NCERT Solutions for Class 11 Business Studies Chapter 10 Internal Trade

Detailed, Step-by-Step NCERT Solutions for 11 Business Studies Chapter 10 Internal Trade Questions and Answers were solved by Expert Teachers as per NCERT (CBSE) Book guidelines covering each topic in chapter to ensure complete preparation.

Internal Trade NCERT Solutions for Class 11 Business Studies Chapter 10

Internal Trade Questions and Answers Class 11 Business Studies Chapter 10

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 customs duty or import duty is levied on such trade as goods are part of domestic production and consumption. Internal trade can be classified into two broad categories:

• Wholesale trade
• Retail trade

Question 2.
Specify the characteristics of fixed shop retailers.
Answer:
Fixed Shops – Fixed shop retailers have a fixed place of business and do not move from one place to another. Their shops are situated in market places or residential localities. They are of two types (a) small-scale shops, and (b) large-scale shops.
Small-scale Fixed Retail Shops – Small-scale retail shops are the most common form of retail trade. Such shops are found in every nook and corner of cities. They are of the following types :

(1) Street Stalls – These are located at street crossing or in the busy streets. A stall is an improvised structure a table or a temporary platform to display the goods for sale. They deal in a wide variety of low-priced articles such as bread, butter, stationery, hosiery, toys, etc.

(2) Second-hand Goods Shops – These shops deal in second-hand goods or used articles such as books, utensils, furniture, garments, etc. They buy goods from private and public auctions. Such shops cater mainly to the needs of poor people who cannot afford to buy new articles. Well-to-do people too visit such shops in search of rare books or antiques. Persons with modest mean make purchases from such stores.

(3) General Stores – General stores are small shops located mainly in residential areas. They deal in the wide variety of products of everyday use. Such stores cater to the daily requirements of local residents for articles like tooth brush, soaps, detergents, electric bulb. etc. A general store may be a single line store or a multi-line store.

(4) Single Line Stores – Such stores deal in one line of goods. They are located generally in shopping centres. Medical stores, cloth stores, grocery shops, book shops, jewellery shops, sweetshops, etc. are examples of these stores.

(5) Speciality Stores – These stores deal in a particular category of products in one product line. For example, a store may be selling sarees only instead of all types of garments. They provide a wide variety of the product and cater to the needs of particular customers. Another example of a speciality store is a shop dealing in children’s books only. Speciality stores are generally located in central places so as to attract a large number of customers.

Question 3.
What purpose is served by wholesalers providing ware¬housing facilities?
Answer:
Two-way purposes are served by wholesalers providing warehousing facilities in the following manner:

1. Wholesalers take delivery of goods when goods are manufactured in a factory and keep them in their godowns/warehouses which reduce the burden of manufacturers of providing storage facilities for the finished products.
2. Warehousing by wholesalers relieves the retailers of the work of collecting goods from several producers and keeping a 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 various services to the manufacturers as well as the retailers and consumers. The major services offered by wholesalers in relation to marketing function may be cleared from the below-mentioned facts: The wholesalers take care of the distribution of goods to a number of retailers who, in turn, sell to a large number of customers spread over a large geographical area. This relieves the manufacturers of many of the marketing activities and enable them to concentrate on the production activity.

Wholesalers are in direct contact with the retailers, they are in a position to advice the manufacturers about various aspects including customer’s tastes and preferences, market conditions, competitive activities and the features of the product preferred by the customers. They serve as an important source of market information on these and related aspects.

Wholesalers take delivery of goods when these are produced in a factory and keep them in their godowns or warehouses. This reduces the burden of manufacturers of providing storage facilities till the market requirements for the finished products.

Wholesalers make suggestions-about the type and quality of goods required by the consumers. Such information enables the manufacturers to regulate production in accordance with the changing requirements of the market. A manufacturer can make necessary improvements in his/her product.

Question 5.
How do the wholesalers help the manufacturer in availing the economies of scale?
Answer:
A wholesaler buys goods in bulk and thereby enables the manufacturers to carry on large-scale production. Large-scale production results in a lower cost of production per unit. By operating on a large scale the wholesaler relieves the manufacturers of innumerable duties which they find difficult and expensive to performs.

Wholesalers collect small orders from a number of retailers and pass on the pool of such orders to manufacturers and make purchases in lots. This provides help to producers to undertake production on large scale and take advantage of the economies of scale. The manufacturer is assured of the sale of his product by the wholesaler.

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

1. The store which is dealing in general category product lines is called single-line store e.g., Garments, medicines, etc.
2. There is no such advantage of specialization.
3. They are situated in market places.

Specialty Stores:

1. 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.
2. They take advantage of specialization in a particular segment of the market.
3. They are located in a central place of market.

Question 7.
How would you differentiate between street traders and street shops?
Answer:
Small Scale Fixed Shop Vendors:
(1) Street Stalls – These are located at street crossings or in the busy streets. TV starts an improvised structure — a table or a temporary platform to display the goods for sale. The stallholders generally deal in cheaper products like newspapers, magazines, toys, pens, cheap hosiery, etc.

(2) General Stores – General stores are set up in residential areas and they stock all kinds of products needed by the local residents for their daily use. A general store is owned and managed by a sole proprietor who keeps personal contact with his customers.

The general store may be a single-line store or a multi-line store. A single line store specialises in selling only products of a single line. For instance, medical stores deal in medicines only and stationery stores deal in stationery items only.

Question 8.
Explain the services offered by wholesalers to manufacturers.
Answer:
Services to Manufacturers-Wholesalersrenderthe following services to manufacturers :
(1) Bulk Buying-A wholesaler collects orders from a large number of retailers. He buys goods in large quantities and avails of discounts on bulk buying.

Therefore, the producer is saved from the trouble of collecting small orders from a large number of widely scattered retailers. He also saves the costs of packing and despatching goods in small lots. He need not spend much on advertising and publicity.

(2) Concentration on Production – A wholesaler relieves the producer from the botheration of finding buyers for his goods. The manufacturer can, therefore, pay undivided attention to the main task of manufacturing. The wholesaler facilities round the year production by the manufacturer.

(3) Economies of Scale – The wholesalers facilities large-scale production of goods and reap the economies of large-scale operations. A wholesaler buys goods in bulk and thereby enables the manufacturer to carry on large-scale production. Large-scale production results in lower cost of production per unit. By operating on a large scale the wholesaler relieves the manufacturers of innumerable duties which they find difficult and expensive to perform.

(4) Regular Production – Wholesalers often place advance orders before the seasonal demand and keep stock of seasonal products. In this way they enable manufacturers to continue production steadily even during periods of slack demand. The wholesaler keeps the goods in his own warehouse till are required in the market.

(5) Storage – By buying goods in bulk, a wholesaler relieves the producer of the need for carrying large stocks. Producers do not have to make arrangements for warehousing because goods are lifted by wholesalers immediately after they are produced. Producers are assured of a quick turnover of their capital because they do not have to block their capital in carrying large stocks.

(6) Market Information – Wholesalers keep the manufacturers aware of market demand, competitive products, changes in tastes and fashions in the market. They make suggestions about the type and quality of goods required by the consumers. Such information enables the manufacturers to regulate production in accordance with the changing requirements of the market. A manufacturer can then make necessary improvements in his products. ”

(7) Price Stability – Wholesalers stock goods during the slack season and sell them during the period of peak demand. As a result, they prevent violent fluctuations in prices. ,

(8) Financial Assistance-Wholesalers make prompt and sometimes even advance payments to manufacturers. Therefore, producers have to invest lesser capital in their business. The manufacturer need not block his capital in the stocks which are immediately purchased by the wholesalers.

Question 9.
What are the services offered by retailers to wholesalers and consumers?
Answer:
The invaluable services that the retailers render to the wholesalers and producers are given as hereunder:
1. Help in the distribution of goods:
A retailer’s most important service to the wholesalers and manufacturers is to provide help in the distribution of their products by making these available to the final consumers, who may be scattered over a large geographic area. They thus provide place utility.

2. Personal selling:
In the process of the sale of most consumer goods, some amount of personal selling effort is necessary. By undertaking personal selling efforts, the retailers relieve the producers of this activity and greatly help them in the process of actualizing the sale of the products.

3. Enabling large-scale operations:
On account of retailer’s services, the manufacturers and wholesalers are freed from the trouble of making individual sales to consumers in small quantities. This enables them to operate on, a relatively large scale, and thereby fully concentrate on their other activities.

4. Collecting market information:
As retailers remain in direct and constant touch with the buyers, they serve as an important source of collecting market information about the tastes, preferences, and attitudes of customers. Such information is considered very useful in making important marketing decisions in an organisation.

5. Help in promotion:
From time-to-time, manufacturers and distributors have to carry on various promotional activities in order to increase the sale of their products. For example, they have to advertise their products and offer short-term incentives in the form of coupons, free gifts, sales contests, and so on. Retailers participate in these activities in various ways and, thereby, help in promoting the sale of the products.

Services to Consumers:
Some of the important services of retailers from the point of view of Consumers are as follows:
1. Regular availability of products:
The most important service of a retailer to consumers is to maintain the regular availability of various products produced by different manufacturers. This enables the buyers to buy products as and when needed.

2. New products information:
By arranging for effective display of products and through their personal selling efforts, retailers provide important information about the arrival, special features, etc., of new products to the customers, This serves as an important factor in the buying decision-making process of the purchase of such goods.

3. Convenience in buying:
Retailers generally buy goods in large quantities and sell these in small quantities, according to the requirements of their customers. Also, they are normally situated very near to the residential areas and remain open for long hours. This offers great convenience to the customers in buying products of their requirements.

4. Wide selection:
Retailers generally keep stock of a variety of products of different manufacturers. This enables the consumers to make their choice out of a wide selection of goods.

5. After-sales services:
Retailers provide important after-sales services in the form of home delivery, the supply of spare parts, and attending to customers. This becomes an important factor in the buyers ’ decision for repeat purchase of the products.

6. Provide credit facilities:
The retailers sometimes provide credit facilities to their regular buyers. This enables the latter to increase their level of consumption and, thereby, their standard of living.

Long Answer Questions

Question 1.
Itinerants 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:

1. They are small traders operating with limited resources.
2. They normally deal in consumer products of daily use such as toiletry products, fruits and vegetables, and so on.
3. The emphasis of such traders is on providing greater customer service by making the products available at the very doorstep of the customers.
4. As they do not have any fixed business establishment to operate from, these retailers have to keep their limited inventory of merchandise either at home or at some other place.

Question 2.
Discuss the features of the departmental store. How are they different from multiple shops or chain stores.
Answer:
Departmental Store (Meaning) – A departmental store is a large retail establishment having, in the same building, a number of departments each of which confines its activities to one particular line of goods. It deals in a wide variety of merchandise under one roof.

The merchandise is grouped into well-defined departments which are centrally controlled. Thus, a departmental store is a combination of several small stores under one roof and unified control. Everything from a pin to an airplane is the spirit behind a typical department store. In India, some stores include ‘A K. liberally in Mumbai and ‘Spencer’ in Chennai are examples of departmental stores.

Essential Features – The distinctive features of a departmental store are as follows :

(1) Large size – A departmental store is a large retail establishment with huge capital investment. It deals in a wide range of products.

(2) Central location – A departmental store is located in the centre of the city so that people from different parts of the city may easily reach it.

(3) Wide variety – A departmental store deals in a wide range of goods practically from “pinto plane”. It is a complete shopping centre. The merchandise offered for sale is classified into Several classes and each departmental specialise in one line.

(4) Services and amenities – A departmental store provides several facilities such as a post office, restaurant, public telephone, reading room, free home delivery, credit, parking, etc.

(5) Attractive appearance – A departmental store is housed in a big and impressive building which is elegantly furnished and tastefully decorated and easily accessible to customers.

(6) Unified control – All purchases are made centrally while selling is decentralised.

(7) Extensive advertising – A departmental store undertakes advertising and publicity on a large scale to attract customers from far and wide.

(8) Elimination of middlemen – A departmental store buys goods directly from manufacturers. Therefore, it eliminates middlemen.

(9) Centralized buying – Generally purchases are made centrally. This saves time and effort of customers.

(10) Decentralized selling – Sales are decentralized to departments.

Difference between Departmental Store and Chain Stores

Basis	Departmental Store	Chain Stores or Multiple Shop
1. Nature	There is one store with many departments.	There are several shops under this system and the shops are scattered over several places.
2. Variety of goods	It. deals in a large variety of goods to cater the needs of customers.	They deal in one speciali­sed commodity eg., text­iles, cater to social needs
3. Purpose	It provides all types of goods to satisfy all requirements of customers.	They meet only the limited requirements of customers.
4. Location	It is located at a central place in a city and attract customers from far off places.	The chain stores are spread over in many cities, and try to reach to the custo­mers.
5. Customers	High class rich people.	Belong to higher and mid­dle income groups.
6. Advertisement	A departmental store under­takes advertisement at the local level.	The-chain stores undertake advertisement in a wide geographical area
7. Window display	Done in an artistic decorative style which is unique.	Done in an identical man­ner. All shops appear to be similar.
8. Credit Facility	Credit facility may be allowed to reputed customers.	All sales are strictly on cash basis.
9. Risk	Risk is more and concentrated on the store.	Risk is divided over all the shops.
10. Other Facilities	It may provide many allied facilities to customers like restaurant, entertainment, etc.	No allied facility is provi­ded to customers.
11. Flexibility	One line of goods can easily be withdrawn without affect­ing the others.	They cannot close down a particular line of goods without suffering from adverse effects. They have less freedom to adjust to local conditions.
12. Pricing	The prices charged are not fixed and uniform.	Sell goods at fixed and uniform prices.

Question 3.
Why are consumers cooperative 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 co-operative stores generally buy in large quantities, 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:

1. Ease information: It is easy to form a consumer cooperative society. Any ten people can come together to form a voluntary association and get themselves registered with the Registrar of Cooperative Societies by completing certain formalities.
2. Limited liability: The liability of the members in a cooperative store is limited to the extent of the capital contributed by them. Over and above that amount, they are not liable personally to pay for the debts of society, in case the liabilities are greater than its assets.
3. 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.
4. Lower prices: A cooperative store purchases goods directly from the manufacturers or wholesalers and sells them to members and others. The elimination of middlemen results in lower prices for the consumer goods to the members.
5. Cash sales: The consumer cooperative stores normally sell goods on a cash basis. As a result, the requirement for working capital is reduced.
6. 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 local market would be very difficult because of the following points:

1. Non-Availability of Products: Without a local market, the 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.
2. 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.
3. 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 manufacturer’s warehouse.
4. Lack of Variety of Products: Local markets provide consumers with a wide variety of products for choice-based selection. This would not be available in one place in the absence of local markets.
5. 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.

Question 5.
Explain the usefulness of mail-order houses. What type of products are generally handled by them? Specify.
Answer:
Mail Order House :
Meaning – Mail order houses are retail outlets which carry on business through the mail. Mail-order business is also known as “selling through post’ for the retailer and ‘shopping by post’ for the consumer. Under this, the retailers contact the prospective customers through some sort of advertising. Advertising is carried through the press, T.V., or by sending leaflets and catalogues giving the necessary details about the product.

Mail order houses maintain mailing lists of potential customers. Then send the literature about their products through mail. They also mail reply paid cards to prospective customers. When they receive orders, they will procure the goods and despatch them to the customers usually by V.P.P. (Value Payable Post). Sometimes, the goods are sent by railway parcel and the railway receipt is forwarded to the customer by V.P.P.

Many mail-order houses also send the goods ordered through couriers. This type of business is not suitable for all types of products. For example, goods that are perishable in nature or are bulky and cannot be easily handled, are not recommended for mail house trading.

Only the goods that can be graded and standardised, easily transported at low cost, having ready demand in the market and available throughout the year, having least possible competition in the market are suitable for this type of trading.

Mail order business is suitable under the following conditions:

• Goods are identified by brand name and are of standardised quality;
• Goods enjoy popular demand by the customers scattered over wide areas.
• Goods do not require demonstration or special skills in handling and use; and
• Goods are durable and do not get spoiled in the course of transit.

Books, drugs and medicines, sports articles, cosmetics and beauty aids, electronic gadgets of small value, and cameras are some of the goods which are sold through the mail.

The following factors have contributed to the growth of mail-order business:

• growth of postal facilities and development of railways and other means of transportation;
• increased circulation of newspaper and journals; and
• the growing desire of people to have wider varieties and better qualities of goods.

In India, the mail order business is not so popular because of poverty and illiteracy among people, lack of effective advertising, lack of standardised products, and deceitful practices by unscrupulous traders. However, some of the business houses in India have started advertising their product through T.V. to generate interest of the people in their products. They also book orders over the phone. This is also known as teleshopping.

Features – The features of a mail-order house are as under:

(i) No personal contact – Goods are sold without any personal contact between the seller and the buyer. Orders for goods are received and executed by post by approaching the customers through advertisements in newspapers or magazines.

(ii) Mode of payment – Goods are usually sent to customers by V.P.P. (Valued payable post). The postman will deliver the goods after receiving the payment from the buyer. Thus, post office acts as an agent of the mail-order house as it collects payment on behalf of the mail-order house. The goods may be sent through a bank which is instructed to deliver the articles to the customers.

(iii) Role of Brand name — In mail-order business, the customer can’t inspect the goods. He will send the order by describing the brand name and code number of the product he requires.

(iv) Role of advertisement – Advertisement is the backbone of mail-order business. Information about the availability of various products is provided to the prospective customers through advertisement in different media such as Press, Journal and Magazines. All the relevant information about the products such as price features, delivery terms, terms of payment, etc. are described in the advertisement.

(v) Capital requirement – Mail order business can be started with a small amount of capital as there is no need to keep huge stocks. Goods could be manufactured on receipt of orders. Moreover, it is not at all necessary to have a business establishment in some central location. It could be started even at the residence of its proprietor. It can be started with a relatively low amount of capital.

Advantages: Mail order business offers the following advantages to the seller and the buyer:

(i) The buyer needs not travel a long distance to reach the retail store to get the delivery of goods. He can get them at the place of his residence. He is generally given a money-back guarantee. He can return the goods if the goods are not upto the mark.

(ii) The mail-order business houses can be located in less expensive localities. There is no need to maintain a large sales, force and to have showrooms for the display of goods. Thus, the cost of operation of the business is quite low.

(iii) Goods can be procured after receiving orders from the customers. Thus, blocking of capital can be avoided and a businessman can operate with a small investment. It need not require heavy expenditure on building and other infrastructural facilities.

(iv) The seller is able to establish direct touch with his customers. He can directly know the reactions of his customers and satisfy them if they have any grievance or misapprehension. The biggest advantage of mail-order business from the point of view of consumers is that unnecessary middlemen between the buyers and sellers are eliminated.

(v) Mail order business is very much suitable where prospective customers are scattered over a wide area. Under this system, the goods can be sent to all the places having postal services.

(vi) The post office acts as the carrier of goods and the collector of sale proceeds. The chances of bad debts are nil. A businessman can meet the needs of a large number of customers scattered throughout the country with the help of a facility provided by the post office.

Goods suitable for Mail Order Business – Only those goods are suitable for sale through the post which has the following characteristics:

1. Goods should be durable and not perishable.
2. Goods should be standardised or graded.
3. Goods should bear a brand name or trademark.
4. Goods should be easy to handle.
5. Goods should be light and not bulky or heavy.
6. Goods should have a steady and wide demand.
7. Goods should be easily explained to buyers through descriptions or pictures.
8. Goods should be relatively valuable in proportion to weight. Books, footwear, artificial jewellery, watches, readymade garments, fountain pens, toys, hosiery products, and toilet goods are suitable for the mail-order business.
9. Goods which involve the least possible competition in the market, and
10. Goods which can be described through pictures etc are suitable for this type of business. Goods should be easily transported at a low cost.