Production, Commerce, Needs, and Wants

Production & Commerce

• Commerce involves the distribution of products from the producer to the consumer from point of production to point of consumption
• Products encompass the goods and services a company produces to meet customer needs and wants
• Production is any activity aimed at satisfying human needs and wants
• A producer is defined as any person or company engaged in the creation of products
• Consumers are the end-users of all goods and services produced

Needs and Wants

• Needs are essential for survival such as air, water, food, warmth, shelter, love, and affection
• Air is necessary or the absence results in death
• Water is necessary or unavailability results in dehydration
• Food is necessary or without it causes starvation
• Adequate warmth, such as heating, prevents death
• Shelter provides protection from natural hazards
• Love and Affection are necessary for social survival
• Wants enhance life but are not essential, such as luxuries like entertainment and designer items
• Human wants are unlimited, exceeding available resources, leading to the central economic problem.

Nature of Production

• Production creates utility, which is the power of a commodity to satisfy human needs and wants
• Production creates utility of form by changing the product into a more useful form
• Production creates utility of place by making the product accessible to the consumer
• Production creates utility of time by making the product available when it is needed

Branches of Production

• Primary activities are the first stage, including genetic industries like farming, forestry, and fishing
• Primary products are in an unusable state and require further processing in secondary industries
• Secondary activities include manufacturing and construction
• Production of finished and semi-finished goods is included in secondary activities
• Secondary activities involve adapting resources to suit needs and changing the form of goods
• Finished goods can be used directly or as raw materials for other goods which are intermediate goods

Tertiary Activities

• Tertiary Activities provide direct personal and commercial services
• Commercial services facilitate goods and services distribution, including communication, finance, insurance, retail, and wholesale
• Direct personal services are provided directly to consumers, such as teaching, acting, and tailoring
• Direct personal services aimed at satisfying immaterial wants

Location of Production Units

• Climate: Essential for agricultural units which must ensure suitable crop planting conditions
• Nature of land: Agricultural units require flat, fertile land for optimal production
• Access to markets: Agricultural units must be near markets due to the perishability of agricultural products
• Efficient and cheap transportation should be available
• Labor: Both agricultural and manufacturing units need labour to carry out production
• Government policy: Incentives like cheap land are used to encourage specific production in specific areas
• Transport: Efficient and cheap transport is essential to Manufacturing units
• Power source: Factories are set up were cheap and adequate supply of electrical power is available
• Nearness to market: This is essential in manufacturing unit to avoid high transport costs

Specialisation and Division of Labour

• Direct production involves individuals producing goods for themselves
• Surpluses are exchanged to maximize satisfaction, following the law of equi-marginal utility
• Specialization at the national level happens when a country focuses on goods with a comparative advantage
• These goods may be most profitable or suited to local conditions
• Regional specialization concentrates on specific goods and services unique for a given area
• Regions specialize in major products due to local conditions or historical prominence

Specialization at Individual Level

• The production process involves splitting up into tasks performed by individuals or groups
• Workers excel in fields of expertise skills, interests, or experience
• Individual production stages are interconnected and interdependent

Results of Specialization

• Reduced time consumption
• Increased output per worker and improved efficiency
• Large-scale production which leads to surpluses
• Increased use of money because surpluses require a medium of exchange

Advantages of Specialization

• Laborers become experts through repetitive tasks
• Jobs become easier for the laborers
• More effective usage of equipment and tools
• The betterment of production processes
• Achieved economies of scale through low average costs per unit
• Production quality is enhanced
• Production on a large scale

Disadvantages of Specialization

• Interdependence of departments
• Danger of boredom setting in
• Rise in unemployment as machines are used, and craftsmanship vanishes

Trade

• The exchange of goods through buying and selling

Nature of Trade

• Trade occurs when the ownership of goods is transferred
• Occurs in societies that lack self-sufficiency
• Barter trade was the earliest form, but it is hard to decide on the values of goods
• Barter trade needs a double coincidence of wants
• Barter trades have difficulties with divisibility, portability, and storage
• Money was introduced as a medium of exchange due to the challenges of bartering

Purpose of Trade

• Sellers aim for profits with trade and buyers seek fulfillment of needs and wants
• Allows ties between nations
• Provides local employment opportunities
• Encourages people to socialize
• Trade is essential as specialization necessitates the exchange of surplus goods

Types of Trade

• Local or domestic trade takes place within a country's borders in wholesale and retail
• International and foreign trade occurs between two countries, including imports and exports

Aids to Trade

• Aids to trade involve firms that distribute goods from the producer to the consumer
• Advertising, banking, communications, insurance, transport, and warehousing services facilitate trade and commerce

Relationship between Sectors

• Manufacturing depends on raw materials from the primary sector
• Tertiary activities distribute factory-finished goods to the end consumer
• Without tertiary activities, finished goods cannot be sold; advertising, finance, storage, and transport would be absent
• Manufacturing needs tertiary activities to deliver goods to the proper recipient at the right time
• As manufacturing gets more specialized, it becomes reliant on others to supply services and advertise
• Manufacturers may integrate tertiary activities, like advertising, warehousing, and retail, but often sell to wholesalers or retailers

Commercial Services

• Commercial Services helps with changing location and possession of goods, regarded as highly productive
• Providing personal services increases efficiency in other sectors by maintaining law and order, promoting health, and offering education

Types of Trade

• Home Trade involves both the sale and purchase of goods and services within international borders
• Foreign Trade involves the global scale transactions of goods and services

Comparison of Home and Foreign Trade: Similarities

• Buying and selling is done to make profit
• Requires creation of surplus
• Requires aids to trade
• Serves mankind by fulfilling demands and needs
• Works according to area of expertise

Comparison of Home and Foreign Trade: Dissimilarities

• Home Trade is conducted within national borders, while Foreign Trade happens across the globe
• Home Trade deals with the same currency, Foreign Trade involves different currencies
• Home Trade commonly uses transport by land or rail, while Foreign Trade is done more by sea or air
• Home trade uses straightforward documentation. Foreign trade has involved complex documents
• Home Trade commonly involves small and big quantities, Foreign Trade involves big quantities only
• Home trade involves the same culture and language, foreign trade involves different cultures and languages
• Home Trade follows same government policies and foreign trade has different government policies
• Home Trade involves methods of payment of cash or cheque, foreign trade involves online transfers or bill of exchange
• Home trade has no imposed taxes, foreign trade has taxes on imports and exports

Retail Trade

• A type of home trade focused on direct sales to consumers consisting of buying and selling of goods to make profit
• Home trade is categorized into wholesale and retail sectors

Wholesale Trade

• Purchases goods in bulk from producers or manufacturers
• Sells goods in smaller quantities to retailers
• Acts as an intermediary distributor

Retail Trade

• Retail trade comprises buying items in small sizes from the wholesaler
• Retail trade consist of selling in smaller sizes to the final consumer

Channel of Distribution

• Delivery of goods from the producer to the end customer
• Ends when goods are delivered to the point of consumption
• Ends when form of good is changed

Different Channel of Distribution

• Producer to the consumer this is for expensive, technical, perishable, or exclusively made goods for one customer
• Producer to retailer to consumer this is for larger retailers, producer's own outlets, or perishable items like bakery
• Producer to wholesaler to retailer to consumer this is for standard consumer items, low value and long shelf life suitable with seasonal demand or production
• Producer to agent to wholesaler to retailer to consumer this is an international trade procedure of appointing an agent in home market

Factors Affecting Choice of Channel of Distributions

• Producer capabilities means if the producer can open their own retails
• Producer philosophy means if theres exclusive or extensive distribution shops
• Type of customer means if for own or business use
• Size of order means if it is small or large
• Nature of product means is it perishable or long shelf life
• Value of product means how expensive or cheap
• Size of market means being small or long
• Nature of market means being home or internal

Functions of the Retailer to the Customer

• A large variety of types of goods, and brands of goods are provided
• Selling in very small convenient units, by breaking bulk.
• Providing personal advice.
• Provision of after Sales Service, like repairs maintenance, & overhauling
• Provision of credit facilities, like Credit cards and informal credit
• Providing delivery services
• Providing information about products
• Dealing with complaints.
• Checking goods before sale and delivery
• Wide network enables producers to reach many consumers

Functions of the Retailer to the Suppliers and Manufactures

• Setting producers free from distribution worries.
• Pay producer in cash & collect from customers themselves
• Providing storage, in large quantities
• Undertaking branding, advertising, and warehousing
• Passing on useful information from customers

Large Scale Retailer

• Retailers are typically operated as public limited companies
• Large amounts of capital needed
• Assets required to raise money
• Normally buys in bulk direct from manufactures
• Sometimes have their own factories
• Stores in bulk, eliminating need for wholesaler

Advantages of Large Scale Retailers: To Business

• Enhanced turnover and economies of scale
• Ability to employ specialist staff – Efficient business
• Low competition due to high capital requirement
• Saving on transportation
• Discounts due to bulk purchasing
• Sophisticated warehousing

Advantages of Large Scale Retailers: To Customers

• Diverse product variety
• Low rates and one-stop shopping

Extra benefits from large scale retailers

• Additional services like ATMs and post offices
• Freedom of choice with open display of items
• Money-back guarantees on mail orders
• Quality goods sold
• Opportunity for arm-chair shopping through mail orders

Disadvantages of Large Scale Retailers: To Business

• Elevated capital requirements
• High fixed costs, like large expenses
• Substantial risks, such as stock damage
• Management problems
• Business has to give incentives to customers burdening the business
• Business has to allocate area for non productive activity like play areas
• Opportunities for shop lifting occur

Disadvantages of Large Scale Retailers: To Customers

• Inconvenient locations
• Traffic congestion in main commercial areas
• Customers are restricted to standardized items
• Impersonalized service
• Encouragement of impulsive buying
• Lack of home delivery and credit facilities

Types of Large Scale Retailers

• Multiple chain stores supply products from a central head office
• Controlled from a central head office
• Standard appearance, names, goods, price, methods and service
• Goods usually on open display
• Typically public limited companies led by a board of directors
• Centralized buying balanced with decentralized selling
• Standard purchases give favorable terms
• Expert specialists in buying maximize store efficiency
• Layout standardization reduces capital expenditure

Advantages of Multiple Chain Stores

• High flexibility
• Risks are spread out
• Economical advertising as all branches are promoted together.

Negative Affects of Multiple Chain Stores

• Too much centralized control restricts localized services.
• Lack of personal touch

Department Store Characteristics

• Many departments/specialized shops under one roof.
• Each department has a unique line of goods.
• Some stores have mail order departments
• Large store with distinctive atmosphere and facilities for shoppers.
• Attractive window/open displays and visible prices

Advantages of Department Stores

• Bulk buying means favorable purchase terms
• Expert specialists enable efficiency
• Economical advertising occurs as all departments
• Trading losses in one department offset by profits in others

Disadvantages of Department Stores

• Due to location; rent costs are high
• High risk change in market conditions

Variety Chain Store Characteristics

• Mixes traits of multiple shops and department stores
• Many types of goods & similarly styled outlets around the country
• Goods openly displayed and sell by self-service
• Volumes of sale so large that goods can be manufactured to retailers demands
• Brand names are common

Supermarket Characteristics

• Self service adopted
• Large departmental stores
• Incentivize One stop shoping
• Goods Attractively displayed

Hypermarket Characteristics

• A type of Mammoth store
• Competitive prices are used to encourage one stop shopping in large quantities
• Located outside city

Small Scale Retailer

• Usually sole trader or partnership
• Small capital investments
• Normally do not employ latest equipment
• Provide personal service.

Advantages of Small Scale Retailers

• Provision or service delivery
• Located near residence
• manageale.

Disadvantages of Small Scale Retailers

• Lack of high amenities
• high cost
• low trades
• lack of customers

Dependence on wholesalers

• Needs credit
• Small scale purchase in smaller quantities

Successful traits of small scale retailers

• Personal and Nearness
• Credit facilities

Methods to Increase Profits

• Increase Quality Improvement
• Competitive prices

Starting retail business

• Knowledge based
• Knowledge is industry
• Capital Requirement
• Good Source and Location

Small Scale Retailer: Pedlar

Selling techniques & trends in retailing

• Branding and Packaging

Branding and Packaging

• Branding means selling goods under slogan.
• Brands recognized and marked Authorities .

Goal of Branding

• To stand out against marketing to make consumers aware. Makes customers aware

Advantages of Branding/Packaging

• Sell under distinctive name or slogan
• Gives product brand identity
• Only possible when packaging is performed

Advantages of Branding

• product sells itself
• Increases attention to customer Encourages Impulsive Buying

Advantages of Selling

• Adds value and creates value to customer loyalty
• easy handle+fixed prices with no bargaining
• Customers find product information and shops get converted.

Disadvantages of Selling

• Competition
• Increased Costs

Self-service retailing

• Displaying products on shelves so customers choose independently.

Large retailing

• Common at supermarkets .

Self-service benefits & pitfalls

• Progress of pre-packing
• Lack of personal service
• impulse Buyers and large scale of brands can encourage

What after-sales service is

• Periodic sales maintenance of good quality item

Goal and Positives of Service

• Maintain reputation and quality

Cons of Over head charges

• More sales
• Fault service

Shopping Centers

• A shop with different owners and stories in area
• With wide range of goods

Why shopping centers are attractive.

• Easy access
• Advertise, Variety

Where to find a shopping center

• Far from residents
• High Rent

After visiting shopping centres- Computerized or electronic sales:EPOS(electronic point of sale)

• EFts handle transactions.

Pros of EPOS

• Decrease Lines & easy billing

cons of EPOS

• Expensive installments

What is Barcoding

• Speeds transaction

pros of Barcoding

• Reduced human error and easy control

cons of Barcoding

• Shopping is impersonilized

What is a loyalty card:

• Credit payment card rewarded in spent store money

pros loyalty card:

• Customer increases
• Monitoring made

cons loyalty cars:

• High Implementation of cost

Implications on e-commerce on Retailing

• Sells using internet or channels

Decline on Sales

Causes

• More consumers buy online

Result

• Need to expand business

E-Commerce tools/methods

• Use of software, customers databases, and document process

Home Shopping

What shopping on internet is

• Goods delivered home as offered on websites

Reasons for shopping on internet

• large variety to shoppers that are easily done with computers
• Overcoming traffic
• Companies grow without expenses on floors

Mail Order

What mail order is

• Use of agencies with use with guides

How goods are displayed

• Expensive cataloge

Ways consumer orders

• Order by form

Goods are on

• Credit

How payment is conducted:

• Instalment options

Shopping by phone

How shopping by phone is

• Calling SMS for purchase.

Telsales

Whhat Telesales is

• Phone with product
• Talking with customers

Shopping by television

Detail of television shows with advertisements about a product

effects of large retail:

• role of wholesar dimishes due to distributors now selling goods themselves
• Stores develop and many facilities are established to grow market
• prices go high

survival traits of small retail:

• personal access
• ability to supply on small capital
• lower overheads

Customer Credit

Buying goods with an agreement to pay for them later

Benefits of Credit

Allowed to use without being fully paid

Reasons for Credit

Gaining over competition

Matters Discussed

Details On rates and parties

Disavdantage by economy

Demand leads to inflation

Types of Credit

1. short Term

• Amount of credit if so low • Paid within year

2. Informal Credit

•no well written agreements •Involve security

3Credit Cards

• Magnetic strip with microchip customers can use to withdraw

4 Advantages to card User

•Can obtain cash at any ATM •Increases purchasing power

5 Disadvantages to Retailers

• Rental

6. Overdraft

• Short term financial aid for bank borrower to gain balance

###7 Long term loan • Repayments done on installment with collateral security

8 Leasing

• Assets with rental in fixed payments for period of time

In terms with leasing who are lessee, lessor?

•owner is lessor •user is lessee

9 Hire Purchase

• Leasing agreement that requires to buy amounts after by paying amounts in time

10 Sale and lease backs

Lesee orignially has asset

Types of lending criteria

• Banks Loan; with high interest. • leasing more expensive but involved

Advantages of customer credit

Increases profit

Disavantages of customer credit

Over Spending

Consumer Protection

• Providing quality products as service in safe place.

Reasons For Consumer Protection

Consumer right ignorace

Who might be Explioted

• High prices
• False claims

Protection rights

Ensure quality goods and right quantity

To protect consumer-

• Govt forms
• Govt policy

Reasons For consumer Protection

• Products endangering safety
• unfair trading
• ignorance of custom rights

Types of Consumer Protection

Consumer association, and Government

Wholesale Trade

The role of wholesaler in chain distribution Tradition Channel Chain of distribution Producer --> Wholesaler --> Retailer --> consumer

Types of channel

Traditional Channel Flourishing because of large retailers channel 4 channel 5 How manufacturers sell

What is eliminated

Brand and need of one stop stores

wholesaler traits

Standards resources and imports

function of a wholersaler

Supplies source and reduces

Producer trait

Producers are relieved of risk and storage

service to retailer

• Can buy in small quanitites

services to final consumer

• Regular supply and asssured

selling process

• Bring Seller together

types of agente

Del credere

insurance estates

Search for trade estate

Agencies who is much help to

Export who need to find markets

document trades 1

Why Trade Documents Better control Legal Records and misunderstandings

doc trades 2

Issued, Title, contacts and authority

Types of Documents

• letter of inq. • Quoation • Catolouge • Price list.

delivery system

Delivery: sent goods and info for buyer check

Invoice

Supplied in type •amount, date and payments terms.

Receipt:acknowledges payments

terms of payments

Recorded for for payment Discounts offered

trade discounts

Paid and lower price Given to bulk buyers

C. W. O

payment made at

Trade Discount

Deduction form price

Intermational Trade

Export

Value of trade

balance of payments

(Visible exports + import to other countriers)

Terms for payment

B/c payment deficits exist

customs

Collecting revenue taxes

international trades

Countries join bloc to promote trade • countries have same trade policies

Types international

Trade

• European
• SAARC

trading bloc benefits

Free access and market Employment

disadvantages of joining trading system

Losing trade regulations

Free traits

Country have goods and not Supports industrialization Exports are job port

Protection.1

Countries depend supplies From 1 industry oversea

Importance of ports

Free trade exist And trade is taken

Reasons for port protection

Avoid balance and problems To support

Types of protection

Set and customs import Barring trade Tariffs Setting rules for distribution

Difficulties

Advertising chapter 8

That attempts to persuade customers and purchase service.

Goals for adverts

Launch product Increase sales Introduce Make market

advs. for advertisement

Brand to new consumers, sales

Adverts bad side

Price increases, unwantedness

Advertersing terms

• Informative
• Persuave
• Remind

what makes a good advert

• Overal. Image .

types of advertisement

Direct and non

what advertising do

Provide for product increases sales increase profits

high is absolute cost:

Bad circulation causes customer confusion and bad purchases

What Is Used In adverts.

• Gender and Sounds
• Safety features with famous actors

Television Adverts

• Millions Watch

###Radio Adverts

• Cheapter
• Song Usage

media ads

• Permanent-Magavine
• cheap-Poster

Ads from the cinema

• only in cinema

others

cheap ,internet

facts of adverts:

Cost, targets, government policies.

advertising is,

Accounts management, theme building or creative.

controlling for adverts

• Regulations,

communication what is it

communication why is. essential

communication benefits

It connects with contacts outside, helps in stocks and sales and finance.

types of communication

• orals, face by face

types of writting

• Letters, notes , boards brochers

types for Visua L-

Charts, photos , postermodw

what effective communications looks likes:

From Sender to reciever there is message

what is Telecomm.

Communication

Mobile Phone: what is looks like

Carry internet easy access device for payments.

fax communications

• for written and quick

internet comms

Network of users on world

facts

Cheap monitor markets 0-0

5 Intranets

Special use of internet

Emails benefits:

Message transfers, fast . cheap and attachments.

Telecommunication

• Group of people through lines

facts

Special care

what factors decide on choice to communications

Cost , Distance , Accuracy.

posts

Message carried • ordinary is fast • Record exists

registered mail

Security fee

Express Mail

Fast and guareentwd

post resteant

Addressed where posted

telecommunications

• Credit access and statement access
• Value pays is what the government gives

ware housing is

• is large buildings to store material

what warehouses bring

Production is not stop Stabilized cost over time Can grade and blend

Types

Retail and wholesale Cash and carry stores

Cold Storage.

• Maintain temperatures levels

Regional

regional and distributors

High retailers and supermarkets

manufactures

• keep stock

public

• owned by state

bond

• duty is pay • locked and import is recorded

Insurance

Contracts of security

Insurance: what's the meaning

Transferred and pay premium

Why do we pay

• gives you guarantee

Types of

•insurange

insurable

• theft

not

•fashion

How works:

Based on Pooling

insurace payment of premium

Based on poll Low pay- and transfer

premium high and lows: factors

• High risk equal premium • high and insured sum amount

Insurance Policy and Priciples

• to be safe and with faith is

insuravke interest for only which is

• your benifit

Indemintifcations: what is

• bring you to before

What Is the contribution

• to transfer to another • And that has rights..

how many Types of insurance:

• General and Life

General

fire and content

water

moter

•injury for party on risk

life

what is life insurnace

• security of payment when end time

nuclear

• high rate of premium

middle insurance mean

Bigger independent Risk advice and manage

Agencies

sell policies commisoon bases

Insuranc and process of policy

Check insure and provide form where company then measures payments.

Types of documents

• Original policy
• ownership

then check report

banking

benefits of banks

Keeps money and allows easy payment for services

types of banks

Central- issues currency to govern commercial banks: accept money.

Services. from commercial banks

Accept paymehts and loans Online money

savings types for accounts

Savings , fix or currents

banks: loan types

Bank Loan

• Lending
• Overdraft
• Discounting bill

Payment methods

Payer to payee

cheques

Open order and crash Credit with security

over commiting.

Bank to court

overcome high payments.

• Pay by cards

direct and standing

Order with payments

what about credits

Payments by internet for all locations with payees names and details

agencies benefits

Acts as the payee.

Exchange for forieng currency

Buy and sells forex

card and bank

Allows and aids process with telecommunications for bank access-pin

Lockers

For valuables

Night depositiors

Can deposit after times

in slip

Add money for our account

Business Units Chap. 14

Factors for locations:

• proximity. Supplies labour.

Buss. Organized who use rescources resources;

Produce good and services to need demand

Private Organized

• with private people and own resources and earn proft

Public Sector

• government or people and utilities at price point

types of liability

what are liabilities:

Creditors,

types of Sector Organization.

whats is one trader:

One with less assist with limit capital liability and with less entities

Partnerships:

One to Two With legal entities

partnership : investments

Cash . kind expertise

Private with limits

Separate legal entity and share based investment

facts of limited company

•share increase-longer terms.

Public company:

Share base investment

Public

• Share capital

facts

Long term , but complex and taxation are high

business

• Limited company needs Share capital Business obj. Registered entity adn Share holding

Capital:

Paid business and reserves from it

Multinational.Transnational

Which has branches

Advantages:

Less changes