COMMERCE : an introduction

Mr G. Mumba Munali Boys High School Lusaka

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

Sub Topics On Introduction To 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

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

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

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

International 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.

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

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

How 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.

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

How Aids to Trade Assist A Trader 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.

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

How Aids to Trade Assist A Trader Cont.

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

How Aids to Trade Assist A Trader Cont.

Banking
Finances the traders by means of loans and overdrafts Safe-guards the traders 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.
G. Mumba (Mr.) Munali Boys High School, Lusaka

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.

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

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 (email), etc.

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

Basic 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.

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

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.

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

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

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 semifinished 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.

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

Types 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 ones 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.

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

Stages 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 Zambias major rivers, cutting of trees in the forest for lumbering purposes quarrying, etc.

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

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.

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

Stages 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.

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

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

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

Factors Of Production Cont.

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

Factors Of Production Cont.

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.

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

Factors Of Production Cont.

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

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

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 workers ability is made use of. Allow for the use of machines which lead to a further saving of time.
G. Mumba (Mr.) Munali Boys High School, Lusaka

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

How/Why Specialization Depends On 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.
G. Mumba (Mr.) Munali Boys High School, Lusaka

Chain Of Distribution and Production

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