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NIOS Class 12 Business Studies Chapter 22 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 22 Internal Trade, NIOS Senior Secondary Course Data Business Studies for All Chapter, You can practice these here.
Internal Trade
Chapter: 22
Module – 8 : TRADE AND CONSUMER PROTECTION
INTEXT QUESTIONS 22.1
Q. 1. State any two features of ‘internal trade’.
Ans: Following are the features of internal trade:
(a) The buying and selling of goods takes place within the boundaries of the same country.
(b) Payment for goods and services is made in the currency of the home country.
Q. 2. Identify the following and write ‘WT’ for wholesale trade and ‘RT’ for retail trade:
(a) Dealing in limited variety of product. ( )
Ans: WT: Wholesale trade.
(b) Goods purchased from wholesalers for resale. ( )
Ans: RT: Retail trade.
(c) Providing facilities like grading and packaging. (.)
Ans: WT: Wholesale trade.
(d) Buying of goods in bulk from the manufacturers. (.)
Ans: WT: Wholesale trade.
(e) Trading activities carried on near the residential areas. ( )
Ans: retail trade:
INTEXT QUESTIONS 22.2
Q. 1. The middlemen should be eliminated. Do you agree? Give one reason.
Ans: The middlemen provide useful services to both producers and consumers. For the producer, they free him of the complexities of arranging for transport, warehousing, financing and marketing of his produce to a large extent. The responsibility of the producer gets limited to producing the product. Largely all efforts to sell and distribute the same is taken up by these middlemen. For the consumers too, these middlemen are beneficialas they make the products available at the place and time of convenience to them. So the middlemen should not be eliminated.
Q. 2. Rectify the following sentences if found wrong:
(a) A wholesaler has direct link with the consumers.
Ans: A retailer has 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 22.3
Q. 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. They do not have a fixed shop where they can sell. You must have seen them distributing newspapers early in the morning, selling peanuts, bangles, toys etc. in buses and trains; selling fruits and vegetables in your locality using a cart, selling ice-cream, namkeens etc. on a cycle; selling rice, earthen pots or even carpets by using a cart, etc.
Q. 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: Secondhand goods shop.
INTEXT QUESTIONS 22.4
Q. 1. The decoration, display, sign boards etc. of the multiple shops are built alike. Why? Give reasons:
Ans: The decoration, display, sign boards etc. of the multiple shops are built alike due to following reasons:
(a) Same ownership.
(b) Easy to recognise.
Q. 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 any body appointed by the owner.
INTEXT QUESTIONS 22.5
Q. 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.
Q. 2. Make necessary corrections and rewrite the following sentences:
(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 22.6
Q. 1. Name any five products that are suitable for mail order retailing.
Ans: (a) Medicine.
(b) Books.
(c) Toys.
(d) Cosmetics.
(e) Plant seeds.
Q. 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 22.7
Q. 1. What is meant by ‘Shopping Mall’?
Ans: Shopping malls have been another outcome of the ‘retail revolution’ in urban areas. They 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.
Q. 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 customs 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 Type Questions:
Q. 1. What is meant by ‘Internal Trade’?
Ans: Buying and selling of goods and services within the geographical boundaries of a country is referred to as internal trade.
Q. 2. State the meaning of multiple shops.
Ans: In a departmental store, the whole business is carried on in one building and the customers are drawn to it. But under multiple shops big manufacturers approach customers by setting up shops near the customers.
There are some retail stores running in your town/city having the same name, same decoration and dealing in the same type of products under a single brand name. There is Raymonds, Nirula’s, McDonalds, etc. These are multiple shops. They sell similar range of commodities at the same price in all their shops. These shops are usually owned and run by big manufacturers/producers. They open a number of branches at different localities in a city or in different cities and towns in a country. These shops are also called ‘Chain Stores’.
Q. 3. Mention any two benefits of wholesaler.
Ans: Following are the benefits of wholesaler:
(i) Wolesaler saves the time and efforts of producers.
(ii) They provide goods in realatively small quantities to retailer and provide them with facility of credit purchases.
Q. 4. Define the term ‘Franchise’.
Ans: Franchise is a form of retailing wherein two parties enter into an agreement in whichone party authorises others to sell or produce and sell specified goods and services.
Q. 5. Name any four types of large scale retailing business.
Ans: (i) Departmental Store.
(ii) Multiple Shops.
(iii) Super Market.
(iv) Consumer Cooperative Store.
(v) Mail Order Retailing.
(vi) Franchise.
Short Answer Type Questions:
Q. 6. Explain the role of wholesaler in the distribution channel.
Ans: Role of Wholesalers in the distribution channel: 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 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 its transportation.
Q. 7. State any four merits of departmental stores.
Ans: Merits of Departmental Stores:
(a) They sell a large variety of goods to 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 manufacturers, and get good amount of discount from them. They are able to reap the benefits of economies of 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.
Q. 8. Give any four points of distinction between a retailer and a wholesaler.
Ans:
| Wholesaler | Retailers |
| They purchase goods from manufactures and sell them to retailers. | They purchase goods from wholesalers and sell them to ultimate consumers. |
| They buy and sell goods in large quantities. | They buy and sell goods in small quantities. |
| They specialise, generally, in purchase and sale of only one commodity. | They do not specialise in only one good but provide all types of goods. |
| They require a large amount of capital. | They require comparatively less capital. |
Q. 9. Explain the merits of super markets.
Ans: Merits of Super Markets are:
(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.
Q. 10. What is meant by ‘mail order retailing’?
Ans: The mail order retailers place the advertisements in newspapers, magazines etc. or publicise about 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. The payment for the same is either made by the customer through the money order or demand draft (at the time of ordering the goods) or through cash-on-delivery /VPP (Value Payable Post) arrangement (i.e., payment is made by the customer on receiving delivery of goods, not in advance). This method of sale can be conveniently used by the buyer to order goods of his choice while sitting at home and the seller can sell his products even to customers living in very remote areas. However, this system is not suitable for all types of goods. Goods that do not need personal inspection and whose use can be understood by description only (books, plants seeds, cutlery) and light weight, non-perishable products (certain medicines, cosmetics, readymade garments, relatively low- valued electronic gadgets, cameras etc.) that occupy less space are suitable for mail order retailing.
Long Answer Type Questions:
Q. 11. State the features of Departmental stores. How is a departmental store different from multiple shops?
Ans. Following are the features of departmental Stores:
(i) They sell a large variety of goods to consumers, under one roof.
(ii) They buy large volumes of goods, at a time directly from manufacturers.
(iii) These stores are organised on a large-scale basis.
(iv) These stores provide facilities like restaurant, telephone, toilet, ATM etc.
| Departmental stores | Multiple Shops |
| It provides goods to satisfy all requirements of the customers at one place. | They deal in a limited range of merchandise, mostly standard consumer products. |
| It requires huge investment as large stocks of varieties of products are maintained and a number of services are provided to the customers. | They require relatively small capital investment in stocks as goods needed at one place may be repleshed from some other near by place. Also they do not provide other services to the customers. |
| Usually departmental stores offer credit facilities to their regular customers. | Multiple shops sell goods only on cash basis and do not grant credit to customers. |
| Departmental stores are located at central places so as to be accessible to people from different parts of the city. | These are located near residentail areas or in busy markets. |
Q. 12. Describe the role of middlemen in the channel of distribution.
Ans. Both wholesalers and retailers act as a link between producers and consumers in the chain of distribution of products. They are called middlemen as they come in the middle, i.e., between the producers and the consumers in the chain of distribution.
The middlemen provide useful services to both producers and consumers. For the producer, they free him of the complexities of arranging for transport, warehousing, financing and marketing of his produce to a large extent. The responsibility of the producer gets limited to producing the product. Largely all efforts to sell and distribute the same is taken up by these middlemen. For the consumers too, these middlemen are beneficial as they make the products available at the place and time of convenience to them.
Role of midlemen in the distribution of goods:
(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 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 its transportation.
(b) Role of 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 collected from different locations. The retailers may offer credit facility to customers. They also offer pre and after sales services and communicate to consumers the technique of usage of the products. They act as salesman of the product and persuade buyers to purchase goods and services. They provide information to the manufacturers or wholesalers about the feedback on consumers response to the product.
Q. 13. What is meant by 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 store purchase the goods directly from manufacturers or dealers and make them available at a cheaper price.
Merits of Consumer Cooperative Stores are:
(a) The consumer cooperative stores generally provide the goods at a lower price 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 profit earned by the consumer cooperative stores are distributed among the members as bonus.
Q. 14. Explain the features of Franchise as a form of large scale retailing business.
Ans: 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 a specific 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 of 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 in 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.
Q. 15. Describe in brief, the recent trends in distribution.
Ans: Recent Trends In Distribution: With the advancement in the information technology (i.e., use of computers, telephone, internet etc.) methods of distribution of goods from producers to consumers have witnessed new developments. Today consumers can conveniently buy products of their choice without leaving their home or office, any time during the day or night. Certain channels of distribution eliminate the long and expensive chain of middlemen. Manufacturers are directly approaching consumers, either through their websites using Internet or through their agent (direct selling).
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) 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: Today products can be ordered instantly from any where in the world, 24-hours of the day, from the convenience of one’s home or a nearby cyber-cafe..
On the website we can see the picture of the product, read about it and then orderit, just with the click on the mouse of the computer. The payment for the product may be made using a credit card or by bank draft etc.
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.
We can buy all types of products from flowers to foods, clothes to computers, from producer located even at a far-off place in some other country or continent. The producer is able to cater to a larger number of customers sitting any where in the world, efficiently and speedily, using Internet marketing.
But a drawback of this means of distribution is that the consumer can only see the image of the product. He/she cannot see the actual product nor touch it, try it nor witness a live demonstration of its use. Full information about the product may not be available on the website.
(e) Telemarketing: Some producers/ manufacturers approach the consumers over the telephone, to tell them about the pr duct 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.
