November 01, 2021
INTRODUCTION TO COMMERCE
Meaning of Commerce:
Commerce is the study of production, distribution and exchange of goods and services aimed at satisfying human wants and in order to earn a living. These production, distribution and exchange of goods and services are aided by such commercial activities like trade, transport, insurance, warehousing, advertising and banking and finance.
IMPORTANCE AND FUNCTIONS OF COMMERCE
(1) Commerce is the life blood of a nation.
(2) It helps to improve the standard of living of people.
(3) It makes exchange of goods and services possible.
(4) It aids movement of goods and services.
(5) It encourages inter-dependence among nations since no nation is self- sufficient.
(6) Provides employment opportunities.
(7) It makes storage of goods possible.
(8) It encourages specialisation.
(9) It makes people of a country to enjoy goods not produced in the country.
(10) It provides fund for business activities.
FACTORS THAT DELAYED THE DEVELOPMENT OF COMMERCE IN WEST AFRICA
The development of commercial activities was delayed in West Africa till twentieth century when compared with, commercial activities that were going on in Europe even before the nineteenth century. Even till today, commercial activities in West Africa seem to be at the incipient stage as a result of the following factors;
[1) Lack of enough capital
(2) Political instability
(3) Low national income
(4) Low savings.
(5) Lack of true entrepreneurship
(6) Absence of developed markets.
(7) Inadequate and inefficient means of transport and communication.
(8) Inadequate infrastructural facilities.
FACTORS THAT CONTRIBUTE TO THE GROWTH OF COMMERCE
(1) Warehousing
(2) Development of modem techniques of production.
(3) Development of efficient means of transport and communication.
(4) Insurance
(5) Development of financial institutions
(6) Advertising
(7) Political stability.
CHAPTER 2
DMSIONS OF COMMERCE
Commerce is divided into six main divisions known as commercial occupations engaged mainly in the movement of goods. These six divisions or branches are: Trade, Transport and Commurications, Banking, Insurance, Advertising and Warehousing.
Trade: It is the exchange, buying and selling of goods and services. Trade is divided into Home Trade and Foreign Trade. Home Trade (also known as domestic or internal trade) is the exchange, buying and selling of goods and services within a country. Foreign Trade (also called international or external trade) is the exchange, buying and selling of goods and services between two or more countries. While Home Trade is divided into wholesale and retail trade, Foreign Trade is divided into Import and Export.
Transport and Communication: They involve movement of goods and services and sending of messages from one place to another. Major means of transport and communication are land, water and air transport; and oral, non-verbal and written communication.
Banking: A bank is an institution set up purposely for safe keeping of money, valuable goods and documents like wills and others. The existence of banks had been a big boost to business activities the world over.
Insurance: It is a provision made for the protection of persons or objects against risks. It includes motor vehicle, fire, accident, burglary, etc.
Advertising: It is a means of bringing the existence or production of new goods and services to the knowledge of members of the public and to persuade them to buy and use the goods and services. The media of advertising include: Radio, Television, Newspapers, Magazines, etc.
Warehousing: This is the act of storing goods produced ahead of demand until the time they will be needed. Warehouses are divided into: Ordinary, Bonded and State.
CHAPTER 3
OCCUPATIONS
Occupations refer to activities which people engage themselves in order to earn a living.
CLASSIFICATION OF OCCUPATIONS OR CLASSES OF PRODUCTIVE OCCUPATIONS
Occupations are divided into the following groups:
1. Extractive Occupation: This occupation involves people whose activities are directed at bringing out natural resources from the soil and sea. Things extracted by people in this occupation are known as raw materials E.g. farming, fishing, mining, hunting, etc.
2. Manufacturing Occupation: Workers involved in this occupation engage in changing the form of the raw materials extracted from soil or sea by the extractive industry workers.
3. Constructive Occupation: Workers involved in this occupation engage in assembling different components extracted and manufactured by both the extractive and manufacturing industrial workers to construct them into organized whole.
4. Commercial Occupation: This involves the activities of those who work in different groups as a team in order to make production of goods and services possible and available to who needs them. Examples are insurance, transport, advertising, etc.
5. Direct Services: These include those whose economic activities involve giving satisfaction, amusement, enjoyment and rendering personal services to others. They include actors, singers, dancers, cooks, drivers, barbers etc.
6. Indirect Services: These involve those who earn their living by rendering one type of service or another to members of the public. They include: Police, Armed Forces, Teachers, CMI Servants, etc.
FACTORS THAT INFLUENCE OCCUPATIONS
(1)Level of education
(2) Level of training
(3) Remuneration
(4)S3x
(5) Life ambition
(6) Talent
(7) One’s interest.
(8) Family background
(9) Government policy
(10) Country’s level of development
(11) Environmental factor
(12) Peer group.
CHAPTER 4
PRODUCTION, SPECIALISA11ON AND EXCHANGE
Production is the transformation of raw materials into finished goods and the distribution and provision of goods and services in order to satisfy human wants. Production also refers to the creation of utility, while utility is the ability of any commodity or service to satisfy human wants.
TWO MAIN TYPES OF GOODS
1. Consumer Goods: These are goods and services that can satisfy the consumer’s immediate wants. Examples are beer, milk, bread, the services of a teacher lawyer, barber etc
2. Capital Goods: These are goods and services meant for the production of further goods and services. They are for instance machines cars, lorries, raw materials, etc.
TWO MAIN TYPES OF HUMAN WANTS
(a) Material Wants: These are wants that may be satisfied with the use of the gift of nature.
(b) Immaterial Wants: These are wants not meant to increase our material wealth but to make our lives worth living and are satisfied with personal service. These wants may include education protection health, amusement, etc.
TYPES OF PRODUCTION
1. Primary Production: This involves the extraction of raw materials from the soil or sea e.g. mining, farming, fishing etc.
2. Secondary Production: This is a stage where raw materials are processed and transformed into finished goods
i.e. utility is added to the raw materials of the primary production
3. Tertiary Production: This is the stage where the goods and services made available at the two stages are taken to those who are in need of them.
FACTORS OR AGENTS OF PRODUCTION
There are four main factors of production and they are:
1. Land: Land as a factor of production is a free gift of nature and is fixed, e.g. water, forest, minerals, etc.
2. Capital: It is wealth reserved or set aside for the production of more wealth.
TYPES OF CAPITAL
1. Fixed Capital Refers to durable assets of a business such as building, machinery furniture, etc.
2. Circulating Capital: This refers to those materials that change their form in the process of production into finished products e.g. raw materials.
3. Current Capital: Refers to those things needed for day to day running of the business, e.g. money, and is also known as liquid capital.
4. Social Capital: They refer to infrastructural facilities provided by government that aid e.g. roads, electricity, railways, sea and airports etc.
5. Labour: Refers to both physical and mental efforts of man directed at production. Labour is divided into unskilled, semi-skilled and skilled.
6. Entrepreneur: Refers to the factor of production that co-ordinates other factors of production for more productive purposes.
FUNCTIONS OF THE ENTREPRENEUR
1. Risk bearing.
2. He takes decisions.
3. Co-ordination of other factors of production.
4. Efficient management
5. Organisation of research.
6. Provision of capital.
7. He maintains good communication
Division of Labour: It is a system of breaking down production processes into different stages so that each stage is undertaken or handled by an individual.
Specialisation: Refers to the act of an individual or a firm or a country concentrating its resources and efforts in the production of relatively few commodities.
ADVANTAGES OF DIVISION OF LABOUR AND SPECIALISATION
(1) Time saving
(2) Increase in production
(3) They are less fatiguing
(4) Increase in leisure
(5) They economise tools
(6) Improvement in the quality of goods
(7) Division of Labour loads to specialisation
(8) They increase the skill of workers
(9) Creation of employment opportunities.
(10) They lead to Innovation and invention.
(11) They make the use of machine in production possible.
DISADVANTAGES OF DIVISION OF LABOUR AND SPECIALISATION
(1) They make work monotonous
(2) They cannot work in agricultural economy
(3) The use of machines reduces employment opportunities.
(4) They bring about decline of craftsmanship.
(5) They bring about immobility of labour
(6) Increase in interdependence among individuals and industries.
LIMITATIONS OR FACTORS THAT ENCOURAGE OR DISCOURAGE DIVISION OF LABOUR
(1) The size of the market.
(2) The availability of Iabour
(3) Availability of capitaI.
(4) Nature of the product produced.
(5) Technical difficulties.
(6) Technological development.
CHAPTER 5
HOME TRADE - THE RETAIL TRADE
Who Is A Retailer? A retailer is that trader who buys goods in small quantity from the wholesaler or directly from the manufacturer and sells in units to the public or final consumers.
CHARACTERISTICS OF RETAIL TRADE
(1) The retailer sells in units.
(2) The retailer stocks a wide variety of goods.
(3) It involves selling directly to the consumers.
(4) It involves buying in small quantity.
(5) Consumer goods are mainly involved.
(6) A large number of small shops are involved.
(7) Majority of the goods come mainly from wholesalers.
(8) It involves bringing the goods nearer the consumers.
FUNCTIONS OF THE RETAILER
1. He stocks variety of goods.
2. He sells in units.
3. Brings the goods nearer the consumers.
4. He gives credit facilities to consumers.
5. The retailer advises the consumers.
6. He advises both the manufacturer and the wholesaler.
7. He completes the process of production.
8. The retailer advertises the goods.
9. He performs the function o weighing, measuring an packaging.
10. He opens at convenient hours.
11. He renders after - sales services.
FACTORS THAT SHOULD BE CONSIDERED WHEN STARTING A RETAIL BUSINESS
(1) Capital
(2) Experience
(3) Hours of business
(4) Source of supply
(5) Methods of advertising.
(6) Means of transport
(7) Terms of trade
(8) How to please customers.
(9) The site of the business.
FACTORS THAT LEAD TO FAILURE OF MANY RETAIL SHOPS
(1) Wrong purchases
(2) Over-spending
(3) Lack of experience
(4) Avoidin3nsurance
(5) Lack o advertisement
(6) Lack of fore-sight.
(7) Credit facilities offered
(8) Lack of book of account.
FACTORS A RETAILER SHOULD TAKE INTO CONSIDERATION WHEN MAKING HIS PURCHASES
(1) Quality
(2 Quantity
(3) Terms of payment
(4) Packing of goods
(5) Methods of delivery
(6) Terms of trade
(7) The extent o credit facilities offered.
CHAPTER 6
HOME TRADE - SMALL- SCALE RETAIL TRADE, HAWKING
Hawking involves carrying of goods from one place to another, either on the head, by carts or by canoes.
ATTRIBUTES OF HAWKING
1. Hawking is a form of small scale retail trade.
2. It involves movement of goods from one place to another.
3. Goods are carried and displayed either on the head, by carts or by canoes
4. Popular consumer goods like food items are involved.
5. Hawking requires small capital outlay.
6. It involves advertising with the use of horn, bell, trumpet, shouting, etc.
ADVANTAGES OF HAWKING
1. Hawking is carried out with small amount of capital.
2. It provides door to door services to consumers.
3. Hawking serves as a medium of advertising.
4. Hawkers help to complete production of goods.
5. Running expenses like rents and wages don t exist.
6. Goods sold by hawkers are relatively cheap.
7. It provides employment opportunities.
8. Hawking serves as a stepping stone to bigger business.
9. Hawking business is easy to start.
DISADVANTAGES OF HAWKING
1. Hawking goods along major road is very risky.
2. It causes traffic hold-up in big cities like Lagos.
3. Young girls who hawk fall easy prey to sex maniacs.
4. Hawking constitutes environmental nuisance.
5. Food items are exposed to health hazards by hawkers.
6. In hawking by canoe, death may result if the canoe capsizes.
7. Hawking deprives some children their education.
8. Hawkers expose themselves to bad weather conditions.
STREET RETAILING: These are retail traders who display their rods alonq.mor streets in urban areas.
MARKETPLACE RETAILING: This is a method whereby retail traders agglomerate in a common meeting place - local market to buy and sell goods.
SMALL STORES: These are small stores where goods are retailed in front of residential houses of the retailers or in buildings rented purposely for that type of business.
MOBILE SHOPS: These are small retail shops that are moved from one place to another in motor vans or lorries.
TIED SHOPS: These are shops that confine whatever they sell in single commodity which their producers supply directly to them.
VENDING MACHINES: These are forms of small scale retail trade in which customers obtain self- service from automatic vending machines that sell goods like tea, hot and cold soft drinks, coffee, cigarettes, sweets, etc.
WHY THERE ARE MANY SMALL SCALE RETAIL TRADE IN WEST AFRICA
1. Lack of sufficient capital used in establishing large business.
2. Low savings as a result of low per capita income.
3. Majority of people of West Africa fall into the low income group who can only afford to buy goods in units.
4. Unemployment forces many to buy goods in units.
5. Lack of true entrepreneurship.
6. Absence of developed markets in West Africa.
7. Inadequate and inefficient means of transport and communication.
8. Low production of goods.
9. Running expenses is lower in small business than large ones.
10. Small scale retail trade requires small capital.
11. It is more flexible than large one.
WHY SMALL SCALE RETAIL TRADE CONTINUES TO EXIST DESPITE STIFF COMPETITION FROM LARGONES
1. Because it requires small capital.
2. It provides door-To-door services.
3. Their owners show more personal interest and attention to the business.
4. Customers are highly respected.
5. It is carried out with flexible policies, rules and regulations.
6. It opens early in the morning till late in the night, on Saturdays, Sundays, and even on public holidays.
7. Prices of goods sold in small scale retail trade are low
8. Customers obtain more credit facilities in small scale retail trade than in large ones.
9. Owners are &ways willing to replace defective products.
10. Popular goods like food items are sold in them.
ADVANTAGES OF SMALL SCALE RETAIL TRADE
1. Small scale retail trade requires small capital.
2. It is located near customers’ residential houses:
3. Customers are highly recognized and respected.
4, It opens for longer hours.
5. It provides employment to those who could not secure white collar jobs.
6. It does not require high running expenses.
7. It can be combined with other forms of businesses.
8. It is a popular field for new enterprises.
9. It serves as a good medium for advertising goods.
10. It serves as a stepping stone to bigger business.
11. It is closely supervised and it renders efficient service.
DISADVANTAGES OF SMALL SCALE RETAIL TRADE
1. This type of trade faces the problem of inadequate capital
2. Limit expansion as a result of lack of sufficient capital.
3. It does not enjoy economies of scale.
4. It makes low profit compared with large ones.
5. It cannot compete favourably with large ones.
6. It is denied both trade and cash discount.
CHAPTER 7
HOME TRADE - LARGE - SCALE RETAIL TRADE DEPARTMENT STORES
Department stores are large - scale retail units in which different stores are housed in a large building under the same roof. Examples are A.G Leventis, Kingsway Stores, S.C.O.A., UT. C., Chellarams, etc.
FEATURES OF DEPARTMENT STORES
1. They are housed in large buildings.
2. They are divided into different departments or stores.
3. Each department specialises in the sale of a particular type of product.
4. Every department has and is under the control of a departmental manager.
5. Each department is independently run and is self-accounting strategic business centres.
6. Each department has floor supervisor, cashiers and sales attendants under the departmental manager.
7. Every department store has a General Manager who co-ordinates the activities of all sectional managers.
8. Department stores deal in wide range of goods.
9. Goods sold in department stores carry fixed price tags thereby making it impossible for bargaining by the customers.
ADVANTAGES OF DEPARTMENT STORES
1. Department stores have high and rapid rate of turnover.
2. They reap the benefit of large - scale buying.
3. Their prices are low because they buy directly from manufacturers.
4. They provide more employment opportunities.
5. Customers do their shopping under one roof.
6. They are located at strategic business centres.
7. Goods in one section help to advertise goods in other sections.
8. Profits of one department help to cover the losses of others.
9. Customers enjoy other services like restaurant, toilet etc.
10. They economise the use of land.
DISADVANTAGES AND CRITICISMS OF DEPARTMENT STORES
1. Department stores require huge amount of capital.
2. They give little or no credit to customers,
3. Their prices are high as a result of their expensive overhead cost like high rents.
4. Floor attendants do not recognise and show courtesy to their customers.
5. They do not open for business on Saturdays, Sundays and public holidays.
6. Their self-service system denies many people employment opportunities.
7. They are not easily accessible to customers.
8. Department stores are elitist in nature.
9. Their fixed price tags are not in line with our bargaining instinct.
10. They do not allow customers to return goods.
SUPERMARKETS
These are large scale retail business units that deal mainly in household goods like fruits, fish, butter, bread, etc.
FEATURES OF SUPERMARKETS
1. They sell wide range of goods including food items.
2. They operate in spacious stores.
3. They are found mainly in urban areas.
4. Supermarkets involve in bulk purchases and sell in units.
5. Goods sold in supermarkets carry fixed price tags.
6. They operate the system of self - servicing.
7. Supermarkets require and use few sales attendants.
8. Their self - service system breed high cases of pilfering.
9. The goods sold in them are pre - packed.
10. Facilities that facilitate shopping are made available.
Supermarkets have close resemblance with department stores and therefore, have similar advantages and disadvantages.
MULTIPLE SHOPS
Multiple shops are also known as chain stores and they are large - scale business units with similar stores scattered all over a country.
FEATURES OF MULTIPLE SHOPS
1. They have similar stores scattered all over a country.
2. Multiple shops deal in one type of product in all their branches.
3. They have centralised administration.
4. The head office manufactures and purchases all goods.
5. The price of goods is predetermined by the head office.
They operate on the basis of cash and carry.
. Goods are displayed in open counter with fixed prices.
They are found mainly in urban and sub-urban areas.
9 When they do not manufacture the goods, they involve in bulk purchasing.
10 Multiple shops require large capital.
11 They embark upon nation-wide advertising.
12. A branch that suffers from shortages of stock can collect goods from a nearby branch for sale.
ADVANTAGES OF MULTIPLE SHOPS
1. They are easy to identify.
2. They are specialists in the sale of one type of product.
3. Their cash and carry system reduces the incidence of bad debts.
4. Losses in one branch can be absorbed by other branches.
5. Small profits made by different branches lead to large overall profits.
6. They save a lot of costs in advertising.
7. They manufacture their products at large - scale.
8. When they involve in purchases, they buy directly from manufacturers in bulk at reduced rates.
9. Staff and stock can easily be transferred from one branch to another.
10. They employ experts for administration, purchases, accounting, advertising, etc.
DISADVANTAGES OF MULTIPLE SHOPS
1. Branch managers are denied personal initiatives.
2. They do not take into accounts the prevailing local conditions.
3. Customers are denied opportunities of doing their shopping under one roof.
4. They require huge capital to establish and run.
5. Their cash and carry system denies customers credit purchases.
6. Their purchases and fixing of prices may not be aware of local needs and the prevailing prices.
7. They incur increases in transport costs.
8. Impersonal relationship exists between customers and sales attendants.
MAIL ORDER BUSINESS
This is a form of retail business conducted through the post office and it serves as the best example of the elimination of small - scale retailer by the wholesaler.
FEATURES OF MAIL ORDER BUSINESS
1. The business is conducted through the post office.
2. Its existence is made through intensive advertising.
3. C.W.O. and COD. are the main methods of payment.
4. It requires large warehouses.
5. It may also be conducted through agents.
6. Mail - order business requires few workers for its operation.
TYPES OF MAIL ORDER BUSINESS
1. Manufacturers Mail Order Business: In this type, manufacturers by-pass middlemen and sell directly to members of the public.
2. Department Stores Mail Order Business: Department stores involve in mail order business mainly to supplement.
3. Specialist Mail Order Business: This is when retail groups involve in mail order business.
ADVANTAGES OF MAIL ORDER BUSINESS
1. Goods are sold directly to consumers.
2. The business can operate from a warehouse.
3. It does not require expensive fittings and other costly equipment.
4. The business buys directly from manufacturers in bulk at reduced rates.
5. It does not require sales assistant.
6. Customers can be reached wherever the
7. The risk of bad debt is reduced through C.O.D. and C.W.O. The business guarantees quality through C.O.D.
DISADVANTAGES OF MAIL ORDER BUSINESS
1. It is very expensive to advertise mail order business.
2. It cannot function very well where postal services are inefficient like in West Africa.
3. The business is very expensive.
4. It attracts low patronage.
5. Mail order business is elitist in nature.
6. It breeds high cases of missing goods.
RETAIL CO-OPERATIVE SOCIETY
This is also known as consumers co-operative society, and as the name indicates, is an association of consumers who pool their resources together in order to buy goods in bulk from manufacturers.
VARIETY CHAIN STORES
These are stores that combine the features of both multiple shops and department stores and can easily be baptized multiple department stores.
HYPERMARKETS
These are gigantic supermarkets that sell different kinds of goods at competitive prices.
DIFFERENCES BETWEEN SUPERMARKETS AND HYPERMARKETS
|
|
SUPERMARKETS |
HYPERMARKETS |
|
1 |
Occupy small space |
Occupy large space |
|
2 |
Located in strategic centres. |
Located at the periphery in a town |
|
3 |
May operate without parking spaces |
Provide parking spaces |
|
4 |
Deal mainly in consumer goods |
Deal in both consumer and durable goods |
|
5 |
Prices of goods are low |
Prices of goods are lower |
|
6 |
Provide luxurious shopping facilities |
Do not have luxurious shopping facilities |
|
7 |
Can operate in a single floor of a building. |
Operate in complex building. |
These comparisons between supermarkets and hypermarkets can equally apply to hypermarkets and department stores since department stores have close resemblance with supermarkets.
WHY RETAIL TRADE INCLUDES LARGE AND SMALL ORGANISATIONS
1. They want to stock variety of goods.
2. It requires relatively small capital.
3. They can afford the space to display variety of goods.
4. It gives room for faster and greater sales.
5. Selling variety of goods leads to high profits.
6. Retail business provides employment opportunities.
7. Our people cannot afford to buy goods in bulk but in units
8. It can be carried under one man management.
