Internal trade - Class 11 Business Studies - Chapter 10 - Notes, NCERT Solutions & Extra Questions
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Extra Questions - Internal trade | NCERT | Business Studies | Class 11
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What is meant by internal trade?
Internal trade refers to the buying and selling of goods and services within the boundaries of a nation. Unlike international trade, it does not involve cross-border transactions and is not subject to customs duties or import taxes.
Specify the characteristics of fixed shop retailers.
The characteristics of fixed shop retailers include maintaining a permanent place of business, offering a more stable shopping environment, and potentially having greater resources which often translates into a larger variety of goods. They do not move around like itinerant traders and are able to provide additional services such as credit facilities and personal customer service.
What purpose is served by wholesalers providing warehousing facilities?
Wholesalers providing warehousing facilities serve the critical purpose of storing goods until they are needed by retailers or consumers. This not only helps in balancing supply and demand but also reduces the burden on manufacturers to store large quantities of products, assisting in reducing the costs associated with storage and inventory management.
How does market information provided by the wholesalers benefit the manufacturers?
Market information provided by wholesalers can immensely benefit manufacturers by offering insights into consumer preferences, market trends, and competitive strategies. This information helps manufacturers tailor their production according to market needs, ensuring better sales and customer satisfaction.
How does the wholesaler help the manufacturer in availing the economies of scale?
Wholesalers help manufacturers in availing economies of scale by purchasing goods in large quantities. This allows manufacturers to produce goods on a larger scale which typically reduces the per-unit cost of production, thus enhancing the overall efficiency and potentially leading to lower prices for consumers.
Distinguish between single line stores and speciality stores. Can you identify such stores in your locality?
Single line stores focus on a single type of product but may offer a variety of brands or models within that product type, such as a store exclusively selling electronics. Speciality stores, on the other hand, focus more narrowly, often on a single brand or a tightly defined product range, like a store specializing only in Apple products. You might find single line stores like a general electronics retailer, whereas a speciality store might be a branded boutique in your locality.
How would you differentiate between street traders and street shops?
Street traders are mobile vendors who sell their merchandise from carts or temporary setups at busy locations, focusing on direct and instant sales often from pedestrian traffic. Street shops are more stationary, often set up on the pavement but with a permanent physical structure, offering a somewhat consistent location where customers can return.
Explain the services offered by wholesalers to manufacturers.
Services offered by wholesalers to manufacturers include:
- Facilitating large-scale production by purchasing goods in bulk.
- Bearing risk associated with storage and changes in market conditions.
- Providing financial assistance by offering credit or upfront payments.
- Offering expert advice and market information beneficial for planning and strategy.
- Warehousing, thus reducing storage overhead for manufacturers.
- Assorting goods from multiple sources to meet retailer needs.
What are the services offered by retailers to wholesalers and consumers?
The services offered by retailers to wholesalers and consumers include:
- For wholesalers, retailers help in distributing goods to the end consumer and providing feedback on consumer demand.
- For consumers, retailers ensure the availability of a wide range of products, offer convenience in shopping, offer credit facilities, provide product information, and often support after-sales services and returns.
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.
Itinerant traders continue to thrive in India despite the rise of large-scale retailers due to several key reasons. Primarily, their flexibility allows them to move directly to consumers across diverse locations, effectively reaching areas underserved by larger retailers. They offer convenience by selling goods at the consumer’s doorstep, fulfilling immediate and localized needs. Additionally, itinerant traders typically deal in low-priced items catering to the budget constraints of lower-income groups, providing affordable options that might not be available in big stores. The personal relationships they build with their customers enhance customer loyalty, which is not easily replicated by larger, impersonal retail chains. Lastly, their low overhead costs enable them to offer competitive pricing, maintaining their relevance in the market. These factors collectively ensure the enduring presence and success of itinerant traders in India's diverse market landscape.
Discuss the features of a departmental store. How are they different from multiple shops or chain stores.
Departmental stores are large retail establishments offering a wide variety of products, categorized into distinct departments within a single building, aimed at providing an all-in-one shopping experience. Key features include varied product offerings, centralized location, large scale operations, enhanced customer services like personalized assistance, and promotions. They usually form as joint stock companies managed by multiple departments and focus on high consumer service levels, including conveniences like restaurants and home delivery.
Multiple shops or chain stores, on the other hand, are networks of branches offering standardized goods across various locations. They concentrate on high-volume, uniform products, ensuring consistent quality and pricing, operated under centralized procurement and policy directives. Unlike departmental stores, they offer limited customer services, emphasize cash sales, and have limited product lines, targeting broader consumer segments.
Why are consumer cooperative stores considered to be less expensive? What are its relative advantages over other large scale retailers?
Consumer cooperative stores are considered to be less expensive due to their unique structure and operational objectives. These stores are owned, managed, and controlled by consumers themselves, aiming to reduce the number of middlemen involved, which lowers the markup on goods. By purchasing directly from producers and wholesalers, they eliminate intermediary costs and pass the savings directly to consumers.
Relative advantages over other large-scale retailers include democratic management, where each member has equal voting rights, offering a fairer system. These stores focus on lower prices rather than profits and provide goods of good quality at cheaper rates. Also, profits are returned to members as bonuses or reinvested for community welfare, enhancing community development and member benefits.
Imagine life without your local market. What difficulties would a consumer face if there is no retail shop?
In the absence of a local market, consumers would face significant challenges. Primarily, they'd contend with the inconvenience of travelling long distances to buy basic necessities, leading to increased time and transportation costs. The lack of immediate access to essential goods would be a serious issue, especially for urgent or everyday needs. Additionally, the absence of personalized service that local shopkeepers typically provide, such as product recommendations and credit facilities, would be sorely missed. Moreover, the variety and options for price comparisons would diminish, potentially leading to higher costs. Overall, without local retail shops, the shopping experience would become more cumbersome and less consumer-friendly.
Explain the usefulness of mail orders houses. What type of products are generally handled by them? Specify.
Mail order houses are retail outlets that sell their merchandise through mail without direct personal contact with buyers. This format offers several advantages, including limited capital requirements as these businesses do not require significant expenses on physical stores. It also eliminates middlemen, benefiting both seller and consumer through reduced prices. Additionally, wide reach is a key feature, allowing delivery to remote areas facilitated by postal services, enhancing convenience for customers. Mail order houses typically handle products that are easy to transport, non-perishable, and have standardized packaging. Suitable products include books, clothing, small electronics, and cosmetics, which can be efficiently described and sold through catalogues or online platforms.
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Comprehensive Notes on Internal Trade for Class 11 Students
Introduction to Internal Trade
What is Internal Trade?
Internal trade refers to the buying and selling of goods and services within the boundaries of a nation. This kind of trade includes transactions that occur in local shops, markets, departmental stores, malls, and even from door-to-door salespersons.
Importance of Internal Trade
The cornerstone of a nation's economy, internal trade enables the exchange of goods and services, contributing to overall economic growth. It ensures a balanced distribution of products across the country and plays a critical role in the efficient utilisation of resources.
Types of Internal Trade
Wholesale Trade
Definition and Characteristics
Wholesale trade involves purchasing goods in large quantities for resale or intermediate use. Wholesalers typically buy bulk goods from manufacturers and sell them in smaller lots to retailers or industrial users.
Services Provided by Wholesalers to Manufacturers
- Facilitating Large Scale Production: Consolidate small orders from various retailers.
- Bearing Risk: Store goods and assume risks related to price fluctuations, theft, and spoilage.
- Providing Financial Assistance: Often pay manufacturers in cash, reducing capital blockage.
- Expert Advice: Offer insights into market trends and consumer preferences.
- Help in Marketing: Distribute goods to many retailers.
- Facilitating Continuity: Purchase goods year-round, ensuring steady production.
- Storage: Offer warehousing services, reducing manufacturers’ storage requirements.
Services Provided by Wholesalers to Retailers
- Availability of Goods: Maintain adequate stock.
- Marketing Support: Provide advertising and sales promotions.
- Grant of Credit: Extend credit facilities to retailers.
- Specialised Knowledge: Advise on product features, pricing, and store display.
- Risk Sharing: Purchase in bulk and sell in small quantities to mitigate risks.
Retail Trade
Definition and Characteristics
Retail trade involves selling goods directly to the ultimate consumers. Retailers purchase products from wholesalers and sell them in smaller quantities to consumers, making it the final stage in the distribution process.
Services Provided by Retailers to Manufacturers and Wholesalers
- Helping Distribution of Goods: Reach consumers scattered across a geographic area.
- Personal Selling: Facilitate personal interactions and sales.
- Enabling Large Scale Operations: Allow manufacturers and wholesalers to focus on large-scale sales.
- Collecting Market Information: Gather insights into consumer preferences.
- Help in Promotion: Participate in promotional activities.
Services Provided by Retailers to Consumers
- Regular Availability of Products: Ensure continuous stock of various products.
- New Product Information: Inform consumers about new products.
- Convenience of Buying: Edit fast consumption patterns with extended store hours.
- Wide Selection: Provide various products.
- After-Sales Services: Offer home delivery and spare parts.
- Providing Credit Facilities: Offer credit to regular buyers.
Classification of Retailers
Itinerant Retailers
Examples of Itinerant Retailers
- Peddlers and Hawkers: Sell goods door-to-door or at marketplaces.
- Market Traders: Open shops at different locations on specific days.
- Street Traders (Pavement Vendors): Sell goods at busy areas such as railway stations.
- Cheap Jacks: Set up temporary shops in business localities.
Characteristics of Itinerant Retailers
- Operate with limited resources.
- Deal in daily-use consumer products.
- Focus on customer convenience by delivering to their doorstep.
- Maintain limited inventory.
Fixed Shop Retailers
Small Shop Retailers
- General Stores: Stock daily-use products like groceries and toiletries.
- Speciality Shops: Focus on specific products like children's garments or electronics.
- Street Stall Holders: Sell inexpensive items at street corners and other busy places.
- Second-Hand Goods Shops: Deal in used products like books, furniture, and clothes.
- Single Line Stores: Sell one category of products, such as ready-made garments.
Large Stores
-
Departmental Stores
- Offer various products under one roof.
- Advantages: Attracts many customers, offers buying convenience, multiple services, economies of scale.
- Limitations: Lack of personal attention, high operating costs, potential for high losses, inconvenient location.
-
Multiple Shops or Chain Stores
- Operate a network of retail outlets.
- Advantages: Economies of scale, elimination of middlemen, no bad debts, efficient goods transfer.
- Limitations: Limited product selection, lack of employee initiative, no personal touch, difficulty in adapting to demand changes.
Diagram: Types of Retailers
graph TD
A[Retailers] --> B["Itinerant Retailers"]
A[Retailers] --> C["Fixed Shop Retailers"]
B --> D["Peddlers and Hawkers"]
B --> E["Market Traders"]
B --> F["Street Traders (Pavement Vendors)"]
B --> G["Cheap Jacks"]
C --> H["Small Shop Retailers"]
C --> I["Large Stores"]
H --> J["General Stores"]
H --> K["Speciality Shops"]
H --> L["Street Stall Holders"]
H --> M["Second-Hand Goods Shops"]
H --> N["Single Line Stores"]
I --> O["Departmental Stores"]
I --> P["Multiple Shops or Chain Stores"]
Modern Retail Outlets
Mail Order Houses
- Operation: Sell goods through the mail without direct contact.
- Advantages: Limited capital requirement, eliminates middlemen, no bad debts, wide reach, provides convenience.
- Limitations: Lack of personal contact, high promotion cost, no after-sales service, no credit facilities, delayed delivery, potential for abuse, reliance on postal services.
Consumer Cooperative Stores
- Formation: Owned and managed by the consumers themselves.
- Advantages: Easy formation, limited liability, democratic management, lower prices, cash sales, convenient location.
- Limitations: Lack of initiative, shortage of funds, lack of patronage, lack of business training.
Super Markets
- Characteristics: Large retail units selling a variety of consumer goods with a focus on low price appeal, wide variety, self-service, and high sales turnover.
- Advantages: Convenience, central location, wide selection, no bad debts, benefits of scale.
- Limitations: No credit facilities, lack of personal attention, mishandling of goods, high overhead costs, significant capital required.
Vending Machines
- Role: Useful for selling pre-packed, low-priced, high-turnover products.
- Advantages: Convenience, operates 24/7, reduces labour costs.
- Limitations: High initial and maintenance costs, limited product inspection before purchase.
Chambers of Commerce and Industry
Role in Promoting Internal Trade
Chambers of Commerce and Industry like ASSOCHAM, CII, and FICCI actively work to promote internal trade by interacting with the government and ensuring favourable policies for businesses.
Key Functions and Contributions
- Reduce hindrances to interstate trade.
- Simplify tax structures and introduce transparency.
- Promote sound infrastructure development.
- Advocate for flexible labour legislation.
GST and Internal Trade
Introduction to GST
Implemented on 1st July 2017, GST aims to simplify the tax structure by replacing multiple indirect taxes with a single tax system, thereby promoting a unified market.
Key Features of GST
- Applicable throughout the country.
- Based on the principle of destination-based consumption tax.
- Four tax slabs: 5%, 12%, 18%, and 28%.
- Allows input tax credit to reduce the cascading effect.
Impact of GST on Internal Trade
GST simplifies interstate trade, reduces the burden of multiple taxes, enhances tax compliance, and aims to reduce the overall cost of goods and services.
Benefits of GST for Business and Consumers
- Reduces the overall tax burden.
- Promotes a harmonised national market.
- Increases economic activity and employment opportunities.
- Provides higher disposable income for consumers.
Conclusion
Internal trade is an essential aspect of a nation's economy, ensuring the efficient distribution of goods and services. Understanding the types of internal trade, the roles of wholesalers and retailers, and modern retail outlets are crucial for Class 11 students. Additionally, the introduction of GST has significantly impacted internal trade, aiming to simplify taxes and promote economic growth.
FAQs
Common Questions about Internal Trade
- What is internal trade?
- What are the types of internal trade?
- What is the difference between wholesale trade and retail trade?
- What services do wholesalers provide to manufacturers?
- How do wholesalers assist retailers?
- What roles do retailers play in the economy?
- What are the different types of retailers?
- What are itinerant retailers?
- What are fixed shop retailers?
- What is the significance of Chambers of Commerce in promoting internal trade?
- What are the characteristics of departmental stores?
- What are the advantages and disadvantages of multiple shops or chain stores?
- How do mail-order houses operate?
- What are the advantages and limitations of consumer cooperative stores?
- What are the characteristics of super markets?
- What role do vending machines play in retail trade?
- How does the implementation of GST affect internal trade?
- What are the key features of GST?
- How does internal trade contribute to the economy?
- How do consumer cooperative stores function?
For an in-depth understanding, please refer to the detailed sections above.
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