores.
Ans: Merits of Departmental Stores:
(a) They sell a large variety of goods to the consumers, under one roof. So it saves time and effort of the customers.
(b) Departmental stores offer wide variety of goods produced by different manufacturers.
(c) They buy large volumes of goods, at a time directly from the manufacturers, and get good amount of discount from them. They are able to reap the benefits of the economies of scale with reference to large-scale operations.
(d) Since these stores are organised on a large-scale basis, they can afford to employ efficient and competent staff to provide the best services.
3. Give any four points of distinction between a retailer and a wholesaler.
Ans:
| Basis | Wholesale trade | Retail trade |
| Number of items | Deals in a few items. | Deals in a variety of items. |
| Quantity of goods bought and sold | Large | Small |
| Source of purchase | Manufacturers | Wholesalers/producers |
| Main activity | Sells goods to the retailers. | Sells goods for consumption or final use. |
| Amount of capital required | Large | Small |
| Nature of relationship with producers/consumers. | Direct link with the producers and indirect link with the consumers. | Indirect link with the producers and direct link with the consumers. |
| Location | Located in the same area along with other wholesalers dealing in similar products. | Located near residential areas. |
| Display | Does not require elaborate display of goods. | Requires attractive display of Products. |
4. Explain the merits of super markets.
Ans: The merits of super markets:
(a) Super markets deal with a wide range of goods of daily household needs.
(b) It provides standard quality items to the customers. Chances of adulteration and duplication are minimal/almost nil.
(c) Due to economies of large-scale purchase and avoidance of middlemen the goods are available at a cheaper price in super market.
(d) In a super market normally services of salesmen and shop assistants are not available. This reduces the cost of operation.
(e) A customer can find goods of different brands at one place. This makes comparison and selection easy. You can take your own time to select items of your choice.
5. What is meant by ‘mail order retailing’?
Ans: The mail order retailers places the advertisements in newspapers, magazines, television, social media etc. or publicise their products in booklets, catalogues, brochures and handouts. These advertisements, leaflets, brochures etc. contain an order form or other details on how to order the product apart from a detailed description of the product being sold. On seeing the advertisement the interested customers can place an order by post and the retailer on receiving the order, dispatches the goods by post or courier.
| Long Answer Questions |
1. State the features of departmental Stores. How is a departmental store different from multiple shops?
Ans: Features of Departmental Store:
(i) The entire building is divided into a number of departments or sections.
(ii) In each department specific type of goods like stationery items, books, electronic goods, garments, jewellery etc. are made available.
(iii) All these departments are centrally controlled under one management. Once you enter such a store you can do all your shopping by moving from one department to another.
(iv) To encourage people to do all their shopping in one store, these stores also provide facilities like restaurant, telephone, toilet, ATM etc., for the convenience of customers.
(v) These stores also provide the facility like free home delivery of goods, execution of telephonic order for goods, credit facility, etc.
(vi) It is generally located at the main commercial centres of the cities and towns, so that customers from different localities can easily come to buy goods as per their convenience.
(vii) Big Bazar, Vishal Megamart, Ebony, Shoppers’ stop are some of the leading departmental stores in our country.
A number of identical retail shops with similar appearance normally deal in standardised and branded consumer products established in different localities owned and operated by manufacturers or intermediaries are called Chain stores or Multiple shops. Departmental Store is a large-scale retail shop where a large variety of goods are sold in a single building. A departmental store is centrally located and attracts customers towards it. On the other hand multiple shops are situated in different localities and attempt to reach near the customers.
2. Describe the role of middlemen in the channel of distribution.
Ans: The role of middlemen in the channel of distribution are:
(a) Role of Wholesalers: The wholesalers through their services offer a number of benefits to the producers and retailers. They save the time and effort of the producers and allow them to concentrate on production of the goods while distribution is taken care of by the wholesalers. They deal with goods in bulk and reap the benefit of economies of scale. They provide goods in relatively small quantities to the retailers and provide them with facility of credit purchase. They provide information to the producers about the consumers’ preferences, changing taste and fashion, market demand etc. Wholesalers also bear the risk involved in holding of stock of goods and their transportation.
(b) Role of the Retailers: Retailers are engaged in selling the product to the end users or the consumers. They cater to the demand of the customers by providing a variety of products procured from different locations. The retailers may offer credit facility to the customers. They also offer pre-sales and after-sales services and communicate to the consumers the technique of usage of the products.
It is often debated that the middlemen do not serve any useful purpose, but only escalate the price of a product unnecessarily. However, we must not forget that they render useful services to the producers and the consumers. To that extent, they are justified to get their share of profit in the sale of the product. But it should be reasonable and not too high so as to become a burden on the consumers.
3. What is meant by a Consumer Cooperative Store? Explain its merits in brief.
Ans: Consumer Cooperative Store is another form of large scale retail trade which is owned by the cooperative society. When the consumers of a particular area or group find it difficult to get the items of daily necessity they usually form a cooperative society and run the retailing business. The consumer cooperative stores purchase the goods directly from manufacturers or dealers and make them available at a cheaper price. Let us learn about the various merits of consumer cooperative stores.
Merits of Consumer Cooperative Stores:
(a) The consumer cooperative stores generally provide the goods at a price lower than the market, because they eliminate the profits of middlemen in the process of distribution.
(b) These stores sell the goods on cash basis. So the risk of bad debts is avoided.
(c) These stores are generally located near the residential area for the convenience of the members as well as general public.
(d) The profits earned by the consumer cooperative stores are distributed among the members as bonus.
4. Explain the features of Franchise as a form of large scale retailing business.
Ans: The features of Franchise as a form of large scale retailing business are:
(a) It is based on an agreement between the franchiser and the franchisee, wherein they enter into a commercial relationship, generally for an agreed period of time.
(b) Under this agreement, the franchisee gets the right to use a particular brand name, process or product owned by the franchiser, for the purpose of retailing, in return for a fee.
(c) The fee is generally paid partly as an initial payment at the time of entering into the contract and partly on regular payments either monthly, quarterly or annually. This regular payment may be paid by the franchisee as a percentage of his sales volume or profit or a fixed amount agreed upon in the contract.
(d) The franchiser may also be required to invest money in arranging a large space in prime locations, in furnishing it and in procuring stock for the outlet. In most cases all franchise outlets are required to maintain uniform pre-determined decoration, method of serving customers, type of products etc.
(e) Franchise as a system of retailing is suitable for brands that have earned a name for themselves in the market. Only then can a franchisee benefit from using that name over a new brand.
(f) The franchiser is very cautious while choosing franchisees for his goods or services. Only competent persons with requisite entrepreneurial skills and commitment to quality/customer-satisfaction, in addition to, of course, a sound financial position will be able to run this business successfully. A franchisee who fails will bring disrepute to the brand and also hamper the franchiser’s future business prospects.
5. Describe in brief the recent trends in distribution.
Ans: Some of the recent trends in distribution are discussed below:
(a) Direct Marketing: Under this method of distribution the manufacturers bypass the chain of middlemen and approach the consumers directly and sell them the goods and services, without the help of wholesalers and retailers. The manufacturers inform the prospective customers about their products and its uses through advertisements (in newspapers, television, radio, social media) or catalogues, letters and brochures. If the customer wants to buy the product, he/she may place an order to the manufacturers over the telephone or through a letter sent by post or e-mail. The product gets delivered to the customer through courier, post or by salespersons.
Direct marketing may be classified into different types, based on the mode of communication used by the manufacturers to approach the customers. The manufacturers may use:
(i) Printed catalogues to inform the customers about the products called Catalogue Retailing.
(ii) Television advertisements called Televised Shopping. and
(iii) Brochures, letters etc. sent by mail called Direct Mail Retailing.
(b) Internet Marketing: With the widespread use of computers and Internet, today it is possible to buy and sell products over the internet, through websites maintained by producers. Products can be ordered instantly from anywhere in the world, 24-hours of the day, from the convenience of one’s home or a nearby cyber-cafe.
Internet marketing makes it convenient to do shopping anytime, anywhere and it is easy to compare prices of the same product charged by different producers. The only thing we have to do is to open different websites on the Internet. There is no need to physically go from one shop to the other, or one market to the other.
(c) Telemarketing: Some producers/manufacturers approach the consumers over the telephone, to tell them about the product and its uses and ultimately persuade them to buy the product. This method is often used to sell credit cards, subscription to certain books and journals and also membership of certain clubs etc.
A marketing representative of the concerned producer calls up prospective customers over the telephone and tells them about the product and its uses. While interacting the caller can gauge the interest level of the customer towards the product and influence his decision to buy the product. If the customer is willing to buy the product, it is delivered to him by courier or post.
