Communication is the process by which information is sent and received

between individuals or groups. It is said to be effective if the message is received

in the same way as it is sent. This means that the message sent is unambiguous
and directly understood by the receiver in the form as it was intended by the
sender. The receiver's response in words and actions, i.e. the feedback shows
how effective the message has reached him. However, at any point in the
process, interfering noise or distortions to the message may reduce the
effectiveness of the communication.

NECESSITY FOR EFFICIENT AND FAST COMMUNICATION IN TRADE

• There must be a convenient and efficient system of communication among

businessmen as they need to contact one another over business deals.
• Vital information may be required by the businessmen to be transferred
quickly whenever required from any source.
• Large organizations have many departments and branches scattered all
over the country. So there is a need to link all departments and branches.

WAYS IN WHICH EFFICIENT AND FAST COMMUNICATION HELP TRADE

• Facilitates trade and business transactions.

• Expands trade to overseas markets.
• Promotes the development of highly organized market.
• Creates an efficient international banking and financial system.

IMPORTANCE OF EFFECTIVE COMMUNICATION IN COMMERCE

In commerce, it is important that information is transmitted effectively because of
the following reasons:

1. Facilitation of business transactions and trade

Commercial information must be transmitted accurately and rapidly so as to

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facilitate business transaction and trade. Before any sale transaction can take
place, information on sources and availability of supply, the competitive prices and
the terms of trade have to be communicated to the buyer. When a business deal
is contracted between a buyer and a seller, then the buyer places his orders,
gives instructions for delivery and arranges for payment for the goods purchased.
All these require efficient and effective communication network so that business
dealings can be carried out easily and quickly. Any miscommunication may lead to
problems later on - contracts may not be honoured, losses may be incurred due to
errors resulting from inaccurate information, etc.

2. Expansion of trade to include overseas markets

The development of faster and more efficient system of communication has

helped to promote foreign trade. Up-to-date information on overseas markets and
their products are easily available via the communication channels. Confirmation
on overseas deals and documentation of imports and exports orders can be
processed easily and quickly through international communication links. With the
establishment of an expanded market, products can be produced on a large scale
and economies of scale can be reaped.

3. Promotion of the successful marketing of a product

One of the aims of advertising is effective communication. An advertising
campaign always aims at affecting or influencing the attitude and the behaviour of
the receiver of the message. When an advertising message is effectively
communicated to the consumers by the sponsor of the product, then the
consumers will react positively towards the product and hence increase the
demand for the product.

4. Creation of an efficient international banking and financial system

A good network of communication services creates an efficient
international and financial system. International payments can easily be made as
money can be easily and speedily 'transmitted' through telex and telegraph
services between banks and financial centers throughout the world.

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5. Promotion of the development of highly organized markets

Highly organized markets like the commodity exchange, stock exchange
and foreign exchange markets cannot operate without a modern effective system
of communication. Buyers and sellers in these markets are brought together
through the telephone, telex and computer network even though they are
thousands of miles apart. Information on price movements in these markets can
be transmitted instantaneously and accurately through these effective
communication channels. Decisions to buy or sell commodity, security or currency
in such organized markets are based on on-line information on market conditions.

6. Enhancement of effective interdepartmental and inter-branch

communication
Effective communication system to link up all the departments or branches in a
large organization brings about more effective control and administration of the
whole organization. All instructions, decisions, changes in market policies and
plans need to be communicated easily and quickly within the internal
telecommunication or computer network of the organization. Effective
communication is an essential component of the organizational success whether it
is at the interpersonal, inter-group, intra-group or organizational or external levels.
The organization here maybe a wholesaler, a large retailer, a bank, an insurance
company or even an advertising agency

METHODS OF COMMUNICATION
1. Information can be encoded into various transmittable forms. The methods or
forms by which communication can be transmitted include both verbal and non-
verbal types.
2. When oral communication is made, information, messages or ideas are put into
spoken words which will then be carried by the various media or channels of
communication (e.g. audio media or audio-visual media) to the receiver.
3. Written communication, on the other hand, uses the written word to convey
messages or thoughts that will be carried to the receiver via the written, printed or
electronic media.
4. Oral or spoken communication can take the following forms:
(a) Direct face-to-face communication between individuals

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(b) speech/talk given to a group of individuals

(c) Oral reports presented at meetings
(d) Individual contact through electronic devices such as the telephone, intercom,
public address system, tape recorder. (Note that the parties are not
communicating face-to-face to one another.)
5. Written communication may take the following forms:
(a) Handwritten
(b) Typed
(c) Printed
(d) Electronically generated document, e.g. telegram, telex or electronic mail
6. Spoken communication has the advantage of immediate feedback over written
communication. This type of communication is favoured in situations where the
sender of a message requires an immediate response from the receiver.
7. Written communication, on the other hand, has the advantage that a permanent
record of the communication exists for future reference. This type of
communication is suitable where binding of contract or confirmation of information
is essential.

INTERNAL AND EXTERNAL COMMUNICATION

For the successful and smooth operation of a large organization, it is essential to
have effective internal and external communication.

Internal
1. Internal communication refers to the communication that is confined within an
organization. It can be horizontal, i.e. it takes place between people of same level
or vertical, usually top down from management to supervisors and clerks.
2. Different sections or departments within an organization can have interlinks or
interconnections with each other through the following means:
(a) Oral: Intercom, paging, telephone, face-to-face discussion, meeting or
conference
(b) Written: Memos, circulars, reports, letters, minutes or electronic mail
3. For example, the Sales Department contacts the store either by telephone or
through the computer network to check the stock level of a certain product. If the
product is found to be low in supply, then the Purchases Department is informed
through the same network to place orders for the product. This is just one

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example of the many online internal communication that takes place almost every
day in a large trading organization.
4. The features of internal communication are as follows:
(a) Brief
(b) Less formal
(c) personal
(d) Rapidly transmitted through the internal network

External

1. External communication or communication between a firm and other firms or

the firm with the public is just as important for the successful operation of any
business.
2. It may be necessary for the firm to communicate with the external parties like
the following:
(a) The head office or other branches on matters pertaining to the organization
(b) Suppliers, local or overseas, to source for supplies of their products or raw
materials
(c) Customers to entertain their queries and to take their orders
(d) Bankers to settle or enquire on financial matters
(e) Agents or sales personnel to monitor the sales of the product
(f) Others that have interest in the firm
3. External communication includes the written and spoken words transmitted via
the following channels:

Oral
(a) Telephone
(b) Conference or seminar
(c) Meeting

Written
(a) Business letter (b) telex
(c) Fax (d) telegram
(e) Electronic mail (f) advertisement
(g) Leaflet or brochure or press release

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4. Communication with external parties must be:

(a) Formal (b) clear
(c) Accurate (d) rapid

Telephonic
(a) When information is transmitted in telephonic form, the telephone is used as
the tool of communication.

Advantages
(i) Immediate response is received from the receiver.
(ii) Communication is direct and personal.
(iii) It is fast and cheap.

Disadvantages
(i) there is no written record of call.
(ii) There is no or limited non-verbal cues as feedback.
(iii) The receiver has to take the call.

ELECTRONIC COMMUNICATION
(a) Information can be transmitted electronically through facsimile transmission or
via computer network. For facsimile transmission, exact copies of documents can
be sent from one fax machine to another in any location that is linked by
telephone.
(b) In this modern age of information technology, networking via computers either
within a firm or among branch firms or with any location, local or overseas,
connected to the Internet is becoming a cheap and convenient means of
electronic communication. Voice, data and images are transmitted globally with
great speed within the computer network.

Advantages
(i) It is cheap because it is the cost of a local phone call.
(ii) It is convenient because the sender does not need to go to the post office to
send messages.
(iii) It is fast because information can be sent instantaneously throughout the

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world.
(iv) The same message can be sent to different people at the same time.
(v) Text files and animated images can be transmitted electronically together with
the message.

Disadvantages
(i) Its use is limited to only those who are linked to the computer network.
(ii) Its response is only immediate when both the sender and receiver are
interconnected through the Internet.

Types of Electronic Communication

Telefax / Facsimile service

1. The telefax or facsimile transmission is a popular and effective means of instant
printed communication. It is versatile in what it can transmit and the service is
relatively cheap.
2. Business enterprises can send and receive pictures, diagrams, drawings,
graphics, charts, handwritten or typed documents electronically to and from
destinations locally or overseas by means of the facsimile service.
3. An exact copy of document can be transmitted electronically from one facsimile
machine to another in any location linked by telephone. This service is useful to
banks, legal, shipping, advertising and construction firms. Singapore Telecom
provides this service for those who do not have facsimile machines. It receives the
facsimile messages on behalf of the customer who can either collect the message
or have it delivered to him personally.

Intranet
The computer network within a company enabling employees to keep in contact
with one another. May be in one building or many branches. Enables the
management to put information on to the network for use by employees, company
policy, and sample documents. Speeds up communication within an organisation.

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Electronic mail (E – mail)

1. Electronic mail, or more commonly known as e-mail, is a system of text

messages and their attached files sent through computer networks that are
connected to the Internet.
2. The advantages of e-mail as a means of communication are as follows:
(a) It is cheap because messages are sent overseas at the cost of a local
telephone call.
(b) It is fast because messages can be sent instantaneously.
(c) It is convenient because files, video segments, sound clips and illustrations
can be attached to e-mail messages.
(d) A single message can be sent to several destinations at the same time.
(e) The computer need not be switched on, unlike the facsimile machine, to
receive messages and unlike the telephone which requires the receiver to be
present to receive the message. The e-mail message remains in the mail box until
the receiver retrieves it.

Teleconferencing
1. Teleconferencing allows more than two people at different sites to be connected
by phone and to talk and hear each other at the same time. A more advanced
form of teleconferencing is video teleconferencing which is an audio visual
communication facility that allows a face-to-face interaction with business
associates in distant locations. Business associates can be seen communicating
interactively from specially equipped conference rooms located at different sites
as if they are face-to-face with each other. This is especially useful for
organizations like multinational corporations with offices and business spread over
a number of locations, locally or overseas. This is an excellent alternative to the
normal face-to-face meeting which is often hindered by distance, cost and time
constraints.

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Videoconferencing
Videoconferencing technology allows people at two or more locations to see and
hear each other at the same time.

Video communication enables one of the partners of the business, who lives
abroad, to actively participate in all Board meetings. It also allows the separate
sales divisions of the company in other countries in to interact whenever
considered necessary.

Videoconferencing allows the company to collaborate more easily and frequently

and means the various company functions located in different locations can be in
immediate contact whenever necessary.

Face-to-face communication
(a) Face-to-face communication is the simplest form of oral communication
usually involving two or more individuals. The sender and receiver of information
are in direct contact. Information is transmitted through the use of verbal and non-
verbal symbols (e.g. a person's facial expression, gestures, posture, and tone of
voice). The sender and receiver can engage in discussions about the message,
with the receiver responding by asking questions, agreeing or disagreeing and the
receiver repeating or giving more information, and giving his response.

Advantages
(i) Communication is interactive because it is two-way.
(ii) It is immediate and it is possible to get instant feedback.
(iii) There is more chance of the information being effectively and successfully
communicated.
(iv) It can take a variety of forms:
(a) Private discussion or conversation
(b) Instruction
(c) Formal discussion
(d) Formal meeting
(e) Interview
(f) Conference or seminar

Disadvantages
(i) There is no permanent record.
(ii) It may not be planned just as carefully as in written communication.

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CHOICE OF METHOD OF COMMUNICATION

The choice of method of communication between individuals or firms depends on

the following factors:

Cost
1. Where two methods of communication are equally efficient, the cheaper
method will be preferred. Mail service is by far the cheapest mode of external
communication while the more sophisticated the telecommunication service is, the
higher the cost. However, individuals who have access to computer-mediated
communication system may find the electronic mail the most economical way of
sending messages to others who are also connected to the computer network.
The sender and the receiver may be in different countries but the cost of
communication is that of a local telephone call.

Urgency
1. If information is required to be sent urgently, express mail delivery or courier
service would be faster than ordinary mail. However, if instant communication is
required, the telephone, the telex, the facsimile service or the electronic mail will
serve better. The higher cost may be justified by the results obtained through its
speed.

Accuracy of in formation
1. Information sent through letters, telex, facsimile or e-mail will be more
accurately transmitted compared to the telephone or even the telegram which
economizes on the usage of words. This is because communication is written and
detailed information can be communicated.

Record of information
1. The telephone has the disadvantage of not providing any written record of a
conversation or communication. The letter or telex service will serve better as a
form of communication when a businessman wishes to bind the other party to any
business contract or where proof of transaction is required.

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Safety and security

1. To ensure that a message is received, it is sometimes necessary to send it by
registered post and recorded delivery. The use of courier service for safe delivery
of important documents is becoming increasingly popular. Courier service may be
relatively more expensive than registered post and recorded delivery but the
delivery may be faster.

Convenience
1. Sometimes, the choice of communication depends on what is convenient and
available for use to both the sender and the recipient.
2. Telegraphic service may have to replace telephone service so as to send
messages urgently to remote areas with no telephone lines.
3. Electronic mail may be cheap, fast and convenient but it can only be done via
the Internet.

Confidentiality
1. Where confidential information is to be transmitted, the telex or facsimile may
not be suitable as messages may be retrieved by others. A telephone call may not
be appropriate too as the call can be overheard. Information enclosed in an
envelope and sent by registered post and recorded delivery ensures
confidentiality. For the same reason, it may be necessary to enclose an internal
memo with confidential information, in a sealed envelope.

Other factors
1. Distance: Whether the sender and the receiver are in the same building, within
the same town or in different towns within the same country or in different
countries.
2. Time of day: Whether it is convenient for the receiver (especially if he is not in
the same country).
3. The parties involved: Whether the relationship of the sender and the receiver of
the information is that of an internal and external member of the organization, a
senior officer and a junior officer or two officers of equal rank in an organization.
4. Information to be transmitted: Whether it is short or complex - an explanation,
imparting good or bad news, formal or informal matters.

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ANALYSIS OF GIVEN SITUATIONS IN THE CHOICE OF THE METHOD OF

COMMUNICATION

1. Wong & Lee, a law firm in Singapore, wishes to send an important document to
Gamble & Co. in London. The document must reach Gamble & Co within three
working days. The information contained in the document is confidential.
Photocopy of the document is not acceptable. State, with reasons, which method
of communication you would recommend.

Wong & Lee could use either Speed Post or private courier service to send the
document to Gamble & Co.

Reasons for choice

(a) It ensures that the document reaches its destination within three working
days as the document is urgently needed. Registered postal service would be too
slow for this purpose.
(b) It ensures confidentiality of the document. Facsimile service is not appropriate
as the transmitted information may be retrieved by others.
(c) It ensures that the original copy of the document is sent to Gamble & Co. On
the other hand, facsimile service will produce only photocopy of the document
which is not acceptable.
(d) It may cost more than facsimile service. However, the factors as mentioned in
(a) to (c) justify the higher cost. Moreover, it is an important document.

2. The General Manager of a trading company wishes to inform all the heads of
department in the organization to summit their annual reports by the following
Friday. State, with reasons, which method of communication he should use.

The General Manager could use a memorandum (memo) to inform his staff of the
decision.
Reasons for choice
(a) As all the heads of departments are within the same organization, the use of
memo ensures that the information reaches them quickly.
(b) It provides a record of the transaction.
(c) Particulars about the names of the sender and the receiver, the message and

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the date are clearly stated so the memo can be used as a reference.
(d) The same memo can be addressed to all the heads of department.
(e) Telephone calls may not be appropriate as it does not provide a record of
transaction and cannot be used for future reference.
(f) Written communication carries more authority.

3. A retailer has found out that the local wholesaler has sent him an incorrect
quantity of goods. State, with reasons, which method of communication he could
use to inform the wholesaler

The retailer could notify his wholesaler by phone about the error and this phone
call can be followed by a letter sent by post.

Reasons for choice

(a) A phone call should be made because the matter is urgent and requires the
immediate attention of the wholesaler.
(b) As the wholesaler is located in the same town, the cost of a local phone is low.
(c) Through the phone call, the retailer and the wholesaler could exchange ideas
about the possible cause of the error.
(d) The phone call should be followed by a letter as written communication carries
more authority and provides proof of a transaction.

4. A factory manager of an established company wishes to place an urgent order

for a spare part of a piece of complicated equipment. He needs to inform the
manufacturer in Japan of the specifications of the spare part in the form of
drawings. Which method of communication would you recommend? Why?
The factory manager could use facsimile service for this purpose provided that
both the sender and the receiver are linked by the service and the facsimile
machine of the receiver is switched on. Alternatively, e-mail could also be used if
the specifications of the spare parts could be sent as an attached file via the
Internet.

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Reasons for choice

(a) Facsimile service and e-mail could transmit the message instantly and quickly
as the matter is urgent. Telex and phone call are not suitable as the specifications
are in the form of drawings.
(b) The cost of the e-mail is that of a local call whereas communication via
facsimile or phone will be charged as an overseas call.
(c) Telex and phone call cannot transmit the specifications clearly and precisely.
(d) Speed Post and courier service may be slower and may cost more.

5. A mail order firm wishes to inform its customers about a new catalogue. The
firm is in possession of a list of names and addresses of its customers. Which
method of communication would you recommend? Why?

The mail order firm could use postal service to circulate the new catalogue.

Reasons for choice

(a) The ordinary postal service is relatively cheap. The number of catalogues to be
sent out may be numerous. Cost is an important factor in determining the choice
of method of communication.
(b) There is no urgency in sending the catalogue. Speed Post or courier service
will cost more.
(c) The catalogue can be used as reference if and when necessary.

POST OFFICE
The Post Office provides many services to the public, which is divided into two
groups.
The two groups are (a) traditional mail services and (b) financial services.

• Ordinary Post: The Post Office delivers first-class and second-class letters
inland and abroad by ordinary post at a relatively low cost. The aim of the
Post Office is to deliver 90 per cent of the first-class inland letters the
following working day.
• Registered Post: When cash or important documents have to be sent
through the Post Office, it is most safe to send it by registered post. For this
letter a receipt is given on payment of an additional fee, which is fixed

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according to the weight or contents of the letter. The Post Office takes
special care of such letters. If such a letter is lost the Post Office will pay a
small compensation.
• Recorded Delivery Service: This is a proof showing that the letter was
posted and also delivered. For this service a charge is made and the
customer is given a receipt as a proof of delivery. Later, on receipt, the
addressee has to sign for the delivered letter. A compensation is payable if
the letter is not delivered.
• Business Reply Service: This enables the public to send business reply
letters without paying for a stamp. Traders who are using this service must
first obtain a license and deposit an advance amount with the Post Office.
• Airmail: There are two types of airmail; first-class and second-class. The
aerogramme is very popular now for its speed and cheapness. The only
disadvantage is that the writing space is limited.
• Parcel Post: The Post Office also undertakes to deliver parcels for which
they charge a moderate amount. The Post Office has recorded a growth in
delivery of parcels in spite of competition from other private carriers. The
maximum parcel weight accepted is 25kgs. For foreign parcels, the weight,
the distance and the mode of transport used, determine the rate to be
charged for the parcel.
• Franking Machines: Some large companies post hundreds of letters
everyday and it is not possible to stick stamps on each letter. So they are
allowed to use franking machines, which print the postage payable on the
envelopes. A meter is attached to these machines, which record the total
postage payable to the Post Office.
• Data post: Data post has been developed to meet the punctual delivery of
some letters. There is a freefone link to all Data post service centers so that
customers can arrange collection times for their urgent parcels, letters and
documents. These packages will be delivered the following working
morning.
• Private Boxes: These are offered at the Post Office for rent on payment of
a fee for a certain period. Letters are kept in these boxes and the owner
collects them at his own time. Each private box holder holds the key to the
box. This service avoids misdelivery of letters.
PAYMENT THROUGH THE POST OFFICE:

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1. Giro Bank:
This system allows payment to be made from any branch of any bank to any
branch of any bank. Anyone above the age of fifteen can open a Giro Bank
account. In this system, payments are made direct to the bank and the amount is
then transferred to the creditor’s account via the computer system.

The following are the advantages:

• There is no need of bank account, but the creditor must have one.
• There is no risk of the cheque getting lost as it is paid direct into the bank.
• Payments can be made from any branch, any bank to any branch, any
bank.
• Account holders can deposit money into their accounts from any branch
any bank.
• Many people can be paid using one Giro Bank slip.
• The payments are much faster as the transfers are done by computer.
• Giro Bank account holders are provided with pre-paid first class envelopes
for their remittances.
• Customers can avail of the services for longer hours, as the Post Office is
open for longer hours, and even on Saturdays.
• Businessmen can get statements whenever their accounts change.

The following are the disadvantages of Giro Bank:

• Range of Services: The Giro Bank provides its customers with fewer
services when compared with the retail banks.
• Post Office Congestion: The Post Offices have all kinds of other business
to contract. So the Post Office is always crowded with different kinds of
customers. So the bank customers find it very difficult.

2. Postal Orders:
• Postal orders are issued from 25pence to £20.
• A fee is charged for issue of the postal order.
• The postal orders are not negotiable.
• Only the payee can collect the money from the post office.
• Postal orders can be crossed like cheques.

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DIFFERENCES BETWEEN POSTAL ORDERS AND CHEQUES:

POSTAL ORDERS CHEQUES

• Postal orders are issued by the Cheques are issued by the banks.
Post Office.
• Postal orders are issued from 25
Cheques can be issued for any
pence to £20.
amount.
• The Post Office charges an
Banks charge an amount for operating
amount for each postal order
the account.
issued.
For operation of cheques, the customer
• There is no need of having an
must have a bank account.
account to use a postal order.
• Encashment is made at the Post
Encashment is made at the bank.
Office.
• Postal orders are not negotiable.
Cheques can be negotiable.

SAVINGS THROUGH THE POST OFFICE:

• National Savings Bank: They offer ordinary accounts, which are small
savings and easy withdrawals for a fixed rate of interest. The interest is tax-
free up to £70. They also offer investment accounts, which have higher
rates of interest and withdrawals need one month’s notice.
• National Savings Certificate: They are issued for different amounts and can
be cashed with a week’s notice on their maturity. No income tax is payable
on interest for these certificates. Some of these issues are index-linked.
• Premium Bonds: There is no interest paid, but the holders have a right in a
draw for cash prizes each week. The prizes are up to £250000.
Subscribers can buy a minimum of £100 worth of bonds and a maximum
holding £10000.

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IMPORTANCE OF POST OFFICE:

• With written communication there is evidence of contract.

• Words may be misheard over the telephone.
• There are no telephone facilities in all places.
• Post Office is needed to send payments.
• Post Office is needed to send parcels.
• Post Office is needed to send original documents.
• Telecommunication services are very expensive.
• Written communication is needed to keep track of goods in international
trade.
• Government needs documents for calculations to prepare balance of
payments record.

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