Unit_1_Business_Studies_CA

JC:
Commerce and Accounting Unit 1
Botswana Open University
Junior Certificate Programme
Commerce and Accounting
Unit 1: Introduction to Commerce

JC: Commerce and Accounting Unit 1
Acknowledgements

This unit is a product of many people who worked hard to see it ready for use by
BOU learners. BOU wishes to acknowledge contributions from the following.

Programme Development Coordinators
Tebo Gaborongwe Ditshweu
Tommie Hamaluba

Writer
Matshidiso Molefhe

Content Editor
Victoria Annoh

Reviewer
Gloria. W. Uezesa

Editor
Lobakeng Eric Setabo

DTP
Mompoloki Oitsile
Gaolatlhe Masire

Cover Design
Gaolatlhe Masire

© 2018 BOU

All rights reserved. Reproduction, copying and all forms of transmission are only
in accordance with the national Copyright Laws that are in force.

Please, address correspondences to:

The Vice Chancellor
Botswana Open University
Private Bag BO 187
Tel. 3181470/3646000
Fax: 3181473
Gaborone, Botswana
Margin Icons
While working through this Course material you will notice the frequent use of
margin icons. These icons serve to “signpost” a particular piece of text, a new task or
change in activity; they have been included to help you to find your way around this
course material.
A complete icon set is shown below. Familiarise yourself with the icons and their
meaning before starting your study.
Learning Objectives References
Glossary Bibliography
Activity Unit Aims
Time
Unit Outcomes
Unit Assessment
i Introduction
Self-assessment Exercise Further Reading
Summary
Contents
Introduction to the Course i
Introduction to Unit 1 1

Lesson 1: The Nature and Scope of Commerce 3
Lesson 2: The Nature of Prtoduction 16
Lesson 3: Commercial Activities 29
Lesson 4: Channels of Distribution and Specialisation 38
Answers to Self-assessment Exercises 54
References 60
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Introduction to the Course
Overview
Hello learner and welcome to JC Business Studies. Before you study this course let us have
a bit of an introduction to the course. In studying Business Studies you will be provided with
the key to understanding how different organisations and the range of business disciplines or
subjects are related and integrated. The study of Business Studies offers a starting point for
building a career in business.
Many job opportunities and career advancement exist in the business world. Some business
studies students may acquire careers, which lead to ownership of small businesses. Success in
owning and managing a business is directly related to success in having business knowledge.
Course Aims
The course aims at:
• Providing learners with usable skills such as communication, critical evaluation,
logical thinking and working habits, positive attitudes to work, and a sense of
leadership
• Providing learners with basic skills, values and attitudes useful in gaining entry
into the field of business
• Assisting learners to develop feasible business ideas, set up businesses and run
them in small groups in the form of mini-enterprises
Course Structure
The JC Business Studies course is divided into two components or streams:

• Commerce and Office Procedures
• Commerce and Accounting
This course is divided into units; it has a total of 20 units, which are made up of coverage
from Commerce, Accounting and Office Procedures. These units are further divided into
lessons. Units have 2 or more lessons.
The Commerce part of the course is generic to both sub-divisions. For this part you will learn
about the nature of commerce, the needs and wants and the nature of production. You will
also learn about commercial activities, the channels of distribution as well as specialisation.
There are a total of 8 Units of Commerce.
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For Office Procedures you will learn about commercial organisations, office administration,
their roles in society and the opportunities they generate. There are a total of 7 units of Office
Procedures.
In Accounting you will be given a foundation for accountancy by learning about everyday
commercial transactions and entrepreneurship. There are a total of 5 units of Accounting.
Therefore, if you register to do Commerce and Office Procedures, you will end up doing a
total of 15 units (8 units of Commerce and 7 units of Office Procedures). On the other hand if
you choose to do Commerce and Accounting, you will do a total of 13 units (8 units of
Commerce and 5 units of Accounting). Your choice of which stream or sub-division of
Business Studies to follow should not be influenced by the number of units in each, but rather
what you want to pursue in future; Accounting or Office procedures.
Resources
To study this course you will need to have a pen or pencil while writing the answers to the
self-assessment exercises and activities. Use a blue or black pen when writing answers to the
assignment. For the Accounting component, you will also need a calculator.
Teaching Approach
The course encourages a learner-centred approach to learning. In this approach, you are at the
centre of most of the activities and BOU plays a facilitating role for learning to take place.
BOU is a distance learning institution. This means that you will receive study
materials from the institution and study on your own, at your own time, at your own pace and
at your own place.
However, in addition to the print materials, you will be helped in your learning by the use of
study centres – for tutorials. But, all in all, the responsibility of learning is yours.
Assessment and Feedback

Throughout this course you will be assessed or tested in different ways. These include in-text
activities, self-assessment exercises and assignments. You will also write a mock examination
at a specified time, and a final examination at the end of the course. Your study centre will
advice you accordingly regarding your preparedness for examination as well as the procedure
for you to follow in order to sit the final examination.
Feedback for the in-text activities is given immediately after the activity. The feedback for
the self-assessment exercises are found at the end of every unit.
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The assignment should be sent to your nearest centre for marking by your tutor. The
assignment will be sent back to you after your tutor has marked it and there will be comments
if necessary. Please make sure you read your Tutor’s comments and make an effort to seek
assistance if and when necessary.
Paper 4 (Alternative to Coursework)

Take note that as a private candidate you are allowed to carry over your Course Work
(Paper 3) marks from your previous year. This means your marks are valid for one (1) year
after you last wrote the Junior Certificate Examination. Therefore, if you sat your JC exami-
nation last year, you just have to write Paper 1 and Paper 2 of this subject. However, if you
are new to this subject and did not sit for it last year, then you have to sit for Paper 4, which
is an alternative to course work that is done in the schools. Sometimes, you might find that
your performance for course work was bad, so we suggest that you sit for Paper 4, which
might give you better result.
Paper 4 (Alternative to Coursework) is a 1-hour paper carrying 40 marks and weighting 20%
of the entire subject. This component is offered to you (private candidates) as an alternative
to a Centre-Based Assessment. It is a written paper consisting of structured questions based
on how to develop, plan, organize and operate a small business.
As you will remember, Commerce units are common to the two streams of Commerce and
Accounting & Commerce and Office Procedures. As such, the unit numbers are different
depending on what stream you opt for. The units necessary for Paper 4 (if you are writing the
paper) are as follows:
Unit Title Commerce and Commerce and
Office Procedures Accounting
Entrepreneurship Unit 9 Unit 6
Financing a Business Unit 10 Unit 7
Forms of a Business Unit 11 Unit 8
Operating a Business 1 Unit 12 Unit 9
NB: We seriously recommend that all the candidates sit for paper 4 to boost their chances
of passing as they might not have done well at school in the previous year in the case of the
upgraders.
Where to Get Help

If you have some difficulties in your work including activities, exercises, assignments, and
others, you can get help from any of the following:
• Subject tutor at the study centre
• Officers at the regional office
• Programme Development Officer at BOU head office.
• Fellow students, friends and relatives
Always remember that as a distance learner, you cannot go it alone. At some point you need
someone to assist you or encourage you. BOU will always be there to see you through this
course.
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Introduction to Unit 1
i Introduction
Welcome to the first Unit of this course. This Unit is about commerce and the importance of
commerce. The Unit also covers how goods and services are provided to satisfy human needs
and wants. This Unit is designed to give you the basic knowledge and understanding of the
environment in which business activities take place and how changes in the environment can
affect business behaviour in Botswana. The Unit also deals with providing knowledge, skills
and attitudes in food production as well as trade and the distribution of goods and services
from the producers to the final consumers. Unit 1 is an introductory unit in Commerce, the
other units will provide more information on other sections of commercial activities.
Unit Aims
• To know the importance of production in the satisfaction of human wants and
needs
• To know the importance of specialisation in the production of goods and services
• To know the role and importance of the branches of commerce in trade
Unit Content
Introduction to Unit 1 1
Lesson 1: The Nature and scope of commerce 3
Lesson 2: The Nature of production 16
Lesson 3: Commercial activities 29
Lesson 4: Channels of distribution and specialisation 38
Answers to Self-assessment Exercises 54
Self-assessment exercise 1 54
References 60
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Time
You are advised to take about two hours to study each of the lessons in this Unit. However, a
slow learner might take more than the suggested time for better understanding.
Resources
To study this lesson effectively, you will require the following: this unit booklet, a pen and a
notebook to note relevant points.
Lesson Assessment
Your progress will be assessed using the following:
• In-text activities
• Self assessment exercises
• Unit assignment
Feedback will be provided for all the activities and self-assessment exercises.
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Lesson 1
The Nature and Scope of Commerce
i Introduction
Welcome to lesson one which is an introduction to Commerce. This subject teaches us about
business and how these businesses produce and distribute their goods and services to final
consumer. Without commerce it is not easy for consumers to satisfy their wants. Commerce
ensures that businesses continue to produce. In this lesson, we shall learn about Commerce;
the scope of Commerce and its importance, job opportunities available from studying
Commerce, needs and wants, and producers and consumers.
Learning Objectives
Once you have successfully completed this lesson, you should be able to:
• explain Commerce as a subject
• outline the scope of Commerce
• explain the importance of Commerce
• identify job opportunities available from studying Commerce
• explain the difference between needs and wants using examples
• describe goods and services using examples
• distinguish between a consumer and a producer
• classify goods into producer and consumer goods
• explain the importance of producers in satisfying needs and wants
• discuss the effects of production on the environment.
Lesson Content List

1.0 Explanation of Commerce 4
2.0 Scope of Commerce 4
3.0 The importance of Commerce 4
4.0 Job opportunities available from studying Commerce 5
5.0 The difference between needs and wants 5
6.0 Goods and services 8
7.0 The difference between a consumer and a producer, and
producer goods and consumer goods 9
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8.0 The importance of producers in satisfying needs and wants 11

9.0 The effects of production on the environment 12
Summary 12
Glossary 15
1.0 Explanation of Commerce

The word commerce refers to trade and aids to trade. It is mainly concerned with the
distribution of goods for the satisfaction of human needs and wants. During and after the
production process, all the raw materials, goods, equipments as well as the finished products
are taken to where they are needed. All this movement is made possible by the commercial
activities. It is Commerce that helps to transfer goods from where they are made to where
they are needed to satisfy needs and wants.
2.0 Scope of Commerce

Commerce includes trade and aids to trade. It is a part of production that deals with the
distribution of goods and services. It is through Commerce that the products and services are
distributed both home and abroad. Trade can take place at a local level where wholesalers and
retailers are involved. At international level, importers and exporters are involved. In order
for trade to take place, there must be aids to trade that make the process work smoothly, and
these include; warehousing, advertising, banking, insurance communication and transport.
3.0 The Importance of Commerce

There are several factors that make commerce important to human life. These are outlined
below:
• Commerce equips people with business skills that will help them work or run a
business.
• It supplies goods and services to and from both home and international markets,
which help consumers to enjoy a wide variety of goods.
• It also improves people standard of living as new businesses help to create
employment so more people earn money to buy goods and services.
• Commerce also helps to develop the community and the nation at large because
when businesses are created there will be some development of infrastructure for
the businesses to run smoothly.
• It also aims to organise the most efficient distribution of goods and services in
order to satisfy human needs and wants.
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4.0 Job Opportunities Available From Studying

Commerce
Career opportunities in Commerce are available in the area of trade and all the services that
help trade take place.
Activity 1
From reading on the importance and scope of Commerce, try to identify some
job opportunities for someone who studied Commerce.
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Feedback to Activity 1
I hope your answers included the following;
• Entrepreneur/businessperson
• Retailer
• Cashier in the store
• Bank clerk
• Bookkeeper
• Importer
• Exporter
• Insurance agent
5.0 The Difference Between Needs and Wants

Everyone on this planet has needs and wants that they would like to satisfy. All the businesses
exist to satisfy our needs and wants. But what is the difference between these two?
5.1 Needs
A need is a good or service that we cannot do without. Needs are a must have for human
survival and are therefore very essential or necessary in our lives. Examples of needs include:
clothing, shelter, water and food.
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5.2 Wants
Activity 2
Thinking about your wants

Answer the following questions about your wants
Which television programme do you love most?
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Which cell phone type do you like?
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What do you spend your holiday doing?
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Which music do you like listening to?
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Well done, I just wanted you to think about what your wants are before explaining
what they really are.
Wants are things we desire in life but which are not necessary for life. They just make our
lives more comfortable. They are just things we desire, they are not essential for our survival.
For example, for life to be more meaningful and enjoyable we would like to have a radio,
television, a car, fridge, furniture etc. You may also survive without taking a taxi to school,
but you may feel more relaxed and comfortable taking a taxi than walking to school. People
could also have survived without going to watch the 2010 FIFA WORLD CUP, but they went
to watch because they got a lot of pleasure from watching it.
Activity 3
Classify the following into needs and wants.

Magazines, bed, bread, cell phone, clothing, DVD player, television, shoes and
deodorant.
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Needs Wants
Bread Magazines
Clothing Bed
Shoes Cellphone
Dvd player, deodorant,
and television
We can further make a distinction between needs and wants by using their characteristics as
shown in the table below.
Table 1: Differences between needs and wants
NEEDS WANTS
Needs are few Wants are unlimited
Needs never change Wants are always changing
Needs are easily satisfied Wants are difficult to satisfy
Needs are necessary for human survival Wants just make our lives more
comfortable, we can do without them
Activity 4
Write which characteristic is true or false about your needs and wants
Chararacteristics of needs and wants
Wants are ever changing
Wants are limited
Your basic needs are unlimited
It is difficult to provide for needs
Wants are desirable
Wants are easy to obtain
Your basic needs are easily satisfied
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Characteristics of needs and wants

Wants are ever changing true
Wants are limited false
Your basic needs are unlimited false
It is difficult to provide for needs false
Wants are desirable true
Wants are easy to obtain false
Your basic needs are easily satisfied true
6.0 Goods And Services

People satisfy their needs and wants by using goods and services. When you go to the
shops, you usually go to buy something. You may go to buy a chocolate, an ice cream or a
pair of trousers. Below is a diagram showing how goods and services can be classified.
Figure 1: Classification of goods and services
6.1 Goods
Sometimes you buy things that you can take out of the shop once you have bought them
and those are called goods. Goods are tangible things that are made or grown and can be
sold. Tangible means that the goods can be seen and touched. There are two types of goods:
consumer goods and producer goods. Examples of goods are: furniture, cars, clothes, food,
machines, computers, tools and many others.
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6.2 Services
A service is a non-physical or intangible item meaning that it cannot be touched or seen but
the person being offered the service derives or gets satisfaction from the service. There are
two types of services: producer services and consumer services. Examples of services are:
insurance, education, advertising, health care, gardening, transport, entertainment and many
others.
Activity 5
Can you please list five services that you have used before?
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Good, I hope your answers are in line with the following:
• Education
• Medical care
• Insurance
• Banking
• Tourism
• Entertainment
• Communication services etc
7.0 The Difference Between Consumers and

Producers; and Producer and Consumer Goods
In the previous section of the lesson we talked about goods and services, to better understand
the difference between consumer and producer goods and services we will first explain what
producers are and what consumers are and what they do.
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7.1 Producers
Do you know that without producers, there would be no goods and services? Producers make
sure that when you go to your local shop to buy, goods and services are there for you.
Activity 6
Can you think of any producer here in Botswana? Gather information about
what goods are produced and what those goods are used for and who uses
them?
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Well done, now you can get to know what a producer is.
A producer is an organisation or someone who provides goods and services that are used by
individuals or businesses to satisfy their needs and wants. A producer can also be referred to
as a manufacturer. For example, some of your families grow sorghum and maize, which are
for own use. In this case your families are producers. Other examples of producers include
Botswana Meat Commission, which produces meat, and Kgalagadi Breweries, which
produces soft drinks. Other producers such as Barclays Bank of Botswana and Botswana
Insurance Company provide services to their customers.
7.2 Consumers
Do you know that all of us are consumers because we use the goods and services provided
by producers? We use part of our income to buy necessities and luxuries. We buy most of
our goods from the shops and these shops are called retailers and wholesalers. Retailers and
wholesalers are middlemen who distribute goods from producers to consumers. For example,
a school uniform manufacturer sells uniforms to shop owners who are the middlemen who
will in turn sell to school children who are the final consumers. A consumer is therefore the
end user of the product or service. For example, Lesego produces tomatoes in her farm and
sells them to a shop in Kanye. People who buy the tomatoes from the shop to cook are called
consumers because they buy the goods for their own use and not for resale.
Now, in the next section we will learn more about producer and consumer goods and services.
You will realise that we explain what they are and what they do and then give examples.
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Producer goods are goods that are used by businesses to produce other goods or to provide
services. Raw materials such as wood, minerals, fish, and crops are good examples of
producer goods as they are used to produce other goods. Computers, machinery, trucks, and
equipment are all producer goods as they are used by businesses in their production
processes.
Other goods are called consumer goods. These goods are made to meet our individual needs
and wants. They may be durable or non- durable as shown in figure 1 above. Durable
goods are items that last long or for years and are kept longer by the users. Examples include
furniture, domestic electric appliances such as fridge, microwave, kettle, and personal com-
puter used at home. Non-durable items are items that do not last very long and have to be
replaced. Examples of non-durable items include food, clothes, light bulbs, pen, notebooks,
and perfume to name a few.
Producer services are the services that businesses use or buy from other businesses in order
to help in making their businesses a success. Examples of some producer services include
accounting, advertising, and insurance. Businesses need and use these services to make their
production efficient.
Consumer services are services that are used by the final consumers such as individuals and
families. The examples for these are similar to those of producer services but the difference
is that here they are used by individuals not businesses. Examples of consumer services are
insurance, education, health care, transport.
8.0 The Importance of Producers in Satisfying

Needs and Wants
Now that you know about consumers and producers, you will now learn how important
producers are in satisfying consumers’ needs and wants. All producers are important
because without them, we would not have goods and services. They see to it that the goods
and services that the consumers want are produced and they usually produce them in large
quantities so as to keep the market supplied with the goods all the time. The producers make
use of resources such as land, raw materials, machines and labour to convert the raw
materials into different finished goods for the satisfaction of our needs and wants.
Producers have to make or design new products regularly or modify existing ones to meet
the wants of consumers. In order to do this successfully, producers conduct market research
to find out the types of products consumers want or would like and then they produce them.
Producers also make the most efficient methods of production to produce cheap goods that
are of high quality to satisfy the wants of consumers. Due to the activities of producers most
families no longer have to plough for their own food but buy what producers have produced
from the shops.
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After the goods are produced it is now the work of the traders to now bring them closer to the
consumers. It is the work of the retailers and wholesalers to ensure that the goods and
services reach the consumers at the right time and in the right quantity to satisfy their needs
and wants. They make sure that when you go to a local shop to buy, the goods and services
are there for you.
In the past, family members produced what they needed for satisfying their needs and wants.
Families ploughed for their consumption, others hunted animals while others gathered some
wild fruits for use by their families. As time went by, there was some surplus of the goods
produced and these were traded within the community. Today producers have taken over what
families used to do for themselves and this has resulted in a wide variety of goods and
services.
9.0 The Effects of Production on the Environment

Producers may affect the environment in trying to satisfy our needs and wants. The activities
of producers can affect the environment in a negative or positive way.
9.1 Positive effects

• Farm waste can be used to fertilise the farms.
• The growing of trees reduces carbon dioxide in the atmosphere.
9.2 Negative effects

• Air pollution due to emissions from factory chimneys and excavations from
mines.
• Water pollution caused by business that use chemicals and dispose of their waste
in rivers and dams.
• Noise and smell that comes from factories or construction sites.
• Cutting down of trees can cause deforestation, which leads to soil erosion.
• Overgrazing can also cause soil erosion.
• Factory building and shops can destroy park and beautiful landscape.
Summary
In this unit, we have learnt that:
• Commerce is trade and aids to trade. It is mainly concerned with the distribution
of goods for the satisfaction of human needs and wants.
• Commerce equips people with business skills that will help them work or run a
business.
• It also aims to organise the most efficient distribution of goods and services in
order to satisfy human needs and wants.
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Job opportunities available from studying commerce include;

• Entrepreneur/businessperson, retailer, cashier, bank clerk, bookkeeper, importer,
exporter, insurance agent etc.
• A need is a good or service that we cannot do without.
• Wants are things we require in life but which are not necessary for life.
• Goods are tangible things that are made or grown and can be sold.
• A service is intangible meaning that it cannot be touched or seen.
• We satisfy our needs and wants by purchasing goods and services.
• Goods, which are used directly by the consumer, are called consumer goods.
• Producers are individuals or organisations that provide goods and services which
consumers make use of to satisfy their needs and wants.
That brings us to the end of Lesson 1. To check your level of understanding, do the following
exercise.
Self-assessment Exercise 1
Section A: Multiple Choice [5 marks]
1. Which of the following is a human want?

A. clothing
B. food
C. furniture
D. water
2. What are goods used by the final consumer called?

A. consumer goods
B. intagibles
C. producer goods
D. tangibles
3. Which of the following is a tangible item?

A. car
B. education
C. entertainment
D. healthcare
4. Which of the following is a need?

A. cellphone
B. motorbike
C. television
D. water
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5. Who is a consumer?
A. produces goods and services
B. purchases good and services
C. sells goods and services
D. supplies goods and services
Section B [15 marks]

1. (a) Using examples explain what is a service. [4marks]
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(b) Explain what needs are and give two examples. [4 marks]
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(c) State three differences between needs and wants and give examples. [7 marks]
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Glossary
Business: an organisation that produces goods and services.
Commodity: any product that can be sold for profit.
Distribution: delivery of products to places where they are needed.
Entrepreneur: someone who takes the risk of starting a business.
Entrepreneurship: whereby a person takes the risk and the ability and skill to organise and
run the business.
Infrastructure: the basic physical systems such as roads, communication, technology needed
by a country.
Intangible: cannot be touched or seen.
Luxuries: items which are not really necessary for a person’s survival.
Natural resources; raw materials that grow naturally
Necessities: are things you need to survive.
Retailer: a trader who sells the goods in small quantities, e.g. Shoprite, Choppies, Spar or
Street Vendors.
Surplus: an extra amount or something which is more that necessary.
Tangible: can be touched or seen.
Wholesaler: a trader who sells goods in larger quantities, e.g. Sefalana, Trade World, Metro
etc.
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Lesson 2
The Nature of Production
i Introduction
In the previous lesson, you learned about the nature and scope of Commerce. You have
learned that Commerce distributes goods to the final consumers after they have been
produced. You also learned about needs and wants and that human beings do satisfy their
needs and wants through production of goods and services. Without producers there will be
no goods and services.
In this lesson, you will learn about the creation of goods and services; that is production, the
two types of production, the chain of production, factors of production, ways of using the
factors of production sustainably, contribution of factors of production to productivity, stages
of production and lastly the effect of HIV and AIDS on labour productivity.
Learning Objectives
• explain production
• explain direct and indirect production
• relate direct and indirect production to the satisfaction of needs and wants
• illustrate and explain the chain of production
• describe the chain of production of specific goods
• describe the factors of production and their rewards
• discuss ways of using the factors of production sustainably
• show the contribution of factors of production to productivity
• discuss the effects of HIV and AIDS pandemic on labour productivity
• explain the stages of production.
Lesson Content List

1.0 Explanation of production 17
2.0 Types of production 17
3.0 Relating direct and indirect production to the satisfaction of needs
and wants 18
4.0 Chain of production 19
5.0 Factors of production and their rewards 21
6.0 Ways of using the factors of production sustainably 22
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7.0 Productivity 22
8.0 The contribution of factors of production to productivity 22
9.0 The effects of HIV and AIDS pandemic on labour productivity 22
10.0 Stages of production 23
Summary 25
Glossary 28
1.0 Explanation of Production

Production refers to the creation of goods and services to satisfy human needs and wants. It
also refers to all the activities that bring about goods and services. Production can also be
referred to as the creation of utility or usefulness. This means that the goods and services sat-
isfy our needs and wants because they are useful in our lives. Production takes place when the
inputs are changed into outputs. For example, flour, salt, sugar, yeast are mixed together and
fried in cooking oil to make fat cakes.
There are different businesses that grow crops, manufacture goods, build houses etc. In
addition there are direct services such as the ones provided by teachers, doctors, nurses,
lawyers, police and so on which play an indirect role in production and distribution of
services.
Production includes all the processes by which:

• natural resources are extracted from the land.
• the raw materials are changed into more useful goods.
• finished goods are transferred from where they are made to the final consumer.
For production to be complete, the goods and services produced must reach the final
consumer. For example, the production of chocolate will start somewhere in South Africa,
but will only be complete when the consumers buy the chocolate in the retail outlets such as
Shoprite and Choppies.
2.0 Types of Production

There are two types of production; direct and indirect production. A diagram below shows the
two types of production.
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Figure 1: Types of production
2.1 Direct Production

This is the production or creation of goods for one’s own use. For example an individual who
grows crops for his or her own family only is involved in direct production. Other examples
are when a person builds his own house or makes his own furniture or clothes. Direct
production is a feature of subsistence economy.
2.2 Indirect Production

Indirect production is the production or creation of goods for sale. It occurs when people
concentrate on what they do best and sell their surplus production. This type of production
depends upon trade, as people sell the surplus to earn money and with this money, they can
then buy the other goods or services they want but which they did not produce.
3.0 Relating Direct and Indirect Production to the

Satisfaction of Needs and Wants
Goods and services are made or provided by production. When an individual has a poultry
farm for his own use, he or she is involved in direct production, therefore is satisfying the
need for meat to his or her family. On the other hand, other individuals produce goods for sale
so that they can buy other goods that they do not have, for example, if you grow vegetables
for own consumption, then sell the surplus to earn money, you can use the money to buy
needs and wants you want but did not produce with the money.
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4.0 Chain of Production

Chain of production refers to the different stages through which a product goes before it
reaches the final consumer. These stages of production are linked.
For example, chain of production for the manufacture of canned beef involves the following
processes:
• Rearing of cattle
• Cattle sold to BMC and slaughtered
• Cattle will be skinned
• The carcass being cut up and cooked
• The meat will then be processed into different meats
• Beef will then be canned into the packages
• Beef will then be distributed to the retailers and wholesalers who will then sell to
the consumers.
Another example of chain of production; the manufacture of a car:
• Mining of the iron ore.
• Mixing iron ore with other metals to make steel.
• Manufacture of various car components such as tyres, paint, batteries, seats, belts,
lamps etc.
• Assembling the parts to make a car.
• Final product assembled and taken to the retailers who will then sell to the final
consumer.
5.0 Factors of Production and their Rewards

Producers use resources to make goods and services. These resources are classified into four
main groups called the FACTORS OF PRODUCTION. Production cannot take place without
them. The factors of production are:
(a) Land
Land refers to all the natural resources that are used in production and are provided by
nature. This includes the minerals underground, fish in the water, trees and forests or any
other resource provided by nature. Land includes the earth and anything that grows or lives in
it.
For example, a company manufacturing clothes needs land to build its factory, a fisherman
needs the water from which to catch the fish and a miner needs the minerals which are below
the earth. Land is therefore considered the free gift of nature and is the most important factor
of production. For using the land, the landowners are paid rents as their rewards.
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(b) Labour
Labour refers to human resources, that is, the physical and mental effort by people used in
the production process. Examples of metal labour include teachers, lawyers, etc. Examples
of physical labour include labourers, factory workers and farmers etc. This labour may be
skilled, semi- skilled or unskilled.
• Professionals: these are highly skilled workers who received many years of
training in their profession such as lawyers, engineers, accountants etc.
• Skilled workers: are those who have been formally trained for the jobs that they
do. For example, electricians, teachers, nurses.
• Semi skilled workers: these ones have only received little training for the jobs
that they do such as bookkeepers and cooks.
• Unskilled workers: these ones have not received any formal training for their
jobs. Examples are cleaners, herdboys, and housemaids.
The reward for labour is wages and salaries. We shall learn the difference between wages
and salaries later in Unit 8.
(c) Capital
Capital includes money and all the man made assets used in the production of goods and
services. Money is needed to build or rent the premises, buy the machinery needed, pay the
workers and buying all the raw materials needed for production. Machinery is needed as
without it the work will be slow and therefore production targets will not be met.
Sometimes you have to borrow money if you do not have enough to use as capital. In that
case, you have to pay the money back plus some interest. Interest is the price paid when
borrowing and using money that does not belong to you. The reward for capital is therefore
interest. This is why when you borrow money from the bank or someone; you have to pay
them interest.
(d) Entrepreneurship/Enterprise
For the production process to take place, someone must have the idea and the skill to organise
and control the production process. An entrepreneur is the person who takes the decision to
set up the business. He or she makes the following decisions of the business:
• What to produce, that is, the type of goods and services and their quantities.
• How to produce, that is, the methods of production and how much to produce
• Where to produce, that is, the location of the enterprise.
The decisions above involve risks and require some special skill. The entrepreneur has to pay
rent for the land being used, pay wages and salaries to the workers and pay some interest on
the money borrowed from the bank. If the factors of production are well organised, then the
entrepreneur will make profit, but if not well organised, then he or she will incur losses.
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The production of crops requires land on which the plants will be grown, labour is necessary
for planting and taking care of the crops such as weeding and harvesting. For the work to
be done there has to be some capital to buy all the necessary machinery needed for the
production to take place. Lastly entrepreneurship is also needed to organise the process of
production.
Activity 1
A manufacturer making clothes has a large number of inputs listed below.
Group the inputs under the headings land, labour, capital, and
entrepreneurship.
Cotton, factory building, poultry farm, computer, labourer, designer, cutter,
sewing machines, business owner.
Factors Of Production Inputs

Land
Labour
Capital
Enterpreneurship
I hope you have classified the inputs as follows:
Factors Of Production Inputs

Land Cotton, poultry farm
Labour Labourer, designer, cutter
Capital Computer, factory building
Enterpreneurship Business owner
6.0 Ways of Using The Factors of Production

Sustainably
As I have said earlier, the success of the entrepreneur depends on how they use the factors of
production. It is also important to note that these factors of production can be depleted or
finished. As such, there are ways through which the entrepreneur must ensure each of the
natural resources is used in a sustainable manner. Let us see how.
(a) Natural resources

These factors of production are limited in supply and they should be used in such a way that
they are not depleted and do not harm the environment. The natural resources should be
conserved for future use by the future generation. There must be laws that protect these
natural resources. Water from the factories can be cleaned and re-used for irrigation. Waste
such as plastics and bottles can also be recycled.
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(b) Labour
Employees should be motivated so that they are more productive. They should not be
exploited and where they work should be safe, clean, and hygienic.
(c) Capital
In terms of capital, the businesses must make sure that they buy wisely and look
after what they have bought so as not to waste money.
7.0 Productivity
This measures the output produced by a factor of production although usually it is the
contribution of labour. If labour is being used efficiently, the amount of goods and services
they produce will be high. In this case we say the productivity of labour is high.
Productivity is measured using the formula:
Total productivity = total output/total input
For example, using a robot to spray cars will make fewer mistakes and will be faster than if a
human being is doing it. Also, more cars will be sprayed in a shorter time.
8.0 The Contribution of Factors of Production to

Productivity
Factors of production contribute greatly in improving productivity
• When quality of natural resources is high, the quality of the product will also be
high.
• The demand of the natural resource is related to the demand for a product.
• The availability of the factors of production will affect the production of natural
resources such as the raw materials.
• When the owner of a business has a lot of experience and is skilled at taking
calculated risks then productivity is bound to go up
• When a business has access to all the capital it needs then production will go up
as well as productivity
9.0 The Effects of HIV and AIDS Pandemic on

Labour Productivity
I am sure by now you have heard about Botswana’s statistics on HIV and AIDS. It has one
of the highest statistics of HIV infections in Africa. HIV and AIDS effects on the economy is
very serious as it affects labour productivity in the following ways:
• Workers who are sick miss work, to go to the hospital and this therefore means
that there is no one doing their work and this lowers productivity.
• Workers die and that means the money that was used to train them is wasted and
their dying therefore reduces the number of trained workers which affects
productivity negatively.
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• Workers who are sick tend to be weak and therefore they become slow lowering
productivity.
• Employees could retire or leave work due to ill health and therefore total output
would fall.
• The healthy workers would also not come to work because they would be
attending the funerals of their relatives and colleagues who died from HIV/AIDS
• If workers are healthy and happy with the environment in which they work, they
will work harder and produce more, so productivity will be higher.
10.0 Stages of Production

Production activities involve complex processes that take place at different stages. Do you
know the stages through which the maize flour you use for phaleche goes through? Yes you
are right. The farmer grows the maize which is sold to BAMB and this is bought by Bolux
where it is milled and packaged then is sold to the shops from where you buy it to cook. The
stages are shown in the diagram below. Study the diagram carefully and then read about the
process that take place at each of the stages.
Figure 2: Stages of production
10.1 Primary Production

This is the first stage of production that is concerned with the extraction of raw materials,
which are either below or above the earth’s surface. These raw materials can either be
extracted through mining which provides diamonds, fishing which provides fish, farming
which provides agricultural products, forestry which provides us with furniture and quarrying
which provides gravel that will be used in the construction of buildings and roads. These are
called extractive industries because the raw materials are taken out from nature. The products
of the extractive industries are called primary products and are in a raw or natural form.
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The products obtained at this stage will then have to go to the next stage of production
for processing into goods that are usable. Examples of the areas of primary production in
Botswana include the Ngamiland area where there is much fishing and the Pandamatenga
area where they do a lot of farming.
10.2 Secondary Production

This is the second stage of production. It involves the transformation of raw materials
from the primary stage into finished goods. It consists of manufacturing and construction
industries.
(a) Manufacturing
This is the transformation of raw materials into goods that can be used. For example, making
of trousers, biscuits, bread, cars, television and so on. There are some cases where raw
materials are turned into semi-finished goods in one factory and then they will be sent to
another factory to be finished into usable goods.
Semi-finished goods are the kind of goods that can be sold immediately or used in the
production process of other goods. For example, the sugar produced by Blue Crystal in
Lobatse will be bought by Kgalagadi Breweries to make some soft drinks. In this case then
the sugar is a semi- finished product.
(b) Construction
Construction includes the building of roads, bridges and houses. This process uses the prod-
ucts of primary and manufacturing industries to build a house, bridge or dam. For example,
the builder will use rocks extracted through quarrying, cement and iron rods manufactured
after mining and many other things to build a house.
10.3 Tertiary Production

This is the last stage of production that involves the provision of services. There are two
services involved in this stage of production namely: commercial services and direct
services. Commercial services include services such as warehousing, advertising, banking,
transport, insurance and communication, which you will learn about in the next lesson. These
services help or support trade as they ensure that the goods and services are made available
to the consumers. Direct services on the other hand, are services provided by one person to
another and they include the services of doctors, nurses, lawyers, the police etc. Direct
services facilitate the production process; this means that without direct services production
may be seriously affected. For instance workers who are not well need the services of a
doctor in order to be healthy enough to be productive.
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Activity 2
Name the stage of production each of the following is involved in:

A retailer, a cattle farmer, a soap factory, a teacher, a hunter, a builder
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A retailer..... tertiary
Cattle farmer....primary
A soap factory ....secondary
A teacher.... tertiary
A hunter...primary
A builder.... secondary
Summary
In this lesson, we have learnt that:
• Production satisfies human needs and wants through transformation of raw
materials into finished goods and services.
• The two types of production include; direct and indirect production. Direct
production is the creation of goods and services for own use while indirect
production is the making of goods for sale.
• Chain of production refers to different stages of production a product goes
through before it reaches the final consumer and these stages of production are
linked.
• Before anything can be made, there must be four resources for production to take
place and those are land, labour, capital, and entrepreneurship.
• Land includes all the natural resources needed for production.
• Labour provides all the mental and physical effort needed to produce goods and
services.
• Capital is the money and man-made goods needed for production.
• Entrepreneurship is the risk taking activity by the entrepreneurs who organise all
the factors of production.
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• Each factor of production has its own reward; land earns rent, labour earns wages
and salaries, capital earns interest and entrepreneurship is rewarded with profit.
• There are three stages of production and they are: primary, secondary and tertiary
stage of production. In primary production, raw materials are extracted from the
land while in secondary production, raw materials are turned into semi finished or
finished goods through manufacturing and construction. In tertiary production the
goods are distributed to the final consumers and services are provided.
• HIV and AIDS may affect labour productivity as workers who are sick stay away
from work. Some workers die and money that has been used to train them is
wasted. Employees will retire or leave work due to ill health and the healthy
worker would also not come to work because he or she is attending the funeral of
their relatives who died from HIV/AIDS.
exercise.

1. What is the difference between direct and indirect production?
A. direct production is making goods for one’s consumption while indirect
production is producing goods for sale
B. direct production is making goods directly while indirect production is making
goods indirectly
C. direct production is producing goods for one’s own consumption while indirect
production is producing goods for profit
D. direct production is producing goods by yourself while indirect production is
hiring someone to produce goods for you
2. Which of the following best describes primary production?

A. the changing of raw materials into useable goods
B. the distribution of raw materials to the final consumer
C. the extraction of raw materials or natural resources
D. the provision of direct services
3. Which of the following best describes a chain of production?

A. all the steps involved in the making of the product
B. how the goods and services are made
C. how the workers are lined up to assemble the product
D. how the various raw materials are put together to make a product
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4. What is meant by a factor of production?

A. the factors affecting production
B. the man made resources used in the production of goods and services
C. the natural and man made things that are required to make production possible
D. the raw materials required to make a product
5. Which of the following is involved in primary production?

A. farmer
B. priest
C. retailer
D. teacher
Section B [15 Marks]
1. Identify and explain the stages of production also give examples. [9 marks]
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2. Identify some of the economic activities that take place in an extractive industry.
[6 marks]
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Glossary
Extractive industries: the industries involved with the extraction of natural resources from
below or from top of the earth.
Interest: the amount charged for borrowing money, also reward for capital.
Natural resources: raw materials that occur naturally.
Profit: money that is left over after paying all the expenses.
Rent: payments done for hiring land or buildings.
Utility: the satisfaction derived from goods and services.
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Lesson 3
Commercial Activities
i Introduction
In the previous lesson you learned about production, that is the creation of goods and
services, and the factors from which these goods and services are made. Without these four
factors, production cannot take place. You have also learned about the stages through which
a product passes before becoming the final product. We also learned that HIV/AIDS reduces
productivity.
In this lesson you are now going to learn about the commercial activities, which are the
activities that help in the distribution of the goods produced.
Learning Objectives
• explain commercial activities and how they relate to production
• explain the importance of the different branches of Commerce
• describe trade and aids to trade
• differentiate between home trade and foreign trade.
Lesson Content List

1.0 Commercial activity 29
2.0 Trade and aids to trade 30
3.0 How commercial activities relate to trade 32
4.0 The importance of the different branches of Commerce 32
5.0 The difference between home trade and foreign trade 34
Summary 35
Self-assessment exercise 36
Glossary 37
1.0 Commercial Activity

In the previous lesson, you learned that commerce is the buying and selling of goods and
services. It is made up of all the services that help trade to take place such as advertising,
banking, communication, warehousing, insurance and transport. The importance of
commercial activities is to ensure that production takes place. The raw materials,
semi- finished goods and capital goods are needed for production and the commercial
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activities ensure that all these goods are:

• insured against damage, theft and fire
• kept in the warehouse until needed
• transported and delivered where they are needed
• advertised by the supplier
• financed by a bank or other financial institution.
I have already explained what Commerce is in Lesson 1. It refers to trade and aids to trade
and is concerned with the distribution of goods and services to satisfy the needs and wants of
people. After the goods are made from the factories it is commerce that helps to take them to
the final consumer.
1.1 The Structure of Commerce

Commerce is made up of trade and aids to trade. Trade is made up of home trade and
international/foreign trade. Home trade is made up of wholesale trade and retail trade.
Foreign trade is made up of export trade and import trade.
Aids to trade are the commercial services that facilitate trade which are:
Warehousing, Advertising, Banking, Transport, Insurance and Communication.
In short the services are known as W.A.B.T.I.C.
2.0 Trade and Aids to Trade

The word commerce simply refers to trade and aids to trade. It is concerned with
the distribution of goods and services in order to satisfy human needs and wants.
Commerce helps in the transfer of goods from where they are made to where they
are consumed. It is facilitated by services such as storage, transport, insurance,
banking, advertising and communication. Together, these services are referred
to as aids to trade. The traders who undertake this distribution process and the
businessmen and women that provide the support services have one common
goal – to satisfy human wants. As a reward for their actions they get profit.
2.1 Trade
Trade refers to the buying and selling of goods and services. As you know, a trader buys
goods and services and sells them with the intention of making profit. There are two types of
trade, which are; home trade and foreign trade. Home trade is the buying and selling that
takes place at a local level or within the country and consists of retailers and wholesalers.
Retail trade involves selling goods in small quantities to consumers while wholesale trade
is the selling of goods in large quantities usually to retailers but sometimes also to consumers.
Botswana is also involved in international trade or foreign trade. We import the goods we
do not have or cannot produce cheaply and export to other countries. Foreign trade or
international trade is divided into two and it involves importing and exporting. Impor trade
is the buying of goods from outside the country. Export trade is the selling of goods outside
the country.
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Activity 1
Make a list of some of the goods Botswana imports and exports from other
countries
Imports
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Exports
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I hope your list include the following;
Imports
• Machinery
• Food beverages
• Metal and metal products
• Tobacco
• Vehicles and transport equipment
Exports
• Diamonds
• Beef
• Copper nickel and soda ash
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3.0 How Commercial Activities Relate to Trade

Aids to trade are the services that make trade possible. They include; warehousing,
advertising, banking, transport, communication and insurance. These services are also known
as the commercial activities. Without them trade and production would be impossible.
4.0 The Importance of the Different Branches of

Commerce
Aids to trade are the services that help to make trade possible. These services are also known
as commercial services. They are so important that without them production and trade would
almost be impossible. Commercial services help in the following way:
4.1 Transport
There are modern changes in transport that makes it easier for trade to go beyond the borders
of a country. The various modes of transport include; road, rail, water, and air.
Importance of transport in trade:

• Move the raw materials to the factory for production to take place.
• Move the goods to the final consumer for sale when ready.
• Move workers to and from work.
4.2 Banking
Banking offers several services to individuals and businesses that make trade possible.
Importance of banking in trade:
• Provides finance to set up the factory, buy raw materials and pay the workers or
even when you want to expand your business you borrow money from the bank or
CEDA.
• Provide safekeeping of the producer’s money.
• Money deposited in the bank also earns some interest, which helps the money to
grow or increase.
• Helps businesses and individuals to make and receive payments.
• It offers financial advice on how to invest money wisely.
• Helps trader to get foreign currencies in order to be able to buy from other
countries.
4.3 Insurance
Refers to the protection against a risk that we are not sure will occur, but when it occurs it
causes a financial loss. For example, after buying a car, you never know when it may be
involved in a car accident or may be stolen and you lose all the money you used to buy it. So,
it is best to insure it, as the insurance company will compensate you in case of these losses.
Premium is the amount of money paid to the insurance companies every month by the
insured.
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Importance of insurance in trade:

• It provides business people with the confidence to continue trading because if the
risk they have covered against occurs, they will be compensated.
• Businesses can insure their employees so that if they have accident at the work
place, the insurance company will compensate them so they do not sue the
employer.
4.4 Warehousing
Warehousing refers to the storage of goods. Producers manufacture large quantities of goods
and store them in warehouses so as to have a steady supply of the goods. There are different
types of warehouse but they all serve one purpose of storing the goods.
Importance of warehousing in trade:

• It helps businesses to have a steady supply of goods especially those that are
grown seasonally.
• It helps to keep the prices of the goods stable as goods will be taken out of the
warehouse when needed and prices will not go up or down because of shortages.
• It protects the goods from damage due to bad weather.
• It provides space for goods to be viewed or seen before being bought.
• Warehouses are also located at the ports of entry so as to keep the goods while
still awaiting transport or payment of customs duty.
4.5 Advertising
This refers to the spreading of information about a product or service so as to attract people to
come and buy. It also persuades potential buyers to buy the product.
Importance of advertising in trade:

• It informs the potential buyers about the goods available, their price, benefits, and
quality and where they could be found.
• Persuades people to buy large quantities of the products, which will increase
sales, and profits of the business hence market share.
• Helps to build brand loyalty as customers become loyal to particular brands of
products.
• It announces the new products in the market.
• It educates the customers about the products and their use.
• It also reminds customers that the products are still available in the market and
they should continue buying it. For example, Coca-Cola keeps on advertising
their products though they have been in the market for long.
• Advertising also helps in recruiting workers for businesses; job
vacancies/positions are advertised for potential candidates to apply for.
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4.6 Communication
This refers to the transmission of information from one person to the other. It can be done in
either oral or written form. Communication can be done through media such as telecommuni-
cation or postal services.
Importance of communication in trade:

• It enables the producer to give instructions to his or her workers.
• Helps traders to keep in contact with their customers and suppliers.
• Helps to place orders with suppliers by telephone, fax, or internet.
• Helps the manufacturers to widen their markets by contacting foreign customers
by fax, internet or other means available.
5.0 The Difference Between Home Trade And

Foreign Trade
There are several factors that distinguishes home trade from foreign or international trade.
Home trade is trade that takes place within a country while foreign or international trade is
trade that happens among different countries. As we mentioned above, home trade is
characterised by wholesale trade and retail trade while international trade is characterised by
import trade and export trade.
The table below outlines the differences between the two.
Table 1: The Difference Between Home Trade And Foreign Or International Trade
HOME TRADE FOREIGN /

INTERNATIONAL TRADE
Composition Consists of retail and Consists of import and export trade.

wholesale trade.
Coverage Home trade is the Foreign trade is the buying and

buying and selling of selling of goods and services around
goods and services the world.
within a country.
Communication There is no difficulty in Communication is difficult as

communication as one different languages are used.
common language is
used.
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Currency In home trade, the same Different currencies of different

currency is used in the countries are used. E.g. South Africa
country. E.g. here in uses Rands and cents and UK uses
Botswana we use Pula Pounds and Pence.
and Thebe.
Trade restrictions In home trade, there Imports may be restricted using

are no trade barriers quotas, custom duties etc.
like custom duties and
quotas.
Distance covered by Usually short and not Usually long and expensive.
goods too expensive.
Measurements In home trade, the same Different units of measurements are

units of measures and used. For example in Canada, they
weights are used. use pounds for mass, whereas her in
Botswana we use kilograms.
Summary
In this topic, you have learnt that:
• Without commercial activities, trade would not take place; producers will not be
able to distribute their products to the final consumers.
• Trade and aids to trade are the branches of commerce.
• Trade is divided into home trade and foreign trade. Home trade is the buying and
selling of goods within a country whereas foreign trade involves buying and
selling with other countries.
• Home trade involves retail and wholesale trade whereas foreign trade involves
imports and exports.
• Aids to trade include: warehousing, advertising, banking, transport, insurance and
communication (WABTIC for short).
• Home trade and foreign trade mainly differ in the following aspects;
measurements used, language used, currency, distance travelled by goods, trade
barriers, coverage, and composition.
exercise.
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1. Which of the following is not an aid to trade?

A. Banking
B. Communication
C. Retailing
D. Transport
2. Kitso, a citizen and resident of Botswana sells his products to someone in Malawi.
What type of trade is Kitso involved in?
A. Home trade
B. Foreign trade
C. Retail trade
D. Wholesale trade
3. Which aid to trade will persuade customers to buy the product in large quantities?
A. Advertising
B. Banking
C. Communication
D. Insurance
4. Which of the following best describes retail trade?

A. Delivering the goods to the customers
B. Providing goods on credit
C. Selling goods in large quantities
D. Selling goods in smaller quantities
5. Which of the following is an example of trading?

A. Insurance
B. Processing
C. Warehousing
D. Wholesaling
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Omphile is involved in the production of baskets in Maun in the Ngamiland area. She gets her
raw materials, which are reeds from the river. She sells her baskets in Maun.
(a) What kind of trade is Omphile involved in? Give reasons for your answer. [4 marks]
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(b) List four aids to trade and explain how they can help Omphile. [8 marks]
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(c) Discuss four differences between home and foreign trade. [8 marks]
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Glossary
Compensated: to be given money to make up for the loss incurred.
Media: methods or means that communicate information to the people such as television,
radio, and newspapers.
Market share: the size of the market that the company serves.
Premium: the regular monthly payments paid to an insurance company by the insured.
Warehouse: a place where goods are stored.
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Lesson 4
Channels of Distribution and Specialisation
i Introduction
In the previous lesson you learned about the branches of commerce, which include trade and
aids to trade. I am sure by now you know what trade is. The aids to trade include the com-
mercial services that help in the buying and selling of goods as well as direct services. Without
these commercial services, trade would not take place; producers will not be able to distribute
their products to the final consumers.
In this lesson you will learn about how goods are distributed to their final consumer from the
producers using different channels. You will also learn about the functions of retailers and
wholesalers as well as the characteristic or features of the small and large-scale retailers.
Specialisation and division of labour will also be looked into as well their advantages and dis-
advantages. We shall also relate specialisation to school activities, local community, the nation
and the world.
Learning Objectives
• identify the channels of distribution for various goods
• explain the functions of wholesalers and retailers
• describe characteristics of small and large scale retailers in Botswana
• explain specialisation and division of labour
• state advantages and disadvantages of specialisation and division of labour
• relate specialisation to school activities, local community, the nation and the
world.
Lesson Content List

1.0 Channels of distribution for various goods 39
2.0 Functions of wholesalers and retailers in Botswana 43
3.0 Types of retailers in Botswana 45
4.0 Specialisation and division of labour 49
5.0 Advantages and disadvantages of specialisation and division of labour 50
6.0 Relating specialisation to school activities, local community, the nation,
and the world 51
Summary 51
Glossary 53
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1.0 Channels of Distribution for Various Goods

This refers to the different routes that products take, from the producers/manufacturers until
they reach the final consumers. It includes all the activities that are involved in the movement
of goods and services from where they are produced or made to the final consumer.
The following are parties involved in the channels of distribution;

Manufacturers; these are producers of the goods made from raw materials.
Wholesalers; these are the middlemen in trade who buy the finished goods from the producer
and sell them to the retailers and or consumers.
Retailers; these are middlemen in trade who buy the finished goods from producer or
wholesaler and sell the goods on smaller quantities to the consumer.
Consumer; this is the end user of the product.
Agents; these are the people who sell goods and services on behalf of organisations.
There are several channels of distribution as outlined below.
(a) Channel of Distribution 1
Figure 1: Channel of distribution 1

The above channel of distribution shows that the producer or the manufacturer makes the
good and then sells the good to the wholesaler who then sells to retailer. The retailer will
then sell the product to the final consumer. The wholesaler buys the goods in large quantities
from the producer and then splits up the goods into suitable or small quantities to the retailer.
This process of splitting the goods is called ‘breaking bulk’. The retailer further breaks bulk
for the consumer. The wholesalers who sell mainly to retailers are general wholesalers and
examples include Eureka wholesalers. This is the traditional channel of distribution.
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(b) Channel of Distribution 2
Figure 2: Channel of Distribution 2

The channel of distribution 2 shows that wholesalers buy from the manufacturer and sell
directly to the consumers. For example, wholesalers such as Sefalana and Trade World allow
customers to buy directly from them. Some customers prefer to buy from these wholesalers
as they buy in large quantities. Examples of these consumers include the government, hotels
and families with large households. They buy in large quantities as they also consume a lot
of the goods and services. The wholesalers that sell to consumers are called Cash-and-Carry
wholesalers as they do not sell on credit and they usually do not deliver goods to customers.
(c) Channel of Distribution 3

Some goods require the manufacturer to give advice to the retailer before they sell to the
consumer. Examples of such goods are furniture and car. These kinds of goods are sold
through the specialists’ retailers who can offer the after sales services after the item has been
sold. Some goods are also large and expensive and require little handling so are sold through
a specialist retailer rather than a wholesaler.
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(d) Channel of Distribution 4
This channel of distribution shows that certain goods are sold directly to the consumer. This
is referred to as direct selling. This is a method mainly used to sell fresh produce such as
fruits and vegetables and other perishable products. The channels also include:
Mail order: where producers send catalogues to customers so that they can place orders of
goods that they like.
Direct selling: when producers sell perishable items directly to the consumer.
(e) Channel of Distribution 5

In this channel of distribution the producers hire agents to sell their goods for a commission.
Agents’ deal directly with the consumers and a good example of this channel of distribution is
selling of Tupperware products.
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Activity 1
Match the following terms with their definitions
Term Definition
Consumer Making products available to

where and when people need
them.
Wholesale trade Selling goods in smaller quantities to

customers.
Distribution Individuals or organisations that

make goods and services.
Producers Selling goods in larger quantities

to customers.
Retail trade The end user of the final product.
Term Definition
Consumer End user of the final product.
Wholesale trade Selling goods in larger quantities to

customers
Distribution Making products available to where and

when they are needed.
Producer Individual or organisation that makes

goods and services.
Retail trade Selling goods in smaller quantities to

customers.
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2.0 Functions of Wholesalers and Retailers in

Botswana
Before we go on to discuss the functions of wholesalers and retailers, let us first learn what
they entail and their types.
2.1 Wholesale Trade

Wholesale trade is the selling of goods to another trader in large quantities. Wholesaling has
played and is still playing a major part in the distribution of goods because most of the goods
we use in our daily activities pass through wholesalers before reaching us consumers.
(a) Types of Wholesalers

There are three main types of wholesalers and they include the following:
• Cash-and-carry wholesalers: they sell to traders and the general public in cash
as the name says. They sell to traders in relatively small quantities. They deal
mainly in grocery and household appliances. They do not provide transport or
delivery. Retailers or consumers pay cash for their goods and have to organise
transport to carry their own goods. They also do not offer any credit facilities.
Examples in Botswana include: Trador, Cash Build, Trans Africa and Sefalana.
• General wholesalers: these are the wholesalers who sell a wide range of goods
such as furniture, clothing, groceries and hardware. They are usually very large
and operate on regional or national basis. They often send the salesman around
to obtain orders from the retailers. They have delivery trucks that deliver goods to
their customers. These wholesalers sometimes package goods. Examples of such
wholesalers include Eureka.
• Specialist wholesalers: these are wholesalers, which sell one line of goods. For
example, Builders World specialises in one line of goods, which is building
materials.
(b) Functions of the wholesaler

• Warehousing: they store goods and keep them safe until the retailers need them.
• Risk bearing: by storing the goods in large quantities, they take a lot of risk as
sometimes the goods kept in the warehouse may no longer be wanted by
customers or they go out of fashion. Prices may also fall while there is still a lot
of warehoused stock forcing them to sell their goods at a loss.
• Stabilises prices: wholesalers keep prices steady by holding goods in store to
prevent shortages or excess which can develop in the market. They keep enough
supply of goods in the market so as to be able to cater or meet the demands of the
consumers and avoiding rising prices.
• Provide a wide range of goods: wholesalers order goods from various producers
from all over the world and stock them for consumers thereby providing them
with a wide range of goods.
• Supplies information: wholesalers help to relay or give information about the
product from the producer to the retailer who then passes the information to the
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consumer. For example, the wholesaler may inform producers about the type of
goods that are mostly demanded by consumers.
• Breaking bulk: wholesalers buy the goods in large quantities for the producers
and sell them to the retailer in smaller quantities.
• Prepares goods for sale: wholesalers package, brand, label and bottle the goods
on behalf of producers to make them ready for sale.
• Acts as a financier: wholesalers provide credit to retailers, which give them time
to pay later.
• Provides transport: some wholesalers have their own fleet of trucks that collect
goods from the producers to the wholesaler’s warehouses. Some wholesalers also
deliver the goods for the retailers.
2.2 Retail Trade

This is the selling of goods in small quantities to consumers. The retailers buy goods in bulk
from wholesalers and sell them in smaller quantities to the final consumer. The retailer is the
last link in the chain of the distribution of goods. Examples of retailers are Choppies,
Shoprite, and General Dealers etc.
(a) Functions of the Retailer

• Breaking bulk: the retailer buys goods in bulk from the wholesaler and sells
them in smaller quantities to the consumer.
• Provides a variety of goods: they buy from different wholesalers and provide
consumers with a wide variety of goods to choose from. For example, they may
sell a wide variety of products such as: milk, washing powder, kitchen utensils,
meat, and wines to their customers.
• Give advice to consumers on goods: they advice consumers about the best items
to buy and this help consumers to make wiser choices.
• Provide after sales service: Some retailers like furniture shops usually assemble
items bought from them for their customers and offer repair and maintenance
services.
• Provide feedback: retailers keep the wholesalers and producers informed about
the customer’s reactions on the product so as to cater for changes if necessary.
• Offer credit facilities: some retailers allow their regular customers to buy goods
and pay at a later date. Others sell durable goods on hire purchase. So consumers
can buy goods even when they do not have cash especially expensive goods
such as furniture.
• Provides convenient location: most retail outlets are located nearer to the
consumers so that they just travel short distances if they need anything from
them. They are normally in busy shopping malls and town centres and even in our
neighbourhoods.
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3.0 Types of Retailers in Botswana

There are two types of retailers namely; small scale retailer and large retailers. The distinction
between small and large-scale retailers can be a difficult one to make, but three factors are
usually considered.
• The amount of capital invested. Usually, the bigger the capital investment the
larger the retail shop and vice versa.
• The size of stock held. Small retailers tend to hold a small amount of stock while
large-scale retailers hold more stock.
• The range of services offered to customers. Larger retailers do usually offer
delivery, credit and better customer care than smaller shops.
3.1 Small Scale Retailers

There are many types of small scale retailers with some trading formally while others are
involved in informal trade usually without a license. Small scale retailers can also be divided
into two groups namely, small retailers without premises and small retailers with fixed
premises.
A lot of retailers are involved in selling goods to consumers without fixed shops or premises
to operate from. Examples: the street photographer, street vendors, mobile shops etc. The
main types of small retailer include:
(a) Mobile shops

These retailers use a vehicle, a bicycle or a cart to carry their goods to their customers for
sale. Examples include the ice cream vans and the retailers of fruits and vegetables who use
bakkies. They are able to reach isolated places where there are no shops and their door-to-
door service also targets people who are too busy to go to the shops.
(b) Hawkers
They also sell their goods by moving from one house to another. They sometimes may use
bicycles so as to cover some certain areas. They are required to obtain hawkers licence to sell.
They sell goods such as cosmetics, clothing and jewellery.
(c) Street markets or vendors

These retailers sell their products along the streets or in special places like the bus rank and
malls. Another example is the Sunday flea market, which is held in front of River Walk Mall
in Gaborone or the one at BBS. They sell household appliances, cosmetics, jewellery, cooked
food, fruits or vegetables.
(d) Pedlars or Itinerant traders

They move from door to door carrying a handful of their goods for sale. They are normally
seen around with large boards to which they have stuck the few items such as watches,
earrings, necklaces, lip ice, combs, caps, cigarettes and so on. They like selling at the bus
ranks and taxi stations.
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Advantages of the above-mentioned small-scale retailers are as follows:

• They all give their customers personal attention and may even know them by
their names.
• Their operation costs are low, as they do not have a lot of expenses such as for
rent and advertising.
• They also give credit to their regular customers.
• Few regulations or no regulations required, e.g. hawker’s licence.
• Not much start up and working capital is needed.
Their disadvantages include the following:

• They do not provide a wide variety of goods.
• They are affected by the weather condition such as rain, wind and the sun.
• If the trader falls sick, the business cannot continue and it affects those who
depend on him or her.
• If the good sold does not work properly, they rarely give refund or replace the
goods as they move around a lot
(e) Independent retailers

This kind of business is owned and run by one person who provides all the capital needed to
start the business. These are commonly known as General Dealers in Botswana. They have
fixed premises and incur overhead expenses such as rent, electricity etc.
Advantages of independent retailers are:

• The business requires small amount of capital to set up.
• The owner makes his or her own decisions quickly.
• The owner takes all the profits made by the business.
• The owner gives his or her clients some personal contact.
• The owner can give credit to regular customers, which will increase sales.
• The owner is self-employed and he or she gains a lot of satisfaction and interest
by working for him or herself.
Disadvantages of independent retailer are:
• It is difficult for them to have access to loans as they are small in size and do not
have security.
• They do not sell a wide range of goods.
• The business might close down when the owner dies.
• The owner’s personal assets are at risk as the business has unlimited liability
which means that if the owner borrows money form any institution and fails to
pay back, his or her personal possessions will be repossessed to repay the debt.
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3.2 Large Scale Retailers

These are the retailers that operate on a large scale and they offer a wide range of goods and
services to their customers. Examples of large scale retailers in Botswana are; supermarkets,
hypermarkets, retail co-operative societies, chain stores, department stores and mail order
firms
(a) Supermarkets
A supermarket is a self-service retail outlet, with over 200 square metres of selling space. It
has the following features:
• They sell a wide range of goods such as groceries, meat, vegetables, toiletries,
kitchen utensils and many others.
• They have a minimum of three till points.
• They provide facilities such as trolleys and shopping baskets.
• They sell goods at low prices because they buy from producers directly at low
prices.
• They sell pre-packed and branded goods suitable for self-service.
• They are located in busy malls, which are visited more often by customers.
• They provide long opening hours for the customers.
(b) Hypermarkets
They are vey large retail outlets with over 5000 square meters of selling space. Their features
are as follows:
• They offer self-service.
• They offer a wide range of goods than supermarkets.
• They provide good parking areas for their customers.
• They sell at lower prices because of buying in bulk from producers.
• They provide long opening hours for the customers.
• They provide facilities such as trolleys and baskets.
• They also provide facilities such as restaurants.
• Goods are sold on cash-and-carry basis.
• Normally located in the outskirts of town where land is cheap because of their
large size.
(c) Chain stores or multiple stores

These are the retailers selling one line of goods under a single centralised ownership and
control. They are a group of shops owned by the same company and have branches all over
the country, even in neighbouring countries. There are two types of multiple stores, which
are: variety chain stores and specialist chain stores.
Variety chain stores sell a variety of goods such as Pep stores.
Specialist chain stores sell one line of goods, examples include; Ellerines, Barnets, Bears,
Supreme Furniture, CB stores, Topline
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Features of chain stores or multiple stores:

• They have many branches, which trade under one name.
• Each branch is headed by a branch manager and this manager reports to the
General Manager at the head office.
• The branches are controlled from the head office and this is where all major
decisions are made.
• The head office handles all the buying and distribution of stock to the branches.
• All branches use the same name and all have the same shop colour designs that
are easily recognised by customers.
They sell uniform quality products.
(d) Department stores

They are large retail outlets with different departments under one roof. Each department
specialises in one type of good and they do operate like one single shop. A general manger
controls the whole store. However, a department manager who ensures that his or her own
department does well heads each department.
Features of department stores:
• The store is divided into departments each selling one kind of goods.
• A department manager who reports to the General Manager manages each
department.
• They offer wide range of goods in their different departments such as books, toys,
clothing, electrical appliances and household items.
• They are equipped with carpets, lifts or escalators, which allow customer to do
their shopping comfortably.
• They are located in city centres.
• They provide shopping baskets and trolleys.
(e) Mail order businesses

These types of retailers sell their products through the post office. They are suitable for high
value, lightweight and low volume goods such as watches, jewellery, clothes, bedding and
any other item, which can be sent conveniently through the post office. An example is Home
Choice in South Africa.
Features of a mail order business:
• They use agents, catalogues and advertisements to inform the people about their
products.
• The customers will then place orders by phone, fax or email.
• The goods will then be packaged and sent to customers though the post office.
• The customers will then be notified upon arrival of the goods and will be required
to pay for the goods and take them after payments.
• Sometimes the retailer allows the customer to pay in instalments until he or she
finishes paying for the goods.
The goods can be returned in case the customer is dissatisfied about the goods for
a replacement or refund.
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(f) Retail co-operative societies

These are retail outlets that are formed and run by a group of individuals who want to serve
the community. They are owned and controlled by their members who buy shares or
contributes towards setting up the store. Membership is normally open to anyone willing to
buy shares in the society. Their main objective is to provide goods to the community at
affordable prices and to take part in community projects.
Features of retail co-operative societies:
• Members are owners, the people who have bought shares and they are also the
customers.
• Members are given dividend stamps with every purchase that they make.
They can exchange the dividend stamps for goods later.
• They sell a wide range of goods.
• The stores are run by a committee, which is elected by the members.
• The society offers community services such as scholarships and funeral benefits
to the community.
• They do not only aim to make profit but to also promote welfare of members.
4.0 Specialisation and Division of Labour

In the earliest societies, people had to produce everything they wanted for themselves. They
had to grow their own food, build their own shelters and make their own clothes. As
societies developed, however, so did technology. New technology meant that one person
could produce more than he or she needed. The result was that people had a surplus of the
goods they produced and found they were able to exchange this surplus for the surplus goods
and services produced by other people. People began to concentrate or focus in producing
the goods and services they were best at producing, because they knew they could exchange
them for other goods and services
Specialisation could mean when a person, a firm, a region or a nation uses their resources or
efforts to produce one particular good or service. A specialist is therefore an individual who is
very skilled in doing a particular thing.
The development of specialisation coupled with developments in technology, gave rise to the
growth of firms and the division of labour. Division of labour takes place when the process of
making a product is broken down into different tasks, which are to be performed by different
workers. Each worker will do his or her own task and the final product will be the result of all
the workers. The specialisation of individual employees is known as the division of
labour. For example, in car assembly factory, each person has got his or her own specific
work. One worker will assemble the engine, one will fit the wheels, another installs the
windscreen wiper, another one paints and so on. The final product will be the car and will be
the effort of all the workers.
Specialisation and division of labour do not mean the same thing, but as division of labour
takes place, the workers end up specialising. In other words division of labour leads to
specialisation. This is because when the work is broken down into small units and each
employee carries out his or her part of the work, after some time they acquire skills and
become specialised.
Specialisation can be in various forms such as;
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• Specialisation by individual: when individuals become professionals such as teacher,

nurse, doctors etc
• Specialisation by product: when a company specialises in making a product. For
example, one company can make cars, another make clothes, food shoes etc
• Specialisation by nation: when a country is well known for a particular good or service
for example Botswana specialises in producing diamonds and beef.
• Specialisation by region: when a particular region has one or two goods which are
dominant, for example, Southern Africa region is rich in minerals and therefore
specialises in producing those minerals. The Arab region is well known for its oil
deposits.
5.0 Advantages and Disadvantages of Specialisation

and Division of Labour
The advantages and disadvantages of specialisation and division of labour are similar, so we
will be discussing them below.
5.1 Advantages
• Time is saved, as workers do not have to move from one job to another.
• Workers become more skilled and efficient as they repeat the tasks.
• It does not take so much time to train one person as he or she is trained to perform one
task.
• The number of outputs per person is increased, as the person knows the job vey well.
• It allows workers to concentrate on tasks they are best at doing.
• Machines can be used to make production faster which will reduce the cost per unit of
output.
5.2 Disadvantages
• Doing the same task everyday can be vey boring which may lead to loss of
quality and low productivity.
• Use of machinery may lead to unemployment of workers as machines do the
work better than people.
• It leads to workers having only one skill and this would makes it difficult for
them to find another job when their current employment ends.
• Workers depend on one another such that, if one worker is slow or absent from
work then production will be delayed.
• Specialisation leads to production of standardised or similar products and this
limits the choice for the consumers, as the goods produced may not suit their
tastes.
• Workers only concentrate on their task and this makes them not feel responsible
for the whole product.
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6.0 Relating Specialisation to School Activities,

Local Community, the Nation and the World
If you look around you whether in school or in your community you will notice that
specialisation happens all the time. Below we will take some examples to relate
specialisation to our activities in schools, the community and the world in general.
• At school level: in secondary schools, the school programmes are divided into
departments with teachers teaching only one or two subjects unlike in the primary
school where one teacher teaches most of the subjects.
• Specialisation and school activities; a learner may also specialise in school activities
such as netball, chess, debate, soccer etc. They can also concentrate more on their
subject of choices or the ones they like most.
• Specialisation and the community: some people in the community are nurses while
others are carpenters.
• Specialisation and the nation: Botswana specialises in selling diamond and beef
because it has rich soil where the cattle can breed.
• Specialisation and the world: Germany has well trained labourers and capital goods so
they manufacture cars. Canada has good fertile land where they grow wheat. China has
cheap labour and produces cheap low-grade electronic goods and clothing. South Africa
has good soil for growing grapes and specialises in making wines.
Summary
In this topic, we have learnt that:
• Products pass from the producer to the consumer in different ways and these different
routes through which the product passes is called channels of distribution.
• The channel of distribution depends on the type of product and who their
customers are.
• Retailers sell goods in small quantities to the consumers, in other words they
break the bulk.
• Wholesalers sell goods in large quantities to the consumers and or retailers.
• The three types of wholesaler are: general, cash-and-carry and specialist
wholesalers.
• The two types of retailer are; small and large scale retailers.
• Small-scale retailers include; hawkers, street traders, market stall holders, mobile
shops and independent retailers.
• Large scale retailers include; supermarkets, hypermarkets, chain stores, department
stores, mail order house and co-operative retail societies.
• Specialisation is when a person, a firm, a region or a nation uses their resources to
produce a particular good or service.
• A specialist is an individual who is very skilled in doing one particular thing.
• Division of labour is breaking down the job to be done into several tasks.
exercise.
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Section A: Multiple choice [5 marks]
1. What are the various routes through which products go before reaching the final
consumer?
A. channels of distribution
B. distribution
C. domestic trade
D. trade
2. What is the reason why the manufacturer may sell direct to the retailer?
A. the manufacturer may be prepared to increase the cost of production
B. the manufacturer may want to keep all the profit
C. the product may be a household necessity
D. the product may need after sales service after it has been sold
3. Which of the following is not a function of a wholesaler?

A. buying mass produced goods from the manufacturer
B. keeping prices stable
C. packaging goods
D. producing goods
4. What do the words Cash- and Carry wholesalers mean?

A. buy in bulk
B. buy in cash
C. buy on credit
D. visit their warehouses
5. What is a common name to describe retailers and wholesalers?

A. consumers
B. manufacturers
C. middlemen
D. producers
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1. Classify the following retailers into small and large scale retailers [5 marks]
hawkers, independent retailers, mobile shops, department stores, mail order firms.
..............................................................................................................................
..............................................................................................................................
..............................................................................................................................
..............................................................................................................................
..............................................................................................................................
..............................................................................................................................
2. Explain two ways in which a supermarket differs from a hypermarket. [4 marks]
..............................................................................................................................
..............................................................................................................................
..............................................................................................................................
..............................................................................................................................
..............................................................................................................................
..............................................................................................................................
3. Explain specialisation. [2 marks]
..............................................................................................................................
..............................................................................................................................
..............................................................................................................................
..............................................................................................................................
..............................................................................................................................
..............................................................................................................................
4. State two advantages and two disadvantages of specialisation. [4 marks]
..............................................................................................................................
..............................................................................................................................
..............................................................................................................................
..............................................................................................................................
Glossary
Agent: individuals who sell goods on behalf of other organisations.
Catalogue: a booklet showing goods being sold, their pictures, prices, colours, sizes and
code.
Commission: an amount of money paid to an agent who sells goods on behalf of others.
Direct selling: when goods are promoted and directly sold to the consumers.
Dividend: profits given to shareholders at the end of the specific period.
Hire purchase: hiring an item while paying to have it or acquire it.
Perishable goods: goods that do not take long to go bad, e.g. fruits, vegetables, meat,
cheese etc
Self service: where customers take the goods from the shelves on their own without
the help of shop assistants.
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Answers to Self-assessment Exercises

Section A
1. C
2. A
3. A
4. D
5. B
Section B
1. (a) A service is a non physical or intangible item meaning that it cannot be touched or
seen that is used to satisfy needs and wants.
Examples include:
• Education
• Medical care
• Insurance
• Banking
• Tourism
• Entertainment
• Communication services etc
(b) A need is a good or service that we cannot do without. A need is a must have for human
survival and they are therefore essential or necessary in our lives. Example of needs include;
• Shelter,
• Water
• Food.
• Clothing
(c)
NEEDS WANTS
Needs are few Wants are unlimited
Needs never change Wants are always changing
Needs are easliy satisfied Wants are difficult to satisfy
Needs are needed for human survival Wants just make our lives more
comfortable, we can do without them
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Section A
1. A
2. C
3. A
4. C
5. A
Section B
1. Primary production
This is the first stage of production that is concerned with the extraction of raw materials,
which are either below or above the earth’s surface. These raw materials can either be
extracted through mining, fishing, farming, forestry and quarrying.
Secondary production
This is the second stage of production. It is involved with the transformation of raw materials
into finished goods. It consists of manufacturing and construction industries.
Manufacturing is the transformation of raw materials into the goods that are usable. For
example, making of trousers, biscuits, bread, cars television and so on.
Construction
Construction includes the building of roads, bridges and houses. This process uses the
products of the primary and manufacturing industries to build a house, bridge or dam, for
example, the builder will use rocks extracted through quarrying, cement extracted thorough
mining and many others to build a house.
Tertiary production
This is the last stage of production that involves the provision of services that help in the
distribution of the finished products from where they are made to the final consumer. There
are two services involved in this stage of production namely; commercial services and
direct services. Commercial services include services such as warehousing, advertising,
banking, transport, insurance and communication.
2. Extractive industries
Mining, farming, forestry, quarrying, fishing etc
Section A
1. C
2. B
3. A
4. D
5. D
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Section B
1. (a) Omphile is involved in home trade
(b) Aids to trade and how they help Omphile
Transport will help Omphile in the following manner:
• Move her reeds from the river to where she makes the basket.
• Move her baskets to the final consumer for sale when ready.
• Move her workers to and from work.
Banking will help Omphile in the following manner:

• Provide finance, to pay the workers
• Safe keeping of her money.
• Her money deposited in the bank also earns her some interest.
• Help her to make and receive payments.
• It will offer her financial advice on how to invest her money wisely.
• When she exports her baskets, the bank will convert the money into Pulas for her.
Insurance will help Omphile in the following manner:

• It will provide her with the confidence to continue trading because if the risk such as theft
or fire occurs she will get compensated.
• It also enables her to insure her life and her workers in case they get injured while
working.
Warehousing will help Omphile in the following manner:

• It will help her to have a steady supply of the baskets.
• It helps to keep her prices of the baskets stable as goods will be taken out of the
warehouse when needed and prices will not go up or down because of shortages.
• It protects her baskets from damage due to bad weather.
• Also provide space for baskets to be viewed or seen before being bought.
Advertising will help Omphile in the following manner:

• It informs her potential buyers about the baskets available, their price, benefits,
quality and where they could be found.
• Persuade people to buy large quantities of the baskets, which will increase sales,
and profits of the business hence market share.
• Helps to build a good reputation about her baskets so as customers become loyal
• It announces the new baskets in the market.
• It educates the customers about the baskets and their use.
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• It will also remind customers that the baskets are still available in the market and
should continue buying it.
• Advertising might also help her to recruit basket weavers for her business.
Communication will help Omphile in the following manner:

• It will enable Omphile to give instructions to her workers.
• Help her to keep in contact with her customers.
• Help her customers to place orders of baskets by telephone, fax or Internet.
• Help her to widen her markets of baskets by contacting foreign customers by fax,
Internet or other means available.
• Help to inform the workers about any issues relating to the business.
(c) Difference between home trade and foreign trade
HOME TRADE FOREIGN TRADE/INTERNATIONAL

TRADE
Composition Consists of retail and Consists of import and export trade.
wholesale trade.
Coverage Home trade is the buying Foreign trade is the buying and selling of
and selling of goods and goods and services around the world.
services within a country.
Communication There is no difficulty in Communication is difficult as different

communication as one languages are used.
common language is
used
Currency In home trade, the same Different currencies of different countries
currency is used in the are used. E.g. South
country. E.g. here in Africa uses Rands and cents and UK uses
Botswana we use Pula Pounds and Pence.
and Thebes.
Trade restrictions In home trade, there are Imports may be restricted using quotas,
no trade barriers like custom duties etc.
custom duties and
quotas.
Distance covered Usually short and not Usually long and expensive
by goods too expensive
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Measurements In home trade, the same Different units of measurements are used.
units of measures and For example in the Canada, they use
weights are used pounds for mass, whereas her in Botswana
we use kilograms
Section A
1. A
2. D
3. D
4. C
5. C
Section B
1.
Small scale retailer Large scale retailers
Hawkers Department stores
Mobile shops Mail order firms
Independent retailers
2. Difference between a supermarket and a hypermarket
Supermarket Hypermarket
They occupy a space of 200metres square in They are vey large retail outlets with over
selling space. 5000 square meters of selling space.
They are located in busy malls, which are They are located in the outskirts of town
visited more often by customers. because of their large selling space.
They sell mainly grocery and a limited They sell a wide range of goods.
number of goods.
3. Specialisation is when a person, a firm, a region or a nation uses their resources to

concentrate on the production of one product.
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4. Advantages of specialisation
• Time is saved, as workers do not have to move from one job to another.
• Workers become more skilled and efficient as they repeat the tasks.
• It does not take so much time to train one person as he or she is trained to perform
one task.
• The number of outputs per person is increased, as the person knows the job vey
well.
• It allows workers to concentrate on tasks they are best at doing.
• Machines can be used to make production faster which will reduce the cost per
unit of output.
Disadvantages of specialisation
• Doing the same task everyday can be vey boring which may lead to loss of
quality and low productivity.
• Use of machinery may lead to unemployment of workers as machines do the
work better than people.
• It leads to workers having only one skill and this makes it difficult for them to
find another job when their current employment ends.
• Workers depend on one another such that, if one worker is slow or absent from
work then production will be delayed.
• Specialisation leads to production of standardised or similar products and this
limits the choice for the consumers, as the goods produced may not suit their
tastes.
• Workers only concentrate on their task and this makes them not feel responsible
for the whole product.
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References
Kgosiemang, T. et al (2009): Business Studies in Action- Commerce and Office Procedures,
Longman Botswana, Gaborone
Matindike, G. (1996): Focus on Commerce, College Press
Wokorach, J.B. (1999): Commerce: A Complete Course, 4th edition, Salama Publishers,
Mochudi
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JC:

Commerce and Accounting Unit 1

Botswana Open University

Junior Certificate Programme

Commerce and Accounting

Unit 1: Introduction to Commerce

Learning Objectives References

Activity Unit Aims

Self-assessment Exercise Further Reading

Lesson 2: The Nature of Prtoduction 16

Lesson 3: Commercial Activities 29

Lesson 4: Channels of Distribution and Specialisation 38

Answers to Self-assessment Exercises 54

Introduction to the Course

The JC Business Studies course is divided into two components or streams:

Assessment and Feedback

Paper 4 (Alternative to Coursework)

Where to Get Help

Lesson Content List

8.0 The importance of producers in satisfying needs and wants 11

1.0 Explanation of Commerce

2.0 Scope of Commerce

3.0 The Importance of Commerce

4.0 Job Opportunities Available From Studying

5.0 The Difference Between Needs and Wants

Thinking about your wants

Classify the following into needs and wants.

Table 1: Differences between needs and wants

Needs are few Wants are unlimited

Needs never change Wants are always changing

Needs are easily satisfied Wants are difficult to satisfy

Characteristics of needs and wants

6.0 Goods And Services

Figure 1: Classification of goods and services

7.0 The Difference Between Consumers and

8.0 The Importance of Producers in Satisfying

9.0 The Effects of Production on the Environment

9.1 Positive effects

9.2 Negative effects

Job opportunities available from studying commerce include;

1. Which of the following is a human want?

2. What are goods used by the final consumer called?

3. Which of the following is a tangible item?

4. Which of the following is a need?

Section B [15 marks]

Lesson Content List

1.0 Explanation of Production

Production includes all the processes by which:

2.0 Types of Production

Figure 1: Types of production

2.1 Direct Production

2.2 Indirect Production

3.0 Relating Direct and Indirect Production to the

4.0 Chain of Production

5.0 Factors of Production and their Rewards

Factors Of Production Inputs

Factors Of Production Inputs

6.0 Ways of Using The Factors of Production

(a) Natural resources

8.0 The Contribution of Factors of Production to

9.0 The Effects of HIV and AIDS Pandemic on

10.0 Stages of Production

Figure 2: Stages of production

10.1 Primary Production