Students can Download 1st PUC Business Studies Chapter 10 Internal Trade Questions and Answers, Notes Pdf, 1st PUC Business Studies Question Bank with Answers helps you to revise the complete Karnataka State Board Syllabus and to clear all their doubts, score well in final exams.
Karnataka 1st PUC Business Studies Question Bank Chapter 10 Internal Trade
1st PUC Business Studies Internal Trade Text Book Questions and Answers
Short Answer Questions
What is meant by internal trade?
Buying and selling of goods and services within the boundaries of a nation are referred to as internal trade. No custom duty or import duty is levied on such trade as goods are the part of dometic production and consumption. Internal trade can be classified into two broad categories:
- Wholesale trade
- Retail trade
Specify the characteristics of fixed shop retailers.
Fixed shop retailers are retail shops who maintain permanent establishment to sell their merchandise. They, therefore, do not move from one place to other to serve their customers. Other characteristics of fixed shop retailers are:
- They have greater resources and operate at a relatively large scale as compared with the itinerant traders.
- These retailers deal in different products, including consumer durables as well as non durables.
- They have greater credibility in the minds of customers.
- They are in a position to provide greater services to the customers such as-home delivery, repairs, credit facilities, etc.
What purpose is served by wholesalers providing warehousing facilities?
Two way purposes is served by wholesalers providing warehousing facilities in the following manner:
- Wholesalers take delivery of goods when goods are manufactured in factory and keep them in their godowns/warehouses which reduce the burden of manufacturers of providing for storage facilities for the finished products.
- Warehousing by wholesalers relieves the retailers of the work of collecting goods from several producers and keeping big inventory of the same for maintaining adequate stock of varied commodities for the customers.
How does market information provided by the wholesalers benefit the manufacturers?
Wholesalers provide useful market information to the manufacturers about various aspects like customer’s tastes and preferences, market conditions, competitive activities and the features preferred by the buyers. This information proves extremely beneficial to the manufacturers as it helps them in taking effective decisions regarding their production and marketing strategies.
How does the wholesaler help the manufacturer in availing the economies of scale?
Wholesalers serve as a link between retailers and the manufacturers. They Collect small orders from number of retailers and pass on the pool of such orders to manufacturers and make purchases in bulk quantities. This enables the produers to undertake production on a large scale and thus take advantage of the economies of scale.
Distinguish between single line stores and speciality stores. Can you identify such storeS in your locality?
Single Line stores:
- The store which are dealing in general category product lines are called single line store e.g., Garments, medicines etc.
- There is no such advantage of specialization.
- They are situated in market places.
- The stores which are dealing in a particular type of product under one product line e.g., jeans shop have all brands of Jeans only.
- They take advantage of specialization in a particular segment of the market.
- They are located in a central place of market.
How would you differentiate between street traders and street shops?
- The traders who are generally sell their goods on busy street comers, bus stands etc.
- They deal in cheap variety of goods.
- These are the platforms used to display the goods for sale.
- They deal in low priced articles but not that much cheap.
Explain the services offered by wholesalers to manufacturers.
The major services offered by wholesalers to the producers of goods and services are given as below:
1. Facilitating large scale production:
Wholesalers collect small orders from number of retailers and pass on the pool of such orders to 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.
2 Risk Bearing:
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 lots of risks such as the risk of fall in prices, theft, pilferage, spoilage, fire, etc. To that extent, they relieve the manufacturers from bearing these risks.
3. 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. To that extent, the manufacturers need not block their capital in the stocks. Sometimes they also advance money to the producers for bulk orders placed by them.
4. 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. They serve as an important source of market information on these and related aspects.
5. Help in the Marketing Function:
The wholesalers take care of the distribution of goods to a number of retailers who, in turn, sell to large number of goods to customers spread over a large geographical area.
6. Facilitate Continuity:
The wholesalers facilitate continuity of production ‘activity throughout the year by purchasing the goods as and when they are produced.
Wholesalers take delivery of goods when the goods are produced in factory and keep them in their godowns/warehouses.
What are the services offered by retailers to wholesalers and consumers? Services to Manufacturers and Wholesalers.
The invaluable services that the retailers render to the wholesalers and producers are given as here under:
1. 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, who may be scattered over a large geographic area. They thus provide place utility.
2. 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.
3. 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.
4. 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.
5. 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. Retailers participate in these activities in various wavs and, thereby, help in promoting the sale of the products.
Services to Consumers:
Some of the important services of retailers from the point of view of Consumers are as follows:
1. 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.
2. 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, This serves as an important factor in the buying decision making process of the purchase of such goods.
3. 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. This offers great convenience to the customers in buying products of their requirements.
4. 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.
5. After-sales services:
Retailers provide important after-sales services in the form of home delivery, supply of spare parts and attending to customers. This becomes an important factor in the buyers ’ decision for repeat purchase of the products.
6. 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
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.
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. Following are the reasons for their survival in spite of competition from large scale retailers:
- They are small traders operating with limited resources.
- They normally deal in consumer products of daily use such as toiletry products, fruits and vegetables, and so on.
- The emphasis of such traders is on providing greater customer service by making the products available at the very doorstep of the customers.
- 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.
Discuss the features of a departmental store. How are they different from 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.
- A modem departmental store may provide all facilities such as restaurants, travel and information bureau, telephone booth, restrooms, etc. As such they try to provide maximum service to higher class of customers for whom price is of secondary importance.
- These stores are generally located at a central place in the heart of a city, which caters to a large number of customers.
- 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;
- A departmental store combines both the functions of retailing as well ais warehousing. They purchase directly from manufacturers and operate separate warehouses. That way they help in eliminating undesirable middlemen between the producers and the customers; and
- They have centralized purchasing arrangements. All the purchases in a department store are made centrally by the purchase department of the store, whereas sales are decentralized in different departments.
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 appearances are established in localities, spread over different parts of the country in contrast to departmental stores which are established at a central place in the city.
These different types of shops normally deal in standardized and branded consumer products, which have rapid sales turnover. These shops are run by the same organization and have identical merchandising strategies, with identical products and displays.
Why are consumer cooperative stores considered to be less expensive? What are its relative advantages over other large scale retailers?
A consumer co-operative store is an organization owned, managed and controlled by consumers themselves. The co-operative stores generally buy in large quantity, directly from manufacturers or wholesalers and sell them to the consumers at reasonable prices. Members get products of good quality at cheaper rates since the middlemen are eliminated or reduced.
The major advantages of a consumer cooperative store are as follows:
- 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.
- 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.
- 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.
- Lower prices: A cooperative store purchases goods directly from the manufacturers or wholesalers and sells them to members and others. The elimination of middlemen results in lower prices for the consumer goods to the members.
- Cash sales: The consumer cooperative stores normally sell goods on cash basis. As a result, the requirement for working capital is reduced.
- 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.
Imagine life without your local market. What difficulties would a consumer face if there is no retail shop?
Life without a local market would be very difficult because of the following points:
- Non-Availability of Products: Without a local market, regular availability of goods to the consumers would be hampered. There would not be a mechanism through which products could reach consumers from the manufacturers as and when required.
- Information about New Products: Information about new products reaches the consumers through the local markets. The new products even after being advertised would not be available to consumers easily if there were no local markets.
- Inconvenience: Local markets provide consumers the convenience’ of place and time in buying products.
In the absence of local markets the Consumers will have to go long distance for buying products directly from the manufacturer’s warehouse.
- Lack of Variety of Products: Local markets provide consumers with a wide variety of products for choice based selection. This would not be available at one place in the absence of local markets.
- Lack of After Sales Services: The retailers in the local market provide after sales service to the consumers for goods purchased from the retail shops. This service would become difficult in case there are no local markets.
Explain the usefulness of mail orders houses. What type of products are generally handled by them? Specify.
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, catalogs, 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. On receiving the orders, the items are carefully scrutinized with respect to the specifications asked for by the buyers and are complied with through the post office.
There can be different alternatives for receiving payments. First, the customers may be asked to make full payment in advance. Second, the goods may be sent by Value Payable Post (VPP). Under this arrangement, the goods are sent through post and are delivered to the customers only on making full payment for the same.
Third, the goods may be sent through a bank, which is instructed to deliver the articles to the customers. In this arrangement, there is no risk of bad debt, as the goods are handed over to the buyers only after he makes foil payment. However, there is a need to ensure the buyers that the goods despatched are in accordance with their specifications.
This type of business is not suitable for all types of products. For example, goods that are perishable in nature or are bulky and cannot be easily handled, are not recommended for mail-house trading. Only the goods that can be
- graded and standardised
- easily transported at low cost
- have ready demand in the market
- are available in large quantity throughout the year
- involve least possible competition in the market and
- 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 wide spread. It is so because only the literate people can be reached through advertisements and other forms of written communication.
- Limited capital requirement: Mail order business does not require heavy expenditure on building and other infrastructural facilities. Therefore, it can be started with relatively low amount of capital.
- Elimination of middle men: The biggest advantage of mail-order business from the point of view of consumers is that unnecessary middlemen between the buyers and sellers are eliminated. This may result in lot of savings both to the buyers as well as to the sellers.
- Absence of bad debt: Since the mail order houses do not extend credit facilities to the customers, there are no chances of any bad debt on account of non payment of cash by the customers.
- Wide reach: Under this system the goods can be sent to all the places having postal services. This opens wide scope for business as a large number of people throughout the country can be served through mail.
- Convenience: Under this system goods are delivered at the doorstep of the customers. This results in great convenience to the customers in buying these products.
Mail order houses usually deals only in the goods that can be:
- Graded and standardized
- Easily transported at low cost
- Have ready demand in the market
- Are available in large quantity throughout the year
- Involve bleast possible competition in the market
- Can be described through pictures etc.
1st PUC Business Studies Internal Trade Additional Questions and Answers
One Mark Questions
What is internal trade?
Buying and selling of goods and services within the boundaries of a nation is referred as internal trade.
What is wholesale trade?
Wholesale trade refers to buying and selling of goods and services in large quantities for the purpose of resale or intermediate use.
Who is a wholesaler?
A wholesaler is a person who buys goods from the producers in bulk quantities and sells them in small quantities to a retailer.
What is retail trade?
Retail trade refers to sale of goods in small quantities for the final consumptions.
Who is a retailer?
Retailer is a person who buys the goods in large quantities from the wholesalers and sells ‘them in small quantities to the ultimate consumers.
Automatic Vending Machine
Free on Board.
Cost, Insurance and Freight Price.
Errors and Omissions excepted.
Cash on Delivery.
Name any one type of internal trade.
State one type of Itinerant retailers.
Give an example for small scale fixed retail shop.
Soaps, Hair oil and Tooth Paste.
Give an example for large scale fixed retail shop.
Spencer, Food world and reliance fresh.
Give an example for departmental stores.
Give an example for multiple shops.
Pizza Hut and Mc. Donald.
Give an example for Super markets.
Reliance Fresh and Food world.
Give an example for malls.
Garuda Mall and Orion Mall.
Who are peddlers?
Peddlers are those who carry their goods on their heads and backs from one door to another in the streets for selling the goods.
Who are Hawkers?
Hawkers are those who carry their goods on back of animals or by using wheeled carts from one door to another for selling the articles.
Who are cheap jacks?
Cheap jacks are petty retailers who have independent shops of a temporary nature in the business locality.
Two Marks Questions
What do you understand by itinerant retailers?
Itinerant retailers are traders who do not have a fixed place of business to operate the business. They keep on moving with their wares from street to street or place to place in search of customers.
What do you mean by small fixed shops?
Small scale fixed retail shops are established in every nook and comer of the most of the cities. They operate their business with small capital and small stock.
What do you mean by large fixed shops?
Large fixed shops established with a large amount of capital, located in important places and markets and towns and cities.
Give the meaning of internal trade documents.
The documents which are used in buying and selling of goods within the country is known as internal trade documents.
What is an invoice?
Invoice is a statement giving the particulars of the quantity, quality, price of the goods sold.
Give the meaning of Debit note.
When the goods are returned to supplier or any allowance claimed from supplier the trader prepares the statement known as debit note.
Give the meaning of Credit note.
Credit note is a statement containing the details of goods returned as to quantity rates etc.,
What do you understand by Lorry Receipt and Railway receipt?
Means receipts given by Transport Company who ply transport vehicles on road for the goods they had taken for transporting from one location to another. Railway receipt: Railway receipt is a receipt issued by the railway authorities for receipt of goods in the railway.
Give the meaning of E & OE.
Errors and omissions excepted is a phrase used in an attempt to reduce legal liability for potentially incorrect or incomplete information supplied in a contractually related document such as a quotation or specification.
State the meaning of AVM.
Automatic Vending Machine is a electronic machine used to disperse a product to a consumer after a certain amount of money has been put into the machine.
State any two features of itinerant retailers.
- Door to Door Delivery.
- Limited Inventory.
What are second hand goods shops?
Second hand goods shops are shops generally sell used goods like books, furniture and automobiles etc.,
Give the meaning of specialty shops.
Specialty shops are retail stores specialize in the sale of specific line of goods or products for example shoes, toys and gifts etc.,
What are multiple shops?
A Multiple shop is a retail organisation having branch at different areas dealing in similar line of goods under single ownership and centralised management.
Write the meaning of Departmental stores.
It is a fixed shop which sells different kinds of goods under different departments in one building having separate department for medicines, furniture and electronics.
Which types of goods are suitable for mail order business?
Mail order business means buying and selling by post hence mail order business houses are those retail institutions which receives order through post and dispatch goods by post parcel.
Name any two internal trade documents.
- Debit note
What is meant by FOB price?
FOB means, the cost of movement of goods on board of Airlines or on board of ship is borne by the seller.
Give any two examples for chamber of commerce and industry.
- Indian chamber of commerce
- Confederation of Indian Industry
State any two functions of chamber of commerce and industry.
- Issuing certificate of origin to exporter
- Protecting trademarks and patents
Five Marks Questions
What are the Services of Wholesalers to Retailers
1. Availability of goods:
Retailers have to maintain adequate stock of varied commodities so that they can offer variety to their customers. The wholesalers make the products of various manufacturers readily available to the retailers.
2. Marketing support:
The wholesalers perform various marketing functions and provide support to the retailers. They undertake advertisements and other sales promotional activities to induce customers to purchase the goods. The retailers are benefitted as it helps them in increasing the demand for various new products.
3. Grant of credit:
The wholesalers generally extend credit facilities to their regular customers. This enables the retailers to manage their business with relatively small amount of working capital.
4. Specialized knowledge:
The wholesalers specialize in one line of products and know the pulse of the market. They pass on the benefit of their specialized knowledge to the retailers. They inform the retailers about the new products, their uses, quality, prices, etc.
5. Risk sharing:
The wholesalers purchase in bulk and sell in relatively small quantities to the retailers. Being able to manage with purchase of merchandise in smaller quantities, retailers are in a position to avoid the risk of storage, pilferage, obsolescence, reduction in prices and demand fluctuations in respect of the additional goods that they would have to purchase in case the services of wholesalers are not available.
Briefly explain the Role of Chamber of Commerce and Industry.
- Transportation or interstate movement of goods: The Chambers of Commerce and Industry help in many activities concerning interstate movement of goods which includes registration of vehicles, surface transport policies, construction of highways and roads.
- Octroi and other local levies: Octroi and local taxes are the important sources of revenue of the local government. These are collected on the goods and from people entering the state or the municipal limits.
- Tax structure: The Chambers of Commerce and Industry play an important role in interacting with the government to harmonize the sales tax structure indifferent states. The sales tax is an important part of the state revenue.
- Marketing of agro products and related issues: Streamlining of local subsidies and marketing policies of organisations selling agro products are some of the areas where the Chambers of Commerce and Industry can really intervene and interact with concerned agencies like farming cooperatives.
- Ensure proper Weights and Measures and prevention of duplication brands: Laws relating to Weights and Measures and protection of brands are necessary to protect the interest of the consumers as well as the traders. They need to be enforced strictly.
Types of Large Scale Fixed Retail Shops.
Types of retail trade:
1. 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. 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. Thus, they satisfy diverse market segments with a wide variety of goods and services. Ex: More, Spencer etc.
2. Discount stores:
volumes. Ex: Megamart etc.
3. Convenience store:
Relatively small stores located near residential area. It is opened for long hours throughout the week. Ex: KB’s fair price etc.
4. Speciality stores:
They carry on a narrow product line, with a deep assortment within the line. Ex: Reebok.
5. Super Market:
A large outlet selling low cost goods & high volume. Ex: Reliance Fresh, Food World etc.
6. Off price retailers/factory outlets:
It is owned & operated by manufacturer. It is normally carry the manufacturer surplus, discontinue or irregular goods. Ex: Woodlands
7. Catalog showrooms:
They sell a broad selection of high mark up last moving branded goods at discount.
8. Mail Order Houses:
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.
9. Chain Stores or Multiple Shops:
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 appearances are established in locally ties spread over different parts of the country. These different types of shops normally deal in standardized and branded consumer products, which have rapid sales turnover.