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Class 11 NCERT Solutions: Chapter 10 Internal Trade Exercise 10.1 (Business Studies)

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Short Answer Questions

Question 1: What is meant by internal trade?

Answer: Internal trade is the trade of buying and selling of goods and services within the borders of a country. Internal trade takes place when goods are purchased from an individual or establishment within a country, such as a neighbourhood shop, a central market, a department store, a mall, or even a door-to-door salesperson or an exhibition. There are no customs or import duties levied on such trade because the goods are part of domestic production and intended for domestic consumption. Payment must be made in the country’s legal tender or any other acceptable currency.

Types of Internal Trade:

1. Wholesale Trade: Wholesale trade is the buying and selling of large quantities of goods and services for resale or intermediate use. Wholesaling refers to the activities of individuals or businesses that sell to retailers and other merchants, as well as industrial, institutional, and commercial users, but do not sell in significant quantities to target consumers. 

2. Retail Trade:  A retailer is a business that sells goods and services directly to the final consumers. The retailer typically purchases goods in large quantities from wholesalers and sells them in small quantities to ultimate consumers. Retail is the final stage of distribution wherein goods are transferred from the hands of manufacturers or wholesalers to the final consumers or users. 

Question 2: Specify the characteristics of fixed shop retailers.

Answer: The retailers selling goods from a permanent place are known as Fixed Shop Retailers. They don’t move from one spot to another to serve their customers. Fixed Shop Retailers are one of the most common types of retailing trade in a market. They are divided into two categories; viz., fixed shop small retailers and fixed shop large retailers. For example, the Kirana stores near our houses are run at a fixed place and provide us with a variety of goods and services. The main advantage of fixed shop retailers is that it provides a wide variety of products in one place and has more trust among people. 

Characteristics of Fixed Shop Retailers:

  • As compared to the itinerant trades, fixed shop retailers usually have much more resources. They even for the most part operate on a pretty large scale. However, the size of fixed shops can vary from small to large. 
  • These stores generally sell a variety of items, including both consumer durables and non-durables. 
  • The fixed shop retailers have more trust and credibility in the minds of people. 
  • They also provide customers with additional services such as home delivery, maintenance, credit facilities, etc. 

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

Answer: Wholesalers buy products in bulk from manufacturers, stock them, and resell them to merchants in small amounts. This bulk purchase of products allows manufacturers to manufacture on a large scale without having to think about storage facilities. Wholesalers provide what is known as place utility by providing warehouses near to delivery centres. Wholesalers not only provide warehousing services such as collection, storage, and security of products, but they also help with marketing and delivery, resulting in time utility.

Question 4: How does market information provided by the wholesalers benefit the manufacturers?

Answer: Wholesalers offer a variety of services to manufacturers and retailers, as well as significant assistance in the distribution of goods and services. They provide both time and place utility by making the goods accessible at a location where they are required and at a time when they are needed for consumption or use.

Manufacturers can create products that meet the requirements of their customers by using this information. The wholesaler’s market information benefits the manufacturer in the following ways:

1. Information about customer preferences and tastes helps manufacturers produce accordingly.

2. Current business conditions help manufacturers in making decisions.

3. The manufacturers can know about the goods in high demand among customers.

4. They also get information on the market’s level of competition based on which they make necessary changes.

Question 5: How does the wholesaler help the manufacturer in availing of the economies of scale?

Answer: A wholesaler acts as an intermediary between manufacturers and retailers. They operate by collecting orders from retailers and passing them on to manufacturers so that they can make bulk purchases. As a result, the producers can produce the goods on a large scale and get benefit from economies of scale.

Wholesalers frequently purchase goods in large quantities from manufacturers. So after a purchase, wholesalers distribute the products in small quantities to retailers for resale. During this process, they offer manufacturers a variety of warehousing services such as collection, storage, marketing, and delivery of products. These services reduce the strain on manufacturers by providing time and place utility, which lets them produce goods on a massive scale and reap the benefits from economies of scale.

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

Answer: 

Basis

Single-line Stores

Specialty Stores

Meaning These are small shops which deal in only one type of product or good. These stores specialise in a single product line.
Range of Product A wide range of products is available in single-line stores. All brands of a product in which they specialise are available in specialty stores.
Located Single-line stores are located in the market. Specialty stores are located in the central place of the market.
Example A garment store with clothes of all sizes for kids, men, and women. A store with all brands of women’s clothing.

Yes, these stores can be identified based on their features. If a fixed shop retailer with a small shop is dealing with only one type of product or good and providing a wide range of that product, then it is a single-line store. If a fixed shop retailer with a store specialises in a single product line, then it is a specialty store.

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

Answer: 

Basis

Street Traders

Street Shops

Meaning Street traders are small retailers who generally sell low-priced consumer items on street. Street shops are the shop situated on the street side or main roads and sell marginal rate items.
Permanent Shops Street Traders don’t have permanent shops. Street Shops are located permanently.
Reliability Street Traders are less reliable. Street Shops are relatively more reliable.
Example Traders dealing in vegetables, newspapers, etc. A neighbourhood grocery store, Xerox shop, etc.

Question 8: Explain the services offered by wholesalers to manufacturers.

Answer: A wholesaler acts as an intermediary between manufacturers and retailers. They operate by collecting orders from retailers and passing them on to manufacturers so that they can make bulk purchases. 

Wholesalers provide numerous services to manufacturers such as:

1. Facilitating Large-Scale Production: Wholesalers collect small orders from a large number of retailers and pass those orders to the manufacturers, and after production, make purchases in bulk quantities. This helps manufacturers to be confident and accurate about the scale of production that is needed at times.

2. Bearing Risk: Wholesalers bear a lot of risks as they collect the orders in their name, purchase goods in bulk, and take responsibility for goods delivered to them. They relieve the manufacturers from the risks associated with falls in price, theft, spoilage, fire, etc. 

3. Financial Assistance: Wholesalers generally make cash payments to the manufacturers for the goods ordered by them. It enables manufacturers to work smoothly as their capital is not blocked in stocks. Sometimes, they advance some amount of money to the manufacturers also with the bulk orders placed by them.

4. Expert Advice: Due to being in direct contact with the retailers, wholesalers are in a position to advise manufacturers about the customer’s taste & preferences, market conditions, competitive activities, etc.

5. Help in the Marketing Function: Wholesalers are in direct contact with the retailers who are in direct contact with a large number of buyers. By this, manufacturers are relieved from many marketing activities, which enables them to concentrate on production activity.

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

Answer: Retailers are business enterprises involved in selling goods and services directly to the ultimate customer. They buy goods from wholesalers in large quantities and sell them in smaller quantities to the ultimate customer. 

Services offered by retailers to wholesalers are as follows:

1. Helps in the distribution of goods: Retailers are last in the distribution chain. With the help of retailers, finished products are delivered to the final consumers. Wholesalers cannot reach directly to the end consumers as they are less in number, so they need retailers who can directly engage with the end consumers.

2. Collecting market information:  As retailers are in direct contact with the final customers, they can gather information from them and pass it to the wholesalers about the tastes, preferences and attitudes of customers. With the help of such information, important marketing decisions can be taken.

3. Enabling large-scale operations: Retailers allow wholesalers to be free from the tension of individual sales to final consumers. They can focus on other necessary activities. 

Services offered by retailers to consumers are as follows:

1. Regular availability of products: The most important aspect of a retailer is to maintain the regular availability of products for the end consumers, which enables the buyers to choose from various products. 

2. New product information: Retailers are the last element in the distribution channel. They give information to consumers about new products or services through the effective display of products and personal selling efforts.

3. Convenience in buying: Retailers are situated very near to residential areas and operate for long hours, which gives convenience to the customers as they can buy products at times they need.

Long Answer 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 traders are retailers who do not have a set location where they operate. That is, they don’t have a shop where they sell their products. They are also known as mobile vendors because they move from place to place selling their goods. They are generally located on street corners, and they frequently relocate in search of more customers. They usually offer low-cost, non-standard goods.

The following factors contribute to itinerant traders’ survival in the spite of stiff rivalry from large-scale retailers:

1. They generally deal in everyday consumer goods such as toiletries, fruits and vegetables, and so on.

2. The emphasis of such traders is on providing better customer service by making products available at the customers’ doorstep.

3. These retailers keep limited inventory at home or some other place, as they do not have a fixed business location to operate.

4. These retailers can even go to places where it is difficult for a shop to sustain itself because of less demand for goods from the customers.

5. They can also provide services in remote areas.

Question 2: Discuss the features of a departmental store. How are they different from multiple shops or chain stores?

Answer: A department store is a large establishment that sells a wide range of products organised into distinct departments in order to satisfy nearly every customers’ requirements under one roof. It is divided into several departments, each of which focuses on a specific type of product. For Example: Within a store, there may be separate departments for toiletries, medicines, furniture, groceries, electronics, clothing, and dress material.

Features of Departmental Stores

The features of Departmental Stores are as follows:

1. Excellent Services: A modern department store may include all amenities such as a restaurant, a travel and information bureau, a phone booth, restrooms, and so on. As a result, they strive to provide the excellent service possible to a higher class of customers for whom price is secondary.

2. Centralised Locations: These stores are generally located in a central location in the heart of a city, where they can serve a large number of customers.

3. Corporate Status: As these stores are so large, they are usually organised as a joint stock company operated by a board of directors. A managing director is in charge, who is assisted by a general manager and several department heads.

4. Elimination of Middlemen: A department store performs both retailing and warehousing functions. They buy directly from manufacturers and have their own warehouses. As a result, they contribute to the elimination of undesirable middlemen between producers and customers.

Difference between Departmental Stores and Multiple Stores

Basis

Departmental Stores

Multiple Stores/Chain Stores

Location They are centrally located in the city. They are located in every important locality of the city.
Range of Products They deal in a large variety of products as the main aim is to satisfy all the needs of customers under a single roof. They are specialised in only one line of product.
Services Offered They provide several services to the customers, like free home delivery, liberal credit, etc. They provide limited services with respect to guarantee and repair of the products.
Pricing They do not follow a uniform pricing policy for all departments. Discount is offered on certain products to clear the stock. They maintain a uniform pricing policy and sell the products at fixed prices.
Class of Customers Customers belonging to higher income groups are attracted by such stores. Customers from all income groups are attracted by them.
Credit Facilities Credit facilities are provided to regular and reputed customers. No credit facilities are provided as all sales are made in cash only.
Flexibility There is more flexibility as policies can be changed as per the requirements. There is less flexibility as branch managers have to operate as per instructions received from the head office.

Question 3: Why are consumer cooperative stores considered to be less expensive? What are its relative advantages over other large-scale retailers?

Answer: Consumer Cooperative Stores are enterprises established, owned, and managed by a group of consumers sharing common interests. In simple words, it is an association of consumers who voluntarily come together to satisfy their common needs along with safeguarding their interests as a consumer.

The role of middlemen is removed in such societies because products are purchased straight from manufacturers or wholesalers and sold to society members at reasonable prices. Because consumer cooperative stores do not seek profit, the prices for goods provided by them are significantly cheaper than those of retail shops. In comparison to large-scale retailers, the money required to establish a consumer cooperative organisation is extremely low. As a result, consumer cooperative stores require little investment and sell lower-priced goods making them less expensive than other stores.

Advantages of Consumer Cooperative Stores

1. Limited Liability: One of the most highlighted benefits of Consumer Cooperative Stores is that the member enjoys limited liability. This means their liability is limited to the extent of their capital contribution. Hence, they are not personally liable for the payment of debts of the store or their personal assets will not be used to pay off the debts. 

2. Prevents Exploitation: The main objective of Consumer Cooperatives Stores is to eliminate the intervention of the middlemen, who add up their profit to the price of goods and exploit innocent consumers.

3. Quality Products: Consumer Cooperatives Stores ensure that the consumers get supreme quality goods at the best reasonable price by eliminating the role of middlemen.

4. Regular Supply: The members of the Consumer Cooperative Stores have a direct link with consumers, hence, they can predict the upcoming demands of the consumers more efficiently and can ensure a regular supply of the goods.

5. Supply as per Choice: Cooperatives, while dealing with the consumers, directly grab the knowledge about the present choices and preferences of the consumers in the market, which help them satisfy the consumers.

6. Convenient Location: These stores are located in convenient places, usually near residential areas where consumers can easily purchase goods as per their choice. 

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

Answer: Retailers are business enterprises involved in selling goods and services directly to the ultimate customer. They buy goods from wholesalers in large quantities and sell them in smaller quantities to the ultimate customer. Apart from buying and selling, retailers are also involved in promotions, after-sales services and are information providers. 

Many problems can arise if there is no retail store because these serve as a link between manufacturers/retailers and consumers by purchasing products from supermarkets/retailers and selling them directly to consumers. Life will be difficult for residents if no retail stores are available at that time. They will have to travel a long distance to purchase a basic product or for daily use. One can purchase certain goods as needed if other retail shops are within walking distance of their home. If there are any shops nearby, they can easily find medicine and other essential things in an emergency. Life can be very challenging otherwise.

Some of the facilities provided by local shops that a consumer will not be able to perceive in their absence are:

1. Regular Availability of Products: The most important aspect of a retailer is to maintain the regular availability of products for the end consumers, which enables the buyers to choose from various products. 

2. New Product Information: Retailers are the last component in the distribution channel. They give information to consumers about new products or services through the effective display of products and personal selling efforts.

3. Convenience in Buying: Retailers are situated near residential areas and operate for long hours, which gives convenience to the customers as they can buy products at times they need.

4. Wide Variety of Products and Services: Retailers offer a wide range of products and services to consumers. They can select products and services based on their use, preference, needs, and choice. Having various options to choose from is always good from the point of view of a customer.

5. After-sales Services: Retailers provide important after-sales services that include home delivery, supply of spare parts, pre-installation services, online support, etc., which becomes a vital element in the customer’s decision to repeat the purchase of the products.

6. Provide Credit Facilities: Sometimes, retailers offer products on credit to their regular customers, which increases customers’ level of consumption and satisfaction, and ultimately improves their standard of living.

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

Answer: Some goods are made in a specific location, but their customers live far away from the place of their production. With the help of middlemen, these products can be made available to customers. However, to make the transaction more easy, short, and without the involvement of middlemen, Mail Order Houses are used. Under this system, the goods are purchased by the customer directly by mail. The goods are introduced to consumers with the help of advertisements and then interested customers place their mail orders, and the postal service delivers the goods to their homes. All transactions for sale and purchase, including payments, are made through the mail.

The usefulness of Mail Order Houses:

Mail Order Houses are useful in the following ways:

1. Capital Requirement is Limited: There is no investment required for shops, furniture, or stock, as the business can be started with a small initial investment. Money is generally received along with the order in this retail trading method. If it is not received in advance, it’s received along with the delivery of the items. Hence, little capital is needed to run this kind of business.

2. Elimination of Middlemen: Since the buyer and seller are in direct communication, middlemen are not required. It saves the amount of commission due to middlemen being saved for the sellers. 

3. No Fear of Bad Debts: Generally, the business has to face the problem of bad debts. But, there is no possibility of losses due to bad debts in this type of retail trade because all sales are made in cash. 

4. Wide Reach: The work is not limited to any one state or city. There is no set geographic boundary for the market, which may encompass the entire nation or even some other countries. This results in increased sales. This company can reach a large market because it can deliver goods to any location with postal service.

5. Convenience: In the mail order house system, the goods are delivered to the customer’s door. Customers benefit greatly from this because they no longer need to visit the shop, which is very convenient. This saves time and money for the customers to visit the shop and purchase the goods.

Businessmen cannot sell all kinds of goods through mail order business. The characteristics of goods suitable for the Mail Order Business are as follows:

  • The goods should be standardised and graded. 
  • The goods should not be perishable.
  • The goods should not be bulky as it would be difficult to handle them.
  • The goods should be available in large quantities throughout the year.
  • The goods can be easily transported at a low cost.
  • The goods should be capable of easy description.
  • The goods should have ready demand in the market.

For example, Beauty Products, Health Products, Office Supplies, Clothing, etc.



Last Updated : 21 Mar, 2023
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