Business Studies 4 Marks Question

(a) Cash on delivery (COD).
(b) Free on Board (FoB).
(c) Cost, Insurance and Freight (CIF).
(d) Errors and Omissions Excepted (E\&OE)

(a) Multiple Chain Stores.
(b) Advantages of Chain Stores:
(i) Economies of scale.
(ii) Elimination of middlemen.
(iii) Diffusion of risk.

(a) Performa Invoice.
(b) Commercial Invoice.
(c) Lorry Receipt.
(d) Railway Receipt.

(a) The services rendered by Rohit Enterprises to wholesale firm are:
(i) 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.
(ii) 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. For example, they have to advertise their products and offer short-term incentives in the form of coupons, free gifts, sales contests, and so on.
(b) The services rendered by Rohit Enterprises to the consumers are as follows:
(i) Regular Availability of Products: The main 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) Convenience in Buying: Retailers buy goods in large quantities and sell these in small quantities, according to the requirements of their customers. They are normally situated very near to the residential areas and remain open for long hours. This offers convenience to the customers in buying products of their requirements.

(a) Performa Invoice
(b) Commercial Invoice
(c) Lorry Receipt
(d) Railway Receipt

(a) The type of itinerant retail work Dinesh is doing is peddling.
(b) The types of itinerant retailers not specified in the case are:
(i) Market Traders
(ii) Street Traders
(iii) Cheap Jacks

(a) Ethos Ltd. is specialty shops as instead of selling a variety of products of different types, this store specializes in the sale of a specific line of products.
Lines: "Ethos Ltd. is an authorized retailer selling several luxury watch brands"
(b) Ethos Ltd. planning to start the multiple chain store.
The features of multiple chain store are:
(i) These shops are located in fairly populous localities, where sufficient number of customers can be approached. The idea is to serve the customers at a point which is nearest to their residence or work place, rather than attracting them to a central place.
(ii) The prices of goods in such shops are fixed and all sales are made on cash basis. The cash realised from the sales of merchandise is deposited daily into a local bank account on behalf of the head office.

(a) Vishal is a Retail trader. A retailer is a business enterprise that is engaged in the sale of goods and services directly to the ultimate consumers. The retailer normally buys goods in large quantities from the wholesalers and sells them in small quantities to the ultimate consumers. Arranges for proper storage of goods, sells the goods in small quantities, bears business risks, grades the products, collects market information, extends credit to the buyers and promotes the sale of products through displays, participation in various schemes, etc. The retails represents the final stage in the distribution where goods are transferred from the hands of the manufacturers or wholesalers to the final consumers or users

(b)

Regular availability of products	Maintain regular availability of various products produced by different manufacturers. This enables the buyers to buy products as and when needed
New products information	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
Convenience in buying	They sell goods in small quantities and are situated very near to the residential areas and remain open for long hours. This offers great convenience to the customers in buying products of their requirements.
Wide selection	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
After-sales services	Provides after-sales services in the form of home delivery, supply of spare parts and attending to customers
Provide credit facilities	Provide credit facilities to their regular buyers. This enables the latter to increase their level of consumption

Fixed shops are of two types:

1. Small Scale:

There are different types of small retailers which are explained as under:

1. Street Stalls Holders: These retailers carry their business on a very small scale basis in busy and crowded streets by erecting permanent shops. They purchase goods in large quantities from the wholesalers and local suppliers for reselling to the ultimate consumers. They usually deal in household articles and products of daily need. These stall holders are usually the sole proprietors of their shops i.e. carrying every activity right from buying till final disbursement of goods to the consumers.
2. Second Hand Goods Sellers: These dealers deal in second hand or used articles. They purchase these articles from public or private auctions and private households. These articles usually include used garments, furniture, books etc. These dealers meet the needs of the poor people who cannot afford new articles.
3. General Shops: They deal in different variety of goods and are known as general merchants. The goods are meant for daily use or household purposes. They carry their business in permanent shops. They manage the shops themselves and are most often assisted by sales assistants. Usually goods are sold on credit by these merchants to their permanent customers. They also provide free home delivery service and facility of exchange of rejected goods to the customers.
4. Speciality Shops: These retailers deal in one particular line of goods e.g. books, utensils, shoes and medicines etc. These shops can be operated on small scale basis and managed by the owners themselves assisted by salesmen. The most important advantage which can be derived from these shops is that the owners possess the specialised knowledge about the product which is very helpful in satisfying the customers.

2. Large Scale Retailers: The second type of retailers under fixed shops is large scale retailers. The large scale production and rapid urbanisation are responsible for the establishment of large scale retailing organizations.

Most prevalent of these are:

1. Departmental Stores.
2. Multiple Shops or Chain Stores.
3. Mail Order Houses.
4. Super-Markets.
5. Co-operative Stores.
6. Vending Machines.

This is the most common type of retailing in the market place. As is evident from the name, these are retail shops who maintain permanent establishment to sell their merchandise.
Characteristics:

1. 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.
2. These retailers may be dealing in different products, including consumer durables as well as nondurables.
3. 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.

Basis of difference	Street traders	Street shops
Definition	Small retailers who generally sell low-priced consumer items on streets.	Shops situsted on street sides or main roads.
Shops/establishments	Do not have parmanent shops.	Have paermanent establishments.
Products	Bathroom items, eatables, newspapers, etc.	Clothes, shoes, grocery, items, bakery items, etc.
Reliability	These are taken as less reliable by customers.	These are taken relatively more reliable by customers.

Internal trade refers to the buying and selling of goods and services within the domestic territory of a country. It is known as internal trade. In other words, the process of exchanging goods and services within the national boundaries of a country is called internal trade. Purchases of goods from a local shop, a mall or an exhibition are all examples of internal trade. The government does not levy customs or import duties on goods and services that are produced within the country for meeting the domestic demand.
Internal trade can be classified into the following two categories:

• Retail Trade: It refers to the buying and selling of goods in small quantities for final consumption.
• Wholesale Trade: It refers to the buying and selling of goods in bulk, i.e., the exchange of large quantities of goods meant for resale in local markets.

Mail order business is a type of retail trade where orders for the supply of goods are received from customers through mail and goods are dispatched through mail. The goods are supplied either by registered parcel or V.P.P. For this type of business, seller advertises in the leading dailies and magazines and desires the buyers to ask for quotation or price list from the seller. Mail order business has been described as shopping by post from the point of view of buyers and selling by post from the point of view of sellers. This form of retail trade has received wider application in USA and Canada. The leading mail order houses are Montgomery Ward Company, Sears Roebuck and Co. of USA. There are various types of mail order houses like general mail order houses, specialty mail order house, producer's mail order house, wholesaler's mail order house and middlemen type mail order. In this trade, there is no direct contact between the seller and the buyer.The main advantages of mail-order business are given below:

1. This type of business can be started with a small amount of capital and involve less risks in comparison to other types of business houses.
2. Consumers staying at a distant place are benefitted by this method of sale.
3. There is no fear of bad debt as this business does not facilitate credit sale.
4. This business facilitates a country wide market and thereby results in market and operational economies.

Departmental Stores: "A departmental store is that type of retail institution which handles a wide variety of merchandise under one roof with the merchandise grouped into well defined departments which are centrally controlled." "A departmental store is a large retail establishment having in the same building a number of departments each of which confines its activities to one particular branch of trade and forms a complete unit in itself." "A departmental store carries several product lines, typically clothing, home furnishings, and household goods, where each line is operated as a separate department managed by specialist buyers or merchandisers."Features of a departmental store are given below:

1. Central location.
2. Provision of services.
3. Corporate status.
4. Elimination of middlemen.
5. Centralised purchasing.
6. Large variety of goods.

The following are the main terms used in the internal trade:

1. Cash on delivery (COD): It refers to a type of transaction in which payment for goods or services is made at the time of delivery. If the buyer is unable to make payment when the goods or services are delivered, then it will be returned to the seller.
2. Free on Board or Free on Rail (FOB or FOR): It refers to a contract between the seller and the buyer in which all the expenses up to the point of delivery to a carrier (it may be a ship, rail, lorry, etc.) are to be borne by seller.
3. Cost, Insurance and Freight (CIF): It is the price of goods which includes not only the cost of goods but also the insurance and freight charges payable on goods.
4. E and OE (Errors and Omissions Expected): It refers to that term which is used in trade documents to say that mistakes and things that have been forgotten should be taken into account. This term is used in an attempt to reduce legal liability for incorrect or incomplete information supplied in a document such as price list, invoice, cash memo, quotation etc.

Single-line stores	Speciality stores
These are small shops that deal in only one product for example, garments or electronics.	These stores deal only in a particular type of product from a selected product line for example, men's clothing.
These stores offer a wide variety of the product.	These stores generally sell all the brands of the product in which they specialise.
For example: If a store that deals in garments will have a wide variety of clothes in all sizes for men, women and children.	For example, if a store specializes in men's clothing, then it will have all the brands of men's garments.

On the basis of these features, we can identify the different types of stores in a locality whether they are single-line stores or speciality stores.

The services offered by retailers to wholesalers are:

1. Help in distribution of goodsPersonal Selling.
2. Enabling large scale operations.
3. Collecting market information.
4. Help in promotion of goods and services.

The services offered by retailers to consumers are:

1. Regular availability of products.
2. New product information.
3. Convenience of buying.
4. Trade selection.
5. After sales service.
6. Credit facilities.

The retail outlets that sell their goods through mail are referred to as mail order houses. There is no personal contact between the buyers and the sellers in this type of trading. The trader contacts the customer through advertisement in newspaper or magazines, circulars, catalogues and price list is sent to them by post. All the information about product such as price, features, delivery terms, terms of payment etc are described in the advertisement. The customers may be asked to make full payment in advance or goods may be sent by VPP (Value Payable Post), under which goods are delivered to the customer only when he makes full payment for the same. The goods may be sent through a bank which delivers them to the customer only when he makes full payment.
Advantages of Mail Order Houses:

1. They can be started with low amount of capital as no expenditure on building or other infrastructural facilities are required.
2. They do not require the services of middlemen so they are eliminated.
3. They do not extend credit facilities to the customers and thus there are no chances of bad debts.
4. They can serve people wherever postal services are available.
5. They deliver goods at the doorstep of the customer which result in great convenience to the customers in buying the goods.

Limitations of Mail Order Houses:

1. There is no personal contact between the buyers and the sellers. The buyers are not in a position to examine the products before buying.
2. They rely heavily on advertisement and other promotional activities which increases their cost of product.
3. In mail order selling after sales services are absent.

Fixed shops are of two types:

1. Small Scale:

There are different types of small retailers which are explained as under:

1. Street Stalls Holders: These retailers carry their business on a very small scale basis in busy and crowded streets by erecting permanent shops. They purchase goods in large quantities from the wholesalers and local suppliers for reselling to the ultimate consumers. They usually deal in household articles and products of daily need. These stall holders are usually the sole proprietors of their shops i.e. carrying every activity right from buying till final disbursement of goods to the consumers.
2. Second Hand Goods Sellers: These dealers deal in second hand or used articles. They purchase these articles from public or private auctions and private households. These articles usually include used garments, furniture, books etc. These dealers meet the needs of the poor people who cannot afford new articles.
3. General Shops: They deal in different variety of goods and are known as general merchants. The goods are meant for daily use or household purposes. They carry their business in permanent shops. They manage the shops themselves and are most often assisted by sales assistants. Usually goods are sold on credit by these merchants to their permanent customers. They also provide free home delivery service and facility of exchange of rejected goods to the customers.
4. Speciality Shops: These retailers deal in one particular line of goods e.g. books, utensils, shoes and medicines etc. These shops can be operated on small scale basis and managed by the owners themselves assisted by salesmen. The most important advantage which can be derived from these shops is that the owners possess the specialised knowledge about the product which is very helpful in satisfying the customers.

2. Large Scale Retailers: The second type of retailers under fixed shops is large scale retailers. The large scale production and rapid urbanisation are responsible for the establishment of large scale retailing organizations.

Most prevalent of these are:

1. Departmental Stores.
2. Multiple Shops or Chain Stores.
3. Mail Order Houses.
4. Super-Markets.
5. Co-operative Stores.
6. Vending Machines.

The salient features of GST are as under:

1. GST would be applicable on sale of goods and services as against the present concept of tax on the manufacture of goods. GST would be destination based tax as against the present concept of origin based tax.
2. It would be a dual GST. The GST levied by the Centre would be called Central GST (CGST) and that to be levied by the states would be called State GST (SGST). An Integrated GST (IGST) would be levied on inter-state supply of goods or services.

This would be collected by the centre.

3. GST would replace the following taxes currently levied and collected by the Centre:

• Central Excise Duty (including additional Duties of Excise)
• Service Tax
• CVD (levied on imports in lieu of Excise Duty)
• SACD (levied on imports in lieu of VAT)
• Central Sales Tax (CST)
• Excise Duty levied on Medicinal & Toiletries preparations.
• Surcharges and cess.

4. State taxes that would be subsumed within GST are:

• VAT/ Sales Tax
• Entertainment Tax
• Luxury Tax
• Taxes on Lottery, betting and gambling.
• Surcharges & Cess.

Buying goods in large quantities from the manufacturer and selling them in small quantities to the retailer to cater the needs of the consumer is termed as wholesale trade. The person who undertakes such a trade is known as wholesaler. The wholesaler acts as an intermediary between the producer and the retailer. He is known as the first intermediary in the channel of distribution. The wholesaler distributes business works amongst the members of the staff in such a way that the whole enterprise may work as a complete unit. The distribution of work should be done in such a manner as to yield maximum efficiency at minimum troubles.
To Manufacturers:

1. The wholesaler provides valuable information to the producers regarding the needs and the requirements of the consumer.
2. As the wholesaler takes the responsibility of collecting order from retailers, he relieves the producers from this task and thereby encourage producers to concentrate on production.
3. The wholesaler provides finance to the producers at the time of need.
4. The wholesaler helps the producers in determining the quality and quantity of goods to be produced as he is in direct contact with the retailers.
5. The producers are helped to maintain steady prices for the product because wholesaler buys when prices are low and sell when prices are high.

General Service:

1. There are certain goods which are to be assembled or graded before they pass to the retailer or the consumer. For these goods the presence of wholesaler is a must.
2. Wholesaler helps in standardisation and grading of the products.
3. For marketing of foodgrains the services of the wholesalers cannot be dispensed with because they help in packing and re-packing of goods.

If retailers are removed, it will lead to direct marketing. In general, you cannot save money by "eliminating the middleman" because intermediaries specialize in performing certain tasks that they can perform more cheaply than the manufacturer Most grocery products are most efficiently sold to the consumer through retail stores that take a modest mark-up-it would not make sense for manufacturers to ship their grocery products in small quantities directly to consumers.Intermediaries perform tasks such as:

1. Moving the goods efficiently (e.g., large quantities are moved from factories or warehouses to retail stores);
2. Breaking bulk (manufacturers sell to a modest number of wholesalers in large quantities--quantities are then gradually broken down as they make their way toward the consumer);
3. Consolidating goods (retail stores carry a wide assortment of goods from different manufacturers-e.g., super markets span from toilet paper to catsup); and
4. Aiding services (e.g., demonstrations and repairs). If these middlemen are eliminated, they will face absence of these functions which will be troublesome for them.

Large scale retailing means that the retail trade is being operated on a large scale:
Following are the most common forms of large scale retailing:

1. Departmental store.
2. Chain store or multiple shops.
3. Mail order business.
4. Consumer cooperative store.
5. Super bazaar.

Mail order retailing is not popular in India.
Following factors are responsible for the given cause:

1. High rate of illiteracy.
2. Poverty of the masses.
3. Undeveloped states.
4. Fraudulent practices by traders.
5. Much dependency on agricultural products.
6. Inefficient postal services.

Retail trade is carried on both at small scale and large scale. Small scale retailers are either mobile traders (itinerants) or fixed shops. Mobile Traders or Itinerants These retailers have no fixed place of business. They move from place to place and sell articles of daily use near to consumers.These include the following:

1. Hawkers: A hawker moves about in residential localities. He carries his goods in a hand cart or bicycle. He deals in low-priced goods of daily use. E.g. combs, toys, soaps, mirrors, bangles, vegetables, fruits, ice-cream, etc.
2. Peddlers: A peddler also moves from house to house and sells articles of daily use. But he carries his wares on his head or on the back of a mule.
3. Cheap Jacks: A cheap jack hires a small shop in a residential locality for a temporary period. He shifts his business from one locality to another depending on the availability of customers. He deals in low-priced household articles.
4. Pavement dealers or Street Traders: A pavement dealer displays his wares on footpath and outside public places such as railway station, bus stand, cinema, temple, etc. He sells low priced articles like newspapers, magazines, fruits, vegetables, footwear to the passersby. He is also called street trader.
5. Market Traders: A market trader sells goods at weekly markets when the shops are closed for weekly holiday. He displays goods outside the closed shops. He deals in low-priced articles of daily use. He may also set up stalls on fairs and exhibitions.

Fixed Shops (Small Scale Retail Shops): Small scale retail shops are the most popular form of retail trade.These may be classified as follows:

1. Street stalls holders: These stalls are located in the main streets or street crossings.

A stall is an improvised structure made of tin or wood. The street stall holder displays his goods on a temporary platform and sells toys, stationery, hosiery items, etc. at low prices.

2. Second hand goods shops: These shops sell used or second hand articles such as books, clothes, furniture, etc. They cater to the needs of poor people who cannot afford new articles. These shops collect goods at private and public auctions.
3. General stores: These stores sell a wide variety of products under one roof. For example, a provision store deals in grocery, bread, butter, toothpaste, razor blades, bathing soap, washing powder, soft drinks, confectionery, cosmetics, etc.

Consumers can buy most of their daily requirements at one place. Their time and effort is saved. Some of these stores offer free home delivery and monthly credit facilities to regular customers.

4. Single line stores: These stores deal in one line of goods. They keep stock of different size, design and quality of goods in the same line. Book stores, chemist shops, electrical stores, shoe stores, cloth stores, jeweler shops, etc., are examples of single line stores.
5. Specialty shops: These shops generally specialise in one type of product rather than dealing in a line of products. Shops selling children's garments, educational books, etc., are examples of such shops.

To Retailers:

1. The retailers are relieved of maintaining huge stock of goods because the wholesaler fills up the stock regularly. The wholesaler buys in large quantities and sell them at convenient lots to the retailers.
2. The wholesaler provides finance and credit facilities to the retailer and thereby relieves the financial difficulties of the retailer.
3. The wholesaler saves retailers from many types of risks. The retailer is not required to carry huge stock as he can get them from the wholesaler at regular interval. By extending credit has saved the retailers a lot.
4. The wholesaler provides valuable advices to the retailer on all matters relating to new product and market condition and thereby relieves him from collection of market data.
5. The wholesaler gives trade discounts on bulk purchase and as such it enables the retailers to earn handful amount of profit.

To Consumer:

1. He enables the consumer to purchase required quantities of goods at the desired time because he supplies goods regularly to the retailers.
2. He provides goods at a cheaper rate because he facilitates in large scale production.
3. The wholesaler is in a better position to stabilize prices of the products by adjusting demand and supply. The consumers are benefitted a lot on account of stabilization of prices.
4. There is no shortage of goods as the wholesaler goes on large purchasing.

Most of the producers are not in a position to sell their goods directly to the consumers. A chain is required which acts as a connecting link between producer and consumers that directs the flow of goods from centres of production to centres of consumption. In this context, wholesalers purchase goods from the producers and sell them to retailers and retailers sell the goods to the consumers. In this way, wholesale trade and retail trade become the part of internal trade.