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Business Studies Notes PDF

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Internal Trade
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(Class – 11 / Chapter- 10)

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Internal Trade:
Internal trade refers to the buying and selling of goods and services within a country's border. In this the buying
and selling occur in the home country, with payments made or received in the home country and only a few
formalities for traders to complete.

Internal trade can be classified into two broad categories:

a. Wholesale trade
b. Retail trade

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A. Wholesale trade: It refers to the trade in which goods are sold in large quantities. The person who carries on
wholesale trade is known as a wholesaler. A wholesaler provides many valuable services to the manufacturer as
well as the retailer.
Services of Wholesalers

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They provide both time and place utility by making the products available in a location where they are needed and
at a time when they are needed for consumption or use.

The various services of wholesalers:

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● Services to Manufacturers
● Services to Retailers

(a) Services to Manufacturer:

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(i) The bulk purchase made by wholesalers encourages and facilitates large-scale production by the
manufacturers.
(ii) Help reduce the burden of storage of finished goods on the manufactures.
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(iii) Provide useful market information.
(iv) Provide warehousing facilities, thereby protecting the manufacturers from risks related to theft, spoilage or
fire.
(v) Provide financial assistance such as providing advances to the manufacturers while placing the order.
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(vi) Facilitate continuity in production.

(b) Service to Retailers:

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(i) Supply goods produced by different manufacturers.

(ii) Perform a variety of marketing functions such as advertising, thereby, helping the retailers save their time
and money.
(iii) Offers goods to retailers on credit basis.
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(iv) Pass useful information regarding products.

(v) Bear the risk.

RETAIL TRADE
● A retailer is someone who offers goods and services to the public directly.
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● The retailer typically buys vast quantities of items from wholesalers and sells them in small quantities to
end users.
● Arranges for proper storage of goods, sells the goods in small quantities, bears business risks, collects
market information, extends credit to the buyers and promotes product sales via displays, participation in
various schemes, and so on.

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1. Services to Manufacturer and Wholesalers

● Provide useful information such as the taste and preferences of customers, prevailing market conditions
and level of competition on the market.
● Facilitate distribution of goods to the consumers for final consumption.
● Help in promotion of goods to the consumers.

2. Services to Consumers
● Ready or quick supply
● Wide variety

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● Guiding consumers
● Demonstration and after sale services
● Home delivery
● Convenient location

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● Credit facility

Types of Retail Trade

Keeping in mind all the above criteria, that is size product mix, pricing and service level, the retail trade can be

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classified in to the following categories
(i) Itinerants retailers
(ii) Fixed shop retailers

A. Itinerant Retailers C
They are the retailers that continue to move their wares from street to street or from location to location in search
of buyers.
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Characteristics:
● Traders operate with limited resources.
● Deals in products of daily use.
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● Providing excellent customer service by having things available at the customer's doorstep.
● Do not have a fixed business establishment.
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Types of Itinerants:
(i) Hawkers and Peddlers: Hawkers and Peddlers moves from street to street in search of customers. They deal
with non-branded and local items. They supply the goods at the door step of the customer.
(ii) Periodic Market Trader: These traders sell their goods on fixed days in different market places. Their weekly
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markets are fixed. They sell their goods in the weekly market. They deal in low price and low quality goods.
(iii) Retailers on the street: Retailers who sell consumer items of everyday utility, such as stationery, readymade
clothing, newspapers and magazines, and are usually found in places where a large floating population
congregates, such as around railway stations and bus stops.
(iv) Cheap jacks: Retailers who operate temporary independent stores in a business district. They continually
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move their firm from one location to the next, depending on the areas potential. They sell consumer goods as well
as services such as watch, shoe, and bucket repair.

B. Fixed Shop Retailers

Retailers who have a fixed location where they offer their wares. As a result, they do not relocate from one location
to another to service their consumers.
Characteristics:

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● Operate on a large scale and have huge resources at their disposal.

● Generally deal in more than one product at a time.
● Provide various services to customers such as free home delivery and supply of goods on credit.

Types:
a. Fixed shop Small Retailers
b. Fixed shop Large Retailers

A. Fixed Shop Small Retailers

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● General stores: These businesses provide a wide range of products necessary to meet the day-to-day
needs of customers in the surrounding area. They stay open for long periods of time at convenient times
and frequently offer credit to some of their regular customers.
● Specialty Stores: These stores deal in a particular type of product under one product line only. These

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stores are specialized in one product only. They keep all the brands of that product.
● Street stall vendors: They cater to passing clients and specialise in low-cost items such as hosiery, toys,
cigarettes, soft drinks, and other such items. They receive their goods from both local and wholesale
sources. Because a stall's total size is so small, it can only hold a minimal amount of merchandise.

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● Seconds Shops There are the shops to sell goods which are not produced according to the required
specification.
The main features of second-hand goods shop

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(a) These shops deal in the products which have some manufacturing defect.
(b) Goods are sold at a heavily discounted price.

B. Fixed Shop Large Stores

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1. Departmental stores: A departmental store is a large retail showroom having a number of departments under
one roof each department specialised in one line of product.
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FEATURES:
● Provide maximum service to higher class of customers for price is of secondary importance full stop insert
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● These are located at a Centre place in the word of a city which caters to a large number of customers.
● As the size of the store is very large, they are generally formed as a joint stock Company e managed by a
board of directors former.
● A Departmental Store combines both the functions of retailing as well as warehousing.
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● They have centralised purchasing arrangements, whereas sales are distributed across departments.

ADVANTAGES:
● As located at Central places, they attract a large number of customers offering a wide assortment of goods
under a single roof.
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● The company aspires to provide the best possible service to its consumers.
● They can reap the benefits of big-scale operations, notably in terms of purchasing commodities, if they are
organised on a huge scale.
● They spend a lot of money on advertising and other promotional activities to increase their sales.

LIMITATIONS:
● Face high operating costs as compared to any other fixed shops.

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● Lack the personal touch while serving their customers.

● As they operate on a large scale and maintain huge inventories of goods, they face higher risk of losses.
● They are often inconvenient for immediate and quick purchases due to central locations.

2. Chain Stores or Multiple Shops: Refers to the stores owned and operated by single organisations and spread
across various localities.

FEATURES:
● These stores are in well-traveled areas where a large number of people can be approached.

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● Centralised at the head office, from where the goods are dispatched to each of these shops.
● The shop is under the direct supervision of the branch manager who is held responsible for its day-to-day
management.
● Controlled by the head which is concerned about formulating the policy and getting them implemented.

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● The prices of goods in such stores are set, and all transactions are conducted in cash.

ADVANTAGES:
● Economies of scale

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● Elimination of middlemen
● No bad debts
● Transfer of goods
● Diffusion of risk
● Low cost
● Has a high degree of flexibility
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LIMITATIONS:
● Limited selection of goods
● Lack of initiative
● Lack of personal touch
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● Difficult to change demand

3. Mail Order Retailing: In mail order retailing seller contact the potential buyers through advertisements and mail
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publicity. Potential consumers are approached for orders through newspaper or magazine advertisements,
circulars, catalogs, samples and bills, and price lists mailed to them.

ADVANTAGES:
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● Limited capital
● Convenience
● Wider market
● No, bad debts
● Elimination of middleman
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LIMITATIONS:
● No personal contact
● No personal inspection
● Limited variety
● Postal delay
● Heavy advertising cost

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4. Consumer Cooperative Store: A consumer cooperative store is a business that is owned, operated, and
controlled by consumers. The goal of such stores is to reduce the number of intermediaries who raise the cost of
produce and, as a result, provide better service to members. Cooperative stores buy huge quantities of goods
directly from manufacturers or wholesalers and sell them to customers at low prices.

ADVANTAGES:
● Diverse variety of goods is available under a single roof at satisfactory prices.
● Located in the heart of the city, so easily accessible.
● Keeps a wide variety of goods of different design and color which enables the buyers to make better

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selections.
● As cash sales are made, there are no chances of bad debts.
● Advantages of large-scale buying and selling exist thus resulting in lower operating expenses.

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LIMITATIONS:
● Absence of credit facilities affects the purchasing power of buyers.
● The principle of self service is there; therefore customers do not get any personal attention.
● Huge investment is needed.

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5. Vending Machines: In many nations, coin-operated vending machines are handy for selling a variety of things
such as hot beverages, platform tickets, milk, soft drinks, chocolates, newspapers, and so on. Vending machines

in size and weight. C

can be useful for selling pre-packed brands of low priced products which have high turnover and which are uniform

6. Super Markets: A supermarket is a large retailing business unit that sells a wide variety of consumer goods at
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low rates, with a large variety and assortment, self-service, and a significant emphasis on merchandising appeal.
Food and other low-cost, branded, and widely used consumer commodities are the most commonly traded things.

ADVANTAGES:
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● Wide choice
● Low price
● No, bad debts
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● Convenience in shopping

LIMITATIONS:
● No credit
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● Lack of personal touch

● High cost
● Miss handling of goods
● Limited scope
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GOODS AND SERVICES TAX

● On July 1, 2017, the Government of India adopted the Commodities and Services Tax (GST) in accordance
with the 'One Nation, One Tax' philosophy, in order to create a unified market and ensure the smooth
movement of goods across the country.
● Effective taxation ensures that public funds are effectively employed in fulfilling social objectives for
sustainable development.

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● The GST has replaced 17 indirect taxes (8 Central + 9 State levels) and 23 cesses of the Centre and the
States, eliminating the need for filing multiple returns and assessments and Streamlining the tax treatment
of goods and services from producers to consumers throughout the supply chain.
● GST comprises Central GST (CGST) and the State GST (SGST).
● There are four tax bands for all goods and services, namely 5%, 12%, 18%, and 28%.
● Tax liability takes place when the taxable person exceeds the exemption limit of Rs 20 lakhs.

ROLE OF CHAMBERS OF COMMERCE AND INDUSTRY IN PROMOTION OF INTERNAL TRADE

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A chamber of commerce is a voluntary association of businessmen belonging to different traders and
industries. Even professional experts like chartered accountants, financers and others engaged in business in
a particular locality, religion or country can also become the members of chamber of commerce. Its main
objective is to promote the general business interests of all the members and to speed the growth of

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commerce and industry in a particular locality, religion or country.

Following are the main functions of the chamber of commerce and Industry.
● Conducting research and collecting statistics and other information about business and economy.

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● Providing technical, legal, and other useful information and advice to its members.
● Publishing books, magazines and journals of business interest.
● Making arrangements for the education and training of members. Some chambers even conduct
commercial examinations and award diplomas.
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● Arranging industrial exhibitions, trade fairs etc. in order to promote trade.
● Advising the government in matters concerning industrial and economic development of the region.
● Issuing certificate of origin to exporters.
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● Representation of business interest and grievances before the government.
● Providing a forum for discussing the common problems of the business community.
● Acting as arbitrators for solving problems and disputes among the members.
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