Introduction to Commerce

G. Mumba (Mr.) G. Mumba (Mr.) MunaliMunali Boys High Boys High School, LusakaSchool, Lusaka

Grade 10 Grade 10 COMMERCECOMMERCE ::an introductionan introduction

Mr G. MumbaMr G. Mumba

Munali Boys High SchoolMunali Boys High School

LusakaLusaka

G. Mumba (Mr.) Munali Boys High G. Mumba (Mr.) Munali Boys High School, LusakaSchool, Lusaka

Sub Topics On Introduction To Sub Topics On Introduction To Commerce Commerce

• Trade and Aids To Trade• Types of trade (home and foreign trade)• How aids to trade can assist a trader• Human wants and needs• Production

– Types of production– Stages of production– Factors of specialization– Chain of production

• Specialization– Various forms of specialization– Advantages and disadvantages– Specialization and trade

• Channel of distribution

Introduction To CommerceIntroduction To Commerce

• Commerce is trade and aids to trade.• It aims at the distribution of goods and services

in order to satisfy human wants and needs.• Trade is the buying and selling of goods and

services with a view of trying profit.• There are two types of trade namely; home

(local) trade and International or foreign trade.• Aids to trade are commercial activities or

services that assist trade to take place.

Home TradeHome Trade

• Home trade is the buying and selling of goods and services within a particular country, e.g from Lusaka to Ndola within Zambia.

• It involves retailing and wholesaling.• Retailing is the buying and selling of goods and

services in small quantities. The trader involved in this form of trade is called a Retailer.

• Wholesaling is the buying and selling of goods and services in large quantities. The trader involved in this kind of trade is known as a Wholesaler.

International TradeInternational Trade

• Is the buying and selling of goods and services between two or more different countries, e.g between Lusaka in Zambia and Harare in Zimbabwe.

• It involves Importing and Exporting, and as well as Entrepot trade.

• Import trade is the buying of goods and services from another country.

• Export trade is the selling of goods and services to another country.

• Entrepot trade is the importation of goods from another country for re-exportation to another different country.

Aids To TradeAids To Trade

• Aids to trade are commercial services or activities that assist trade to move on smoothly with less or no difficulties at all. There are six aids to trade namely; Advertising Banking Transport Insurance Communication Warehousing.

How Aids to Trade Assist A TraderHow Aids to Trade Assist A Trader

• Warehousing– By storing raw materials awaiting processing– By storing finished goods awaiting sale– By protecting goods against bad elements such as

unfavourable weather, fire, theft, etc.– By storing goods, warehousing prevents shortages– And in turn helps in stabilising prices.– Stores dutiable goods in bonded warehouses until

after duty is paid.

How Aids to Trade Assist A Trader How Aids to Trade Assist A Trader Cont.Cont.

• Transport– Delivering equipment and raw materials to industries.– Delivering finished goods to local and international

markets.– Moving workers to and from their work places to

enhance production– Carrying company executives and agents to far

places in order to meet their clients.

• Advertising– By informing the members of public on the

availability of goods and services on the market.

– By persuading potential customers to buy the goods and services available.

– By informing the public on job vacancies with a view of recruiting new staff

– By spreading awareness on matters of public interest.

• Banking– Finances the traders by means of loans and

overdrafts– Safe-guards the trader’s money and other

valuables.– Facilitates the payment of huge sums through

cheques– Offers special facilities to traders such as

standing orders, direct debits, credit transfers, discounting bills of exchange, etc.

How Aids to Trade Assist A Trader Cont.How Aids to Trade Assist A Trader Cont.

• Insurance– Compensates/ restores/indemnifies traders in case of a risk

occurring.– Protects traders against financial losses resulting from either fire,

theft, etc– And against claims from third parties.– In terms of life assurance, it provides a saving plan to surviving

dependants.– Provides confidence or encouragement to traders to go into

huge businesses without fear of making a loss.

How Aids to Trade Assist A Trader Cont.How Aids to Trade Assist A Trader Cont.

• Communication– Informs the public on the availability of goods and services on

the market– Allows customers and suppliers to contact each other speedily– By means of telephone, facsimile (fax), letters, electronic mail (e-

mail), etc.

Basic Human Wants And NeedsBasic Human Wants And Needs

• Basic Human Wants– These are goods and services that we require

but can still survive without them. They are there to improve on our living standard.

– Examples include; Cell phone, T.V, radio, Computer, Car, furniture, Fridge, Carpet, etc.

– Human wants are also referred to as Luxuries.

Human Wants And Needs Cont.Human Wants And Needs Cont.

• Basic Human Needs– These are goods and services we require in order to

survive. Without basic human needs, one would eventually die.

– Examples include; Food, Shelter and Clothes– Human needs are also referred to as Necessities.

N.B: Basic human wants and needs are satisfied by Production.

PRODUCTIONPRODUCTION

Work Outline;– Definition of production– Types of production– Stages of production– Factors of production– Chain of production– Specialization

• Definition

• Various forms of specialization

• Advantages and Disadvantages

• How/why specialization depends on trade

– Chain/channel of distribution

What Is Production?What Is Production?

• It is the provision of goods and services in order to satisfy human wants and needs

• Or the creation of utility/usefullness in order to satisfy human wants and needs.

• It involves the extraction of raw materials the way nature provided them.

• It involves the processing of raw materials into finished or semi-finished goods.

• Production also involves the distribution of goods and services to areas where they are needed using trade and the aids to trade

• and as well as the direct services provided by personnel such as Doctors, Nurses, Teachers, Police, Lawyers, Accountants, etc.

Types Of ProductionTypes Of Production

• There are two types of production namely; Direct and Indirect production.

• Direct production is the provision of goods and services on a small scale and meant for one’s own use only.

• Indirect production is the provision of goods and services on a large scale and meant for sale. Indirect production calls for specialization.

Stages Of ProductionStages Of Production

• Production takes place in three main stages namely; Primary, Secondary and Tertiary stages.

• (a) Primary Production:• The extraction of raw materials the way nature provided

them.• Examples include; mining of minerals from the ground,

fishing in Zambia’s major rivers, cutting of trees in the forest for lumbering purposes quarrying, etc.

Stages Of Production Cont.Stages Of Production Cont.

• (b) Secondary Production– This is the processing of raw materials into finished or

semi-finished goods. It involves the manufacturing and construction industry.

– Examples include; Baking of bread using wheat as a raw material, process trees into timber and later furniture.

Stages Of Production ContStages Of Production Cont

• (c) Tertiary Production– This is the distribution of goods and services

to areas where they are needed, with the help of Commerce (Trade and Aids To Trade)

– It also involves the direct services provided personnel such as Doctors, Nurses, Teachers, Lawyers, the Police, etc.

Factors Of ProductionFactors Of Production

• These are essential resources or inputs that must be available before any provision of goods and services can take place. These are;– Land– Labour– Capital– Enterprise/Organisation

Factors Of Production Cont.Factors Of Production Cont.

• Land– Refers to all natural resources found on earth

and underground such as – fish in the water, wild animals, mineral wealth,

etc.– People who provide land are known as

Landlords.– Landlords receive rates/rent as their reward.

• Labour– This is the human effort used in the

production of goods and services.– It involves the manual (physical) and mental

(skilled) effort.– Those who provide labour are called Workers.– Workers receive a salary or wages as their

reward.

• Capital– This is any resource used to start business– It includes; money, buildings, machinery, raw

materials, etc.– People who provide capital are called

capitalists.– The reward for capital is interest.

• Enterprise– This is the ability by the owner to organize the

business– It involves making decisions for the business such as

when to start a business, location, type of goods/services to offer, workers to employ, etc.

– People who make these decisions are known as entrepreneurs or orgainzers.

– Entrepreneurs receive profit as their reward for organizing the business well

– and a loss as their reward for poor organization.

SPECIALIZATIONSPECIALIZATION

• This is concentration or narrowing of work on a particular aspect.

• Specialization takes place in various forms such as;– Specialization by individual occupation, e.g Teachers.

Doctors, Politicians, etc.– Specialization by process/division of labour– Specialization by region– Specialization by nation– Specialization by product.

SPECIALIZATION Cont.SPECIALIZATION Cont.

• Advantages Of specialization– It leads to mass production of goods and services.– Allows individual to choose by themselves what they

can do best.– It enable workers to become more skilled and efficient

due to continued repetition of the same task.– Reduced movements of workers involved leads to

time saving.– Training is quicker as jobs are easy to learn– Every worker’s ability is made use of.– Allow for the use of machines which lead to a further

saving of time.

SPECIALIZATION Cont.SPECIALIZATION Cont.

• Disadvantages Of Specialization– The use of machines may lead to loss of employment– Workers become bored due to repetition of the same

work.– If a specialist is absent, work comes to a halt.– A specialist who losses employment may not easily

find another job else where– A specialist will always depend on others for

something he can not provide for him self.– Specialists may suffer hardships when demand for

their goods falls.– Individual crafts and skills are lost due to the use of

machines.

How/Why Specialization Depends How/Why Specialization Depends On TradeOn Trade

• Specialization causes people not be self reliant or sufficient,

• thereby enabling specialist to always depend on others for goods and services they cannot provide for themselves.

• To obtain these goods, specialists sell what they are able to produce in order to get money

• which they use to buy what they cannot provide for themselves.

• Trade is therefore both a cause and consequence of specialization.

Chain Of Distribution and Chain Of Distribution and ProductionProduction

• Chain Of Distribution– This refers to the different routes that goods

travel from the manufacturer, through the Wholesaler and retailer, to the consumer

• Chain Of Production– Refers to the different stages a raw material

undergoes before it becomes a finished product.

Introduction to Commerce

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