Commerce Notes 1

LEOPOLD TAKAWIRA HIGH SCHOOL
Production
 Production is the provision of goods and services to satisfy human needs and wants.
 Goods are tangible items e.g. desks, meat and cars. They can be divided into different
groups namely :-
i. Durable goods which last for a long time, e.g. cars, furniture and equipment
ii. Non-durable goods have a short life span e.g. perishable goods, clothes and
food stuffs.
iii. Consumer goods which are finished goods ready for use by the end user e.g.
ball-point pens, clothes, bread and refrigerators
iv. Capital/producer goods which are used to produce other goods e.g. tractor,
sewing machine, assembly plant etc.
 Services are intangible items such as education and entertainment
Needs and Wants

 Needs are those goods and services necessary for human survival. We cannot survive
without these e.g. food, shelter, clothes, medical services, education and water.
 Wants are the items people can do without. They are not necessary for human survival.
These include television, radio, home theatres, and computers.
 Producers are involved in obtaining raw materials or manufacturing goods, offering
services and trading.
 Consumers are the end users of these goods and services.
Forms of production
There are two forms of production namely direct production and indirect production
i. Direct production – occurs when one produces goods and services for own consumption
e.g. subsistence farming, building own houses and making own clothes.
Advantages – goods produced to own taste
Saves on labor costs
Leads to self-satisfaction
Disadvantages- poor quality goods produced

Lack of other related skills
Lack of variety
Takes long to complete the job
ii. Indirect production - production of goods for sale e.g. a commercial farmer
Advantages - Goods are produced in large quantities
Goods are of high quality
Leads to specialization, standardization and simplification
Leads to variety
Disadvantages- expensive
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Stages of production
There are three namely primary, secondary and tertiary
Production
Primary secondary tertiary
Obtaining raw a) manufacturing or processing

Materials converting raw materials into
(Extraction) e.g. Finished or semi-finished goods
Farming, mining, e.g. tanning baking, etc.
Fishing, quarrying
b) Construction i.e. assembling parts
Parts into whole units e.g. building houses,
bridges, roads, dams
Commerce Direct services

These are provided
directly to the
consumer e.g.
accounting, health,
entertainment
Aids to trade/Indirect services Trade

 Banking
 Insurance
 Warehousing
 Communication
 Transport
 Advertising home trade foreign trade
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Production activities are classified into two principles namely division of labor and
specialization
i. Division of labor – this refers to the breaking down of work or trade activities
into individual tasks that is into small tasks each one done by different people.
Examples of division of labor include a) division into industries, shoemakers,
butchers, bakers, hairdressers, cotton farmers, tobacco farmers etc. b) division
into processes c) geographical division of labor
Benefits of division of labor

 More goods are produced for various markets
 Large scale production has resulted in more people being employed
 Mass production has enabled people to afford different types of goods e.g.
refrigerators, cars, computers resulting in higher standards of living
 Leads to lower production costs resulting in low prices
 Goods are produced at a faster rate due to automation and mechanization
Disadvantages
 Goods produced are standardized. That is goods produced are identical.
 Tasks may become repetitive and boring
 Mechanization and automation results in unemployment
 Lack of job satisfaction
 due to interdependence of workers any disruption in any part of the production
line will slow down production
ii. Specialization – this is doing a job in which one is experienced and talented in.
Benefits of specialization
 Workers and firms become experts in a particular job or task
 Leads to mass production and may lead to lower prices
 Workers become more proficient and productive in their areas of specialization
 Results in high quality products being produced since firms and countries will
concentrate in areas they are experts in.
 Surplus goods are produced
 Firms are able to employ and utilize specialized machinery and equipment.
Disadvantages of specialization
 Automation leads to unemployment
 Repetitive tasks are boring to workers
 Re-training of specialist workers is expensive
 Results in immobility of labor
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 Due to interdependence of workers any disruption in any part of the production

line will slow down production
Factors of production
These are used in the production process to produce goods and services. There are four
factors of production namely land, labor, capital and entrepreneurship.
i. Land – this factor includes all natural resources used in the production process
e.g. agricultural land, seas, lakes, forests and mineral ore deposits. Reward for
this factor is rent.
ii. Labor - this factor includes all the effort put in by people in the production of
goods. Reward for this factor are wages and salaries
iii. Capital - this includes the wealth put aside for the production of further wealth
e.g. money and equipment invested. Reward for this factor is interest.
iv. Enterprise – this factor includes the ability to run a business and requires people
who are willing and able to take risks in investing, time and effort. Reward for
this factor is profit.
Chain of Production
A chain of command shows the various stages of production a good passes before it reaches
the final user or consumer.
Primary/extractive industry manufacturing/secondary industry wholesaler retailer consumer
An industry is defined as a group of producers who provide a particular range of goods for
which they are usually named after, e.g. the mining industry includes firms involved in the
extraction of raw materials such as gold, copper, asbestos.
Primary or Extractive industry

This produces raw materials from the land and the sea.
Examples of primary industries include farming, forestry, fishing and mining.
Each of these is concerned with the provision of raw materials from natural resources.
Secondary industry
In the secondary industry we have manufacturing and construction.
In the manufacturing industry, raw materials from the primary industry are converted into
semi-finished or finished products. E.g. cow hides are converted into leather, cotton is
converted into wool and wheat is converted into flower.
The construction industry uses products from primary and manufacturing industries to
assemble or build articles. Examples of constructive industries include bricks, timber, flooring
and wool products. Therefore flour (manufactured good) is converted into bread or bricks can
be used to construct houses.
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Commerce
 It is concerned with the buying and selling of goods, exchange of commodities and the
distribution of goods.
 In home trade/ domestic trade manufacturers sell products wholesalers, wholesalers
sell them to retailers then sell them to consumers.
 In foreign trade products are bought and sold from other countries. Exports are goods
sold to other countries. Imports are goods being bought from other countries.
Aids to Trade
As commodities move along the chain of production, commercial services known as aids to
trade help facilitate trade between producers, manufacturers, constructive industries,
wholesalers, retailers and consumers.
1. Banking – keeps money safe

Finances business by loans and overdrafts
Provides foreign currency
Allows payments through the use of cheques
2. Advertising - informs customers of new products

Persuades customers to buy
3. Communication - facilitates information flow between buyers and sellers through

Letters, telephones, fax, email etc.
4. Insurance - protects traders from dangers that could happen to a business

5. Transport - a good transport system road, rail or sea helps ensure the goods
Reach the consumer
6. Warehousing – provides storage for raw materials, finished goods, seasonal
Products and goods in transit.
Domestic Trade
Trade is the buying and selling of goods and services for profit. Wholesalers buy goods in bulk
from manufacturers and sell in small amounts to retailers for resale. Consumers may also buy
directly from wholesalers.
Producer
Wholesaler
Retailer
Consumer
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1. Wholesalers
The main function of wholesalers is to buy goods in large quantities and sell them to retailers or
directly to consumers.
Functions of wholesalers to producers

 Selling – wholesaler sells producer’s goods to retailers and consumers. The wholesaler
also creates new markets for the producer’s products.
 Storage – not all manufacturers can afford warehouses. The wholesaler therefore
provides storage facilities for producers. Producers can therefore concentrate on
manufacturing goods.
 Information gathering – Wholesalers’ relays information on consumer wants and
competitor activities back to the manufacturer
 Reducing risk – wholesaler take risk from producers when they buy goods from them
and store them. While in storage the goods may go bad, go out of fashion or get
destroyed by fire.
 Financing – use of wholesalers’ warehouse reduces costs for producers. Also producers
reduce bad debts losses by dealing with wholesalers directly.
 Advertising – wholesalers advertise goods on behalf of the producer
 Clearing production lines
Functions of wholesalers to retailers

 Breaking bulk - wholesalers by in bulk from producers and sell in smaller quantities to
retailers. Most retailers cannot afford to buy in bulk from producers so they buy in
smaller quantities from wholesalers.
 Buying – wholesalers buy stock from different producers and retailers will buy from
them. This will save retailers the time of buying merchandise from different
manufacturers.
 Grading and packing
 Wholesalers introduces retailers and consumers to new products that they might not
know about
 Blending and branding goods
 Keeping prices stable - wholesalers buy goods when they are plentiful and sell them
when they become scarce. For example wholesalers buy fruits when they are plentiful
and cheaper and sell them when they are scarce.
 Financing – wholesalers help retailers save on warehousing costs by stocking goods for
them. They also extend credit to the retailers by allowing them to buy on credit
 Advising – wholesalers can advise their customers on how to manage their stock.
Wholesalers and retailers can also carry out joint market researches for the benefit of
the consumer.
 Transporting – wholesalers can deliver goods to both near and distant customers at
their own expense.
 Prevent shortages - evens out flow of commodities especially seasonal goods
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Function of the wholesaler to the consumer

 Prevent shortages - evens out flow of commodities especially seasonal goods
 Keeping prices stable - wholesalers buy goods when they are plentiful and sell them
when they become scarce. For example wholesalers buy fruits when they are plentiful
and cheaper and sell them when they are scarce.
 Advertises goods
 Provide variety -– wholesalers buy stock from different producers and consumers will
buy from them. This will save consumers the time of buying merchandise from different
manufacturers
 Informs consumers of new products on the market
 Takes consumer complaints to the producer
Types of wholesalers
1. General wholesalers/ traditional wholesalers

 They handle a variety of goods e.g. they may handle furniture, hardware,
stationery etc.
 Provide transport to retailers
 Bear risks, that is they reduce risk for the producers
 Steady prices for consumers
 Provide variety to consumers and retailers
Advantages of general wholesalers

 Enable consumers and retailers to do all their shopping under one roof by
stocking a wide variety of goods
 Provide transport to retailers
 Allow credit to retailers whom they consider to be credit worthy
Disadvantages of general wholesalers

 do not provide merchandise in greater depth as compared to specialist
wholesalers
 they are not able to keep large stocks of each type of good and therefore
some lines may run out before new orders arrive
 they require large amounts of capital to establish
2. Specialist wholesalers
 These wholesalers concentrate on selling one type of a particular type or
line of product e.g. they may stock electric goods or office stationery
 They are able to provide customers with a deep range of the product
 Offer expert advice to customers
 Usually located in urban centers where large orders enable them to stay
in business
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Advantages of specialist wholesalers

 Since they specialize in one product they are able to offer customers with a
deep range of the product
 Offer after sales service to customers
 They can respond quickly to changes in consumer taste and fashion
Disadvantages of specialist wholesalers

 Do not provide variety to customers. Customers have to visit several
specialist wholesalers to buy all their required goods
 They usually situated in urban centers where rent and rates are high
3. Cash and carry wholesalers

 Sell goods on a cash and carry basis
 They do not extend credit facilities to customers
 They don’t deliver goods to retailers and this reduces their expenses enabling
them to offer goods at lower prices.
 Use self-service method of selling
 Have check out points
 Sell household goods
Advantages of cash and carry wholesalers

 Their prices are lower because their expenses are lower since they do not
offer credit or delivery
 Retailer can obtain goods quickly without ordering
Disadvantages of cash and carry wholesalers

 Do not offer delivery services
 Require cash purchases and this may prevent smaller retailers from buying as
they may be strapped for cash
 Retailers do not have personal contact with the wholesaler as there is self
service
4. Voluntary Chains.
 Formed by the joining together of sole traders/small retailers
 They are not owned by one firm but are a group of sole traders/small
retailers who have formed a central bulk buying association by joining
together
 Examples include Spar, Landis
 Members of the chain agree to buy most of their supplies from a number of
wholesalers.
 These wholesalers buy in bulk on behalf of the chain from producers
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Advantages of belonging to voluntary chains

 Supplies can be obtained cheaply through placing large orders with
wholesalers
 Chain can advertise its goods
 Chain gives loans to members to help them improve their premises
 Chain sets standards for member shops which will make them more
attractive to members of the public.
Disadvantages of belonging to a voluntary chain

 Small shops lose their independence
 Success or failure of small shops will depend on the success or failure of the
chain
5. Co-operative Wholesale Societies (CWS)/Retail Co-operative Society

 This is a group of small retailers or producers like farmers grouping
together to form a non-profit making organization
 Each shareholder buys one or more shares, and for the money paid into
the CWS the member gets a low fixed interest
Features of a Co-operative wholesale society

1. Membership is open
2. Members get a limited interest on capital invested
3. Members have equal voting powers
4. Members get dividends for buying from the cooperative and these dividends are
proportionate to the value of goods they buy.
5. Surplus made is shared among the members
Advantages
1. Members can sell the goods at competitive prices especially if the CWS
manufactures them
2. Dividends paid on the basis of volume of purchases encourage the customers to
buy more
Disadvantages
1. Decision making is slow
2. If the CWS manufactures bulk of the products it carries, this may reduce variety
to the customer
3. Cooperative brand names may not be popular
6. Marketing Boards
This is a statutory body or parasternal which controls producers of primary products with which
it is concerned e.g. GMB buys grain, TMB buys tobacco, and Cold Storage Company controls
meat.
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Reasons for setting up Marketing Boards

1. Assured market outlet or to provide a ready market for producers
2. Storage of agriculture and mining produce
3. Reduce monopoly of selling a good
4. Even out supply of goods
5. Prevent shortages
6. To promote research and development of agricultural products
Functions of the different Marketing Boards

a) Grain Marketing Board
 Buy grain from farmers
 Stores the grain in silos
 Sell grain to millers, importers and consumers
 Even out supply of grain
 Prevent shortages of grain
 Offers transport to farmers
 Delivers grain to consumers
 Finances farmers e.g. giving inputs
b) Tobacco Marketing Board

 Buys tobacco from farmers
 Stores the tobacco
 Sells the tobacco to local and foreign companies
 Prevents shortages of tobacco
 Controls the prices of tobacco
 Finances tobacco farmers by giving them inputs
 Inspects grades and weighs tobacco
Reasons for the elimination of the wholesaler

a) Growth of large retailers who can buy directly from producers e.g. hypermarkets
and supermarkets. These retailers have their own warehouses and transport.
b) Perishable goods, these turn bad if stored for a long time e.g. milk, eggs and
vegetables. Producers therefore will sell their goods directly to consumers
c) Technical goods such as electrical goods, computers are sold directly to
consumers by the producers. This is because the producer has to offer technical
advice to the consumer.
d) Expensive goods with a low turnover e.g. jewelry are sold directly to the
consumer. Such goods are not bought in large quantities and producers will sell
directly to the consumer.
e) Producers may have their own retail shops and sell their products directly to
consumers e.g. Bata
f) Some goods are fragile and require special handling e.g. glass
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g) Door to door selling may result in the elimination of the wholesaler as the
producers will be able to sell directly to the customer.
Agents, Brokers and Factors

Agents
 Agents are middlemen who act on behalf of someone else called ‘the
principal’
 Agents are employed by sellers to find buyers for their goods or services
 They are also employed by buyers to find suppliers of the commodities
they need
 Main function is to find where buyers and sellers are as well as where
the best terms of trade can be obtained
 Agents receive a commission for the work they do for their principals
 There are different types of agents some of which are brokers, factors
and del Credere agents
1. Brokers
 Brokers are agents who arrange deals on behalf of buyers and sellers
 Brokers never take possession of the goods they handle
 They are not responsible for the delivery of the goods
 They cannot make agreements in their own names but make agreements
in the names of their principals
2. Factors
 These are agents who are employed by sellers of goods
 They are responsible for selling but not buying goods on behalf of their
principals
 They own the goods they are selling and can go into agreements in their
own names
3. Del Credere Agents

 These agents guarantees that the customer they are selling to will pay
for the goods bought
 If customer fails to pay for the goods the del Credere agent will be liable
for the customer’s debt
 Usually paid a higher commission than factors and brokers
Retail Trade
 Retail means to cut into small pieces or to reduce the quantities
 A retailer is therefore a middleman between wholesalers and consumers
who sells in small or single units.
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Functions of the retailer
1. Functions of the retailer to consumers

 Breaking bulk – retailers buy in large quantities from the
wholesaler/producer and breaks bulk into smaller quantities to suit the
requirements of the individual customer
 Convenience – retailers are conveniently located near costumers and
stock from different wholesalers. Customers will not waste time
searching for different products from different wholesalers
 Offer variety – retailers buy merchandise from different wholesalers
offering customers a variety of different goods.
 Give advice and information to customers
 Extending credit – most retailers extend credit facilities to their
customers.
 Catering for individual taste – retailers buy and sell merchandise that
customers want.
 Delivery services – some retailers deliver goods to their nearby
customers.
 After sales service – after sales service include servicing and
maintenance, providing manuals on the use of products sold, meeting
guarantee claims etc.
2. Functions of the retailer to manufacturers and wholesalers

 Clearing manufacturer’s production lines
 Advertising – retailers undertake advertising campaigns to promote
manufacturer’s products. This will help boost the sales of manufacturers
and wholesalers.
 Gathering information – retailers are in direct contact with customers,
they gather useful information about the market and give the
information to wholesalers and producers.
 Provide a ready market for wholesalers and producers.
Types of Retailers
Retailers are divided into small scale and large scale retailers
Small Scale Retailers

 Provide personal services to customers and the owner may know customers by their
names
 Some of these shops are family owned businesses
 Require licenses from the town council to operate
 examples of small scale retailers include:
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1. Independent shops
 Owned by individuals
 Found in rural and urban areas
 General dealer is one type of an independent store
 They sell groceries mainly but specialize in selling a variety of goods.
Advantages to the consumer

 Open for long hours and even during holidays
 Cater for individual tastes
 Respond quickly to changes in consumer tastes
 Give credit to frequent and well known customers
 May offer delivery and after sales service
Advantages to the retailer

 Retailer requires little capital to establish the business
 Little legal formalities required to establish the business
 Flexible to changes in the market
 Flexible decision making. No central authority involved.
Disadvantages
 Goods usually sold at higher prices than in the larger retailers
 Choice of customers is limited
 Do not offer guarantees
 Cannot compete with supermarkets, chain stores and department stores.
 Low turnover of goods which results in losses
 Often poorly situated]
2. Hawkers
 Also known as Itinerants, peddlers or door to door retailers
 They move door to door selling goods on foot, bicycles or push carts
 They mainly sell goods which are light to carry such as foodstuffs, cobra
or cheap jewelry
Advantages
 It’s cheap to operate since owner does not incur costs such as
rent, rates and electricity
 Customers do not need to move to obtain the goods they require.
The goods are brought to them
 A hawker can quickly learn the needs of customers since he is in
constant touch with them.
 No need to advertise goods
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Disadvantages
 Not safe, hawkers are easily attacked by thieves and robbers
 May not find people at home as they would have gone to work
 Some people simply do not like peddlers
Large scale retail outlets

 Buy in bulk to take advantage of lower prices
 Located at centralized shopping areas to attract large numbers of customers e.g. city
centers, suburbs or growth points
 Have their own transport and warehouses
 Able to pre-pack and advertise goods on behalf of the manufacturers
 Have large shopping space and sell a wide range of goods.
 Examples of large scale retailers include: department stores, hypermarkets,
supermarkets and Multiple Stores
1. Department stores
 Organized into separate departments and provide a range of merchandise
 Located in the city center where rent I expensive
 Sells a wide variety of goods in different departments
 Each department sells one line of goods
 each department has a buyer responsible for the orders of the department
 Sells goods at high prices
 Employ trained and uniformed staff who offer personal service to customers
 Examples include Meikles, Barbour’s and Greatermans
Advantages
 They buy in bulk and therefore given discounts when purchasing
 Each department concentrates on its needs and responsibilities making
department stores efficient e.g. each department has its own buyer
 Offers credit to customers
 Department stores spread their risks by offering a wide range of goods
 Service tailored to the needs of the customer
 Offer convenience to customers by stocking similar good in each department
 each department promotes the other department since customer pass through
more than one department
Disadvantages
 located in city centers where rent is high and parking space for customers is not
available
 small departments purchase in small quantities and do not benefit from bulk
buying discounts
 costly to set up
 a lot of security guard have to be employed to prevent shoplifting
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 some people consider department stores to b for the rich therefore do not shop
there at all
2. Multiple store/Chain stores

 A chain store is a group of retail stores of the same type whose operations
are centrally controlled
 Branches controlled by a head office which make all the key decisions
 Head office buys goods in bulk for all branches
 Each branch has a branch manager
 All branches have similar shop front and use the same name for easy
recognition
 All branches sell at the same price
 Sells narrow range of product or one line of products
 Examples include Bata, Edgar’s, Topics
Advantages
 Head office buys in bulk and therefore receives discounts
 Risks are spread within the chain. Stock and staff can be transferred between
branches
 Can offer credit facilities to customer
Disadvantages
 Centralization of decision making makes individual chain store inflexible to react
to changes in the markets they serve
 There is no close relationship with customers
 Costly to set up
3. Supermarkets
 A large shop which sells household goods and groceries on a cash and carry basis
 Have many check out point and a parcel counter or bays
 Offers trolleys and baskets for carrying goods in the shop
 Displays good according to use
 Sell goods at low price
 Offer self service
 Have wide aisles and offer a variety of goods
Advantages
 Buy in bulk and therefore sell products at low prices
 Offer self-service which provides convenience to customers and also save on
staff
 Their layout ensures maximum exposure of product to customers
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 Low profit margins ensure low prices and therefore attract customers
Disadvantages
 Lack of parking space
 Do not extend credit to customers
 High levels of shoplifting in supermarkets
4. Hypermarkets
 Hypermarkets are larger than supermarkets
 Situated in the outskirts of town where land is cheap and plentiful
 Large parking space
 Sells good on cash and carry basis
 Provides parcel counters
 Hypermarkets have many departments to cater for different customers
e.g. hardware, men’s wear, women’s wear, record bar, restaurant
 Sells variety of goods
 May operate a children’s playground and a service station in front of it
 Has large aisles
 Examples include OK Makro and TM Hyper
Advantages
 Provide enough parking space for customers
 Offer variety at low prices
 Get discounts for buying in bulk
Disadvantages
 Costly to set up
 Hypermarkets need a lot of land which I not always available in cities
 Hypermarkets located on the outskirts of town and customers have to
travel long distances to get to them
5. Mail order firm

 Located in industrial areas or in the outskirts of town
 Operates from a warehouse
 Does not need expensive displays
 Advertises through catalogues or magazines
 Order sent and received through the Post Office
 Goods sold on a Cash on Delivery basis (COD)
 Customer may return goods if not satisfied
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 Employs part time agents
Advantages of Mail order firms

 Low rental expenses
 Customer can do shopping at home at any time
 Customer can return goods if not satisfied
 Offer variety
Disadvantages
 Incurs high costs of postage, packing and advertising
6. Retail cooperative societies

 Formed by customers/small scale retailers to enable bulk buying from
manufacturing companies at low prices
 Mainly formed to eliminate the use of wholesalers
 Sell products at low prices
 A retail cooperative operates a warehouse
 Membership is open to customers by paying a subscription or buying
shares in the cooperative
 Each member is entitled to one vote
 Members elect a management commit to run affairs of the business
 Members are paid dividends in proportion to the amount they would
have spent in purchasing goods in the cooperative society
 Members may be trained in business management
Advantages
 Bulk buying enables the society to sell products at low prices
 Members can be trained in business management
 Members exchange ideas and information
 Members can buy on credit
 The use of a group name by member retailers gives them a personality
and identity
Disadvantages
 Cooperatives are difficult to manage and require highly killed manager
who are not always readily available
 Takes a long time to make decisions since all members of the cooperative
needs to be consulted
Factors considered when establishing a retail outlet

 Competition from other retail outlets
 Nearness to customers
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 Labor required
 Accessibility to the retail outlet i.e. transport and communication links
e.g. road rail etc.
 Storage facilities for the goods
 Nearness to suppliers e.g. wholesalers and manufacturers
 Costs involved, whether there is enough capital to start the business
 Development potential of the area for future expansion
Why Small Scale Retailers are dependent on wholesalers

 Small scale retailers purchase in smaller quantities.
 They need variety (different brands).
 Needs credit.
 Transport to the shop is provided by the wholesaler.
 Wholesaler advices small scale retailers on different selling issues.
 Wholesaler advices small scale retailers on shop layouts.
Modern Trends in Retailing

1. Self Service
 Products are displayed on open shelves.
 Customers have to select them put them into trolley, take it to cash counter, make
payment and arrange for their transportation.
 Generally used in large scale retailing especially supermarkets.
Advantages
To Retailers
1. Lesser requirement of shop staff.
2. More sales in given time.
3. More sales due to impulse buying.
4. Attraction to the customers.
To Customers
1. Shopping can be done in free environment.
2. Freedom of choice.
3. Quicker shopping.
4. Low price.
Disadvantages
To Retailers
1. More capital required (for space, shelves and variety).
2. Shop lifting.
3. Security expenses increases.
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To Customers
1. Impersonalized way of sales.
2. Impulse buying.
3. No delivery is provided.
2. Self-Selection
 A method of selling goods used in department stores and variety chain stores
 Cash points dotted throughout the store
 Customer can pay for an item at one cash point and then move to another part of the shop,
select a second item and pay for it at a different cash point
3. Branding and Packing

 Branding means the selling of goods under the trade mark or brand name of
manufacturer.
 Branding is done to differentiate products from competition.
 Brand Name = Name and Brand Mark = Symbol.
 Packing is the wrapper of product done to provide convenience to customers.
 Branding is only possible if packing is done.
Advantages
To Retailers
1. Products can be differentiated.
2. Market share can be created.
3. Adds value to the product.
4. Assists in handling of products.
5. Information about the product can be written.
6. Attracts customers.
7. Some packing can be reused.
8. Advertisement can be done.
9. Easy to handle. (Arrangement in self-service retailing)
To Customers
1. Brand assures uniform quality.
2. With packing awareness is created.
3. Customer is well informed about the product by advertisement.
4. Some wrappers can be reused.
5. Shopping has become easier.
Disadvantages
To Retailers
1. Brands need to be advertised and advertisement can be burden on resources.
2. Sometimes branding increases competition and competition puts pressure on firm’s
profit.
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3. Imitation brands reduce profit.

4. Customers get confused as what brand to buy.
5. Cost of packing an advertisement is added to the price of product.
6. Customer may be misled by the advertisement of a certain brand.
7. Imitation brands.
4. After Sale Service

 All the services provided by the retailer, manufacturer, or the agent to support
customers after the sale has been made.
 After sale services include: Installation, training, repairing and warranty.
 Warranty is provided by the produced as a guarantee of quality of a product.
 Warranty is valid within a specific period of usage or specific period after purchase.
 In warranty items with faulty performance will be repaired or replaced free of charge
within warranty period.
Advantages
To Retailers
1. Better image.
2. More revenue with more sales.
To Customers
1. Support.
2. Spare parts are available.
3. Warranty.
Disadvantages
To Retailers
1. Capital requirement.
2. Management problems.
3. Parts repaired in warranty are a loss to the business.
To Customers
1. Warranty is added to the cost from customers.
2. Warranty is available only for limiter period.
5. Automatic Vending Machines (AVMs)

 These machines can sell cold bottled drinks, hot drinks, cigarettes and sweets.
 Often placed at cinemas, parks and supermarkets.
 Customers enter the money into the machine, presses a button and desired item comes
out.
Advantages
1. Requires minimum space so rental cost is low.
2. 24 hours sale.
3. No sale staff required.
4. Adds convenience.
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5. Available all the time.

6. Self-service. Less time required.
Disadvantages
To Retailers
1. Available only for the sale of limited range of products.
2. High capital cost.
3. Requires maintenance.
4. Total loss of sales when out of order or out of stock.
5. Machine can easily be broken and money inside can be stolen.
To Customers
1. Only limited range of products is available.
2. Inconvenience if machine out or order.
6. E-commerce
 Also known as Electronic Commerce, Internet
Commerce and Web commerce.
 It is a branch of commerce in which commercial
activities are carried out electronically.
Advantages
To Retailers
1. Wide market.
2. Low competition.
3. No requirement of retail outlet.
4. More chances of involving potential customers into
sales.
5. Products can be displayed and specified on web.
6. Low labor cost.
7. Computer can help keeping a variety of information
regarding customers and employees.
To Customers
1. More variety.
2. Benefit of arm chair shopping.
Disadvantages
To Retailers
1. Capital cost increases.
2. Expenses of developing and operating websites.
3. Danger of hacking.
4. Dependence on skilled labor.
5. Market is limited. (only computer literate people)
To Customers
1. Fraud.
2. Customers can check product only after it is delivered to them.
3. Impersonalized way of buying.
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7. Franchising
 A successful business (franchiser) lets another business (franchisee) use its name under
an agreement e.g. Wimpy, Chicken Inn, Spar
 All franchises are decorated in the same style.
Advantages
To Franchisor
1. Name is spread without much investment.
2. Gets franchising fee from the franchisee.
3. Has right to control certain activities of franchisee.
To Franchisee
1. Training by the franchisor.
2. Less advertisement is required.
To Customers
1. Convenience, easily located.
2. Guarantee of quality.
Disadvantages
To Franchisor
1. Any bad business practice of franchisee can damage franchisor’s image.
2. Responsibilities of training and educating franchisee.
To Franchisee
1. Heavy amount is to be paid to franchisors as franchising fee.
2. Loss of some business controls.
3. Agreement is valid up to certain period.
4. No separate identification of franchisee.
5. Franchising does not determinant of success.
To Customers
Limited choice of product
8. Shopping Complex/Shopping Mall
 One multistory building, with many different shops, each belonging to different owners.
 Wide range of goods and services are available.
 Examples include Joina City in Harare, East gate, and Westgate etc.
Advantages
1. Customers do not travel long distance between shops.
2. Minimum expense on advertising.
3. Labor is available.
4. Variety.
5. Other services like, ATM, banks and post office are there.
6. One Stop shopping.
7. Located in main commercial area.
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Disadvantages
1. High rents.
2. High competition.
3. Low profit margin.
4. Traffic, inconvenience.
5. Pollution.
6. Not located close to homes. Usually located in city centers.
9. Do it yourself products (DIY products)

 DIY product is a kit that contains pieces of a semi assembled item
 Customers purchase this kit and assemble it together into a full usable product on
his/her own at home.
 DIY products usually contain step by step instructions of how the product is assembled
 Examples of DIY product include camping equipment, painting kits and some car repair
kits
Advantages
 Cheaper than fully assembled products
 Consumers enjoy satisfaction of assembling product themselves
 Easy to use
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Hire Purchase
 Used by customers when buying consumer durables such as furniture, motor vehicles,
refrigerator and television sets
 A deposit is paid followed by monthly installments
 Customer owns the good when final installment is paid, buyer does not own the goods
during the hire purchase period.
 Cooling off period required when contract is signed outside trader’ premises
 Seller can repossess the good if buyer defaults
 Court order needed to repossess goods if buyer has paid at least one third of the
purchase price
 Buyer cannot sell the goods during the period
 Hire purchase is suitable for expensive durable goods
 Controlled by a hire purchase act
 Financed by a finance company
Example.
a) Cash price = $10 000
Deposit paid = $10 000 x 0.2 = $2 000
b) Cash price = $10 000

Deposit paid = -$ 2 000
Balance after paying deposit = $ 8 000
$8 000
Monthly installments = = $333,33𝑝𝑒𝑟 𝑚𝑜𝑛𝑡ℎ
24𝑚𝑜𝑛𝑡ℎ𝑠
Advantages to the buyer

 Buyer can use goods whilst paying for them
 Profit generated from using the item (e.g. sewing machine or mini bus) can be
used to pay for the item
 Customer can obtain goods whenever they have enough money for the deposit.
There is no need for the buyer to save full amount for the goods
 Goods are under guarantee during the hiring period
 Payments/installments are spread over a long period.
Advantages to the seller

 Obtain commission from a finance company
 Seller has the right to repossess the good if buyer defaults before paying one
third of purchase price
 By allowing payment to be spread over a long time, seller attracts additional
customers especially those who cannot pay full cash price
 Increases sales and profits
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Disadvantages to buyer
 Customer cannot sell goods until final installment has been paid
 Goods are expensive because of hire purchase charges
 Seller may repossess goods if buyer defaults
 A customer who fail to maintain installment payment risks losing both the good
and the money paid for it
Disadvantages to seller
 Repossessed goods may not be fit for resale
 Suffer from bad publicity resulting from repossessing goods from defaulters
 Increases bad debts and clerical work
Difference between hire purchase and credit sale

Hire purchase Credit sale
The customer does not own the goods The goods are owned by the customer as
until the final installment is paid soon as the agreement is made
If customer defaults in payment the seller If customer defaults seller cannot
can take away the goods repossess the goods. Seller can however
sue customer for the debt
Customer can end agreement and return Customer has no right to end contract and
goods return the goods
Customer cannot sell of goods until all Customer can sell the goods but must pay
installments are paid off off all the outstanding installments
Written agreement required Based on trust, written agreement not
required
Deposit required Deposit not required
Financed by a finance house Financed by the trader
Details shown on hire purchase goods

 Cash price of goods
 Total hire purchase price (cash plus finance charges)
 Deposit required
 Number of installments
 Type of goods or description of the goods
Credit sales Agreement/ Deferred Payment

 A credit sale occurs when a customer receives good from the seller and pay for them at
a later date
 Customer pay for the good in installments determined by the seller
 Credit sale is based on trust, written agreement not necessary
 Customer not restricted to buying expensive goods only
 Deposit not required
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 Buyer owns good as soon as agreement is made

 seller cannot repossess good if buyer defaults
 seller can sue customer for outstanding amounts
 ideal for non-durable goods e.g. clothes, grocery
 financed by the trader
Advantages of credit sale

 It increases volume of trade
 Customers can get goods even when cash is not available
 Customers become the owners of the good immediately and there is no risk of losing
them when they fail to pay
Disadvantages of credit sale

 This method may result in losses to the shop due to bad debts
 Debt collection increases legal and administrative costs
 Traders may fail to recover good if they are not allowed to repossess the goods
 Customer may get locked in a credit trap as they may be tempted to buy more
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Documents used in Home Trade

 Documents are the main source of business information and they are recorded and kept
for future reference
Importance of business documents

 Proof - Documents provide proof of a transaction
 Recording – they are necessary for recording in books of accounts and tax purposes
 Reference – documents can be referred to in the event of a problem occurring
 Documents can be used to draw up accounts to determine the profitability of a business
and how much a business owes and how much it is owed
Functions of different documents
1. Letter of Inquiry
2. Quotation/Price List/Catalogue/Pro-forma Invoice
3. Order
SUPPLIER
BUYER
4. Advice Note
5. Delivery Note/Consignment note
6. Invoice
1. Letter of Inquiry
 Sent buy a potential buyer to a potential supplier of the goods wanted.
 It is made when a potential customer wants to know whether suppliers have the goods
or services they want and their prices.
 The buyer may send an inquiry to several suppliers asking for details of
i. Whether they have the goods in stock
ii. Price of the goods
iii. Delivery date
iv. Credit terms
v. Cost of delivery
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2. The Quotation
 the supplier on receiving the letter of inquiry may send a quotation or a price list or a
pro-forma invoice
 the quotation serves to provide the prospective buyer with details of the goods that the
supplier has for sale
 it enables the customer to compare prices from several suppliers
 the quotation will give details of
i. the goods available
ii. prices
iii. delivery dates
iv. discounts available
v. quotation number
3. Price list
 Instead of a quotation a supplier may simply send a price list to the potential customer
 A price list is a list of items a supplier sells as well as their prices
 Price lists are suitable for products that are well known by the customer
 A price list will give details of
i. The prices of each item a firm has in stock
ii. Percentage of tax applicable
iii. Discounts available
iv. Terms of payment
v. Terms of delivery
4. Catalogue
 A catalogue gives more information than a price list
 Sent by a supplier to a buyer
 A catalogue shows colorful pictures of the items sold by the supplier which capture the
reader’ attention
 Catalogues can be used for advertising
 Catalogues will give detail of
i. Price of each item
ii. Catalogue number for each item in stock
iii. Terms of sale and after sales service
iv. Photograph of each item in stock
5. Pro-forma Invoice
 Pro-forma means a matter of form because it looks likes the actual invoice
 Document is in the form of an invoice and is sent by a supplier to a potential buyer
 A pro-forma invoice is issued when
i. Producer wants payment before dispatching the goods
ii. Replying to a customer’s letter of inquiry
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iii. When good are sent ‘on approval’ to the potential customer. If the customer
finds the good unacceptable he can return the good to the supplier at no cost.
 A pro-forma invoice will contain
i. Prices of the item in stock
ii. Discounts available
iii. Terms of payment
6. Order note
 When a potential buyer decides to buy goods from a supplier he places an order
 An order is a formal request by a customer to a supplier, asking the supplier to provide
the goods specified on the order note.
 An order is prepared by a customer after receiving a quotation, price list or pro-forma
invoice
 An order note contains
i. Description of the goods
ii. Quantity of the goods required
iii. Order number
iv. Prices as per quotation
v. Date of delivery
vi. Place of delivery
vii. Terms of payment
viii. Address of supplier and customer
7. Advice note
 After receiving an order, the supplier will send an advice note or order confirmation to
the customer
 The supplier uses the advice note as confirmation that the order has been received and
that it is receiving attention
 The document helps the customer make the necessary arrangements before goods are
delivered e.g. prepare storage space
 An advice note does not give the price of the goods
 The advice note contains
i. Goods appearing on the order available for dispatch
ii. Date on which goods will be delivered
iii. Method of dispatch
iv. Terms of dispatch
8. Delivery note
 A delivery note is used when the goods are being delivered by the supplier using his own
transport
 It is sent in duplicate
 It is usually sent with the packaged goods
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 The delivery note informs the customer of the goods being delivered
 Customer can check the goods against the delivery note to make sure that all the goods
listed are there.
 If the goods are correctly delivered the customer signs a copy as evidence of delivery
made
 Customer keeps a copy and the other copy is taken back to the supplier
 A delivery note does not give the price of good delivered
 A delivery note contains
i. Description of the goods supplied
ii. Quantity of goods supplied
iii. Addresses of the supplier and the buyer
iv. Delivery date
9. Consignment note
 Used by a supplier when hired transport is used to deliver goods to a customer
 It informs the customer of the good being delivered
 Customer can check the goods being delivered against the note to make sure all the
good listed are present
 It is sent with the packaged goods
 If the goods are correctly delivered the customer signs a copy as proof of delivery made
 The consignment note contains
i. Name and address of consignor/supplier
ii. Name and address of consignee/customer
iii. Address of delivery
iv. Quantity of goods being delivered
v. Description of goods being delivered
10. Invoice
 Issued by the supplier to the customer
 This is a document that summarizes a single transaction
 The invoice informs the customer of the amount due
 The invoice contains
i. Quantity of goods
ii. Description of the good
iii. Price of the goods
iv. Means of delivery
v. Terms of delivery
vi. Terms of payment
vii. Discounts allowed
 Invoices contain the abbreviation E.&O.E. (error and omissions excepted)
 This safeguards the supplier against loss from any mistake made on the invoice and
allows the supplier to correct the mistake afterwards
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11. Credit Note

 A credit note is issued to correct an overcharge on the invoice
 It is issued by the supplier to the buyer
 Credit note is also issued under the following circumstances
i. The goods are oiled or damaged
ii. The supplier has wrongly overcharged the buyer
iii. Incorrect goods have been delivered to the buyer
iv. Empty packing boxes or crates have been returned to the supplier
12. Debit note

 A debit note is issued by suppliers to correct an undercharge on the invoice
 It is issued by the supplier to the buyer
 A debit note can be issued when
i. More items have been sent than reflected on the invoice
ii. The supplier charges too low a unit price on the invoice
13. Statement of account

 A statement of account summarizes the transactions done for a certain period of time
usually a month
 Sent by a supplier to a customer
 A statement of account shows
i. Amount of cash received
ii. Debits for any undercharge
iii. Credits for any allowance e.g. cash discounts
iv. Unpaid balances
v. Totals of invoices sent during the month
vi. Amount now due
14. Receipts
 It’s an acknowledgement by the supplier of payment for goods by the customer
 It is evidence of a cash sale
 A receipt shows
i. Name of buyer and seller
ii. Date of issue
iii. Description of goods sold
iv. Prices of goods and their unit prices
Cash and trade discounts

 Cash and trade discounts are offered to customers
 Both trade and cash discounts reduce the amount to be paid by the customer
 The trade discount is always deducted before the cash discount.
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1. Trade discount
 A trade discount is an allowance by one trader to another trader
 It is also an allowance to a customer who buys to sell again in order to make profit
 It is a deduction from the gross invoice price/catalogue price/price list
 Level of trade discount is usually higher than that of a cash discount.
 Its main purpose is to encourage the customer to continue buying from the supplier
who offered the discount
 It also encourages bulk purchases
2. Cash discount
 A cash discount is offered to any customer buying for cash or those who buy on credit to
encourage prompt payments
 It is deducted after the trade discount
 It reduces the net invoice price
 Range of cash discount is usually lower than for a trade discount
 Suppliers offer cash discounts because
i. They reduce bad debts
ii. Saves on clerical work involved in reminding customers to pay their accounts
iii. Improves the cash flow of a firm
iv. increases rate of turnover
Question
A customer bought goods valued at $4 000 from ABC wholesalers. The terms were 30% trade discount
and a 3% cash discount if the customer paid promptly.
Calculate
i. Trade discount
ii. Cash discount
iii. Actual amount paid by the customer
i. Catalogue price = $ 4 000

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Trade discount = 100 × $4 000
= $1 200
ii. Net Invoice Price = Catalogue Price – Trade Discount

= $4 000 - $1 200
=$2 800
3
Cash discount = 100 × $2 800
= $84
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iii. Actual amount paid = Net invoice Price – Cash Discount

= $2 800 - $84
= $2 716
Terms of delivery
 These indicate who is responsible for the cost of delivery or carriage
i. Carriage paid – the supplier pays the cost of delivering the goods to the consumer
ii. Carriage forward – the customer pays for the cost of delivery
iii. Ex-factory/ex-warehouse – the customer picks up all the costs incurred after the goods
leave the factory or warehouse
iv. Free on Rail/Free on Board – the customer pays all the costs involved in carrying the goods
from the nearest railway station/port to the customer.
v. Cash on delivery – customer pays cash upon delivery of the goods.
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WAREHOUSING
Warehouse is a large building in which goods, raw materials, or commodities are stored.
Importance of Warehouses
 Protection of goods against climatic conditions.
 Protection from theft.
 Producers can store raw material for future production.
 Surplus created can be stored before being finally sold.
 Shortages in the market can be avoided.
 Stabilize prices, price fluctuations can be minimized.
 Storage of perishable goods
 Storing goods that need to mature e.g. wine
 International trade is not possible without warehousing.
 Traders can keep their cargos in bonded warehouses, before they pay the duty.
 Plays important role when demand for products or the time of production is
seasonal.
 Provides place for display of goods.
Types of Warehouses
Retailers Warehouse/Depots
 To store bulk purchases from wholesaler or producer.
 Most large scale retailers such as supermarkets, department stores and
hypermarkets have warehouses attached to their shops
 These allow bulk them to order goods in large quantities sometimes straight
from the manufacturer
 Goods are packed and branded in warehouses.
 Retailers can purchase goods when they are cheap and can stock excess
purchase.
 Goods will always be available to fill empty space on shelves.
Wholesalers Warehouse
 Use warehouses for blending, grading, packing and branding.
 Store goods from variety of manufacturers.
 They buy goods in large quantities and sell to retailers in bulk
 Variety of goods are stored in the warehouse to allow customers to get all they
want
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Cash and Cary Warehouses

 Retailers can buy in small quantities.
 Cheap because of bulk purchases, no credit facility and no delivery.
Cold Storages
 Special warehouse with refrigerating plants.
 Perishable items can be stored.
 Temperature can be set at will.
 Insulation is done.
Regional Distribution Centers

 Owned and maintained by large scale retailers and wholesalers.
 Located close to a good road network.
 Supermarkets/multiple chains/variety chains/franchise/chain of department
stores/hypermarkets mainly use regional distribution centers.
Manufacturers Warehouse
 Used to keep stock of finished goods and raw materials.
 Help producer to carry on production when there is shortage of raw material.
 Can help producer keep on production when there is less demand.
 Produced can get benefit of trade discount be purchasing raw material in bulk.
 Located in manufacturers production houses.
Public Warehouses
 These are owned by public sector (government).
 Some public warehouses are run by local authority’s local authorities such
municipalities and district authorities.
 Different government agencies can stock their material.
 Health departments for example must store sufficient quantities of drugs,
medical equipment etc.
 Also available on rent to private sector.
Port Authorities
 These are another type of public warehouse run by the port or airport authority
 They can be used by any member of the public who may need to goods
 Public warehouses provide facilities for the traders to inspect, grade and pack
their goods while they are in storage
Bonded Warehouses
 Are owned by government and are under the control of custom authorities.
 Dutiable goods are stored, on which duty is not yet paid.
 Normally located on ports.
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 Traders have to pay the rent.

 Grading, blending, packing, branding and sub-assembly can be done.
 Trader can also sell the cargo and the new owner has to pay the duties.
 Nothing can be taken out of warehouse without paying duty.
 Trader can pay some of the duty can get proportional amount of cargo released.
 Exporting can also be done without paying duty.
 It enables government to collect custom duties.
 Government gets information about the types of goods imported
Difference between Bonded and Ordinary Warehouses

Bonded Warehouses Ordinary Warehouses
Located near ports. No specific location.
Controlled by custom authority. Controlled by the owners.
Store finished goods and raw
Stores dutiable goods
materials.
Dutiable goods cannot be removed until the duty Free movement of goods in and
is paid. out.
Owned by government, Owned by private sector.
Marketing Board Warehouses

 Marketing boards are huge organizations
 They are responsible for purchase, storage and distribution of goods such as cotton, grain or
meat on a national scale
 The GMB requires large silos to store various grain products and preserve them for long periods
of time
 The Cold Storage Company also needs refrigerated storage for their meat
 Some marketing boards export and import goods they specialize in therefore they would need
adequate warehouse facilities to enable them to handle large volumes of imports and exports
for the country.
Port Authority warehouses

 These are warehouse that are run and owned by the port or airport authority
 They can be used by any member of the public especially mall traders who need the use of
cheap warehouses
 They provide facilities for traders to inspect, sample, pack or grade goods while in storage
 They also have refrigerated sections for perishable products
Government warehouses
 these are warehouses which are run and owned by the government
 some government warehouses are run by local authorities
 provide storage for government departments e.g. health department need to store large
quantities of drugs
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 they also have refrigerated sections where perishable goods such blood banks and perishable
medical kits may be stored
 allow for grading and packing of good while in storage
Types of warehouse and goods stored in the warehouse
WAREHOUSE GOODS STORED

Silos Grain e.g. maize
Cellar Wine, spirits
Tanks Liquids or Gases
Arsenal Weapons and ammunition
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Communication
 Communication is the process of sending information from a sender to a receiver.
Effective Communication
 Effective communication is when the communicated information is understood the
same way by both sender and receiver.
Importance of communication in commerce

 Need for exchange of documents in trade.
 Minimizes confusion and misunderstanding between buyer and seller.
 Ensures better business control.
 Business can get reliable and cheap information about their market.
 Settle complaints sent by customers
 Create a good public image of a business
 Frequent travelers need to develop a contact with their offices.
 International trading is not possible without efficient communication system.
 Inform customers through advertising of new products
Mode of communications
1. Verbal/Oral
 Face to Face.
 Through a mediator/translator.
 Telephone.
 Mobile phone.
 Seminar/conference.
Advantages of oral communication

 Quick.
 Normally cheap.
 Facial expressions can be seen.

Disadvantages of oral communication
 Message can be distorted.
 No proof or record.
2. Written
 Postal mail.
 Fax.
 Internet.
 Newspaper/Magazine.
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 SMS.
Advantages of written communication

 Records can be kept
 Sometimes it is fast and cheap in case of SMS and internet.
 Lesser chances of message being distorted.
Disadvantages of written communication

 Sometimes it can be expensive.
 Useful only for literate people.
 Not very quick is case of newspaper and postal mail.
Postal Communication Services

 Message is physically transferred.
 Services offered by ZIMPOST
 Service offered by the post office include:
1. Ordinary Mail:
 To send and receive letter. Each letter costs on the basis of weight and distance.
 Service paid for by the customer who buys a postage stamp
 Suitable for information that is not urgent
 Letters can be sent by surface or air mail
 Airmail uses special envelopes or airmail stickers can be stuck on ordinary envelopes
Advantages:
 Cheap.
 Record of information can be kept.
 Wide coverage.
 Air mail is fast
Disadvantages:
 Slow in case of surface mail
 Misplacement of letter can occur.
 Only be used by literate people.
 Air mail is more costly
2. Registered Mail:
 Suitable for sending and receiving valuables or expensive material e.g. certificates.
 Extra fees are paid to ensure delivery and with which to compensate for loss.
 A receipt is issued by the post office as proof of postage
 When article reaches the post office of addressee, the addressee is sent a notification slip
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 The addressee is then asked to sign the notification slip as proof that they have collected
their registered parcel
 Addressee also asked to provide positive identification as proof of ownership of the
registered parcel.
 Compensation is paid if registered mail is lost
Advantages:
 Still cheap.
 Wide coverage.
 Track record of delivery of letter.
 Compensation in case of loss of mail.
 No bank account needed to send the cash
Disadvantages:
 Bit expensive than ordinary mail.
 Slow.
 Useful only for literate people.
3. Express Mail Service/ Expedited Mail Service:

 Used to send documents in urgency.
 Used when safety is necessary and it is used to send valuable articles such as certificates
 Express mail service can be availed on the request of both sender and receiver.
 When sending an EMS parcel, an EMS consignment note is filled in triplicate
 Documents are usually sent overnight and get to their destination the following morning
 Where the address of the recipient is outside the delivery radius, the recipient is
contacted by phone
 Recipient produces proof of identity upon receipt of articles
Advantages:
 Speedy.
 Items delivered personally to the recipient
 Safe and secure
 Compensation available for damaged or lost mail
Disadvantage:
 Extra money is to be paid.
4. Post Boxes/ Post Office box:

 This service is available on request by applying to the post office
 On approval applicant pays an annual rental amount
 Suitable for those who want to receive frequent mail and do not want to show
their identity or residential address.
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 Post boxes are located in post office premises.

 A key is given to the person to whom post box is assigned.
 All mail to a certain post box will be dropped in the post box by the post office
and a representative of the business will collect is personally.
Advantages
 Mail can be collected from the box at any given time even when the post office is
closed
5. Private Bags
 Used by people who do not have street addresses or post office boxes
 Bags are made of canvas and rented from the post office
 Each bag has its own number and can be locked
 Allows mail to be collected from the post office at any time but only during
working hours
6. Franking Machine
 This service is available on request.
 This is suitable for those who have to send a lot of mail on regular basis.
 On request customer will get a franking machine.
 Function of franking machine is to print stamps.
 Franking machine is equipped with a meter which counts on the stamps printed.
 Customer has to pay rental cost of the machine along with the stamps used.
 Saves time and money if outgoing mail is frequent.
Advantages
 A large number of letters can be processed in a short period of time
 Saves on labor required to place stamps on each letter
 Other important information can also be printed on every letter
7. Post Restante
 Used to send mail to people of no fixed aboard e.g. sales people, tourists etc.
 Letters are addressed to the nearest post office
 Mail is held at the post office
 Recipient collects mail upon receipt of positive identification
 Mail is clearly marked “POST RESTANTE”
Advantages
 Convenient and safe
 Helps company officials stay abreast with what is going on at their businesses
Disadvantages
 only useful where the recipient is staying in the specific area for an extended
period
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8. Business Reply Service

 This service mainly used by big businesses that want to encourage customers to
respond to their information
 Businesses will send letters to customers with reply cards or envelopes
 This helps businesses get vital information from the customers
 Business reply service is mainly used in market research
 Customer does not pay for postage, the postage is paid for in advance by the
business
Advantages
 Customers will respond in large numbers since they do not pay for postage
9. Data Post
 It involves the sending of printed computer data to specific customers
 The data or packages are delivered at the doorstep of the intended recipient
 Delivery usually done overnight and parcels reach their destinations the following
morning
 However data post is no longer being used since people now prefer tele-communication
services such as internet and datel
10. Cash On Delivery

 Used by mail order firms
 Postman does not deliver parcel until he collects payment from recipient
Advantages
 Customer does not have travel to the business to make the purchase
 Business avoids risk of bad debts
11. Recorded delivery

 Used where sender wants proof of delivery
 Sender receives a certificate of posting as proof of postage
 Recipient signs for delivery of mail
 Compensation is paid in case of loss
 Often used to send legal documents like summons or sensitive documents like original
certificates or passports.
Advantages
 Proof of postage
 Compensation in case of loss
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Telecommunication Services
 Used for sending and receiving information electronically.
 IN Zimbabwe this service is offered by Telone, Econet, Netone, Telecel, Africom
among others
1. Telephone:
 Telephones are rented from Telone
 Telephone call can be local if made to a subscriber in the same town
 A call to a subscriber in a different town is called a trunk call. A trunk call is a long
distance call and it costs more than a local call.
 To make a trunk call a system called SUBSCRIBER TRUNK DIALING [STD] is used
Advantages
1. Cheap.
2. Easily available.
3. Wide coverage.
4. Fast and allows immediate responses to be communicated
5. SMS facility.
6. Telephone allows direct dialogue between two people
7. A telephone directory usually accompanies a telephone. A directory lists names and
telephone numbers of subscribers per town in alphabetical order
8. Reverse charge call facility.
Disadvantages:
1. Facial expressions cannot be seen.
2. Nonverbal communication is difficult to use
3. No written record.
2. Mobile Phones/Cell phones:

 Cell phones have the same functions as telephones but the difference is they use
wireless technology.
Advantages
1. They are portable and can be carried anywhere.
2. Becoming cheaper.
3. SMS, MMS and Internet.
4. Can be used in the payments of bills.
5. Enables travelers to keep in touch with his office.
Disadvantages
 No written record
 Information can be distorted in case of weak signals.
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 Not so wide coverage as compared to telephones

 Battery needs to be charged.
 The use of cell phones while driving or using machinery can cause accidents
3. Facsimile {Fax :}
 Used for written communications.
 The word FASCIMILE means exact copy
 Special equipment (fax machine) is required at both ends.
 Fax machines can be hired from the post office or they can be bought
 Send will feed document in his fax machine and receiver will get the copy of the
document on his fax machine.
 Charges for the use of fax machines are added to the telephone account each month
Advantages
 Confirmation of communication.
 It is fast and therefore useful for sending urgent information
 An exact copy is received.
 A record can be kept.
Disadvantages
 Expensive, charges are based on time and distance. Suitable only for sending few
papers.
 Fax quality is not so good. Limited life of fax copy.
 Need for a fax machine on both ends.
4. TELEX
 Telex service used where businesses require a written record for the message sent
 The service uses tele-printers, a teleprinter is like an electronic typewriter
 A telex is a combination of a telephone and a printer
 Message will appear on a screen before it is sent and sender will make sure it is correct
before sending it
 The receiving teleprinter will then print out the message
Advantages
 Teleprinter can receive and print message even when unattended
 Message can be sent at any time
 Provides a written record
 Fast
Disadvantages
 Replies are not always immediate
 Telex cannot print diagrams and pictures
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4. Internet:
 A network that links computer networks all over the world by satellite and telephone,
connecting users with service networks such as e-mail and the World Wide Web.
 Modern banking is dependent on internet.
Advantages
 E-commerce is carried out on internet.
 Has increased international trade.
 Cheap source of information.
5. Intranet:
 A network of computers, especially one using World Wide Web conventions, accessible
only to authorized users such as those within a company.
 High capital cost.
6. Email:
 This is a system of sending and receiving information through electronic means
 Each subscriber has an email address e.g. [email protected]
 Information can be stored retrieved and printed
Advantages
 Used to send messages over the internet.
 Attachment can be done.
 Quick.
 Cheap.
 Message can be sent to many people at once
Disadvantages
 Sender and receiver both required email address.
 Virus.
 Information can be distorted.
 For computer literate people only
 Hacking.
 One must get an email address to use this facility.
7. Teleconferencing/Skype:
 Enables people in different parts of the world to talk face to face
 It enables members of the conference to see each other on television or computer
screen as they hold live discussions
Advantages
 Saving time and money on meetings.
 Discussion can be recorded providing a record
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 Facial expressions can be seen.

 Members can take part in meetings from the comfort of their homes
Disadvantages
 Requires special equipment
7. Radio paging/Public address system

 Involves the use of loudspeakers located at strategic points in a building
 Mainly used in factories, shops and offices
Advantages
 Quick
 Cheap
Disadvantages
 In order to attract the attention of all other workers, other workers will be distracted
from their work
Datel
 Used to communicate business information using a computer
 It uses a telephone network and the information transmitted cannot be accessed by
unauthorized personnel
 Used mainly in banks
Advantages
 Fast
 Flexible
 Information can be printed providing a written record
 Safe and secure
Disadvantages
 Modern and expensive equipment required e.g. modulator and a demodulator
Factors affecting choice of communications

i. Cost.
ii. Speed.
iii. Accuracy of information.
iv. Availability.
v. Nature of information.
vi. Secrecy of information
vii. Distance.
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Advertising
Advertising is the process of giving information to the public and persuading customers to buy
the product or services of a particular company.
Importance of Advertising to consumers

 To inform customers about product that are available, what they can do and how to use
them
 Inform customer about new products
 Inform customers of where they can get the product and the price
 To communicate to customers of improvements or changes to products
 Inform customers of promotions and sales taking place
 To notify customers and potential clients on changes e.g. change of address
 Give information to customers about terms of payment and delivery
Importance of Advertising to producers

 Advertising helps increase sales and profits
 To help improve the company’s image
 Fight bad publicity
 Create brand loyalty
 Compete with rival producers or advertisers
 Remind customers of existing products
 Educate customers on health and safety
Types of Advertising
There are three types of advertising
i. Informative Advertising
ii. Persuasive Advertising/ Competitive Advertising
iii. Collective or Generic Advertising
i. Informative Advertising
 Informative adverts give facts and leave people to make their own rational
choices and decisions.
 Provides precise details of goods to the general public e.g. where the good can
be found, type of goods available, price, what they are made of and how to use
the product
 Newspapers carry informative adverts on houses for sale, cars for sale etc.
 School advertise their forthcoming events or functions so that parents and
members of the public can attend
 Employers advertise in search of workers
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ii. Persuasive Advertising/Competitive Advertising

 This type of advertising persuades or encourages customers to buy a producer’s
products
 Used by producers to promote their product using brand names at the expense
of competitors e.g. Surf competes with Cold Power, Heinz beans versus Cashel
Valley, Econet v Telecel etc.
 Advertiser only gives good points about their product
 Advertiser uses attractive devices such as color and music
iii. Generic Advertising

 Occurs when a number of producers in one industry join together and advertise
their product in general terms e.g. Tea: Discover the goodness, Eat more fruit
 The advert names the product in general terms without using brand names
 Advert financed by a trade association
 There is no competition amongst the producers
Differences between persuasive and informative advertising
Persuasive Informative
Only gives good point about a product Give fact about a product as well as
the dangers
Persuades customer to buy an Informs public about prices, quality
advertiser’s products where to buy etc.
Used for products that are already in Used for new products
the market
Aim to increase sales and profits Aim to notify public of new products,
events, where to find goods etc.
Uses attractive devices such as color Does not use attractive devices
and music
Uses trademarks or names Does not really focus on brand names
Used fight competition Can be used even if there is no
competition
Advertising Media
 An advertising medium (media) is the channel of communication that
carries the message from the advertiser to the public or audience
 Media can be direct or indirect
 Indirect advertising targets all the people or the general public e.g.
advertising through newspapers, television radios etc.
 Direct advertising targets particular group of people e.g. brochures,
leaflets posted to specific individuals
 Advertising media can be broadcast, print, outdoor or direct mail
advertising
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Broadcast advertising
1. Television
 Television medium contains vision, sound, motion color and written word
effects in one advert
 Repeat adverts possible
 Adverts can be screened at appropriate to the targeted audience e.g. adult
products can be advertised during late viewing while children products can be
advertised during children’s programme times
 Provides a wide coverage
 demonstrations are possible and results of using the product can be shown
Advantages
 Wide coverage
 Adverts are colorful and interesting
 Cheaper than door to door advertising
 Consistent and cannot be distorted as oral advertising
Disadvantages
 In some areas there is no national coverage
 Some people cannot afford T.V sets
 Expensive
 Adverts interrupt interesting programmes and viewers may use the commercials
time to take a break
 Limited time to communicate information
2. Radio
 Provides sound only
 Wide coverage
 Can be afforded by most people
 Suitable for gods used by the majority of people
Advantages
 Cheap and suitable for small businesses
 Repeat adverts are possible
 Even illiterate people can get the message
 Wide coverage
 Advert can be produced in different languages
Disadvantages
 May require advertising on different radio channels to reach everyone
 Uses only sound
 Require repeat advert for audience to remember the message
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3. Internet
 Makes use of web/internet sites e.g. Yahoo, Google or Linked In
 The Internet has taken many readers and viewers away from newspapers,
magazines and television
 Internet adverts can be:
i. Pop ups – these advert automatically show on web pages
when one is browsing on the Internet
ii. Podcasts – these are multimedia or video files distributed
on the internet for playback on personal computer or
cellphones
Advantages
 Wide coverage
 Adverts are often colorful and interesting
 Repeat advert possible
 Time for advert not limited a with televisions
Disadvantages
 Can only reach computer literate people
 Not everyone can afford a personal computer
4. Cinema
 Combines sound and vision like television
Advantages
 Adverts are colorful and interesting
 Cheaper than door to door advertising
 Consistent and cannot be distorted as oral advertising
Disadvantages
 Coverage is small since cinema theatre are not widely distributed
 Not many people go to the movies
Print Advertising
1. Newspaper
Advantages
 Wide coverage
 Cheap to buy and most people can afford them
 Cost of advertising is low especially when using the classified section
 Possible to target audience by placing adverts in relevant sections
 Advert can be in color for greater impact
 Local newspapers can make use of local languages
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Disadvantages
 Readership declining because of the growth in popularity of the internet
 Adverts have a short shelf life because a newspaper may be read once and
thrown away
 Ideal only for the literate
2. Magazines and journals

 Magazines and journals are used in direct advertising because there are specialist
magazines targeting selected groups of people e.g. Women’s magazines,
Gardening
 Journals exist for specific trades e.g. the New Farmer
Advantages
 Magazines and journals are often colorful and of high quality, and so are the
adverts. The god paper quality allows good color reproduction.
 Readers keep magazines for a long time and exchange with others giving a long
life to the adverts
 Advertising in journal and magazines allows for elective promotion
Disadvantages
 Magazine are not widely read as newspapers
 Cost of advertising in newspapers tend to be high
 Ideal only for those who can read
3. Flyers and brochures

 Flyers and brochures are a cheap way of advertising and ideal for small
businesses
 They are handed out to motorists or pedestrians at busy intersections or are just
placed on car windscreens, distributed with newspapers or placed in letterboxes
4. Yellow pages
 These are widely available and cheap
 Usually located at the end of telephone directories
 They carry adverts classified into different trades e.g. auctioneers, carpet cleaners,
borehole sinkers etc.
 An advert is placed together with competitors
Advantages
 Many consumers use the yellow pages as a starting reference to find goods and
services
 Customers prefer the yellow pages than the newspaper’s classifieds
 Cheap way of advertising
Disadvantages
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 The pages are crowded and adverts can easily get lost in the crowd. That is to
say customers may not notice the advert.
 Adverts placed with those of competitors
 Limited creativity since all advert follow a pre-set format
Practice questions
1. Distinguish between competitive advertising and collective adverting [6]
2. List six disadvantages of advertising [4]
3. A manufacturer’s fixed costs are $10 000 and his variable costs $10/unit. Without advertising he
sells 2000 units. Later he advertises and the campaign costs $2000 but increases sells to 6 000
units. Calculate the cost per unit:
a) Before advertising
b) After advertising [4]
4. How is a trader assisted by advertising [15]
5. What benefits would a company expect from its advertising campaign [5]
Outdoor advertising
 Outdoor advertising include posters, billboards and electric spectaculars
1. Posters
 Cheap way of outdoor advertising especially for a localized target audience
 Effective especially if placed at strategic points like railway stations and local shops
 They can contain a considerable amount of relevant information
2. Neon signs
 This is a form of outdoor advertising which uses bright attractive colors and flashing moving
signals
 Mostly used to advertise a brand name, company name or logo or a forthcoming event which
will continuously be flashed on a screen
3. Billboards
 Digital advertising has grown in popularity as an outdoor advertising medium
 They can be stationery billboards or moving billboards
a. Stationery Billboard
 These are displayed on structures in public places
 They are often large adverts located along highways to target passing motorists
 They are exposed to a constant audience that regularly pass by the viewing point
b. Mobile billboards
 Mobile billboards reach a wider audience such as people in the street, motorists, passengers
and pedestrians as they pass through busy and heavy populated areas
 They are usually placed on large trucks, buses or trailers
Advantages
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 Full color, graphic images/ pictures on a large screen

 Instant digital changes
4. Trade shows and events

 Organizing several events or sponsoring the events gives businesses a great advertising
opportunity e.g. organizing a trade fair, a sports tournament or an exhibition
Direct mail advertising

 Occurs when the advertiser sends marketing or advertising messages directly to the buyer by
post
 It includes brochures, catalogues and other literature on products for the potential buyer to
order
Advantages
 Advert directed at those most likely to buy the product i.e. the advertiser can choose the area
and the people he/he wishes the message to reach
 Advertising campaign can be hidden from competitors
 Message can be as long as is necessary
Disadvantages
 Some people dislike direct adverts and many throw them away before even reading the
contents
 Expensive
 Advertiser has to keep track of the addresses to make sure the mailing list is accurate and up to
date
Point of sale advertising

 Includes window displays at shops and notice in the shops
 Special offers in the shops are also an example of this advertising if given in the shops
Word of mouth advertising

 Business owners can encourage their customer to tell their friend and family about the
products/services on sale.
Advantages
 It is free
 Most people believe what they hear from their friends
Disadvantages
 Inconsistent
 Time consuming and intended market may not listen
Methods of appeal used in advertising

 Advertising appeal is the method used to attract the attention of the public to make them like
certain products or services
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 Advertisements will appeal to:

i. Personal emotions – the need for security, to be loved, to be happy and to live
comfortably
ii. Social emotions – the need to be accepted and belong to a certain class of people
iii. Fear – some adverts will focus on people’s fears to make them want to try certain
products e.g. health, beauty and insurance products
iv. Celebrities – some adverts will use celebrities or popular people in society
v. Sex appeal – these adverts may use beautiful naked women to catch people’s attention
to new products
vi. Music and humor
vii. Scarcity appeal – encourages customers to hurry and buy because there are limited
stock available or because there are a limited number of days for which the offer
remains valid.
Advertising agencies
 An advertising agency is an outside company which does the advertising and marketing on
behalf of another business
 Advertising agencies are paid a commission for their work
 Main function of the agency is creating, producing and placing of adverts on behalf of another
business.
Functions of advertising agencies

i. Market research – the advertising agency obtains information about the market for a client’s
new and existing products. They investigate factors that influence the distribution of product,
pricing, packaging, naming the product and customer’s preferences on the product
ii. Creating the advertisement – with the information gathered from market research, the agency
can create a suitable advertisement for the client. The agency will decide the type of media to
be used, method of appeal and the frequency of the advertisement e.g. daily or once a week.
iii. Producing the advertisement – once the agency knows what it wants it can produce the advert.
The advert I now filmed or drawn e.g. a tune or slogan for the advert is tried and tested. The
advert I presented to the clients so that they can listen and watch it and decide whether it need
any changes or not.
iv. Book space for advert/place the advert – After agreeing on the media to use for the advertising
campaign, the agency books time lots of television or radio or space in the press.
v. Advice to the client - the agency then assesses whether an advertisement has been successful.
If an advert has been a flop the agency will advise the firm on what steps to take next.
Create Produce Book Space Advice
Advantages of advertising
i. Increase demand – advertising helps to increase demand for a product leading to increased
sales. Increased sales are likely to result in bigger profits
ii. Lower prices – increased sales may also lead to mass production which leads to lower
production costs per unit.
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iii. Competition – advertising leads to greater competition between producers which results in
improved quality of products and lower prices
iv. Information – adverts provide information to members of the public on what is available on the
market where they can get the product or the prices of the product.
v. Finance for the media – advertising helps to keep prices of newspapers at reasonable levels and
it also lower license fees for radio and television
vi. Creation of employment – advertising leads to creation of employment in the advertising
industry and in the production of more goods as a result of greater demand
vii. Advertising helps to improve – advertising helps to improve people’s standards of living by
creating jobs and by getting new and better products which make the quality of life better.
Disadvantages of advertising
i. Higher prices – an advertising campaign can be very costly. If it fails to increase demand this can
lead to increment in the price of goods and services
ii. Wastage of resources – advertising encourage multiplication of brand which is regarded as a
waste of resources. Too many brands make it difficult for consumers to choose.
iii. Impulse buying – advertising encourages customers to buy things they do not really need and
usually cannot afford. They end up living beyond their means e.g. committing themselves to
credit buying and hire purchase.
iv. Misleading – some advertising make false claims and exaggerations which mislead consumers.
v. Adoption of foreign cultures – advertising is also criticized for encouraging people to adopt
foreign cultures. Some of these cultures may not be acceptable to some local people.
vi. Exploitation of consumers – advertising exploit consumers by encouraging them to buy things
they do not really need.
vii. Interrupts programmes – most advertising interrupts programmes on the television or on the
radio
viii. Dishonest – advertising only focuses on the good things a product can do without telling
consumers of the harmful side effects of using the product.
Code of Advertising Practice (CAP)

 The code of advertising practice sets out the general principles or standards which advertisers
and advertising agencies should observe.
 The code is supervised by the Advertising Standards Authority (ASA)
 ASA ensures that advertisers and advertising agencies keep to the general principles or standard
set.
 The code protects consumers against
i. False and misleading adverts - advertisers are not allowed to carry out advert which
will mislead customers e.g. an advert cannot claim that a product has some special
quality which it cannot prove or use the word ‘new’ for a product that has been sold for
more than 12 months
ii. Offensive adverts – advertisers are not allowed to make adverts that offend any section
of the community
iii. Disparaging references – advertising firms are not allowed to make comparisons of their
product with those of competitors. For example an advertiser cannot mention the
defects of a competitor’s products
iv. Indecent/immoral adverts – adverts should not contain nude pictures
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Transport
 Transport is the activity that involves the movement of goods as well as people from one place
to another
 Individuals or businesses that run transport companies are called transporters
Importance of Transport
 Allows goods and people to be moved from one place to another
 Removes the distance gap separating producers from consumers
 Raw materials and finished goods can be delivered where they are needed on a regular basis
 Transport allows the creation of large markets for goods
 Storage costs can be reduced as orders can be made and delivered promptly
 Employees are carried to and from work
 Allows a variety of goods to be available to customers
 Help create employment as some people will be employed as drivers, pilots, conductors
The modes of transport

 There are three modes of transport namely
i. Land
ii. Water
iii. Air
 The modes of transport are divided into the types or forms of transport as shown below
i. Land - Road, Rail and Pipeline
ii. Water – sea transport, inland waterways
iii. Air transport – air transport
Road transport
 Road transport is the most commonly used form of transport in most countries
 Roads are usually tarred or they are good gravel roads
 Means of road transport include trucks, buses, vans, cars, carts, bicycles etc.
Advantages
i. Vehicles such as trucks and cars are cheaper to purchase compared to airplanes and trains
ii. It is flexible and allows for door to door deliveries and it does not have fixed timetables and
routes
iii. Fast over short distances
iv. Isolated areas can be reached
v. It complements all other modes of transport to ensure that good reach their final destination
vi. Helps to make goods reach the other modes of transport at airports, railway stations or sea
ports
Disadvantages
i. Has lesser capacity as compared to other forms of transport
ii. Affected by bad weather conditions such as flood, landslides and mist
iii. Congestion resulting from too many road users
iv. Heavy trucks damage roads making roads difficult to use
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v. There social costs like noise and air pollution from smoke emissions of big trucks
vi. Road transport can be fairly expensive if the cost of return of empty crates is included in the
delivery charges
The use of own fleet of vehicles

 Most traders nowadays have their own fleet of vehicles
 Reasons for a trader having their own fleet of vehicles include
i. Collections and deliveries can be made at any time
ii. It is a way of ensuring the safety of goods in transit
iii. Public transport strikes will not affect their operations
iv. They can carry their own staff to and from work
v. Driver can collect empty crates, receive fresh order as well as payment on their way to
a delivery
vi. Traders can advertise their products and services on these vehicles
Disadvantages of operating own fleet of vehicles

i. High startup cost of buying the vehicles
ii. High cost of maintaining, servicing and repairing the vehicles
iii. Vehicles depreciate in value
iv. High cost of insurance
v. Vehicles may be under utilized
vi. Vehicles may be misused
Rail Transport
 This mode of transport requires railway lines for it to function
 The trains can either can carry either goods or passengers and may use diesel or electricity
 There are some parts of rail in Zimbabwe that are electrified which allows avoidance of air
pollution
 Passengers and goods can be loaded and offloaded from trains at railway stations
Advantages
 Fast over long distances
 Operates according to fixed timetables and customers know the times to expect deliveries
 Cheap
 Can operate with a small number of staff
 Free from traffic congestion
 Not easily affected by bad weather conditions
Disadvantages
 Not widespread in the country as road transport
 Door to door delivery not possible
 Cost of setting up stations, sidings, railway tracks is high and expensive to maintain
 Lack of competition results in inefficient service delivery
 Involves heavy losses of life and goods in case of accidents
 Because trains follow fixed timetables, this means that even with half loads they have to make
the journey. This results in heavy losses
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 Trains tend to be slow
Pipeline transport
 Mainly used for the movement of liquids and gases
 Some pipelines like the Beira-Mutare-Harare oil pipeline carry crude or refined petroleum
 Pipelines are also used to move water for domestic, agricultural and industrial use
 Pipelines are also used for sewage disposal
Advantages
 A large volume of liquid can be carried in a short space of time
 Low maintenance costs
 Requires a few people to operate it thus reducing the wage bill
 Door to door delivery is possible
 Where gradient is steep, fluids can flow by the force of gravity reducing pumping costs
Disadvantages
 Expensive to set up
 Leakages can result in huge losses
 Leakages pollute soil and ground water
 Accidents can result in loss of life
 Only suited for the movement of fluids
 May be the target of enemy attacks who will break the continuous flow through acts of
sabotage
 Pipeline transport is not flexible since pipelines cannot be easily redirected to other places
 Damage in one part of the pipeline stops the use of the whole pipeline
 Low temperatures can cause liquids to freeze in the pipeline
AIR TRANSPORT
 Quantity of goods and passengers carried by air transport has increased in recent years
 Air transport is a convenient mode in areas which are hilly or mountainous and cannot be
reached by other modes of transport
Advantages
 Speed
 Speed of air transport results in lower storage costs
 Lower risks of theft and damage, this reduces insurance charges
 Areas that are remote can be reached by air transport
 Suitable for high value goods
 Less accidents as compared to other modes of transport
Disadvantages
 Expensive
 Not suitable for heavy and bulky goods
 Needs road transport to complete journey for both goods and passengers
 Affected by bad weather conditions such as rain, fog and volcanic ash
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 Accidents result in great loss of life
Sea Transport
 bulk of goods in the world are transported by sea
 there different sea going vessels or ships which include
i. A TRAMP
 A ship that can be hired
 Carries a wide variety of goods
 Does not have a fixed timetable
 Does not have a fixed route
 It goes around looking for cargo to carry
 Hire charges can be negotiated
ii. PASSENGER LINERS

 These are big ships that carry passengers
 Travel according to a fixed timetable
 They have a fixed route
iii. CARGO LINERS

 Carry goods
 Have fixed routes
 Have fixed timetables
iv. OIL BULK ORE SHIPS (OBO)

 These are large ships that carry bulk cargo like unrefined oil, mineral ore, e.g. coal from
South Africa
 Have fixed routes and timetables
v. ROLL ON ROLL OFF SHIPS (RORO)

 These are ships that allow vehicles to be driven onto the ship and off the ship
 Vehicles may fully loaded with goods when driven onto the ships
 RORO ships save on labor costs since cargo is not loaded or offloaded from vehicles at
ports
 RORO ships have fixed routes and timetables
Advantages of sea transport

 Cheap method of moving low value goods over long distances
 Heavy and bulky goods can be carried
 New ships are now fast
 Do not have to stick to any timetable or route
Disadvantages of sea transport

 Slow, it takes a long time for goods to reach their destination
 Products made from metal tend to rust
 Pirates rob ships at sea
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 Special packaging required for goods carried by sea

 Expensive to build ships and seaports
 Affected by bad weather conditions such as storms
 Leakages from ships pollute water
Inland Water transport

 Inland water transport uses boats to transport goods and passengers on rivers, canals or inland
lakes
 For example the Suez canal, Panama canal, Lake Kariba and the Lake Victoria
Factors affecting choice of mode of transport
 Type and nature of goods to be carried
 Speed of delivery require
 The value of the goods to be carried
 distance to be covered
 cost of using a particular mode of transport
 flexibility of the mode of transport
 Availability of the mode of transport
Developments that have taken place in transport

1. Increased refrigeration
 Refrigeration is found in road, rail, water and air transport where perishable goods have to be
transported
2. Increased volumes and quantities of goods carried by air

 Air transport is fast
 Cost of transport goods by air is getting cheaper
 Bigger planes are being built that carry more gods
 More airports have been constructed
Containerization
 Containerization is the carrying of goods in large metal boxes of standard size
 Features of containers are
i. They are used in all types of transport
ii. Goods are packed and secured in the container and then the container is sealed
iii. Containers are numbered so that they are traced easily
iv. Cranes and forklifts are used to load and off-load containers
v. Specialized containers exist for different types of goods
Advantages of containerization
1. Bigger quantities of goods are carried more quickly and safely
2. Less time taken to clear goods at border posts
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3. Loading and off-loading is done by cranes saving on labor costs
Disadvantages of Containers
1. Containers allow smuggling of illegal goods
2. Cost of transporting empty containers on return loads is high
3. Expensive to construct steel containers
4. Unemployment may result from mechanical handling of containers
Palletisation
 A pallet is a portable platform on which goods are stacked
 It is loaded and off-loaded from trucks using a platform
 It makes handling of heavy and fragile goods easier
Developments in transport in Zimbabwe

 Expansion and upgrading of the road network
 Toll gates have been set up on the country’s highways
 Beira-Mutare pipeline extended to Harare
 Urban commuter trains introduced in Harare. Also known as Freedom Trains
 Bigger and modern airports have been built e.g. Joshua Mqabuko Nkomo airport in Byo
Document used in the transportation of good

 Documents used in transport include
i. Delivery note
ii. Consignment note
iii. Charter party
iv. Bill of lading
v. Airway bill
1. Delivery note/ Packing list

 Used in home trade when goods are transported using own transport
 The customer will check the good delivered, if they are correct they will sign the delivery note
 The document contains
i. Names and addresses of the supplier and the customer
ii. Descriptions of the good being delivered
iii. Quantity of good delivered
2. The Consignment note/Loading instructions

 Used when a supplier uses hired transport to deliver goods to a customer
 The document give instructions to the transporting company to collect good from a named
place and deliver them to a customer’s address
 The document contains
i. Names and addresses of the supplier and the customer
ii. Descriptions of the good being delivered
iii. Quantity of good delivered
3. Charter Party
 Document used when hiring a ship or aeroplane
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 There three type of this document namely Voyage Charter, Time Charter and the Demise
Charter
 A charter party will include
i. The Lay days – these are the number of days a hirer is allowed to load and unload goods
onto a ship.
ii. Demurrage fees – money paid to the owner of a vessel if lay days are exceeded, route is
altered or time of hire is exceeded.
iii. Dead Freight Charges – payments made by the hirer for space booked but not used
4. Bill of lading
 Document is issued in triplicate
 Used in international trade when goods are transported by sea
 It is a document of title, this means that whoever holds the bill has ownership of goods being
transported
 Functions of the bill of lading include
i. It is a document of title
ii. serves as an acknowledgement of receipt of the goods by the ship-owner
iii. a contract of carriage between exporter and ship owner
 the bill of lading contains
i. name of the shipping company
ii. name and addresses of importer and exporter
iii. port of dispatch and delivery
iv. description of the goods
v. name of the ship
5. Airway Bill
 Used when good are sent by air
 Issued in triplicate
 The airway bill is a contract of carriage
 The airway bill contains
i. Name of the airline
ii. Number of airway bill
iii. Names and addresses of importer and exporter
iv. Airport of dispatch and destination
v. Description of the goods
Functions of port authorities

 There are sea authorities and airport authorities
 Port authorities have the duty of ensuring smooth flow of goods through their ports by
providing the following services
i. Good communication and transport links by road or rail
ii. Provide storage space including bonded warehouses
iii. Provide facilities for loading and unloading of goods
iv. Provide fresh supplies of water, food and fuel
v. Provide accommodation
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vi. Provide office space for customs officials, immigration officials and other
companies
vii. Offer parking space for travelers, taxis and buses
viii. Provide shopping and banking facilities
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International Trade
 International trade is the buying and selling of goods and services across national borders
 It is also known as foreign trade
 When goods are bought and sold across international borders it is called visible trade
 When services are bought and sold across international borders it’s called invisible trade
 Selling of goods and services to other countries is called exporting or export trade
 Buying of goods and services from other countries is called importing or import trade
 Trade between two countries is called bilateral trade
 Multilateral trade is trade is trade involving three or more countries.
Reasons for international trade

 Interdependence –International trade allows countries to get goods they cannot produce.
Countries import what they cannot produce and export what they produce
 Seasonal goods – some goods are seasonal in nature and it becomes necessary to import these
goods when they are out of season in one’s country.
 Variety – trade with other countries allows citizens to goods they want which may not be
produced within their country
 Standard of living – international trade raises citizen’s standard of living
 Specialization – as countries specialize unit costs fall. Specialization results in goods being
produced more cheaply in some countries than in others.
 New markets – international trade opens up new markets for businesses. This allows firms to
expand their operations.
 Technological development – some countries are less developed than others so they produce
and sell raw materials to the developed countries which have the technology to produce and sell
the finished products
Advantages of International Trade

 Countries earn foreign currency from exporting which is used to pay for imports
 Standard of living of citizens is improved
 Friendly relations are established between countries leading to more peace and stability
 Employment opportunities are created
 Citizens obtain a variety of goods
 Gaining knowledge through technology and information transfer.
Middlemen involved in International trade

1. Brokers
 These agents only arrange for the sale of goods between the importer[buyer] and the
exporter[seller]
 They do not handle the goods
 They offer expert advice on the quality of the goods
 They are paid a commission called brokerage
 Move with samples of the goods they sell
 Sell goods in the name of the principal that is they do not assume ownership of the goods
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2. Factors
 They have the imported goods in their possession
 Sell the goods on behalf of the exporter
 They receive a commission which is a percentage of the sales they make
 They deduct this percentage commission before they send the money to the principal
 Sell the goods on a sell or return basis, this means that if the goods do not sell they are returned
to the principal.
 Goods sold in the name of the principal
3. Del Credere Agents

 Del Credere means ‘of the belief that’
 Sell on behalf of their principal
 Sell the goods in their own name
 They offer delivery services
 Bear all risks related to those goods
 Guarantees payment of the purchase price
 Commission for Del Credere agents is higher than that for other agents
4. Forwarding Agents
 These agents act on behalf of exporters and importers
 They have offices at borders, ports of entry or customs boundaries
 Examples of freight companies include Swift, Speed Link, Manica Freight
 Forwarding agents carry out the following functions
i. Giving advice on transport arrangements for goods to be imported/exported
ii. Transporting the goods or booking space on carriers
iii. Preparing the necessary documents
iv. Providing warehousing
v. Arranging for customs clearance
vi. Insuring the goods while in transit
vii. Ensure safe and fast delivery of the goods to the customer
Challenges faced by exporters/importers

Problem Solution
1. Different languages used  Use agents who use the language
2. Different currencies used in different  Make use of exchange rates
countries  Form customs unions, common currency
areas or free trade areas
3. Longer distances travelled  Make use of middlemen
4. A lot of documents are required  Make use of middlemen
5. Technical differences e.g. in units of  Use internationally accepted standards
measurement 
6. Greater risks in international trade  Use services of insurance to cover
insurable risks
7. More competition  Provide quality products
8. Difference in tastes, culture and beliefs  Carry out market research
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The Customs and Excise Authorities

 They monitor the movement of goods into and out of a country and collect customs duty and
excise duty
 In Zimbabwe this is done by Zimbabwe Revenue Authority [ZIMRA]
 Customs Authorities perform the following functions
i. Collection of duties
ii. Controlling bonded warehouses
iii. Enforcement of quotas
iv. Record statistics on imports and exports
v. They document the importation and exportation of goods.
vi. Quarantine imported animals until they are satisfied that the animals are disease free
 Importers must fill in an entry form or customs declaration form which gives information on the
types and values of goods being imported. This helps customs officials to
a) Keep a record of the goods being imported and their origin
b) Determine whether the goods being imported are liable for duty or they are duty free
Customs and excise duties

 A duty or tariff is a tax charged on imported and exported goods
 Customs duty is a tax charged on imports. It is also called import duty
 Excise duty is a tax charged on goods produced within a country
 Duty can be charged in one of two ways
i. Ad Valorem Duty
 ad valorem means towards the value of
 this type of duty depends on the value of the goods
 e.g. if imports valued at $20 000 are charged 10% duty, this is ad valorem duty because it is
based on their value
ii. Specific duty

 This type of duty depends on the quantity of goods imported
 E.g. charging 3cents per liter of petrol imported
Reasons for charging import duties

i. To raise revenue for the government
ii. To protect home industries from unfair foreign competition
iii. To protect employment by discouraging imports so that local industry keeps working
iv. To discourage the use of some products because they are harmful to our health.
v. To correct an unfavorable balance of payments
Difference between home trade and foreign trade
Home trade Foreign trade

1. Few languages spoken in home trade Different and many languages are spoken in
different countries
2. Home trade done over short distances Foreign trade done over long distances
3. Trade done in one currency Different currencies are used
4. Businesses deal with well-known climate, International markets differ differently in climate,
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culture and tastes culture, tastes and legal systems

5. Less competition in home trade Fierce competition in foreign trade
6. Domestic trade does not involve balance Countries involved in international trade have to
of payments balance their payments
7. Measures of protectionism are not present There is protectionism in foreign trade
in domestic trade
Documents used in International Trade
1. Indent
 An indent performs the same functions as an order in home trade
 It can be an open indent or a closed indent
 an open indent does not specify the manufacturer who should supply the goods
 an indent is closed when the manufacturer who should supply the goods is specified
 an indent contains
 An indent contains
i. Description of the goods
ii. Quantity of the goods required
iii. Order number
iv. Prices as per quotation
v. Date of delivery
vi. Place of delivery
vii. Terms of payment
viii. Address of supplier and customer
2. Bill of lading
3. Airway bill
4. Consular invoice
 A consul is a trade representative of a country who is based in another country
 A consular invoice is used when import duties are charged ad valorem
 This document contains
i. The suppliers’ name
ii. The buyer’s name
iii. Description of the goods
iv. Quantity of goods
v. Unit and total price for the goods
 A consular invoice is important because:
a) It provides customs officials with reliable information
b) Duty can be worked out without rechecking the goods
c) Prevents under invoicing by exporter and importers
5. Certificate of origin
 A document which accompanies exports certifying their country of origin
 It requires the trade consul of the importing country’s signature and stamp
 Gives full details of the goods being exported
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Terms of Trade
 This is comparison of a company’s imports and exports
 It considers the price increases for imports and export to establish whether a country’s terms of
trade are favorable or not
Balance of Trade [Visible Balance or Trade Balance]

 This is the difference between the total value of a country’s visible imports and visible exports
during a given period
 Visible imports/exports are tangible physical goods
 𝑩𝒂𝒍𝒂𝒏𝒄𝒆 𝒐𝒇 𝒕𝒓𝒂𝒅𝒆 = [𝒕𝒐𝒕𝒂𝒍 𝒗𝒊𝒔𝒊𝒃𝒍𝒆 𝒆𝒙𝒑𝒐𝒓𝒕𝒔] − [𝒕𝒐𝒕𝒂𝒍 𝒗𝒊𝒔𝒊𝒃𝒍𝒆 𝒊𝒎𝒑𝒐𝒓𝒕𝒔]
 For example: Country X had the following exports and imports in 2010
Exports
Diamonds $20 000
Tobacco $10 000
Imports
Fuel $160 000
Machinery $110 000
Balance of trade = [total visible exports] – [total visible imports]

= [$20 0000 +$10 000] – [$160 000 + $110 000]
= $30 000 - $270 000
= -$240 000 [deficit]
 A deficit in the balance of trade means that a country imported more visibles than it exported
 A surplus in the balance of payment therefore means a country exported more visibles than it
imported
Balance of payment
 The balance of payments is the difference between a country’s total exports (invisible and
visible) and its total imports (visible and invisible)
 Invisible imports represent payments for services provided to us by other countries
 Invisible exports represent the money we receive for services we offer to other countries
𝑩𝒂𝒍𝒂𝒏𝒄𝒆 𝒐𝒇 𝒑𝒂𝒚𝒎𝒆𝒏𝒕 = [𝒗𝒊𝒔𝒊𝒃𝒍𝒆 𝒆𝒙𝒑𝒐𝒓𝒕𝒔 + 𝒊𝒏𝒗𝒊𝒔𝒊𝒃𝒍𝒆 𝒆𝒙𝒑𝒐𝒓𝒕𝒔] − [𝒗𝒊𝒔𝒊𝒃𝒍𝒆 𝒊𝒎𝒑𝒐𝒓𝒕𝒔 + 𝒊𝒏𝒗𝒊𝒔𝒊𝒃𝒍𝒆 𝒊𝒎𝒑𝒐𝒓𝒕𝒔]
 For example:
Visible imports $100 billion

Visible exports $90 billion
Invisible imports $210 billion
Invisible exports $250 billion
a) Calculate country X’s trade balance

b) What is country X’s balance of payments
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b) 𝑩𝒂𝒍𝒂𝒏𝒄𝒆 𝒐𝒇 𝒑𝒂𝒚𝒎𝒆𝒏𝒕 = [𝒗𝒊𝒔𝒊𝒃𝒍𝒆 𝒆𝒙𝒑𝒐𝒓𝒕𝒔 + 𝒊𝒏𝒗𝒊𝒔𝒊𝒃𝒍𝒆 𝒆𝒙𝒑𝒐𝒓𝒕𝒔] − [𝒗𝒊𝒔𝒊𝒃𝒍𝒆 𝒊𝒎𝒑𝒐𝒓𝒕𝒔 + 𝒊𝒏𝒗𝒊𝒔𝒊𝒃𝒍𝒆 𝒊𝒎𝒑𝒐𝒓𝒕𝒔]
= [$90 Billion + $250 billion] – [$100 billion + $210 billion]

= [$240 Billion] – [$340 billion]
= -$100 billion [unfavorable balance of payments]]
 A favorable balance of payment exists when the total value of exports exceeds the total value of
imports
 An unfavorable balance of payment / trade gap/ adverse balance of payment exists when total
imports exceed total exports
Correcting an unfavorable balance of payments

a) Charge customs duties on imports
b) Impose import quotas. A quota is a physical restriction on imported goods.
c) Import license restrictions
d) Import substitution policies
Measures government can take to promote International Trade

 Government can encourage trade with other countries by doing the following
i. Organizing International Trade fairs e.g. Zimbabwe International Trade Fair
ii. Establishing embassies in foreign countries where trade is promoted
iii. Trade missions or visits where local businesses travel to foreign countries
iv. Government can obtain market information for local businesses wishing to export or
import
v. Export promotion schemes and organizations e.g. Export Processing Zone, Zimbabwe
Investment Centre and ZimTrade
vi. Government can form trading blocs with other countries
Free Trade
 Free trade means that movement of imports and exports between countries is done without any
restrictions
 Countries will agree that that no duties, tariffs or taxes are paid when goods from either country
are imported or exported
 Countries that are geographically close to each other can form trading blocs
Trading Blocs
 A trading bloc is a formation of two or more regional countries that agree to preferential or free
movement of goods and people within the member countries
 Countries concerned become one common market
 Producers can sell their products to member countries without paying duty or at reduced tariff
rates
 Examples of trading blocs are COMESA [Common Market for Eastern and southern Africa], SADC
[Southern African Customs Union], SACU [Southern African Customs Union]
Protectionism
 Protectionism is the restriction of trade through laws and measures between countries
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Reasons for Protectionism

1. To protect home or local industries from foreign competition
2. To discourage dumping
3. To ensure high and reasonable levels of employment in the country
4. To raise government revenue
5. To correct an unfavorable balance of payments
6. To ensure local industries produce reasonable quantities to meet the country’s needs.
7. To discourage the use of some products because they are harmful to our health.
Disadvantages of Protectionism
1. Reduces variety for local customers
2. Standards of living are reduced
3. Other countries will impose counter measures that restrict goods from a protectionist state
4. Local industry may underperform because of protection by government
Methods of Protectionism
1. Tariffs – also known as customs/import duty. Imports will be expensive once duty is added
2. Import quotas – a quota is a limit on the quantity of goods that can be imported.
3. Embargo – complete ban on the importing of certain goods
4. Subsidies – subsidies help to reduce the prices of domestic products
5. Import licences – limit the number of importers by reducing the number of licences available to
importers
6. Exchange controls – imports can be reduced by devaluing a country’s currency.
7. Rationing Foreign currency – importers can be limited on the amount of foreign currency they
can use
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Money and Banking

 Money is anything that is accepted in exchange for goods and services
Barter Trade
 Before money people used barter trade
 Barter trade is the exchange of goods for other goods or for services.
Problem of barter trade

1. Double coincidence of wants – barter trade required that the person having the goods to offer
should find someone who not only wants the goods he has, but has some desirable goods to
offer in return
2. Problem of valuing goods – it is difficult to fix the rate at which commodities can be exchanged
3. Indivisibility of goods – not all commodities can be broken down into smaller ports which makes
it virtually impossible to exchange smaller items
4. Problem of storage – some goods are perishable e.g. milk and vegetables cannot be stored
easily for exchange at a later date
5. Problem of portability – some goods are heavy and bulky and therefore difficult to carry
around.
Functions of money
 Money has four basic functions which it must fulfill
 Money must act as
a) Medium of exchange
b) Measure of value
c) Store of wealth
d) Standard of deferred payments
a) Medium of exchange
 Money is the accepted commodity in the exchange of goods and services
 A consumer who wants to obtain a certain product can pay the required amount and obtain the
product
b) Measure of value
 Money is useful in the fixing of the values of different goods and services
 The value of all goods is expressed in terms of money e.g. the value of a loaf of bread is $1
c) Store of value
 In money value or wealth can be stored
 If people store their wealth in goods such as cattle or grain, these goods tend to deteriorate
overtime. Cattle age and die whilst grain rots
d) Standard of deferred payment

 Money allows individuals and consumers to buy on credit and have the amounts they owe
measured in terms of money
 Money allows credit transactions to take place
 A house for example may be paid for over twenty years.
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Characteristics of money
 Money must have the following characteristics
1. Acceptability 2. Stability
3. Portability 4. Scarcity
5. Uniformity/homogeneity 6. Divisibility
7. Durability 8. Identifiable
1. Acceptability
 Money should be acceptable to all members of society
 Anyone should accept the form of money being used as a fair exchange for either goods or
service.
2. Stability
 Good money must maintain a stable value overtime
 Money that changes in value overtime becomes less reliable and people will not depend on it as
a store of value or as standard of deferred payments
3. Portability
 Money should be easy to carry around
4. Scarcity
 Good money should not be so accessible that anyone can obtain any amount and buy anything
 If too much money is available to too many people with little or no effort this causes inflation
 This means that if money is plentiful prices will rise
 Money must not be too scarce however because if it becomes too scarce it ceases to perform its
role as a medium of exchange
5. Uniformity/Homogeneity
 Money within a country should consist of identical notes and coins
 E.g. all $20 notes should look alike
 If money is identical it can be identified easily, counted easily and packed easily
6. Divisibility
 Money can be divided into smaller amounts e.g. 1c, 5c, $1, $5
 Money should be divisible to avoid the problems of indivisibility of commodities found in home
trade
7. Durability
 Good money should last for a long time
8. Identifiable
 Money should be easily identified
 Good money should be able to be distinguished from fake money through the use of special
features e.g. water mark, raised print, unique serial number and the use of high quality paper
Legal tender
 Legal tender is all the money a trader is supposed to accept from a customer settlement of bills
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 This means the seller is legally compelled to accept the form of money tendered by the
customer
 Notes and coins are examples of legal tender
 Bank notes however are full legal tender
 Coin are not full legal tender which means that a seller can refuse the payment of large amounts
of money in coins
 Other forms of payment are not legal tender e.g. cheques, money orders postal orders or credit
cards
Financial institutions
i. Commercial Banks
 Commercial banks are very important in the economy
 Examples of commercial banks include Ecobank, Kingdom Bank, CBZ, Standard Chartered and
Barclays Bank
Functions of Commercial Banks

i. Deposit taking - Commercial banks accept deposits from individuals, firms and other
institutions
ii. Receiving payments – commercial banks receive payments on behalf of their customers
iii. Operating the cheque system – they offer their customers the facility of making payments
through the use of cheques
iv. Offering credit cards – they allow certain customers to buy goods and services on credit up to a
specified value indicated on the credit card
v. Providing cash cards and ATM’s – customers are provided with cash cards which allow them to
withdraw money at the bank’s automated teller machine [ATM]
vi. Offering night safe facility
vii. Giving financial advice
viii. Lending money
ix. Safeguarding customer valuables
x. Act as executors and trustees
Types of bank accounts
a) Savings Account
 Savings account is an account where money is kept for future use
 Usually used by small savers like individuals
 Money can be withdrawn without notice
 Interest rate offered is higher than for current accounts but less than for deposit accounts
b) Deposit accounts
 A deposit account is used by savers who have money to spare
 Money is deposited into this account and can only be withdrawn after giving a notice of
withdrawal to the bank
 Interest rate offered on this account is higher than for savings and current accounts
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 Interest is even higher for fixed deposit accounts where fixed amounts of money are deposited
in an account at regular intervals for fixed period of time.
d) Current Account
 mainly used by business people who need to make numerous transactions
 money can be withdrawn without giving any notice
 withdrawals are mainly done through cheques
 interest rates earned are lower than for savings and deposit accounts
 customer is offered a cheque book and deposit book
Cheques
 A cheque is a bill of exchange drawn on a banker, payable on demand
 A cheque is not legal tender, a person may refuse to be paid by cheque
 Cheques are used by current account holders to make payments
Parties to a cheque
 There are three parties to a cheque
i. The Drawer: this is the person who writes out the cheque. This is the account holder.
ii. The Payee: the person who is given the cheque as payment.
iii. The Drawee: the bank that is supposed to transfer the amount to the payee. This is the bank
on which the cheque is drawn.
Types of Cheques
i. Open cheques
 Open cheques are payable over the bank counter
 Anyone who presents the cheque can obtain the amount of money indicated on it upon
identification
 The payee must sign on the back of the cheque before it is paid
 An open cheque is not safe since it can be cashed by anyone who brings it to the counter.
 An open cheque can be endorsed to a third party, the payee will sign at the back of the cheque
and give it the third party who becomes the new payee
 An open cheque is usually used for small amounts being paid to known people.
ii. Crossed cheques

 In order to make a cheque safe a drawer crosses it
 A crossed cheque is one which bears two parallel lines drawn either vertical or diagonally across
the face of the cheque
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 The main effect of a crossing on a cheque is to prevent direct exchange of the cheque for cash
over the counter
 A crossed cheque must be deposited into an account
 Crossings can be general or special
 A crossed cheque can be opened by the drawer only
 The crossing will be cancelled and the drawer ill endorse the cancellation by signing the cheque
a. General crossings
 Crossings shown above are all general crossings
 In the first crossing nothing is written, this requires that the cheque be deposited into any bank
account. This cheque is also transferrable
 The “Account Payee Only” crossing is also a general crossing; it can be deposited into any bank
account as long as the account is in the name of the payee. This cheque cannot be endorsed to
anyone else [it is not transferrable]
 The “Not Negotiable” crossing means that when the cheque is transferred or endorsed to
someone else, the bank will ensure that the named payee is the real owner of the cheque
before accepting to pay for it.
b. Special Crossings
 The crossings above are special crossings

 The “Barclays” crossing means that the money should be deposited in an account with Barclays
bank only and not any other bank
 The “Barclays, Kaguvi Branch” crossing means that the cheque will only be deposited into an
account with Barclays at Kaguvi branch only
 These crossings restrict the cheques to be deposited with a specific bank or bank branch
Advantages of using Cheques

1. Convenient than carrying cash
2. It is safe especially when crossed
3. Can be posted cheaply than cash
4. There is evidence of payment
5. No need to count notes and coins
6. Customer sent a statement at the end of each month
Disadvantages of using cheques

1. Cheques are not legal tender, some people may refuse to accept them
2. They may be worthless if the drawer has no money in his account
3. Depositing money into an account wastes time
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4. Not suitable for small amounts e.g. $1, 50c

5. Crossed cheques cannot be used by people without bank accounts
Reasons for dishonoring cheques

 The drawee bank can dishonor (refuse to pay) a cheque
 A dishonored cheque is marked ‘RD’ or ‘Return To Drawer’ by the bank and returned to the
payee
 Bank will indicate reasons for dishonoring the cheque
 Some of the reasons are
i. Insufficient funds in the drawer’s account
ii. Amount in words differs from amount in figures
iii. Wrong signature
iv. The cheque is stale or it is 6 months old from the day of issue without being cashed
v. Cheque is torn, dirty or defaced
vi. Drawer is insane or dead
vii. Unsigned for alterations or changes
viii. Drawer has requested bank to stop the payment
ix. Account is closed
x. Missing details
Clearing of cheques
 When a cheque is presented by a payee it goes through a process of cheque clearing
 A cheque may be cleared under one of three conditions
a) Branch clearing
 drawer and payee use the same bank at the same branch
 payee deposits cheque into his account
 payee is credited
 Drawer is debited
 Cheque sent back to drawer
b) Head Office clearing

 Done when payee and drawer use the same bank but different branches
 the cheque has to be cleared through the Head office
 payee deposits cheque into their account
 payee’s account is credited and cheque is sent to the bank’s Head office
 at the Head office the cheques are sorted according to the bank branches and sent to the
respective branches
 cheque sent to drawer’s bank and the drawer’s account is debited
c) Bankers clearing
 Done when payee and drawer use different banks
 Payee deposits cheque into their account
 Payee is credited
 Cheque sent to the payee’s bank Head office
 Cheques sorted according to their banks and sent to the Clearing House at the Central Bank
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 Representatives from banks settle bank indebtedness and exchange cheques and take them
to their banks Head Office
 At the Head office the cheques are sorted according to bank branches and sent to the
respective branches
 At the drawer’s branch the drawer’s account is debited
 Cheque sent back to the drawer
Bank Loans & Bank Overdrafts
Bank Loan Bank Overdraft

1. Formal way of borrowing Informal way of borrowing
2. Available to anyone Available to current account holders only
3. Collateral security required Collateral security not necessary
4. Interest charged on whole amount Interest charged on the amount overdrawn daily
5. Interest is fixed Interest rate is variable
6. Repayments are regular Repayments are irregular
7. Used for long term capital projects Used on short term working capital
8. Interest rate is low Interest rate is high
9. Customer needs to apply in writing Customer does not need to complete forms
Procedure in obtaining a loan

 Customer applies in writing requesting a loan
 Purpose of loan is stated in the form of a proposal
 Customer reveals amount of loan required
 Collateral security is stated
 Application formed assessed and if successful customer will sign the agreement form
 Loan account opened in the name of the customer
 Loan is credited in the customer’s account
Information required before granting a loan to customer

 Customer’s personal details i.e. name, address and date of birth
 Current pay slip
 Period of loan required
 Proof of residence
 Purpose of loan
 Details of previous record with bank or other institutions
Bank payments in Home Trade

 These can be done in the following banking services
1. Stop order or a standing order

 A stop order or standing order is an instruction to a bank to pay fixed amounts of money
regularly on behalf of the customer
 Payment is made regularly on the same day every month
 Can be used for hire purchase instalments, rental charges or mortgage repayments
 Account holder can cancel stop order when necessary
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Advantages of using stop order

1. Payment of amount due on correct date is guaranteed
2. It reduces paperwork
3. Payee receives payments when they fall due
4. Customer avoids bad debts
5. Account holders do not have to remember individual payment due dates
2. Credit transfer/Bank Giro

 Used when someone needs to pay several people who have different bank accounts
 A multiple transfer form is completed
 Ideal for several payments at once
 Payee must have an account
 Method usually used to pay wages or salaries
 Payments made through credit transfer cannot be dishonored
3. Direct debit
 Used for payments that have to be made regularly but whose amount varies from one
period to the next
 Interval between payments may also vary
 For examples bills like water, electricity and telephone bills
 Payee must have a bank account
Advantages of direct debit

1. Method reduces paperwork
2. Creditors receive payments promptly and suffer no bad debts
3. Account holder does not have to remember individual payment due dates
4. Bank Draft/Bank Cheque

 A bank draft is a cheque drawn by the bank on itself
 It cannot be dishonored
5. Bank Certified Cheque

 Used where a creditor wants a cheque drawn by a customer to be guaranteed by the customer’s
bank to make sure it won’t be dishonored
 The bank will stamp the word “CERTIFIED” on the cheque after it checks to see if there are
sufficient funds in the customer’s account
Other financial institutions
1. The Central Bank [Reserve Bank of Zimbabwe]

 It is owned by the Government of Zimbabwe
 It is the central bank in our country
 It is owned by the government
 It issues licences to new banks and supervises activities of all banks
 The Reserve bank also prints money
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Functions of the RBZ

i. It is the government’s bank
ii. It is a banker’s bank. It keeps money for other banks
iii. It is responsible for issuing note and coins used in Zimbabwe
iv. It is a lender of last resort. It lends money to other banks
v. It acts as a clearing house
vi. It supervises operations of other banks
vii. It implements government monetary and exchange rate policies
viii. Regulation of money supply
2. Merchant Banks
 Also known as accepting houses/wholesale bankers because they serve large scale businesses
 Examples of merchant banks include Standard Chartered Merchant Bank, NMB and
Metropolitan bank
 Merchant banks perform the following functions
i. Raise long term finance for the government
ii. Sell shares to the public on behalf of companies
iii. Act as financial advisors to firms
iv. Offer loans to large companies
v. Providing leasing services to companies
vi. Accept bills of exchange in return for a fee
3. Savings banks
 The People’s Own Savings Bank is the only savings bank in Zimbabwe
 It is owned by the government and it is ideal for both small and big savers
 It offers savings and fixed deposit accounts
 Money can be withdrawn from the savings account without giving notice
 Notice however should be given for fixed deposit accounts before making a withdrawal
 The POSB performs the following functions
a) Accept deposits
b) Lending money
c) Making payments on behalf of customers
d) Provide financial advice
e) Offer fixed and savings accounts to customers
4. Building societies
 Examples of building societies include Central Africa Building Society. First Building Society
 Functions of building societies include
a) Accept deposits
b) Lending money for the building of houses
c) Making payments on behalf of customers
d) Provide financial advice
e) Offer savings accounts to customers
f) Lend long term loans called mortgage bonds
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5. Finance Houses/Hire Purchase companies

 Finance houses are important in the buying and selling of goods
 They help customers buy goods on hire purchase or credit
 Examples of Finance Houses include Standard chartered Finance
 Finance Houses get most of their money by borrowing from commercial and merchant banks
 Functions of Finance houses include
a) Provide credit to consumers through hire purchase for the purchase of consumer
durables
b) They offer leasing services
c) Lend money to customers for travel or home improvements
d) Buy treasury bills and bills of exchange from individuals at a discount
6. Discount Houses
 These are companies which take surplus funds from banks and use them to make more money
 They also store cash reserve assets for banks
 Buy treasury bills from the government and Bills of exchange
 Discount houses buy the bills at a discount and then wait for the bills to mature here they collect
the full amount for these bills thus making a profit
Modern trends in Banking

i. In store banking,
 some banks have branches located inside large retail outlets e.g. TN Banking
 In store banking creates convenience for customers
 One can access the bank account at till points and do their banking and shopping at the
same time
 Customers do not have to move around with large sums of money
ii. Internet banking
 Allows customers to access their accounts from their homes or offices
 Customers are connected through the internet
 Payments of accounts can be done through the internet
 Customers can also make inquiries, check recent transactions, transfer funds or even
confirm account balances
 However customer has to go to the bank to make deposits
iii. Tele-banking
 Bank transactions are done through the phone
 Customer simply dials a telephone number provided by the bank
 Customer is not charged for making the call
 Account balance, recent transactions and other details can be obtained over the phone
 Customer can be answered by a computer or by members of a team of customer care
personnel
 Telebanking can be done at any time even during the holidays
 Customer can also be informed through text messages for any withdrawal or deposit
iv. Automated teller machines fitted outside banks and used for money withdrawals.
 ATM’s operate 24 hrs
 Use the self-service method
 Reduce paper work
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 save on labor and space

 reduce the need to carry cash around
 customers given debit cards/ATM cards which they use on these ATM’s
v. Credit cards which allow customers to buy goods on credit up to a certain amount.
Bank payments used in foreign trade
1. Letter of Credit
 This is a document which facilitates payment in foreign trade
 The importer’s bank drafts a letter of credit on his behalf to be sent to the exporter
showing details of goods exporter must supply, where the goods are to be shipped and
documents to be produced to obtain payment
 Letter is sent to the exporter’s bank
 Goods are then sent to the importer when the exporter’s bank receives the letter of
credit from the importer’s bank
 After shipping the goods the exporter presents to his bank the documents stated in the
letter of credit e.g. bill of lading, certificate of insurance etc.
 Exporter is then paid by his own bank
 Shipping documents are then sent to the importer’s bank by the exporter’s bank
 Importer’s bank then sends payment to the exporter’s bank
 A documentary letter of credit is one that is accompanied by shipping documents
Importance of a letter of lading

 Facilitates payment in foreign trade
 Importer is assured that ownership of the goods is assured before payment is made that
importer only makes payment when the shipping documents are in possession of his bank
 Can be used when exporter is not willing to release goods to the importer before payment is
made
 Exporter is guaranteed prompt payment
 Importer is financed by his bank
Bill of exchange
 It is an unconditional order used to secure payment in international trade
 It is a method of settling debts used mainly in international trade
 It is payable a number of days or months from the date it is accepted by the drawee
 When accepted by the drawee it is called usance, tenor or term bill
 Required as part of a documentary credit
 Can be discounted before it matures
 Discounting the bill prevents working capital being tied up in book debt
 It also enables imported goods to be sold before the bill matures
 Allows importer a period of credit before making payment
 A sight bill of exchange is a bill that is payable as soon as the drawee sees it
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Consumer protection
 The need to protect consumers has given rise to a movement referred to as consumer
protection
 Customers need to be protected against
i. Unfair trade practices like selling of substandard products
ii. Misleading advertisements
iii. Indecent or immoral adverts
iv. Incorrect or wrong measurements and weights
v. unfair repossession of goods bought on credit
vi. hoarding of goods in order to create artificial shortages
vii. selling of goods which are not safe for human consumption
viii. refusal by some manufacturers to honor guarantees
ix. unfair pricing of goods or services
Consumer Rights
1. The right to be informed

 Customers have the right to know what they are buying in order to make informed decisions
 Therefore manufacturers will print ingredients and more information on their products
2. The right to redress

 If a customer is ill-treated ,given poor service or given goods that are incorrect the customer has
the right to have the situation corrected
 The customer can go to the courts of law to force the trader to give the expected service
3. The right to basic needs

 Consumers must have access to basic needs such as food, clothing, water, shelter, clothing,
education and health care
4. The right to choose

 Customers should not be forced to buy things they do not want to buy
 Traders should give customers a wide variety to choose from
5. The right to consumer education

 Consumer education involves informing customers of their rights and duties
 Customers therefore have the right to be provided knowledge of their rights
6. The right to be heard

 Customers should be allowed to express themselves and lodge complaints
7. The right to safety

 Customers should not be exposed to goods that are harmful to health
 Ingredients of products should be stated and the effect of their consumption should be stated
 Best before dates should also be printed so that customers do not buy stale or unsafe food
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8. The right to a healthy environment

 Customers must be protected against environmental hazards i.e. customers must live in a clean
and safe environment
 e.g. Chicken Slice puts dust bins outside their premises so that customers throw leftovers in the
bin avoid pollution
The Consumer Council of Zimbabwe [CCZ]

 The CCZ is a non-profit making organization offering wide range services to consumers
Functions of the CCZ

i. Educates consumers of their rights
ii. Settles disputes between consumers and traders
iii. It watches and monitors product prices on the market
iv. It assesses and monitors adverts
v. Provides advice to consumers
vi. Receives customer complaints and investigates them
vii. Encourages the setting up of a small claims court
The Standards Association of Zimbabwe [SAZ]

 Set to set standards for quality for products both nationally and internationally
Functions of the SAZ

 Sets up standards of products and services that are comparable to existing international
standards
 Tests products for quality
 Tests instruments and measuring equipment to ascertain their accuracy levels against set
standards
 Encourages the introduction and maintenance of standards throughout industry and commerce
 Draws together experts in specific fields who devise and set acceptable standards for products
 Authorizes companies to use the SAZ seal of approval if product meets set quality standards.
Protection by government legislation
1. The Sale Of Goods Act

 This legislation places the responsibility for goods sold on the seller
 The seller of the goods should ensure the following
i. That the goods are fit for the purpose which they are sold
ii. Goods sold must be of merchantable quality
iii. Goods sold by description should match the description given
iv. Seller of the goods must have the legal right to sell the goods
2. The Dangerous Drugs Act

 The legislation outlaws the following
i. Sale of drugs that are not fit for the implied purpose
ii. Sale of expired drugs
iii. Misleading description of drugs
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iv. Selling drugs that are banned
3. The Weights and Measures Act

 This law ensures that consumers receive the correct and accurate measures of the product that
they bought in weight, length or volume
4. Food and Food Standards Act

 This law requires that all food products be accurately and correctly described
 The packaging or container of a product should indicate the ingredients used, physical address
of the packaging company, best before date or sell by dates.
5. The Trade Descriptions Act

 This law seeks to ensure that goods are correctly described
 Labels on goods must not misrepresent the goods
 This Act focuses on all goods in general whilst the Food Standards Act focuses on food products
6. Hire Purchase Act

 This act sets out requirements for a sale by hire purchase which includes
i. The consumer should clearly see the cash price of the goods and the full hire purchase
price
ii. The required deposit
iii. The full finance charges
iv. The instalment payable per month
v. Duration of the repayment
vi. Terms of repossession
 This information will enable a customer to make an informed decision on whether to buy on
hire purchase or for cash
How consumers can protect themselves

 Consumers can protect themselves in a number of important ways which include
i. Shopping around and comparing prices
ii. Read and understand agreements before signing
iii. Avoid buying on impulse
iv. Understand advertisements and consider facts of the advertisements
v. Keep records of significant transactions
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Business Calculations
1. Sales/Net sales/Turnover
 Value of goods sold by the business
 𝒏𝒆𝒕 𝒔𝒂𝒍𝒆𝒔 = 𝒔𝒂𝒍𝒆𝒔 − 𝒔𝒂𝒍𝒆𝒔 𝒓𝒆𝒕𝒖𝒓𝒏𝒔[𝒓𝒆𝒕𝒖𝒓𝒏𝒔 𝒊𝒏𝒘𝒂𝒓𝒅𝒔]
2. Gross profit
 𝒈𝒓𝒐𝒔𝒔 𝒑𝒓𝒐𝒇𝒊𝒕 = 𝒔𝒂𝒍𝒆𝒔 − 𝒄𝒐𝒔𝒕 𝒐𝒇 𝒈𝒐𝒐𝒅𝒔 𝒔𝒐𝒍𝒅
3. Cost of goods sold/cost of sales

 The cost price of the goods that have been sold
 𝒄𝒐𝒔𝒕 𝒐𝒇 𝒔𝒂𝒍𝒆𝒔 = [𝒑𝒖𝒓𝒄𝒉𝒂𝒔𝒆𝒔 + 𝒐𝒑𝒆𝒏𝒊𝒏𝒈 𝒔𝒕𝒐𝒄𝒌] − 𝒄𝒍𝒐𝒔𝒊𝒏𝒈 𝒔𝒕𝒐𝒄𝒌
4. Net profit
 𝒏𝒆𝒕 𝒑𝒓𝒐𝒇𝒊𝒕 = 𝒈𝒓𝒐𝒔𝒔 𝒑𝒓𝒐𝒇𝒊𝒕 − 𝒆𝒙𝒑𝒆𝒏𝒔𝒆𝒔
5. Rate of turnover
𝒄𝒐𝒔𝒕 𝒐𝒇 𝒔𝒂𝒍𝒆𝒔
𝒓𝒂𝒕𝒆 𝒐𝒇 𝒕𝒖𝒓𝒏𝒐𝒗𝒆𝒓 = 𝒂𝒗𝒆𝒓𝒂𝒈𝒆 𝒔𝒕𝒐𝒄𝒌
𝒐𝒑𝒆𝒏𝒊𝒏𝒈 𝒔𝒕𝒐𝒄𝒌+𝒄𝒍𝒐𝒔𝒊𝒏𝒈 𝒔𝒕𝒐𝒄𝒌

 𝒂𝒗𝒆𝒓𝒂𝒈𝒆 𝒔𝒕𝒐𝒄𝒌 =
𝟐
Assets
 This is what the business owns
 Assets are divided into fixed assets and current assets
Fixed assets/fixed capital

 Fixed assets are assets which stay in a business for a long time
 They depreciate over time
 Examples include plant, machinery, buildings, furniture and equipment
Current assets/circulating capital

 These assets stay in a business for a period of less than one year
 Current assets represent circulating capital in the sense that it changes in form to finance the
daily business activities
 Examples include debtors, stock, cash in bank, cash in hand
Liabilities
 This is what the business owes
 Money owed by the business to suppliers and other businesses
 Divided into long term liabilities and current liabilities
Long term liabilities

 These are repayable over a period of more than a year
 These are borrowings by the business which must be paid back after a period of more than a
year
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Current liabilities
 These liabilities are repayable over a period of less than a year
 Examples include creditors
Capital owned
 A measure of the value of a business
 Amount owed by the business to its owner
 It also known as the owner’s equity
 𝒄𝒂𝒑𝒊𝒕𝒂𝒍 𝒐𝒘𝒏𝒆𝒅 = 𝒕𝒐𝒕𝒂𝒍 𝒂𝒔𝒔𝒆𝒕𝒔 − 𝒕𝒐𝒕𝒂𝒍 𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
Working capital
 Amount of capital used in the day to day running of the business
 Also known as the circulating capital of a business
 𝒘𝒐𝒓𝒌𝒊𝒏𝒈 𝒄𝒂𝒑𝒊𝒕𝒂𝒍 = 𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒂𝒔𝒔𝒆𝒕𝒔 − 𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
 Importance of working capital is that it
i. Enables creditors to be paid without much difficulty
ii. Allows a business to operate without costly borrowing
iii. Enables a business to pay its day to day expenses such as purchasing raw materials,
paying wages, maintaining stock levels etc.
 A lack of working capital is called overtrading and it restricts the expansion of a business, causes
cashflow problems and leads to borrowing which is expensive
Practice question
1. Opening stock[cost] $5 000
Closing stock [cost] $7 000
Cost of sales $120 000
Calculate
i. Average stock
ii. Rate of turnover
2. Fixed assets $100 000

Current assets $50 000
Current liabilities $20 000
Long term liabilities $45 000
Calculate
i. Owner’s capital
ii. Working capital
3. Turnover $27 000

Cost of sales $12 000
Cost of Average stock $6 000
Total expenses $9 000
Calculate
i. Gross profit
ii. Net profit
iii. Rate of turnover
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Insurance
 Insurance is the financial protection provided by insurance companies against certain types of
risks
 the term risk refers to the possibility that something unfavorable might happen that will result
in financial loss e.g. personal injury, illness or damage to property
Pooling of risks
 Insurance can be seen as a process where many people or businesses contribute money in the
form of premiums into a common insurance pool
 This enables the sharing of risks
 The idea is that if many businesses or individuals are exposed to the same chance of the risk
only a few will actually suffer the loss
 Contributors suffering from the losses will be compensated from the insurance pool
Importance of Statistical records

 To predict losses insurance companies rely on historical data or statistical records from the past
 Actuaries study these records to determine the likelihood of the risk occurring
 Statistical records help insurance companies to:
i. Calculate the probability or chances of the risk occurring
ii. Assess risks and decide whether a risk is insurable or non-insurable
iii. Determine whether to accept to cover a risk or not
iv. Decide on and fix a fair premium for those risks that are insurable
Insurable risks and non-insurable risks
a) Insurable risks
 These are risks which can be calculated from past records
 Fair premiums can be fixed to cover these risks, so insurance companies are prepared to cover
them
 Examples of insurable risks include theft, fire and car accidents
b) Non-insurable risks
 Non-insurable risks are risks which cannot be measured or predicted accurately
 they cannot be calculated and cannot be assessed because they have no past record
 examples of non-insurable risks include wars, social unrest or the risk that a company cannot sell
its products
 fair premiums cannot be fixed and insurance companies are not prepared to cover non-
insurable risks
Principles of Insurance
 For insurance to be successful four principles should be observed namely
i. Utmost good faith [Uberrima fides]
ii. Insurable interest
iii. Indemnity
iv. Proximate cause
87
a) Utmost Good Faith

 This principles requires the insurer and the insured to act truthfully in their dealings with each
other
 Both parties should disclose all facts truthfully to enable a fair premium to be charged
 The insurer should explain to the client all the terms of the insurance and the cover provided
 The insured should answer all questions truthfully and accurately
 The insured should also be aware that concealment and misrepresentation of fact material will
render the insurance contract void.
b) Insurable interest
 This principle requires people to insure only their own property and not other people’s property
 The insured should suffer a financial loss in the event of the risk occurring
 Only a person with a direct interest in an item may insure it i.e. the insured should stand to lose
in the event of the risk happening
c) Proximate cause
 Principle states that the insured can only claim for compensation if a risk for which the
insurance policy was taken is the immediate cause of loss suffered
d) Indemnity
 This principle states that the insured should be compensated for the loss suffered and restored
to the position as before the risk occurred
 The principle states that no one should get compensation exceeding the actual monetary loss
suffered
 Therefore no profit may be made from a loss
 Principle discourages over-insurance with the intention of making a profit
 Non-indemnity insurance is where the insured cannot be restored to a position as before, the
insurer only pays a benefit in the form of compensation e.g. life, personal accident, sickness and
disablements
 There are four doctrines related to the principle of indemnity namely
i. Average clause
ii. Subrogation
iii. Contribution
iv. Notification
i. Average clause
 This doctrine prevents the insured from making a profit from “under-insurance”
 The insured under-insures if he insures an item for an amount less than its full value
 In case of under-insurance the insured will not be compensated to the full value of the item
 Formula to calculate compensation in case of under-insurance is:
𝒗𝒂𝒍𝒖𝒆 𝒊𝒏𝒔𝒖𝒓𝒆𝒅 𝐱 𝒗𝒂𝒍𝒖𝒆 𝒍𝒐𝒔𝒕

𝒄𝒐𝒎𝒑𝒆𝒏𝒔𝒂𝒕𝒊𝒐𝒏 =
𝒂𝒄𝒕𝒖𝒂𝒍 𝒗𝒂𝒍𝒖𝒆 𝒐𝒇 𝒈𝒐𝒐𝒅𝒔
88
ii. Subrogation
 This doctrine says that when the insured is compensated, the damaged property will belong to
the insurer
 If a person wrecks their car in an accident, the insured’s car will be replaced but the remains of
the damaged car belong to the insurance company
iii. Contribution
 This doctrine prevents the insured from making a profit by insuring one item with many insurers
 In the case that a property is insured by more than one insurer, in case of the risk occurring the
insurance companies will share the amount of financial loss.
iv. Notification
 The insured must notify the insurer within reasonable time after the occurrence of a risk
 This is usually` 48hrs
 This allows the insurer to make preparations for the claim by assessing the policy and the
damage.
89

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LEOPOLD TAKAWIRA HIGH SCHOOL

Needs and Wants

Disadvantages- poor quality goods produced

Primary secondary tertiary

Obtaining raw a) manufacturing or processing

Commerce Direct services

Aids to trade/Indirect services Trade

Benefits of division of labor

 Due to interdependence of workers any disruption in any part of the production

Primary/extractive industry manufacturing/secondary industry wholesaler retailer consumer

Primary or Extractive industry

1. Banking – keeps money safe

2. Advertising - informs customers of new products

3. Communication - facilitates information flow between buyers and sellers through

4. Insurance - protects traders from dangers that could happen to a business

Functions of wholesalers to producers

Functions of wholesalers to retailers

Function of the wholesaler to the consumer

1. General wholesalers/ traditional wholesalers

Advantages of general wholesalers

Disadvantages of general wholesalers

Advantages of specialist wholesalers

Disadvantages of specialist wholesalers

3. Cash and carry wholesalers

Advantages of cash and carry wholesalers

Disadvantages of cash and carry wholesalers

Advantages of belonging to voluntary chains

Disadvantages of belonging to a voluntary chain

5. Co-operative Wholesale Societies (CWS)/Retail Co-operative Society

Features of a Co-operative wholesale society

Reasons for setting up Marketing Boards

Functions of the different Marketing Boards

b) Tobacco Marketing Board

Reasons for the elimination of the wholesaler

Agents, Brokers and Factors

3. Del Credere Agents

Functions of the retailer

1. Functions of the retailer to consumers

2. Functions of the retailer to manufacturers and wholesalers

Small Scale Retailers

Advantages to the consumer

Advantages to the retailer

Large scale retail outlets

2. Multiple store/Chain stores

5. Mail order firm

 Employs part time agents

Advantages of Mail order firms

6. Retail cooperative societies

Factors considered when establishing a retail outlet

Why Small Scale Retailers are dependent on wholesalers

Modern Trends in Retailing

3. Branding and Packing

3. Imitation brands reduce profit.

4. After Sale Service

5. Automatic Vending Machines (AVMs)

5. Available all the time.

9. Do it yourself products (DIY products)

b) Cash price = $10 000

Advantages to the buyer