1st PUC Business Studies Question Bank Chapter 10 Internal Trade

Karnataka 1st PUC Business Studies Question Bank Chapter 10 Internal Trade

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1st PUC Business Studies Internal Trade Textual Questions and Answers

1st PUC Business Studies Internal Trade Short Answer Questions

Question 1.
What is meant by internal trade?
Answer:
Buying and selling of goods and services within the boundaries of a nation are referred to as internal trade. No custom duty or import duty is levied on such trade as goods are the part of domestic production and consumption.

Internal trade can be classified into two broad categories:

  1. Wholesale trade
  2. Retail trade

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Question 2.
Specify the characteristics of fixed shop retailers.
Answer:
Fixed shop retailers are retail shops who maintain permanent establishment to sell their merchandise. They, therefore, do not move from one place to other to serve their customers: Other characteristics of fixed shop retailers are:

  1. They have greater resources and operate at a relatively large scale as compared with the itinerant traders.
  2. These retailers deal in different products, including consumer durables as well as non-durables.
  3. They have greater credibility in the minds of customers.
  4. They are in a position to provide greater services to the customers such as home delivery, repairs, credit facilities, etc.

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Question 3.
What purpose is served by wholesalers providing warehousing Facilities?
Answer:
Two way purposes is served by wholesalers providing warehousing facilities in the following manner:

(i) Wholesalers take delivery of goods when goods are manufactured in factory and keep them in their godowns/warehouses which reduce the burden of manufacturers of providing for storage facilities for the finished products.

(ii) Warehousing by wholesalers relieves the retailers of the work of collecting goods from several producers and keeping big inventory of the same for maintaining adequate stock of varied commodities for the customers.

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Question 4.
How does market information provided by the wholesalers benefit the manufacturers?
Answer:
Wholesalers provide useful market information to the manufacturers about various aspects like customer’s tastes and preferences, market conditions, competitive activities and the features preferred by the buyers. This information proves extremely beneficial to the manufacturers as it helps them in taking effective decisions regarding their production and marketing strategies.

Question 5.
How does the wholesaler help the manufacturer in availing the economies of scale?
Answer:
Wholesalers serve as a link between retailers and the manufacturers. They collect small ‘ orders from number of retailers and pass on the pool of such orders to manufacturers and make purchases in bulk quantities. This enables the producers to undertake production on a large scale and thus take advantage of the economies of scale.

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Question 6.
Distinguish between single line stores and specialty stores. Can you identify such stores in your locality?
Answer:

SI. No. Single Line Stores Specialty Stores
(i) The store which are dealing in general category product lines are called single line store e.g. Garments, medicines etc. The stores which are dealing in a particular type of product under one product, line e.g. Jeans shop have all brands of Jeans only.
(ii) There is no such advantage of specialization. They take advantage of specialization in a particular segment of the market.
(iii) They are situated in market places. They are located in a central place of market.

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Question 7.
How would you differentiate between street traders and street shops?
Answer:

SI. No. Street Traders Street shops
(i) The traders who are generally sell their goods on busy street corners, bus stands etc. These are the platforms used to display the goods for sale.
(ii) They deal in cheap variety of goods. They deal in low priced articles but not that much cheap.

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Question 8.
Explain the services offered by wholesalers to manufacturers.
Answer:
The major services offered by wholesalers to the producers of goods and services are given below:
(i) Facilitating Large Scale Production
Wholesalers collect small orders from number of retailers and pass on the pool of such orders to manufacturers and make purchases in bulk quantities.

(ii) Bearing Risk
The wholesalers deal in goods in their own name, take delivery of the goods and keep them in their warehouses bearing risks of fall in prices, theft, spoilage, fire, etc.

(i) Financial Assistance
The wholesalers provide financial assistance to the manufacturers in the sense that they generally make cash payment for the goods purchased by them.

(ii) Expert Advice
Wholesalers can advice the manufacturers about various aspects like customer’s tastes \ – and preferences, market conditions, competitive activities and the features preferred by the buyers as they are in touch with retailers.

(iii) Help in the Marketing Function The wholesalers take care of the distribution of goods to a number of retailers who, in turn, sell to large number of goods to customers spread over a large geographical area.

(iv) Facilitate Continuity
The wholesalers facilitate continuity of production activity throughout the year by purchasing the goods as and when they are produced.

(v) Storage
Wholesalers take delivery of goods when the goods are produced in factory and keep them in their godowns/warehouses.

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Question 9.
What are the services offered by retailers to wholesalers and consumers?
Answer:
Retailer renders following services to the wholesalers:

  1. Help in distribution of Goods: Wholesalers provide help in the distribution of goods and making them available to final consumers.
  2. Personal Selling: In this the retailers relieve the producers of this activity and help them in actualizing the sale of the products.
  3. Enabling Large Scale Operations: It enables them to operate at large scale and fully concentrate on activities.
  4. Collecting Market Information: Retailers remain in touch with the buyers they know about the tastes, attitudes, preference etc. Such information is very useful in taking marketing decisions in an organization.

Some of the important, services of retailers from the point of view of consumers are as follows:

  1. Regular Availability of Products: In order to buy products as and when needed retailer maintains the regular availability of the product.
  2. New Products Information: By arranging effective display, of products and personal selling retailers, provide important information about (heir products.
  3. Convenience in Buying: Retailers are situated very near to. the-re$ideuJiaT&pas and remain open for long hours which enables customer to buy products of their requirement.
  4. After Sales Service: Retailers provide after-sales services to the customers in the form of home delivery, supply of spare parts etc.

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1st PUC Business Studies Internal Trade Long Answer Questions

Question 1.
Itinerant traders have been an integral part of internal trade in India. Analyze the reasons for their survival in spite of competition from large scale retailers.
Answer:
Itinerant retailers are traders who do not have a fixed place of business to operate from. They keep on moving with their wares from street to street or place to place, in search of customers.

Following are the reasons for their survival in spite of competition from large scale retailers:

  1. They are small traders and hence rural customers and consumers from backward areas find themselves more comfortable dealing with them.
  2. They normally deal in consumer products of daily use such as toiletry products, fruits and vegetables, etc demand for which does not fall much with time.
  3. The emphasis of such traders is on providing greater customer service by making the products available at the very doorstep of the customers. This makes it convenient for the consumers.
  4. Their cost of operation is very low as compared to large scale retailers as they do not have to incur expense; of fixed shops and inventory costs. Therefore, they are in a position to offer lower prices to consumers.

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Question 2.
Discuss the features of a departmental store. How are they different from multiple shops or chain stores?
Answer:
A departmental store is a large establishment offering a wide variety of products, classified into well-defined departments, aimed at satisfying practically every customer’s need under one roof. It has a number of departments, each one confining its activities to one kind of product, e.g., there may be separate department for toiletries, medicines, furniture, groceries, electronics, clothing and dress material. Thus, they satisfy diverse market segments with a wide variety of goods and services. Eg: Spencers, Reliance fresh etc.

Some of the important features of a departmental store are as follows:

  1. A modern departmental store may provide all facilities such as restaurant, restrooms, etc. In this way they try to provide maximum service to higher class of customers for whom price is of secondary importance.
  2. These stores are generally located at a central place in the city, which caters to a large number of customers.
  3. They are generally formed as a joint stock company managed by a board of directors as the size of these stores is very large.
  4. A departmental store combines both the functions of retailing as well as warehousing. They purchase directly from manufacturers and operate separate warehouses thereby eliminating undesirable middlemen between the producers and the customers.
  5. All the purchases in a department store are made centrally by the purchase department of the store, whereas sales are decentralized in different departments.

Chain stores or multiple shops are networks of retail shops that are owned and operated by manufacturers or intermediaries. Under this type of arrangement, a number of shops with similar appearance are established in localities, spread over different parts of the country in contrast to departmental stores which are established at a central j place in the city.

These different types of shops normally deal in standardized and branded consumer products, which have rapid sales turnover. These shops are run by the same organization and have identical merchandising strategies, with Identical products and displays.

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Question 3.
Why are consumer co-operative stores considered to be less expensive? What are its relative advantages over other large scale retailers?
Answer:
A consumer co-operative store is an organization owned, managed and controlled by consumers themselves. The cooperative stores generally buy in large quantity, directly from manufacturers or wholesalers and sell them to the consumers at reasonable prices. Members get products of good quality at cheaper rates since the middlemen are eliminated or reduced.

The major advantages of a consumer cooperative store are as follows:

(i) Ease of Formation
It is easy to form a consumer cooperative society Any 10 people can come together to form a voluntary association and get themselves registered with the Registrar of Cooperative Societies by completing certain formalities.

(ii) Limited Liability
The liability of the members in a cooperative store is limited to the extent of the capital contributed by them. They are not liable personally to pay for the debts of society, in case the liabilities are greater than its assets.

(i) Democratic Management
Cooperative societies are democratically managed through management committees which are elected by the members. Each member has one vote,, irrespective of the number of shares held by him/her.

(ii) Lower Prices
A cooperative store purchases goods directly from the manufacturers or wholesalers and sells them to members and others. Elimination of middlemen results in lower prices for the consumer goods to the members.

(v) Cash Sales
The consumer cooperative stores normally sell goods on cash basis. As a result, the requirement for working capital is reduced.

(vi) Convenient Location
The consumer cooperative stores are generally opened at convenient public places where the members and others can easily buy the products as per their requirements.

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Question 4.
Imagine life without your local market. What difficulties would a consumer face if there is no retail shop?
Answer:
Life without a local market would be very difficult because of the following points:

(i) Non-Availability of Products
Without a local market, regular availability of goods to the consumers would be hampered. There would not be a mechanism through which products could reach consumers from the manufacturers as and when required.

(ii) Information about New Products
Information about new products reaches the consumers through the local markets. The new products even after being advertised would not be available to consumers easily if there were no local markets.

(iii) Inconvenience
Local markets provide consumers the convenience’ of place and time in buying products. In the absence of local markets the consumers will have to go long distances for buying products directly from the manufacturers warehouse.

(iv) Lack of Variety of Products
Local markets provide consumers with a wide variety of products for choice based selection. This would not be available at one place in the absence of local markets.

(v) Lack of After Sales Services
The retailers in the local market provide after sales service to the consumers for goods purchased from the retail shops. This service would become difficult in case there are no local markets.

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Question 5.
Explain the usefulness of mail orders houses. What type of products is generally handled by them? Specify.
Answer:
Mail order houses are the retail outlets that sell their merchandise through mail. There is generally no direct personal contact between the buyers and the sellers in this type of trading. For obtaining orders, potential customers are approached through advertisements in newspapers or magazines, circulars, catalogs, samples and bills, and price lists sent to them by post. All the relevant information about the products such as the price, features, delivery terms, terms of payment, etc, are described in the advertisement. On receiving the orders, the items are carefully scrutinized with respect to the specifications asked for by the buyers and are complied with through the post office.

Advantages of Mail Order Houses:

(i) Limited Capital Requirement
Mail order business, can be started with relatively low amount of capital as it does not require heavy expenditure on building and other infrastructural facilities.

(ii) Elimination of Middle Men
The biggest advantage of mail-order business for consumers is that unnecessary middlemen between the buyers and sellers are eliminated which results in savings to the buyers as well as tp the sellers.

(iii) Absence of Bad Debt
Since the mail order houses do not extend credit facilities to the customers, there are no chances of any bad debt on account of non-payment by the customers.

(iv) Wide Reach
This system has a wide reach as a large number of people throughout the country can be served through mail and the goods can be sent to all the places having postal services.

(v) Convenience
This system is very convenient for the consumers as the goods are delivered at the doorstep of the customers.

Mail order houses usually deals only in the goods that can be:

  1. Graded and standardized
  2. Easily transported at low cost
  3. Have ready demand in the market
  4. Are available in large quantity throughout the year
  5. Involve least possible competition in the market
  6. Can be described through pictures etc.

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1st PUC Business Studies Internal Trade Additional Questions And Answers

1st PUC Business Studies Internal Trade Multiple Choice Questions

Question 1.
Which of the following is a part of capital account?
A. Private capital
B. Banking capital
C. Official capital
D. All the above
Answer:
D. All the above

Question 2.
Consider the following statements and identify the right ones.
i. A double entry system of record of all economic transactions between the residents of a country and rest of the world is called balance of trade.
ii. All transactions related to goods, services or income are classified as capital account.
A. i only
B. ii only
C. both
D. none
Answer:
D. none

Question 3.
The investment in productive assets and participation in management as stake holders in business enterprises is
A. FDI
B.FII
C. Balance of payment
D. SDR
Answer:
A. FDI

Question 4.
The portfolio investment by foreign institutional investors is called
A. FDI
B. FII
C. Balance of payment
D. SDR
Answer:
B. FII

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Question 5.
Consider the following statements and identify the right ones.
i. India adopted LERMS in 1992
ii. In 1993, dual exchange rate system was replaced by a unified floating exchange rate.
A. i only
B. ii only
C. both
D. none
Answer:
C. both

Question 6.
Theory of comparative advantage was presented by:
A. Adam Smith
B. Ricardo
C. Hicks
D. Arshad
Answer:
B. Ricardo

Question 7.
It is drawback of protection:
A. Consumers have to pay higher prices
B. Producerrs get higher profits
C. Quality of goods may be affected
D. AH of the above
Answer:
D. AH of the above

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Question 8.
It is drawback of free trade:
A. Prices of local goods rise
B. Government looses income from custom duties
C. National resources are underutilized
D. (a) and (b) of above
Answer:
B. Government looses income from custom duties

Question 9.
Terms of trade of a country:
A. Mean the trade agreement between trading countries
B. Is another name of exchange ratio of two currencies
C. Show the ratio between total export earnings and import bill of a country
D. Are determined by the price index of export and import goods
Answer:
C. Show the ratio between total export earnings and import bill of a country

Question 10.
Gold standard means:
A. Currency of the country is made of gold
B. Paper currency is not used
C. Currency of the country is freely convertible into gold
D. (a) and (c) of above
Answer:
D. (a) and (c) of above

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1st PUC Business Studies Internal Trade Short Answer Questions

Question 1.
What is internal trade?
Answer:
Internal trade, home trade or domestic trade is the trade which is carried on between people in the same country.

Question 2.
What is wholesale trade?
Answer:
Wholesaling, wholesale business or wholesale trade refers to the selling of goods in relatively large quantities by manufacturers or wholesalers to retailer for the purpose of resale, and to industrial and commercial enterprises for use in their business operations.

Question 3.
Who is wholesaler?
Answer:
A wholesaler or wholesale trader is a person who is engaged in wholesale trade. In other words, he is a person who buys goods in large quantities from producers or manufacturers ands sells them in small quantities to retailers for the purpose of resale for the final consumers.

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Question 4.
What is retail trade?
Answer:
The English term “retailer” is derived from the French word “retailer” which means “to cut again”. So, retailing or retail trade means cutting again the goods bought from the wholesalers into smaller quantities and selling them to the final consumers. In other words, retailing is the selling of different types of goods in small quantities to the final consumers.

Question 5.
What is retailer?
Answer:
A retailer or retail trader is person who buys goods from the wholesalers, cuts them into small quantities and sells them to the ultimate consumers.

Question 6.
What is vending machine?
Answer:
They are automatic coin-operated machines for selling pre-packed products. ATM is an example of automatic vending machine.

Question 7.
What is a chamber of commerce and industry?
Answer:
The chamber of commerce and industry is voluntary non-profit seeking association of business firms, i.e., industrial and commercial firms and even professional like chartered accounts of a particular region, formed for the purpose of promoting and protecting the industrial, commercial and economic interest of the region.

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Question 8.
What do you understand by itinerant retailers?
Answer:
Itinerant retailers are those who do not have a fixed place of business, but move from one place to another to sell their goods.

Question 9.
What do you mean by fixed shops?
Answer:
Fixed shops are retail shops which carry on business from definite or fixed premises in the market.

Question 10.
What are small shops?
Answer:
Small shops are shops which conduct their business from properly established shops, but their turnover is small. They operate their business with a small capital and small stock.

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Question 11.
What are large shops?
Answer:
Larges hopes are large-sized fixed shops established with large amount of capital. They are located in important places and markets of towns and cities.

Question 12.
What is a shopping mall?
Answer:
Malls are the chain of shops and showrooms dealing in a variety of goods, owned by different owners, and located at one place in a large building. ‘

Question 13.
What is mail order business?
Answer:
Mail order business is a kind of retail business carried on through mail or post. The organization which carries on business by post is called order business house.

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Question 14.
What is chain store?
Answer:
A chain store is retail organization consisting of a number of similar branches in different localities under one ownership and dealing in one variety of goods. A multiple shop is called a Chain Store in the U.S.A.

Question 15.
What is departmental store?
Answer:
A department store is a retail organization consisting of several departments, each department dealing in one particular kind of goods under one management.

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1st PUC Business Studies Internal Trade Long Answer Questions

Question 1.
State the features of internal trade.
Answer:
The features of internal trade are:

  1. Internal trade is an internal or domestic affair.
  2. The factors that facilitate internal trade also belong to the country concerned.
  3. In the case of internal trade, generally, there are no restrictions on the movement of goods from one region of the country to another region.
  4. In the case internal trade, the payment for goods and services is made in domestic or national currency.
  5. In the case of internal trade, the purchase and sale of goods takes place within the limits of a country.
  6. Internal trade may be carried on as wholesale trade or as retail trade.

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Question 2.
State the features of wholesale trade.
Answer:
The features of wholesale trade are:

  1. Though wholesaling may also be performed by manufacturers of producer, most of the wholesale business is done by merchant middlemen, i.e., wholesale merchants or wholesalers.
  2. Wholesaling, generally, involves breaking the bulk, i.e., splitting the goods purchased from the producers or manufacturers in large quantities into small lots, for the purpose of resale to retailers.
  3. Wholesaling is very important in the marketing process.
  4. It requires huge financial resources for its successful running.
  5. Wholesaling implies selling of goods in relatively large quantities.

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Question 3.
State the characteristics of wholesaler.
Answer:
The main characteristics of wholesaler are:

  1. He is a merchant middleman.
  2. A true wholesaler acts neither as manufacturer not as a retailer, but merely acts as an intermediary between he manufacturers sand retailers.
  3. He is a middleman or intermediary between the manufacturers or producers and the retailers.
  4. As he specializes in one or a few classes of goods, he is considered to be an expert in the class or classes of goods in which he deals.
  5. He, generally, deals in one or a few classes of goods related to one another. In other words, he specialists in one or a few classes of goods.

Question 4.
State the features of retail trade.
Answer:
The features of retail trade are:

  1. It involves the sale of goods to the final consumers.
  2. It requires the sale of wide varieties of goods.
  3. It implies selling in small quantities.
  4. A retailer sells goods to the final consumers.
  5. The turnover of retailer is, generally low.

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Question 5.
State the characteristics of retailer.
Answer:
The main characteristics of a retailer are:

  1. A retailer buys goods from the wholesalers and sells them to the ultimate consumers.
  2. He sells to the consumers for their own final consumption, and no,t for resale.
  3. He sells in small quantities or lots.
  4. He deals in large variety of goods.
  5. He is the last link, intermediary or middlemen in the chain of distribution of goods from the manufacturers to the ultimate consumers.

Question 6.
Distinguish between small fixed shops and large fixed shops.
Answer:
The difference between small fixed shops and large fixed shops;

Small fixed shops Large fixed shops
1. Small shops carry on their activities on a small scale. 1. Large shops carry on their activities on a large scale.
2. Small shops cannot withstand ’greater risks. 2. Large shops retailers can withstand greater risks.
3. Small shops suffer from inefficient management. 3. Large shop can afford to have efficient stall, and so, their management can be efficient.
4. Small shops cannot provide numerous products to consumers. 4. Larger shop can provide many products to consumers.
5. Small shops cannot afford to sell goods on credit. 5. Large shops retailers can even provide credit facilities to consumers.

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Question 7.
Explain the services of a wholesaler to retailers.
Answer:
The main services of the wholesaler to the retailers are as follows:

1. As the wholesaler is supposed to be an expert in the class or classes of goods in which he deals, he is able to offer expert advice to the retailers as to the quantity and quality of the goods to be purchased and the time of purchase.

2. By holding large stocks of goods near the retailers, the wholesaler enables the retailer to obtain their supplies more quickly than they could obtain from the distant manufacturer.

3. The wholesaler often sells goods on credit to the retailers. The credit facility enables retailers to carry on their business with less capital than could otherwise be necessary.

4. As the wholesaler is the controller of the supply of goods, he regulates the supply of goods in accordance with the demand, and thereby helps in keeping the prices steady. By keeping the prices steady, the wholesaler saves the retailer from -the losses raising from the fluctuation of prices.

5. The wholesaler brings to the notice of the retailers the new types of goods that are produced by the manufacturer. This gives an opportunity to the retailers to get new types of goods for expanding their business.

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Question 8.
State the differences between wholesale trade and retail trade.
Answer:
There are many differences between wholesale trade and retail trade:

Wholesale trade Retail trade
1. Wholesale trade refers to the marketing of goods in relatively large quantities. 1. Retail trade refers to the marketing of goods in relatively small quantities.
2. The turnover of a wholesaler is high. 2. The turnover of retailer is, generally, low.
3. A wholesaler buys goods from the producers or manufacturers. 3. A retailer, generally, buys goods from the wholesalers.
4. A wholesaler sells goods to the traders, i.e., the retailers. 4. A retailer sells goods to the final consumers.
5. As the wholesaler buys and sells in relatively large quantities, his scale of operations is large. 5. As the retailer buys and sells goods in relatively small lots, his scale of operations is small.

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Question 9.
Explain the functions of a retailer.
Answer:
The functions of a retailer are:

  1. Connecting Link: A retailer acts as one of the connecting links in the chain of distribution of goods from the producers to the consumers. He is the last link in the chain of distribution.
  2. Storing: He stores in his shop a large variety of goods, and thereby, not only assures ready supply of goods to the consumers, but also meets the different tastes of the consumers.
  3. Transporting: He arranges for the transportation of goods from his shop to the consumers. Sometimes, he even arranges for the transportation of goods from the wholesalers to his shop.
  4. Selling: He sells the goods in his shop to the consumers for their consumption.
  5. Financing: The retailer, often, sells goods on credit to the consumers.

Question 10.
Explain the services of retailer to consumers and manufacturers.
Answer:
Retailer’s Services to the consumers:

  1. He supplies information to the consumers about the arrival of the new products, and thereby, enables the consumers to purchase the latest types of goods.
  2. The retailer, generally, establishes his shop near the consumers. So, he relieves the consumers from the trouble of going over a long distance for making their purchases.
  3. He attends to the complaints of the consumers regarding the quantity and quality of the goods promptly.

Retailer’s Services to the Manufacturers:

1. He finds customers for the new products introduced in the market by the manufacturers through the wholesalers.

2. He relieves the manufacturers from the task of collecting and executing a large number of small orders from the consumers.

3. Because of his close contact with the consumers, the retailer studies the likes and dislikes of the consumers and brings them to the notice of the manufacturers through the wholesalers. The manufacturers are thus enabled to produce goods according to the need s of the consumers.

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Question 11.
State the merits and demerits of department store.
Answer:
Merits of Departmental store are:

  1. As it purchased goods in large quantities, it enjoys the advantages of bulk buying.
  2. As it sells many varieties of goods, it provides a wide choice in the selection of goods.
  3. As it deals in a large number of goods, the customer are able to make all their purchases at one place.

Demerits of Departmental store are:

  1. As it is located in the centre of the city for away from the residential areas, it is not easily accessible to the customers.
  2. In a department store, there is no personal-contact between the owners and the employees, and between the employees and the customers.
  3. As the articles sold by a department store are generally luxuries, it, generally, serves the rich, and not the masses. Therefore. It cannot have a large number of customers.

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Question 12.
Stale the merits and demerits of chain stores.
Answer:
Merits of Chain stores are:

  1. Asa multiple shop, generally, sells articles which are necessities or semi-necessities, it has a large turnover.
  2. In the case of a multiple shop, one branch advertises the other as all the branches are dealing in identical goods.
  3. As it is generally established very near to the residential areas of the customers, it is easily accessible to the customers.

Demerits of Chain stores are:

  1. It does not provide credit facilities to its customers.
  2. It does not provide services, such as the collection of orders through phones, free home delivery of goods, etc.
  3. It pays very little attention to the likes and dislikes of an individual customer, as it sells only a limited variety of standardized articles.

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Question 13.
State the merits and demerits of mail order business.
Answer:
Merits of Mail order business:

  1. The customers can get goods which are not available locally.
  2. The cost of running this type of business is comparatively low because it need not spend money on showing rooms, salesmen etc.
  3. As the sales of this type of business are on cash basis bad debts are avoided.

Demerits of Mail order business:

  1. All articles are not suitable for this type of business.
  2. This type of business cannot attract illiterate customers.
  3. The customers cannot get the goods on credit basis in this type of business.

Question 14.
Distinguish between departmental stores and multiple shops.
Answer:
Differences between a multiple shops and a Department store:

1. A multiple shop serves the masses, whereas a department store serves mainly the rich.

2. A multiple shop approaches the customers through a net work of branches, whereas a department store makes the customers approach it by having its business in a ’ central place.

3. A multiple shop sells goods only on cash basis, whereas a department store sells goods both on cash and credit basis.

4. The essential feature of a multiple shop is centralized buying and decentralized selling. But the essential feature of a department store is decentralized buying and centralized selling.

5. As a multiple shop establishment is distributed over large area, it has a larger number of customers than a department store.

6. The prices charged by a multiple shop are lower than those of a department store, because the overhead charges of a multiple shop are less than those of a department store.

7. The formation of a multiple shop involves the opening of many similar branches in different localities. But the formation of a department store involves the shopping of several separate departments in the same premises.

8. A multiple shop can be formed in any place where there are buyers. So, the selection of a site for the opening of a branch is not difficult problem.

9. A multiple shop deals only in one variety of articles, whereas a department store deals in many varieties of articles.

10. As a multiple shop deals in one variety of articles, it cannot meet all the needs of the customers. But as a department store deals in many varieties of articles, it can meet all the requirements of the articles.

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Question 15.
Explain the arguments for and against the elimination of wholesalers from the
chain of distribution.
Answer:
Arguments for the Elimination of the Wholesalers:

1. Many manufacturers feel that they can promote their sales without the assistance of wholesalers by aggressive selling effort, advertising, branding and product differentiation, lower prices, etc. They also feel that they can do the wholesaling function more economically than they wholesalers.

2. Many wholesalers use their own brands in competition with the manufacturer’s brands. This affects the reputation and the business of the manufacturers adversely. So, they want to eliminate the wholesalers.

3. Some of the manufactures wish to deal directly with the retailers, as they feel that the retailers are the best means of promoting sales.

4. Manufacturers of goods which require sales and after-sales services, such as demonstration, installation, adjustments, fitting, repair service, etc. prefer to deal directly with the retailers to assure such services.

5. Perishable commodities like bakery products, dairy products and fashion goods must be sold as quickly as possible. That means, the channel of distribution of these goods must, not have wholesalers.

Arguments against the Elimination of the Wholesalers:

  1. Many manufacturers do not have sufficient finance and will-raised marketing department to assume to the functions of the wholesalers and to deal directly with the retailers.
  2. Marketing functions are so complex that they require specialization and experts. But most of the manufacturers do not have them. So, they have to depend up to the specialist’s experts, viz., the wholesalers.
  3. The wholesalers perform the functions of concentration, equalization and dispersion better than the manufacturers.
  4. It is not economic for manufacturers to deal directly with the small orders of a large number of small retailers. That means, they have to depend upto the wholesalers.
  5. These are the days of specilisation. In these days of specialization, the manufacturers must be specialized in production, and the retailers must specialize in retailing.

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