Internal Trade – Class 11 Business Studies Chapter 10 Notes & NCERT PDF

Introduction

How do products from different manufacturers reach us? The chapter begins with our neighbourhood provision store, specialised shops, street sellers in rural areas and branded outlets in cities — and asks how middlemen help goods travel from factories to consumers.

Trade refers to buying and selling of goods and services with the objective of earning profit.

On the basis of the location of buyers and sellers, trade is internal trade (within a country) or external trade (between countries).

Key Concepts

10.2 Internal Trade

10.3 Wholesale Trade

Wholesalers sell to retailers, merchants and industrial/institutional users — not significantly to ultimate consumers. They take title of goods, bear risk, buy in bulk and sell in small lots, grade, pack, store, transport, promote and extend credit. They create time and place utility.

10.3.1 Services to manufacturers

10.3.2 Services to retailers

10.4 Retail Trade

A retailer sells goods and services directly to ultimate consumers; retailing is the final stage of distribution. However or wherever the sale is made, if it is to the consumer, it is retailing.

10.4.1 Services to manufacturers and wholesalers: help in distribution (place utility), personal selling, enabling large-scale operations, collecting market information, help in promotion.

10.4.2 Services to consumers: regular availability, new product information, convenience in buying, wide selection, after-sales services, credit facilities.

Terms of Trade (box): Cash on Delivery (COD); Free on Board / Free on Rail (FoB/FOR — seller bears expenses up to delivery to the carrier); Cost, Insurance and Freight (price includes insurance and freight up to destination port); Errors and Omissions Excepted (E&OE).

10.5 Types of Retail Trade

Bases: size, ownership, merchandise handled, and fixed place of business.

10.5.1 Itinerant retailers (no fixed place; small resources; daily-use goods; doorstep service):

10.5.2 Fixed shop retailers (greater resources, credibility and services):

- Departmental stores — "a pin to an elephant" under one roof; central location; joint stock company; combine retailing with warehousing; centralised purchasing, decentralised sales. Indian examples: Akberally (Mumbai), Spencers (Chennai).

- Advantages: attract large number of customers, convenience, attractive services, economy of large-scale operations, promotion of sales.

- Limitations: lack of personal attention, high operating cost, high possibility of loss, inconvenient location.

- Chain stores / multiple shops — similar-looking shops in many localities; standardised branded goods; central procurement; branch managers; fixed prices, cash sales; examples: Bata, DCM, Nirula's, Raymonds.

- Advantages: economies of scale, elimination of middlemen, no bad debts, transfer of goods, diffusion of risk, low cost, flexibility.

- Limitations: limited selection, lack of initiative, lack of personal touch, difficult to change demand.

- Departmental store vs multiple shops — location, range of products, services offered, pricing, class of customers, credit facilities, flexibility.

- Mail order houses — sell through mail; payment in advance, by VPP (Value Payable Post) or through a bank; suitable only for goods that can be graded, cheaply transported, described through pictures, etc.

- Advantages: limited capital, elimination of middlemen, no bad debts, wide reach, convenience.

- Limitations: no personal contact, high promotion cost, no after-sales service, no credit, delayed delivery, possibility of abuse, dependence on postal services.

- Consumer cooperative store — owned, managed and controlled by consumers; at least 10 people register under the Cooperative Societies Act; one man one vote; limited liability; accounts audited by the Registrar.

- Advantages: ease in formation, limited liability, democratic management, lower prices, cash sales, convenient location.

- Limitations: lack of initiative, shortage of funds, lack of patronage, lack of business training.

- Super markets — self-service, low price, wide variety, cash only, central location.

- Advantages: one roof low cost, central location, wide selection, no bad debts, large-scale benefits.

- Limitations: no credit, no personal attention, mishandling of goods, high overheads, huge capital requirement.

- Vending machines — coin-operated sale of beverages, tickets, milk, chocolates, newspapers; ATMs are an example in banking. Useful for pre-packed, low-priced, high-turnover goods of uniform size; high installation and maintenance cost.

Goods and Services Tax (GST)

10.6 Role of Commerce and Industry Associations

Examples: ASSOCHAM, CII, FICCI. They interact with government on:

Key-Facts Sheet

Exam Focus

Key Terms

Common Mistakes