NCERT Solutions for Class 11th Business Studies Chapter 10 – Internal Trade

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

(i) Wholesale trade
(ii) Retail trade

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 serve their customers. Other characteristics of fixed shop retailers are

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

Question 3. What purpose is served by wholesalers providing warehousing facilities?

Answer Two way purpose is served by wholesalers providing warehousing facilities in the following manner

(i) Wholesalers take delivery of goods when these are produced in factory and Keep them in their godowns/warehouses which reduces 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.

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.

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


S.N. Single Line Stores Speciality Stores
(i) The stores which are dealing in general category product lines are called single line stores. e.g., Garments, medicine 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 specialisation in a particular segment of the market.
(iii) They are situated in market places. They are located in a central place of market

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


S.N. Street Traders Street Shops
(i) The traders who are generally sell their goods on busy street comers, Bus stand 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.

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 as 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.

(iii) 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.

(iv) 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.

(v) 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 customers spread over a large geographical area.

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

(vii) Storage Wholesalers take delivery of goods when these are produced in factory and keep them in their godowns!warehouses.

Question 9. What are the services offered by retailers to wholesalers and consumers?

Answer Retailer renders following services to the wholesalers

(i) Help in Distribution of Goods Wholesalers provide help in the distribution of goods and making them available to final consumers.
(ii) Personal Selling In this the retailers relieve the producers of this activity and help them In actualising the sale of the products.
(iii) Enabling Large Scale Operations It enables them to operate at large scale and fully concentrate on activities.
(iv) 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 organisation.

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

(i) Regular Availability of Products In order to buy products as and when needed retailer maintains the regular availability of the product.
(ii) New Products Information By arranging effective display of products and personal selling retailers, provide important information about their products.
(iii) Convenience in Buying Retailers are situated very near to the residential areas and remain open for long hours which enables customer to buy products of their requirement.
(iv) After Sales Service Retailers provide after sales services to the customers in the form of home delivery, supply of spare parts etc.

Long Answer Type Questions

Question 1. Itinerant traders have been an integral part of internal trade in India. Analyse 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

(i) They are small traders and hence rural customers and consumers from backward areas find themselves more comfortable dealing with them.

(ii) 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.

(iii) 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 and helps In the survival of itinerant sellers.

(iv) Their cost of operation is very low as compared to large scale retailers as they do not have to incur expenses of fixed shops and inventory costs. Therefore, they are in a position to offer lower prices to consumers.

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 departments for toiletries, medicines, furniture, groceries, electronics, clothing and dress material. Thus, they satisfy diverse market segments with a wide variety of goods and services.

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

(i) 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.
(ii) These stores are generally located at a central place in the city, which caters to a large number of customers.
(iii) They are generally formed as a joint stock company managed by a board of directors as the size of these stores is very large.
(iv) 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.
(v) All the purchases in a department store are made centrally by the purchase department of the store, whereas sales are decentralised 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 place in the city. These different types of shops normally deal in standardised and branded consumer products, which have rapid sales turnover. These shops are run by the same organisation and have identical merchandising strategies. with identical products and displays.

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 organisation 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 association and get themselves registered with the a voluntary 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.

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

(iv) lower Prices A cooperative store purchases goods directly from the manufacturers or wholesalers and sells them to members and others Elimination or 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.

Question 4. Imagine life without your local market. What difficulties would a consumer face if there is no retail shop?

Answer Life without a focal 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.

(ill) Inconvenience Local markets provide consumers the convenience of place and urns In buying products This would be lost In the absence of local markets and consumers will have to go long distances for buying products directly from the manufacturer’S 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 tor goods purchased from the retail shops This service would become difficult in case there are no local markets

Question 5. Explain the usefulness of mail orders houses. What type of products are generally handled by them? Specify.

Answer Mail order houses are the retail outlets that sell their rner nandre 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 catalogues, 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 scrutinised 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 mall-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 to 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

(i) graded and standardised
(ii) easily transported at low cost
(iii) have ready demand in the market
(iv) are available in large quantity throughout the year
(v) involve least possible competition in the market
(vi) can be described through pictures etc.

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