Chapter 10 Internal Trade NCERT SOLUTION CLASS 11TH BUSINESS STUDIES | EDUGROWN NOTES

Short answer Type Question

Q.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. Purchases of goods from a local shop, a mall or an exhibition are all examples of internal trade.No custom duty or import duty is levied on these goods and services. It can be classified into two broad categories: wholesale trade and retailing trade.

Q.2 Specify the characteristics of fixed shop retailers.

Answer: The characteristics of fixed shop retailers are:
→ They have greater resources and operate at a relatively large scale as compared with the itinerant traders.
→ These retailers deal in different products, including consumer durables as well as non-durables.
→ They have greater credibility in the minds of customers.
→ They are in a position to provide greater services to the customers such as home delivery, repairs, credit facilities etc.

Q.3 What purpose is served by wholesalers providing warehousing facilities?
Answer: Two purpose is served by wholesalers providing warehousing facilities in following ways: → Wholesalers reduces the burden of manufacturers of providing for storage facilities for the finished products. Warehousing by wholesalers also 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.
Q.4 How does market information provided by the wholesalers benefit the manufacturers?
Answer: As the wholesalers are in direct contact with the retailers, they provide information and advice the manufacturers about various aspects including customer’s tastes and p.references, market conditions, competitive activities and the features preferred by the buyers. This information helps manufacturers to cater to the changing needs of consumers.

Q.5 How does the wholesaler help the manufacturer in availing the economies of scale?

Answer: Wholesalers collect small orders from a number of retailers and pass on the pool of such orders to the manufacturers and make purchases in bulk quantities. This enables the producers to undertake production on a large scale and take advantage of the economies of scale.

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

Answer:

Single-line stores	Speciality stores
These are small shops that deal in only one product for example, garments or electronics.	These stores deal only in a particular type of product from a selected product line for example, men’s clothing.
These stores offer a wide variety of the product.	These stores generally sell all the brands of the product in which they specialise.
For example: If a store that deals in garments will have a wide variety of clothes in all sizes for men, women and children.	For example, if a store specializes in men’s clothing, then it will have all the brands of men’s garments.

On the basis of these features, we can identify the different types of stores in a locality whether they are single-line stores or speciality stores.

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

Answer:

Street traders	Street shops
Small retailers who generally sell low-priced consumer items on streets.	Shops situated on street sides or main roads.
Do not have permanent shops.	These stores generally sell all the brands of the product in which they specialise.
Stationery items, eatables, newspapers, etc.	Clothes, shoes, grocery items, bakery items, etc.

Q.8 Explain the services offered by wholesalers to manufacturers.

Answer: The services offered by wholesalers to manufacturers are:

→ Facilitating large scale production: Wholesalers purchase goods in bulk from manufacturers and sell them to retailers in small quantities for further resale. This enables the producers to undertake production on a large scale.

→ 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.
→ 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.

→ 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.
→ Help in marketing function: The wholesalers take care of the distribution of goods to a number ofretailers who, in turn, sell these goods to a large number of customers spread over a large geographical area.
→  Facilitate production continuity: The wholesalers facilitate continuity of production activity throughout the year by purchasing the goods as and when these are produced.
→ Storage: Wholesalers take delivery of goods when these are produced in factory and keep them in their godowns/warehouses.

Q.9 What are the services offered by retailers to wholesalers and consumers?
Answer: The services offered by retailers to wholesalers are:
→ Help in distribution of goods
→ Personal Selling
→ Enabling large scale operations
→ Collecting market information
→ Help in promotion of goods and services
The services offered by retailers to consumers are:→ Regular availability of products
→ New product information
→ Convenience of buying
→ Trade selection
→ After sales service
→ Credit facilities

Long Answer Type Question:

Q.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 fixed place of operation. That is, they do not have a shop from where they sell their products. They are also known as mobile traders as they keep moving from place to place in order to sell their products. They are generally found on street sides, and they shift their place of operation in search of more customers. They usually sell low-priced and non-standard goods.
The reasons that itinerant traders survive in spite of the tough competition from large-scale retailers can be attributed to the following factors:

1. It is very easy to set up a small scale retail shop. One person with limited funds himself can start business. He need not associate other persons and no formalities are necessary.
2. A small scale retail shop can be located anywhere. It can provide goods of daily use near the place of consumers. They are not required to travel to big markets.
3. The small scale retailer knows his customers. He can attend to them personally and cater to their individual tastes and needs. Such personalised service is not available in large scale retail stores.
4. Small scale retailers cater to the masses that have limited income and can afford to buy small quantity. In India majority of the population is poor.
5. It is easy to manage and control a small sale retail shop. The owner himself is the manager. He has direct motivation to work hard and increase the efficiency of business. He takes personal interest in his business organisations.
6. Small amount of capital is required to start a small retail shop. People with small amount of funds can start retail business on a small scale.

Q.2 Discuss the features of a departmental store. How are they different from multiple shops or chain stores?
Answer:  Departmental stores are basically large, fixed establishments that deal in a wide variety of products. The following points highlight the features of a departmental store:

1. Central locations: Department stores are generally located in central areas so as to attract a large number of customers.
2. Defined hierarchy: The management in departmental stores follows the same hierarchy that is generally followed in any joint stock company. That is, the top management consists of a board of directors, with the managing director, the general manager and the department managers under it in that order.
3. Absence of middlemen: Departmental stores purchase goods directly from manufacturers and sell them to customers. Thus, they eliminate the role of middlemen.
4. Centralised purchase with decentralised sales: In a departmental store, the purchases from manufacturers are handled by a single division that follows a centralised purchase policy. On the other hand, the sales are handled by the respective sections of the departmental store, which follow a decentralised policy for sales.
   Differences between Departmental stores and Multiple shops
   

Q.3 Why are consumers cooperative stores considered to be less expensive? What are its relative advantages over other large scale retailers?
Answer:  Consumer cooperative stores are formed by groups of consumers to provide goods at reasonable prices to members of consumer societies. In such societies, the role of middlemen is eliminated as these societies purchase goods from manufacturers or wholesalers directly and sell them to society members at reasonable rates. As consumer cooperative stores do not aim at profit-making, the prices of goods offered by them are much lower than the prices of goods at retail shops. Compared with large-scale retailers, the capital requirement for starting a consumer cooperative society is very low. Thus, consumer cooperative stores do not require much investment, and the goods sold by them are priced lower.
The following are some advantages that consumer cooperative stores have over large- scale retailers:

1. Democratic management: Consumer cooperative stores are democratic organisations as they are managed and controlled by elected managing committees of consumer societies. The members of managing committees are elected by the members of consumer societies on the principle of ‘one member, one vote’.
2. Limited liability: The liability of the members of consumer cooperative societies is limited to the amount of shares held by them. Thus, in case a society’s liabilities increase beyond the assets, the members will not be liable to repay the debts using their personal assets.
3. Low price of goods: As the goods offered by consumer cooperatives are directly purchased from manufacturers and wholesalers, the role of middlemen is eliminated. Therefore, consumer societies are able to sell goods at lower prices.