O level commerce notes

Production

Production is the provision of goods and services to satisfy human needs and wants.

Goods

Goods are tangible items.They can be classified as follows:

1.Durable Goods

These are goods which last for a long time eg cars.

2.Non durable Goods

These are goods with short life span eg food.

3.Consumer Goods

These are finished goods ready for use.

Producer

Those involved in obtaining raw materials or manufacturing goods. Those who offer services and trading.

Consumer

The end users of the product.

Stages of Production

  1. PRIMARY
    • obtaining raw materials eg farming,mining.
  2. SECONDARY
    • manufacturing and proccessing ie raw materials into finished goods.
    • Construction eg assembling parts into finished goods.
  3. TERTIARY
    • trade,banking,insurance,warehousing,communication
    • direct services eg teaching.

Forms of Production

  1. DIRECT PRODUCTION
    • this is when one produces goods and services for own consumption
    • Advantages
      • saves money,makes your ow style,goods are produced according to one’s taste,leads to self satisfaction,full use of resources,saves on labour costs
    • Disadvantages
      • poor quality goods are produced,lake of other related skills,does not satisfy basic needs,lake of variety,it takes long to complete goods.
  2. INDIRECT PRODUCTION
    • involves division of labor and specialization.
    • Advantages
      • goods are produced in large quantities,there is division of labor,goods produced are of high quality,leads to wide range of products.

Division of Labour

Refers to the breakdown of work or trade activities into individual tasks.eg cotton farmers,ginery,textile industries

Benefits of Division of Labour

  1. More goods are produced for various markets.
  2. Mass production has enabled people to afford different type of goods.
  3. Large scale production has resulted in more people being employed.
  4. Goods are produced at faster rate.

Disadvantages of Division of Labour

  1. It leads to interdependent of workers..any disruption in any party may affect the whole process.
  2. Goods produced are standardized.
  3. Tasks become repetitive and boring.
  4. Lack of job satisfaction.

Mass production

The making of goods in large quantities and provision of services in large scale.

Advantages of Mass Production

  1. Leads to low cost of production resulting in low prices.
  2. Goods are always available.
  3. Standard of living is improved
  4. Leads to simplification of processes.
  5. Leads to specialization of workers.
  6. Leads to trade.

Standardisation

The making of identical goods eg cars,stoves etc.

Specialization

  • Doing a job in which one is good at.
    • ADVANTAGES
      • Workers and firms became experts.
      • Workers gain more skill.
      • Workers gain specific skills faster.
      • Leads to trade of surplus goods .
      • Development of technology has progressed at a faster rate.
      • Leads to low cost of production.
      • People choose the work they like.
  • DISADVANTAGES
    • The work becomes repetitive and boring.

Factors of Production

  1. LAND
    • The site in which production is taking place including all the natural resources being used in the production.
      REWARD:rent
  2. LABOR
    • The effort put by people in production of goods can be physical or mental.
      REWARD:wages and salaries.
  3. CAPITAL
    • wealth put aside for the production of further wealth eg money ,plant and equipment.
      REWARD:interest
  4. ENTREPRENEURSHIP/ORGANIZATION/ENTERPRISE.
    • The ability to run business.requires people who are willing to take risks in investing money,time and effort.
      REWARD:profit.

Wholesale Trade

The wholesale trade includes all the various activities that involves the selling of goods to traders for resale to the final user(consumer). The wholesalers buy goods in bulk from several manufactures which they store in their warehouses till the goods are needed. They sale to retailer in less bulk.
Manufacture→wholesaler→retailers→consumer.

Functions of a Wholesaler to Retailer

  • The wholesaler sells goods to retailers in small quantities.
  • Provides retailers with a wider choice of goods obtained from numerous manufactures.
  • Informs retailers of new products development.
  • Receives complains and suggestions from retailers.
  • Stores goods.
  • Evens out the flow of commodities especially for seasonal goods.
  • Offers credit facilities to retailers.
  • Undertakes the following processes..blending,branding,packaging,bottling.
  • Delivers goods to retailers.
  • Advises retailers on display technics and store loyalty.

Functions of a Wholesaler to Producer

  • Collects orders from numerous retailers.
  • Provides manufactures with market info on consumer wants and competition activities.
  • Stores finished products.
  • Clears manufacturer’s production line.
  • Bears risks.
  • Advertises gods on behalf of the manufacturer.
  • Provides a ready market for manufactures.
  • Finances manufactures by paying cash.

Functions of a Wholesaler to Consumer

  • The wholesaler insures a steady flow of goods to consumers.
  • Steadies prices of goods for consumers.
  • Advertises goods.
  • Provides a variety of goods.
  • Informs consumers of new products.
  • Takes consumer complains to the producer

Types of Wholesalers

  1. CASH AND CARRY WHOLESALERS.
    • Sells goods on cash and carry basis.
    • Sell both to retailers and consumers.
    • Sells goods in bulk and case lots.
    • Use self service method of selling.
    • Displays goods.
    • Have checkout points.
    • Have security measures.
    • Sell at low prices.
    • Sell household goods.
    • Have parcel counters.
    • Sell a variety of products.
    • Provides trolleys and baskets.
    • Sell fast moving goods.
    • Serve local markets.
  2. TRADITIONAL/GENERAL WHOLESALERS.
    • Provide a wide range of products.
    • Stores goods.
    • Pay cash to manufactures.
    • Sell goods on credit to retailers.
    • Employ sales representatives.
    • Provides transport to retailers.
    • Bear risks.
    • Steady prices for consumers.
  3. SPECIALIST WHOLESALERS.
    • Specialists on one line of products.
    • Offers expert advise to customers on the product.
    • Provide any other services provided by general wholesaler.
  4. COOPERATIVE WHOLESALERS SOCIETY.
    • formed by producers or cooperative retail society.
    • Buy from producers.
    • Can produce own goods.
    • Buy in bulk from farmers prices.
    • Sell to cooperative members.
    • Each member contributes capital.
    • Surplus is shared among members.
    • Normally sell perishables.
    • Provide variety of goods.
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By: T.Titus Nyakudyara
Twitter: @NyakudyaraTitus

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