DEPARTMENT OF BUSINESS STUDIES

7100 – COMMERCE SIMPLIFIED STUDY KIT FOR GRADE 10 TERM 1

COVERAGE

Questions
Answers
Short Notes

TOPICS

- Introduction to Commerce
- Aids to Trade/ Commercial Services
- Career Prospects
- Production
- Contracts [in buying and selling]
- Introduction to Retailing

Compiled by:

PUMULO. M. J [BBS. Ed – CBU]

PUMULO. M J
BACHELORS’ DEGREE – BUSINESS STUDIES WITH EDUCATION - CBU
INTRODUCTION TO COMMERCE

(i) Explain the importance of commerce

(ii) Explain the aids to trade

(iii) Draw the aids to trade

(iv) Identify career prospects in Commerce

ANSWERS

Commerce is very important to individuals, nation and the world. The importance of
commerce to these are stated below:

INDIVIDUALS

 It provides employment opportunities.

 It helps individuals start or run their businesses.

 It helps to improve the standard of living of individuals through the distribution

of a variety of goods.

 Through the chain of distribution, commerce creates a link producers and

consumers.

 Commerce satisfy the endless human wants and needs.

 Commerce assists the public/consumers to get information about the goods

available on the market.

 Business people and the public are assisted to safe guard their money and make
payments through the banking system.

 Through insurance, commerce provides indemnity and compensation for risks

or losses suffered by clients and hence giving them confidence to continue with
their businesses

PUMULO. M J
BACHELORS’ DEGREE – BUSINESS STUDIES WITH EDUCATION - CBU
NATIONS

 It promotes foreign exchange through trade between nations.

 Countries are able to acquire goods which they may not produce.

 It brings development to the nations.

 It increases national income and wealth.

 Specialisation is made possible by commercial services leading to higher

production of goods of higher quality.

 Creates competition among manufactures or producers of goods.

 Helps in the development of industries for higher productivity.

 Promotes knowledge and skill development through exchange of labour.

 Helps in expansion of aids to trade.

WORLD
 Commerce encourages foreign trade international trade through the distribution of
goods with the help of transport and communication countries can exchange their
surplus goods and earn foreign exchange which is used to import machinery and
sophisticated technology.
 Commerce benefits underdeveloped countries by importing skilled labour and
technical know-how from developed countries.
 Commerce helps during emergencies like floods, war and earthquakes in reaching
the essential requirements like foodstuff, medicines and relief measures from
other countries to any affected area in the world.

PUMULO. M J
BACHELORS’ DEGREE – BUSINESS STUDIES WITH EDUCATION - CBU
 Explain the aids to trade.
Commerce is defined as trade and aids to trade. Commerce is also the distribution of
goods and services to satisfy human needs and wants. The aids to trade are the
commercial services or commercial activities that help in the distribution of goods
from producers to consumers/selling of finished goods that is done by retailers,
wholesalers, importers and exporters with the help of transport, warehousing,
banking, advertising, communication and insurance.

BANKING

 Necessary for depositing as well as receiving money.

 Making payments through cheques, credit transfer, standing orders and direct
debit.

 Receiving finances through loans and overdrafts

 Obtaining foreign exchange.

 Payment of wages and salaries to workers

INSURANCE
 Indemnifies/compensates/covers in case of financial loss, loss of building, raw
materials, finished goods.
 To cover claims from third party such as public liability and employers
liability.
 It also cover consequential loss of profit through fire, theft burglary and
accident.
 It also covers loss of raw materials and other property.

COMMUNICATION
 Necessary in contacting/ getting in touch with suppliers of raw materials.
 Help in provision of information to potential customers.

PUMULO. M J
BACHELORS’ DEGREE – BUSINESS STUDIES WITH EDUCATION - CBU
  Enables the business to receive inquiries, orders, settle queries from customers
and potential customers through letters, telephone, fax, email, internet, cell
phones.
 Contacting customers

TRANSPORT
 Necessary to deliver/ move/carry equipment and raw materials to factories.
 Carry finished goods from factories to markets.
 Move workers to and from the place of work.
 Move customers to and from factories.

WAREHOUSING
 Necessary for storage of raw materials and finished goods.
 Guarantees flow of raw materials and finished goods.
 Avoids fluctuations in supply.
 Some chemicals may need special storage. E.g. in refrigeration.
 Protection against damage, theft/ pilferage, wastage, weather, deterioration
 Store seasonal goods e.g. jerseys, raincoats.

THE DIAGRAM OF COMMERCE

COMMERCE

TRADE
AIDS TO TRADE

HOME TRADE FOREIGN TRADE WAREHOUSING

ADVERTISING
BANKING
RETAIL WHOLESALE IMPORTS EXPORTS TRANSPORT
INSURANCE
COMMUNICATION

PUMULO. M J
BACHELORS’ DEGREE – BUSINESS STUDIES WITH EDUCATION - CBU
CAREER PROSPECTS IN COMMERCE:
Entrepreneurship, marketer, human resource, accountant, banker, insurance broker, business
studies teaching field, sales representative and auditor

1.
(I) Explain Needs and Wants
(ii) Describe the branches of production
(iii) Describe methods of production
(iv) Explain the factors of production
(v) Describe types of goods.
ANSWERS
(I) NEEDS
 -They are human necessities of life
 -Which humans cannot live without
e.g. shelter, food, water, clothing, medical care etc.

WANTS
They are requirements of human being
Which make his/her livelihood or stay on this world better
E.g. computers, vehicles, cell phones, air conditioners, television, radios etc.

INDUSTRY

 Extraction of raw materials from nature e.g. Mining, fishing, lumbering and farming
 And processing of raw materials into semi/finished goods e.g. maize cob into maize
flour and then into nshima, cotton into cloth, wheat into bread.
 Industry can be divided into extractive (primary industry), manufacturing and
construction.
Primary industry is the first stage of production, concerned with extraction of natural
resource from the ground, it can either be under ground or above e.g minerals underground,
fish in water, trees in the forest, animals in the wild fertile soil and good climate, and farm
produce such as oranges, maize cotton.
Manufacturing industry (secondary industry) is the second stage of production where raw
materials are turned/transformed into useable products shoes biscuits, clothes. In certain

PUMULO. M J
BACHELORS’ DEGREE – BUSINESS STUDIES WITH EDUCATION - CBU
 cases raw materials are turned into semi-manufactured goods into one factory and then sent
to another factory.
Construction is also part of secondary industry and it includes building of houses, roads,
bridges.

DIRECT SERVICES
 Is the branch of production that plays an indirect role in production?
 And whose services are essential in enhancing production
 It provides public and personal services to individual citizens.
 These include teachers, doctors, nurses, policemen, lawyers and any services rendered by
service providers.

COMMERCE
 Is trade and aids to trade.
 The aids to trade are insurance, banking, communication, advertising, warehousing, and
transport.
 Is the branch of production that deals with the distribution of goods and services from
the industry (place of extraction or manufacturing) to the consumer/ place of
demand/scarcity
 Also concerned with delivery of inputs such as fuels, spare parts, machinery etc. to the
industry.
 Ferries raw materials from extractive industry to secondary industry.

DIRECT PRODUCTION
 This is the production of goods for bones own use,
 It is done on substances level without need for exchange/trade.
 It directly satisfies ones needs and wants such as a farmer grows only enough maize or
keeps enough live stock for own consumption is involved in direct production.
 If people where to provide all that they need by themselves, they would have little or no
need for trade. In other words they would be self-sufficient.

INDIRECT PRODUCTION
 This is the production of goods for the benefit of sale or others.
 It involves trading of what has been produced so as to obtain what one cannot produce.
 Therefore, it depends on trade and makes people to specialise in one field so as to sell
their value.
 This is the most common type of production in modern society, where few people satisfy
their needs directly by themselves.
 In this type of production people co-operate with each other to satisfy their needs or
wants of everyone.
 People usually engage in one particular occupation which they are best suited and sell
their products or labour in exchange of the goods or services they need.
PUMULO. M J
BACHELORS’ DEGREE – BUSINESS STUDIES WITH EDUCATION - CBU
  For example a farmer sells his farm products to other people like doctors to obtain
medical services or even buy machinery to be used on the farm.

FACTORS OF PRODUCTION
CAPITAL
 Includes, money, building, machinery, raw materials used to produce further goods.
 All man made assets used in the production of goods and services
 Providers of capital are called capitalists/investors.
 Their reward of capital is interest.
 Capital can be accumulated by savings.

ENTERPRISE/ORGANISATION
 The ability to organise the other factors of production of production.
 Enterprise involves making decisions such as expansion of business, ploughing back
buy new motor vehicles
 For production to take place, someone must have an idea and the skill to organise direct
and control the production process.
 The person who provides is known as entrepreneur or organiser. He decides what to
produce, when to produce, how to produce etc.
 The entrepreneur gets profits as a reward.

LABOUR

 This is human effort used in the production of goods and services.

 It can be manual(physical) and skilled(mental labour)
 Labour is limited supply
 It providers of labour are called workers.
 Workers receive a wage or salary as a reward.

LAND
 Includes all kinds of natural resources found on earth and underground.
 Land refers to buildings, minerals underground, and rocks of the crust, fish in the water,
trees and other natural resources. It therefore includes the earth and the oceans and
everything which grows in them.
 Providers of land are called Landlords.
 Landlords receive rent/royalties as their reward.
(v) GOODS- a good is a tangible item that satisfies some human needs and wants e.g
food, furniture, clothes etc.

 Original goods- these are genuine goods that are new, produced for the first time, and
are of its kind, they meets the safety and quality standards expected. Customers buy
goods from authorised stores.
PUMULO. M J
BACHELORS’ DEGREE – BUSINESS STUDIES WITH EDUCATION - CBU
  Counterfeit goods- these are inferior quality goods made or sold under another brand
name without the permission of owners, sellers of such goods infringe on the trade
mark, patent or copyright of the brand owner, counterfeit goods are common in
foods, beverages, clothes, shoes, pharmaceuticals, electronics and many other items.
 Quality goods- these are goods that have capacity to meet the customer’s needs, they
give customers satisfaction, the goods are free from defects or deficiencies and
attractive in appearance and finishing.
 Substandard goods- goods below the national standard of goods and services
required in a given country. These goods are not attractive. Not durable and have
many defects.

CONTRACTS
(i) List the elements of a valid contract
(ii) Explain elements of a valid contract

ANSWERS
CONTRACTS
A contract is a legally binding or valid agreement between two parties. It can be written or orally
e.g. when buying property like a house a written contract would be suitable. A contract can also
be explained as a legally exchange of promise or agreement between parties that the law will
enforce.
INVITATION TO TREAT
 An invitation to treat is merely an invitation for customers to submit an offer.

PARTIES TO A CONTRACT
 An offer is an expression of willingness to contract on certain terms with the intention
that as soon as it is accepted, it becomes binding.
 The person making an offer is the offeror and also known as the promisor. And the
person receiving the offer is the offeree (is the party in whose favour the offer is being
made).
 An offer can be made to an individual, a group of people and the entire world

ELEMENTS OF A VALID CONTRACT

ACCEPTANCE
 Acceptance is a final and unqualified expression of assent to the two terms of an offer it
must be communicated. Signing a contract is one way a party show his/her assent.
 In order for a contract to be formed, the parties must reach mutual assent, this means that
one party makes an offer for a bargain and another accepts
 Signing a contract is one way a party shows his or her assent.
 In order for a contract to be formed, the parties must reach mutual assent.
 An offer can be made to an individual, a group of people and the entire world.

PUMULO. M J
BACHELORS’ DEGREE – BUSINESS STUDIES WITH EDUCATION - CBU
CONSIDERATION
 It is a price paid for the promise of the other party.
 The price must be something of value, although it must not be money only.
 It may be some rights, interest or benefit going to one party detriment, loss or
responsibility given, suffered or undertaken by the other party.
 As long as consideration exists, the court will not question its adequacy provided that it is
of some value.
 It must not be illegal or impossible to perform.

LEGAL CAPACITY
 This is the legal ability to enter into a contract.
 Not all people are completely free to enter into a valid contract.
 The following have no capacity to enter into a contract: people with mental impairment,
minors, bankruptcy and prisoners.

CERTAINTY
 Entering into a contract must involve the elements of free will and proper understanding
of what each of the parties is doing.
 The consent of each of the parties to the contract must be genuine.
 All the essential terms to be settled between the parties must be settled.
 It must be clear as to what the parties have agreed upon.
 The consent may be affected by: mistake, false statement, duress and undue influence
.

WHY CONTRACTS SHOULD NOT BE BREACHED

. Damages business reputation

.Ends good business relationship
.Pay legal fees to lawyer
.Can be sued and made to pay
.Waste a lot of time in courts of law

PUMULO. M J
BACHELORS’ DEGREE – BUSINESS STUDIES WITH EDUCATION - CBU
INTRODUCTION TO RETAILING
HOME TRADE
Features of home trade
. Deals with the exchange of goods and services within the country
. Trade is carried out by wholesalers and retailers
. Transactions are usually done using the local currency
. Home trade operates on relatively small amounts of capital compared to foreign trade
. Roads and rail transport most common forms of transport.

RETAIL TRADE

. Explain the functions of a retailer

.Explain the factors to consider before opening a retail business.
.Characteristics of small scale retailers and large scale retailer
.Advantages and disadvantages of small and large scale reatillers

ANSWERS

 To break the bulk.

 To provide a variety of goods to consumers.
 To display goods in retail shops.
 To offer credits to trusted customers.
 To give guidance to customers especially on new goods.
 To provide a local supply to consumers.
 To price goods before sale to consumers.
 To package goods before sale to consumers.
 To advertise his/her shop to the public.
 To provide pre-sales and after-sales services.
 To offer delivery services on some goods like furniture.
 To act as a middleman/ link in the chain of distribution between the consumer and
wholesaler.
 To pass on information to wholesalers on consumers complaints, suggestions or praise on
the product.
 Risk bearing – the retailer bears risks of physical deterioration of goods, risk of price
change theft, change of fashion of goods

Explain the factors to consider before putting up a retail business

1. CAPITAL
When putting up a shop ensure that enough capital is available. The amount of capital will
determine the site and size of the retail shop. It must be enough for building a new shop or

PUMULO. M J
BACHELORS’ DEGREE – BUSINESS STUDIES WITH EDUCATION - CBU
renting an existing shop and still remain with sufficient funds for buying goods for resale, paying
electricity bill and salaries to workers.
2. LOCATION
When choosing the location of a retail shop ensure that the site of the shop has sufficient
customers to support the shop. The shop will be easily accessible and enough profits will be
realized in relation to the cost of the site.

3. EXPERIENCE
The person intending to open a retail shop should have some ideas on how to run the shop and
also have some management skills.

4. METHOD OF SALES
Consider the method of sale to use whether customers will be served across the counter or self-
service. Also consider whether to offer credit facility or sell on cash basis

5. NAME OF THE SHOP

The name of the shop should be eye caching and easy to remember which contributes to
popularity and success of the business.

6. GOODS FOR SALE

Look at those goods that are marketable, profitable and required by people in the locality of the
shop.

7. METHOD OF ADVERTISING
Consider the display format to use so as to attract as many customers as possible.

8. SAFETY METHODS
Ensure that money is safe by installing security cameras and insurance.

9. LEGAL REQUIREMENTS
Put in place legal requirements to protect the health, safety and welfare of your employees as
well as customers.

10. PRICE OF THE GOODS

The selling price should have a good margin (profit).

Explain characteristics of small and large retailers

SMALL RATAILERS
 They are owned by one person.
 They have limited capital hence they cannot afford to advertise on national scale.
 They cannot employ highly skilled workers to run the business.
 They are located in townships and villages where rent and rates are cheaper.
 They open business for longer hours.
 They offer personal service to customers.
 They do not provide customer facilities such as car parks, restaurants and filling stations.
 They have unlimited liability since most of them are owned by sole traders.
PUMULO. M J
BACHELORS’ DEGREE – BUSINESS STUDIES WITH EDUCATION - CBU
  They offer delivery on certain goods bought by customers.
 They cannot afford to advertise at national scale.
 They generate lower revenue compared to a large retailer.
 They offer credit facilities to their known and trusted customers.

LARGE RETAILERS

 They have limited liability as they are run as companies.

 They usually buy goods in bulk direct from manufacturers at factory prices thereby
enjoying discounts which are passed on to the customers by lowering their prices.
 They have their own transport and also own warehouses.
 They have large capital investment and can afford to advertise on national scale.
 They are mostly located in town centres and are able to employ qualified personnel.
 They are able to provide amenities such as restaurants/car parks, and they mostly provide
self-service.
 They provide a wider range of goods and services.
 If they are a chain store, they have a centralised management system.
 They may manufacturer their own brands e.g Bata Shoe Company, Zambeef.

ADVANTAGES OF SMALL RETAILERS TO RETAILER

 Requires small amount of capital

 Easy to run
 Flexible type of business in terms of operation
 They give customers personal attention
 They are properly licenced
 Operational costs are lower
 They are less legal formalities required to be observed.

DISADVANTAGES OF SMALL RETAILERS TO RETAILERS

 Lacks capital for expansion

 Deals in limited amount of goods offered to customers
 Cannot compete favourably with large scale retailers
 Cannot afford to pay rent or position their businesses in town centres where business is
good.
 Small scale retailers have unlimited liability meaning they are legally responsible for all
the debts against the business. Their business and personal assets are at risk,
 May find it difficult to employ high-calibre employees due to insufficient capital,
PUMULO. M J
BACHELORS’ DEGREE – BUSINESS STUDIES WITH EDUCATION - CBU
  It is difficult for small scale retailers to access bank loans,
 Lacks continuity when the owner dies,
 Small scale retailers lacks transport facilities,
 Small scale retailers lacks storage facilities,

ADVANTAGES OF SMALL SCALE RETAILERS TO CONSUMERS

 The shops remain open for long hours even on public holidays
 They offer a variety of goods to consumers
 Personal service may be offered to customers
 Retailers may offer credit facilities to known and trusted customers,
 They sell in smaller quantities that customers can afford to buy.
 Carters for individual customers taste, for instance a customers may request to be given
what he/she wants.
 May specialise in one line of product hence the customer will be assured of expert advice.

DISADVANTAGES OF SMALL SCALE RETAILERS TO CONSUMERS

 Goods are usually sold at higher prices

 There is limited choice of goods.
 Usually they do not offer guarantees.
 They can be slow at serving customers.
 The goods they sell may not be fresh and sometimes expired products.
Explain advantages and disadvantages of a retailer.

ADVANTAGES OF LARGE REAILERS TO A TRADER

 They enjoy economies of scale. They buy in bulk direct from the manufacturer at factory
price and discount for this reason, they sell their goods at competitive prices and attract a
lot of customers and significantly increase their sales.
 They sell a variety of goods.
 They are able to locate their shops in town centres and prime areas where there is a good
traffic of potential buyers.
 New technology enables them to remain competitive and provide accurate and timely
information good management of the business.
 They have enough capital to employ specialists in various fields such as buying, selling,
window display, accounting, human resources. This improves their efficiency, makes
them more attractive and increases their sales and possibly profits.
PUMULO. M J
BACHELORS’ DEGREE – BUSINESS STUDIES WITH EDUCATION - CBU
  They are able to offer self-service which enables retailers reduce expenditure in wages
and salaries as they do not need many shop assistants since customers serve themselves.
 They are able to attract customers into shops by attractive display of the wide variety of
goods they offer and by use of loss leaders.
 They offer goods at lower prices to customers.
 Customers easily recognise the branches of large retailers in other parts of the country by
name or similar shop fronts.
 They offer additional facilities such as banks, restaurants, car parks and saloons.
 Most large scale retailers offer services like credit, after sales and delivery to their
consumers.
 They offer the convenience of one-stop-shopping to consumers as they stock a wide
range of goods.

DISADVANTAGES OF LARGE RETAILERS TO A TRADER

 Most large retailers no longer offer personal service.

 Most large retailers do not offer delivery services and credit facility to customers.
 Shop site in town centres are expensive.
 Pilfering of goods by customers is a common problem because of high customer’s
traffic in large retail shop.
 Large capital is required to start the business with and to provide customer amenities
such as restaurants.
 Large retail shops become difficult to manage when they increase in number.
 High cost of overheads such as rates, rent since they are in town enters

ADVANTAGES OF LARGES SCALE RETAILERS CONSUMERS

 . Usually large scale retailers give special offers to attract customers and result in
lower prices
 . One stop shopping- consumers are able to buy all they need under one roof.
 . Self-service in large scale retailer makes it easy for customers shopping very
convenient as they easily identify and pick goods thus saving time.
 . Delivery facilities may be provided for consumers durable goods.
 . Consumers can easily recognise the branches because they have similar layout.

DISADVANTAGES OF LARGE SCALE RETAILERS TO CONSUMERS

PUMULO. M J
BACHELORS’ DEGREE – BUSINESS STUDIES WITH EDUCATION - CBU
 o There is less personal contact because customers have to forgo the personal
touch
o No credit facilities is offered because large scale they sell on cash basis.
o No individual taste for customers with an eye for individuality must look to
small scale retailers for individual attention.
o Consumers over spend due to self-service which leads to impulse buying.
o Mostly customers are discouraged to go to these shops because they are
located in town centres where there is too much congestion.
o No delivery service is given to customers.

PUMULO. M J
BACHELORS’ DEGREE – BUSINESS STUDIES WITH EDUCATION - CBU