CBSE Class 11th Business Studies Revision Notes - n9

Free Business Studies - Class 11th (CBSE) - Revision Notes - n9 - Internal Trade

Here are the quick details:

• Subject: Business Studies
• Class: 11th (CBSE)
• Chapter Name: Internal Trade

Internal Trade

• Buying and selling of goods and services within the boundaries of a nation.
• Payments are made and received in the home currency.
• The local mode of transport can be used.

Types of Internal Trade

Wholesale Trade

• Wholesale trade refers to buying and selling goods and services in large quantities for resale or intermediate use.
• The person who carries on wholesale trade is known as a wholesaler.
• Wholesaler acts as a link between the manufacturer and the retailer.
• He purchases goods in bulk from the manufactures and sells them in small and lot to retailers.

Services of Wholesaler

Services to Manufacturers

1. Storage - Wholesalers take delivery of goods after production and keep them in their godown. This reduces the burden of manufacturers of providing storage facilities for the finished goods.
2. Help in Marketing Function - The wholesalers take care of the distribution of goods to several retailers and retailers sell these goods to customers. Ø This relieves the manufacturers from many of the marketing activities and enable them to concentrate on production activity.
3. Expert Advice- As the wholesalers are in direct contact with the retailers, they can advise the manufacturers about various aspects like customers’ tastes and preferences, market conditions, competitive activities etc.
4. Facilitating Large Scale Production - Wholesalers collect small orders from various retailers and pass such orders to the manufacturers. This enables the producers to undertake production on a large scale and take advantage of the economies of scale.
5. Financial Assistance- The wholesalers provide financial assistance to the manufacturers that they generally make cash payment for the goods purchased by them. Even sometimes they also advance money to the producers for bulk orders placed by them.
6. Bearing Risk- The wholesale merchants deal in goods in their own name and kept the goods purchased in large lots in their warehouses. In this process, they bear variety of risks such as the risk of a fall in prices, theft, pilferage, spoilage, fire etc.

Services to Retailer

1. Marketing Support - The wholesalers perform various marketing functions like advertising and other sales promotional activities and provide support to the retailers. The retailers got benefits as it helps them in increasing the demand for various new products.
2. Specialized Knowledge - The wholesalers specialize in one line of products and know the pulse of the market. They pass on the benefit of their knowledge to the retailers about new products, their quality prices etc.
3. Risk Sharing - The wholesalers purchase in bulk and sell in relatively small quantities to the retailers. Hence, retailers can avoid the risk of storage, reduction in prices and fluctuation etc.
4. Grant of Credit - The wholesalers generally extend credit facilities to their regular customers. This enables retailers to manage their business with relatively small amount of working capital.

Retail Trade

• The retailer buys goods in large quantities from the wholesalers and sells them in small quantities to the ultimate consumers.
• The retails represent the final stage in the distribution where goods are transferred from the hands of the manufacturers or wholesalers to the final consumers or users.

Services of the Retailer

Services to the Manufacturers and Wholesalers

• Help in the 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 in different areas.
• Collecting Market Information: As retailers are in direct touch with the buyers. As a result, they are in the best position to gather market information & provide that information to the wholesaler as well as manufacturers. So that they can produce the product as per the needs and wants of the customers.
• Enabling Large-scale Operations: The retailer provides the market sale to the wholesalers as well as manufacturers. The burden of selling is completely taken by the retailer which receives the manufacturers and hence they can focus on producing the product at a large scale.
• Personal Selling: In the process of the sale of most consumer goods, some amount of personal selling effort is necessary. Retailer undertakes personal selling and relieves the producers of this activity. As a result, the producer can focus only on producing the goods.
• Promotion – The retailer uses various techniques like sales promotion, advertisement, coupons etc to attract the consumers.

Services to Customers

• Regular Availability of Products : The most important service of a retailer to consumers is to maintain the regular availability of various products produced by different manufacturers. This enables the buyers to buy products as and when needed. 
• Wide Selection : Retailers generally keep stock of a variety of products from different manufacturers. This enables the consumers to make their choice out of a wide selection of goods. 
• Provide Credit Facilities :The retailers sometimes provide credit facilities to their regular buyers. It helps to increase their level of consumption and standard of living. 
• After-sales Services : Retailers also provide after-sale services in the form of home delivery, supply of spare parts, return and refund etc. This becomes an important factor in the buyer’s decision for repeat the purchase of the products.

Types of Retail Trade 

Itinerant Retailers 

• Itinerant retailers are traders who do not have a fixed place of business to operate from. 
• They keep on moving with their goods from street to street or place to place, in search of customers.
• They are small traders operating with limited resources. 
• The emphasis of such traders is on providing products available at the very doorstep of the customers.  

Types of Itinerant Retailers  (PMCS)

Peddlers and Hawkers

• Oldest form of retailers in the market. 
• They are small traders who carry their products on a bicycle, hand cart, and cycle rickshaw or on their heads. 
• They move from place to place to sell their goods at the doorstep of the customers. 
• Provide goods at the doorstep of customers but one should always be careful in dealing with them as the products they deal in are not always reliable in terms of quality and price. 
• They are mainly found in streets of residential areas, outside schools, colleges etc. They normally deal in goods of value such as toys, fruits and vegetables, fabrics, snacks ice creams. 

Market Traders 

• Small retailers who open their shops at different places on fixed days or dates, such as every Saturday or alternative Saturdays etc. 
• They are mainly catering to a lower-income group of customers and deal in low-priced consumer goods. 
• They mainly deal in a single-line product like fabrics, ready-made garments, toys, etc.

Cheap Jacks 

• Small retailers that 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 area. 
• They deal in consumer items as well as services such as the repair of watches, shoes, buckets etc. 

Street Vendors 

• Commonly found at places where a huge floating population gathers, for example: Near railway stations and bus stands. 
• They sell consumer items of common use like stationery items, eatables, readymade garments, newspapers and magazines etc. 
• They are different from market traders in the sense that they do not change their place of business so frequently.  

Fixed Shop Retailers 

• These are retail shops that maintain permanent establishment to sell their merchandise/Goods. 
• They do not move from place to place to serve their customers. 
• They have greater resources and operate on a relatively large scale as compared to itinerant traders. 
• This category of retailers has greater credibility/trust in the minds of customers. 
• They also provide various services such as home delivery, guarantees, repairs, credit facilities, availability of spares, etc.  

Types of Fixed-shop Retailer 

Small shopkeepers

General Stores 

• Found in residential areas and local markets. 
• Deal in a variety of products which are required to satisfy the day-to-day needs of the consumers (soft drinks, stationery and toilet products). 
• These stores remain open for long hours at convenient timings and often provide credit facilities to their regular customers. 
• The owners behavior plays an important role in the success of general stores. 

 Specialty Shops

• Very popular in urban areas. 
• They are specialized in the sale of a specific line of products, instead of selling a variety of products of different types. 
• These shops are generally located in a central place where a large number of customers can be attracted and provide a wide choice to the customers in the selection of goods. 
• For example: Shops selling children’s garments, men’s wear, ladies’ shoes, toys and gifts, school uniforms or college books etc. 

Street Stall Holders 

• Found in places where the flow of traffic is heavy like street crossings. 
• They attract floating customers and mainly deal in goods of cheap variety like hosiery products, toys, cigarettes, soft drinks, etc. 
• The area covered by a stall is very small and they handle goods on a very small scale. 

Second-hand Goods Shop 

• These shops deal in second-hand or used goods.
• Example - books, clothes, automobiles, furniture and other household goods. 
• The goods are provided to the customers at very lower prices. 
• Customers from lower income group usually visit such shops.
• These shops may also stock rare objects of historical value and antique items which are sold at rather heavy prices to people who have an interest in antique goods. 

Large Retailers

Departmental 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. 
• For example: There may be separate departments for toiletries, medicines, furniture, groceries, electronics, clothing and dress material within a store. 
• Also knows as  a place that can offer a ‘needle to an Aeroplan’ or ‘all shopping under one roof’.
• The most common example of departmental stores in India ‘Spencers’ in Chennai.
•  A modern departmental store may provide all facilities such as a restaurant, telephone booth, restrooms etc. as their main aim is to provide maximum services to customers. 
• These stores are generally located in the heart of a city where a large number of customers gather. 
• They are generally formed as a joint stock company managed by a board of directors. 
• They have centralized purchasing arrangements. All the purchases in a department store are made centrally by the purchasing department, whereas sales are decentralized in different departments.

Chain Stores or Multiple Shops

• Chain stores are networks of retail shops that are owned and operated by manufacturers or intermediaries. 
• Under this, a number of shops with similar appearances are spread over different parts of the country. These different shops normally deal in standardized and branded consumer products. 
• These shops have identical products and displays.
• These shops are located in fairly populous localities, where a sufficient number of customers can be approached.
•  Each retail shop is under the direct supervision of a branch manager, who is held responsible for its day-to-day management. 
• All the branches are controlled by the head office, which is concerned with formulating policies and getting them implemented.
• The prices of goods in such shops are fixed and all sales are made on a cash basis.

The differences between Departmental Stores and Multiple Shops

Mail Order Houses 

• Mail-order houses are the retail outlets that sell their products through mail.
• There is generally no direct personal contact between the buyers and the sellers.
• For obtaining orders, customers are approached through advertisements in newspapers or magazines, circulars, price lists etc. and all the information about the products like price, features, terms of payment etc. are described in the advertisement.
• The goods are delivered at the doorstep of the customers.
• The biggest advantage of mail-order business for consumers is that unnecessary middlemen between the buyers and sellers are eliminated.

Goods and Services Tax (GST) 

• GST is a destination-based single tax on the supply of goods and services from the manufacturer to the consumer and has replaced multiple indirect taxes levied by the central and the state government, thereby converting the country into a unified market. 
• It came into existence on July 1, 2017, and its main aim is to make life easier for manufacturers, producers, investors and consumers.  
• Among other benefits, GST is expected to improve the ease of doing business in tax compliance, reduce the tax burden by eliminating tax-on-tax, improve tax administration, mitigate tax evasion, broaden the organized segment of the economy and boost tax revenues.
•  The GST has replaced 17 indirect taxes ( 8 central + 9 state levels) and 23 cesses of the Centre and the states.
• The territorial spread of GST is the whole country, including Jammu and Kashmir.
• CGST, SCST and IGST are levied at rates mutually agreed upon by the central and the states. 
• There are various modes of payment of tax available to the taxpayer, including Internet banking, Debit / Credit card and National Electronic Funds Transfer (NEFT)/ Real Time Gross Settlement (RTGS).