Commerce O Level Notes 166

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Commerce Notes
Subject Code: 7100
Article No. 166
Zeeshan Sheikh
(MS Marketing – UCP, MBA – University of Lahore)
3-C, Gulberg II , Lahore. 042-35714038

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Title Commerce Notes O Level

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CONTENTES
UNIT 1 PRODUCTION........................................................................................................................................ 20
What is commerce? .............................................................................................................................................20
1.1 THE CHAIN OF PRODUCTION ........................................................................................................................ 20
Production............................................................................................................................................................20
Chain of production .............................................................................................................................................20
Needs and Wants .................................................................................................................................................21
Needs ...................................................................................................................................................................21
Wants...................................................................................................................................................................21
1.2 PRIMARY INDUSTRIES, SECONDARY INDUSTRIES AND TERTIARY ACTIVITIES ............................................................. 21
Direct Production and Indirect production. .........................................................................................................21
Direct production .................................................................................................................................................21
Primary, Secondary and Tertiary Sector of Production: .......................................................................................21
Primary production ..............................................................................................................................................22
Secondary production ..........................................................................................................................................22
Tertiary production ..............................................................................................................................................22
How are manufacturing and tertiary activities inter-related?.............................................................................23
1.3 SPECIALIZATION AND DIVISION OF LABOR........................................................................................................ 23
Specialization .......................................................................................................................................................23
Forms of Specialization ........................................................................................................................................24
1.4 COMMERCE.............................................................................................................................................. 25
Trade and Aids to Trade .......................................................................................................................................25
Types of Trade .....................................................................................................................................................25
Purpose / Importance of Foreign (overseas) trade ..............................................................................................26
Comparison of Home Trade and Foreign Trade ...................................................................................................26
Aids to Trade ........................................................................................................................................................27
1.5 THE RELATIONSHIP BETWEEN INDUSTRY, COMMERCE AND DIRECT SERVICES ............................................................. 27
UNIT 2 RETAIL TRADE ....................................................................................................................................... 30
2.1 THE ROLE OF RETAILER IN THE CHAIN OF DISTRIBUTION ....................................................................................... 30
The Retail Trade ...................................................................................................................................................30
2.2 TYPES OF RETAILERS ................................................................................................................................... 31
Small Scale Retailers ............................................................................................................................................31
Peddlers / Hawkers / Roadside Traders / Mobile Shops / Street Markets ...........................................................31
Advantages ..........................................................................................................................................................32
Disadvantages .....................................................................................................................................................32
Unit Retailers .......................................................................................................................................................32
Advantages ..........................................................................................................................................................32
Disadvantages .....................................................................................................................................................33
Automatic Vending Machines ..............................................................................................................................33
Advantages ..........................................................................................................................................................33
Disadvantages .....................................................................................................................................................33
Specialty shops.....................................................................................................................................................34
Advantages ..........................................................................................................................................................34
Disadvantages .....................................................................................................................................................34
LARGE SCALE RETAILERS ......................................................................................................................................34
Department Store ................................................................................................................................................34
Advantages of departmental stores ....................................................................................................................34
Disadvantages of departmental stores ................................................................................................................35
Multiple Chain Stores / Multiple Shops:...............................................................................................................35
Advantages ..........................................................................................................................................................36
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Disadvantages .....................................................................................................................................................36
Super market .......................................................................................................................................................36
Advantages of supermarket ................................................................................................................................37
Disadvantages of supermarkets ..........................................................................................................................37
Hyper Market .......................................................................................................................................................37
Advantages of hypermarket ................................................................................................................................38
Disadvantages of hypermarkets ..........................................................................................................................38
2.3 LARGE SCALE AND SMALL SCALE RETAILING ..................................................................................................... 38
How do small scale retailers survive against competition from large scale retailers? ........................................39
2.4 SELLING TECHNIQUES AND METHODS AND THE IMPLICATIONS OF E-COMMERCE ........................................................ 40
Branding / Own Brands / Logo ............................................................................................................................40
Packaging ............................................................................................................................................................41
Self Service ...........................................................................................................................................................42
After Sale Service .................................................................................................................................................42
Computers as AID to retailing ..............................................................................................................................43
E-commerce .........................................................................................................................................................45
Why Small Scale Retailers are dependent on wholesalers ...................................................................................45
2.5 TRENDS IN RETAILING ................................................................................................................................. 46
Omni-channel (Omni-channel retailing) ..............................................................................................................46
Self Service Checkouts ..........................................................................................................................................46
Loyalty Programs .................................................................................................................................................47
Mobile Retailing: (m-commerce) .........................................................................................................................47
UNIT 3 CUSTOMER CREDIT ............................................................................................................................... 50
3.1 USE OF CREDIT.......................................................................................................................................... 50
Reasons for giving Credit / Reasons for increased use of credit ..........................................................................50
3.2 TYPES OF CREDIT ....................................................................................................................................... 51
Hire Purchase .......................................................................................................................................................52
Extended Credit / Deferred payment: ..................................................................................................................53
Store cards ...........................................................................................................................................................54
Credit Cards .........................................................................................................................................................54
Informal Credit / Lay-bye .....................................................................................................................................56
3.3 SUITABILITY OF DIFFERENT TYPES OF CREDIT ..................................................................................................... 57
UNIT 4 WHOLESALER ........................................................................................................................................ 60
4.1 THE ROLE OF WHOLESALER IN THE CHAIN OF DISTRIBUTION .................................................................................. 60
Wholesale Trade: .................................................................................................................................................60
Channel of Distribution ........................................................................................................................................60
Different Channels of Distribution .......................................................................................................................60
Factors affecting choice of Channel of Distributions ...........................................................................................61
4.2 FUNCTIONS AND SERVICES OF THE WHOLESALER ................................................................................................ 62
Cash-and-carry wholesalers .................................................................................................................................62
Voluntary chains ..................................................................................................................................................62
Reasons why do wholesalers not operate at retail level ......................................................................................63
Why the role of wholesaler is on decline .............................................................................................................63
4.3 INTERMEDIARIES ....................................................................................................................................... 64
Middle Man .........................................................................................................................................................64
Agents: .................................................................................................................................................................65
1. Factors .........................................................................................................................................................65
2. Brokers .........................................................................................................................................................65
Special types of Middleman .................................................................................................................................65
Why Small Scale Retailers are dependent on wholesalers ...................................................................................65
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UNIT 5 DOCUMENTS OF TRADE ........................................................................................................................ 68

Why are Documents needed? ..............................................................................................................................68
COMMON FEATURES in all Documents ...............................................................................................................68
5.1 DOCUMENTS OF HOME TRADE ..................................................................................................................... 68
ENQUIRY (Issued by: Buyer, Issued to: Seller) ......................................................................................................68
QUOTATION (Issued by: Seller, Issued to: Buyer) .................................................................................................69
CATALOGUE (Issued by: Seller, Issued to: Buyer) .................................................................................................69
PRICE LIST (Issued by: Seller, Issued to: Buyer) ....................................................................................................69
ORDER (Issued by: Buyer, Issued to: Seller) .........................................................................................................69
ADVICE NOTE (Issued by: Seller, Issued to: Buyer) ...............................................................................................69
DELIVERY NOTE (Issued by: Seller, Issued to: Buyer)............................................................................................69
INVOICE (Issued by: Seller, Issued to: Buyer) .......................................................................................................69
CREDIT NOTE (Issued by: Seller, Issued to: Buyer) ...............................................................................................71
STATEMENT OF ACCOUNT (Issued by: Seller, Issued to: Buyer) ...........................................................................71
Differences between Invoice and Statement of Account .....................................................................................72
Sequence of Documents in Home Trade ..............................................................................................................72
5.2 TERMS OF PAYMENT................................................................................................................................... 73
Cash discount .......................................................................................................................................................73
Trade discount .....................................................................................................................................................73
Mark-up ...............................................................................................................................................................74
UNIT 6 INTERNATIONAL TRADE ........................................................................................................................ 76
International trade ..............................................................................................................................................76
6.1 THE IMPORTANCE OF INTERNATIONAL TRADE................................................................................................... 76
Types of International/Foreign Trade ..................................................................................................................77
Visible and Invisible Trade ...................................................................................................................................77
Similarities between Home Trade and Foreign Trade ..........................................................................................77
Differences between Home Trade and Foreign Trade .........................................................................................77
Interdependence of countries ..............................................................................................................................77
6.2 BALANCE OF TRADE AND BALANCE OF PAYMENTS .............................................................................................. 78
Balance of Trade ..................................................................................................................................................78
Balance of Payments ...........................................................................................................................................78
(i) The Current Account ........................................................................................................................................78
(ii) The Capital Account ........................................................................................................................................79
(iii) The Financial Account ....................................................................................................................................79
Why deficit in Balance of Payments and Balance of Trade is undesirable...........................................................79
6.3 CUSTOMS AUTHORITIES............................................................................................................................... 79
6.4 FREE TRADE, TRADING BLOCS AND PROTECTIONISM ........................................................................................... 80
Free trade: ...........................................................................................................................................................80
Trading blocs........................................................................................................................................................80
Protectionism: ......................................................................................................................................................81
How to protect from imports-to make balance of payment surplus?..................................................................81
Effects of protectionism .......................................................................................................................................81
6.5 DIFFICULTIES FACED BY IMPORTERS AND EXPORTERS.......................................................................................... 81
Difficulties faced by Exporters: ............................................................................................................................82
Exporters and Aids to Trade: ................................................................................................................................84
UNIT 7 ADVERTISING ........................................................................................................................................ 86
7.1 THE ROLE OF ADVERTISING ........................................................................................................................... 86
Aims / Purposes of Advertisement .......................................................................................................................86
Advantages of advertisement: .............................................................................................................................87
Dangers of Advertisement: (Criticism on advertisements) ..................................................................................87
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Types of Advertising .............................................................................................................................................88

7.2 ADVERTISING MEDIA ................................................................................................................................. 89
Television .............................................................................................................................................................90
Radio ....................................................................................................................................................................90
Internet ................................................................................................................................................................91
Cinema .................................................................................................................................................................91
National Newspapers ..........................................................................................................................................92
Local Newspapers ................................................................................................................................................92
Magazines............................................................................................................................................................93
Trade Journals:.....................................................................................................................................................93
Trade Fairs / Shows / Exhibition ..........................................................................................................................93
Leaflets / Flyers / Pamphlets................................................................................................................................94
Packaging / Plastic Bags ......................................................................................................................................94
Direct mail............................................................................................................................................................94
Sponsorships ........................................................................................................................................................95
Catalogs / Broachers ............................................................................................................................................95
Digital Billboard ...................................................................................................................................................95
Transport Vehicles ...............................................................................................................................................95
Point of sale display / Windows display ...............................................................................................................96
Neon Lights / Signs ..............................................................................................................................................96
Factors affecting choice of Advertisement Media ...............................................................................................96
7.3 METHODS OF APPEAL (DEVICES) ................................................................................................................... 97
Color.....................................................................................................................................................................97
Emotion................................................................................................................................................................97
Ambition ..............................................................................................................................................................97
Famous people (celebrities) .................................................................................................................................97
Music ...................................................................................................................................................................97
Humor ..................................................................................................................................................................97
7.4 SALES PROMOTION .................................................................................................................................... 98
Difference between Advertising and Sales Promotion .........................................................................................98
Methods of promotion .........................................................................................................................................98
Displays and demonstrations:..............................................................................................................................98
Factors effecting choice of sales promotion method: ..........................................................................................99
7.5 TRENDS IN ADVERTISING: ............................................................................................................................ 99
Digital Billboards:...............................................................................................................................................100
Product Placement:............................................................................................................................................100
Mobile phone advertisement: ............................................................................................................................100
Digital Video Advertisement: .............................................................................................................................100
Importance of Internet Advertising: ..................................................................................................................101
UNIT 8 COMMUNICATION .............................................................................................................................. 104
8.1 IMPORTANCE OF COMMUNICATIONS IN TRADE AND THE GLOBAL MARKET ............................................................. 104
Importance of communication in commerce .....................................................................................................104
8.2 METHODS OF COMMUNICATIONS, INTERNAL AND EXTERNAL ............................................................................. 105
Verbal / Oral ......................................................................................................................................................105
Visual .................................................................................................................................................................105
Written...............................................................................................................................................................105
Electronic methods of communication ..............................................................................................................106
Telephones .........................................................................................................................................................106
Mobile-phones ...................................................................................................................................................106
Internet ..............................................................................................................................................................106
Email ..................................................................................................................................................................107
Intranet ..............................................................................................................................................................107
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Teleconferencing and Video-conferencing.........................................................................................................107

Factors affecting choice of medium: ..................................................................................................................108
8.3 POSTAL SERVICES .................................................................................................................................... 108
8.4 TRENDS IN COMMUNICATION ..................................................................................................................... 108
Tablets and Smart-phones: ................................................................................................................................109
Social Media: .....................................................................................................................................................109
Application Stores ..............................................................................................................................................109
UNIT 9 TRANSPORT ........................................................................................................................................ 112
9.1 TRANSPORTATION .............................................................................................................................. 112
Importance of Transportation ...........................................................................................................................112
Modes of Transportation ...................................................................................................................................112
Pipelines (Transport of gases, liquids)Road Transport.......................................................................................112
Rail Transport ....................................................................................................................................................113
Air Transportation .............................................................................................................................................113
Sea Transportation ............................................................................................................................................113
Waterways .........................................................................................................................................................114
Pipelines .............................................................................................................................................................114
Factors affecting choice of method of transport ...............................................................................................115
Cost of transportation: ......................................................................................................................................115
Risk of damage and safety issues ......................................................................................................................115
Urgency or speed required .................................................................................................................................115
Convenience .......................................................................................................................................................115
Distance .............................................................................................................................................................115
Nature of goods. ................................................................................................................................................115
Quantity to be transported. ...............................................................................................................................115
Value of goods and security needed. .................................................................................................................115
Effects of owning transport to a business: .........................................................................................................116
9.2 CONTAINERIZATION ................................................................................................................................. 116
9.3 PORTS AND AIRPORTS ............................................................................................................................... 117
Port Authorities:.................................................................................................................................................117
Airport Authorities: ............................................................................................................................................117
9.4 TRANSPORT DOCUMENTS: ......................................................................................................................... 117
(i) Delivery Note: ............................................................................................................................................118
(ii) Consignment Note: ................................................................................................................................119
(iii) Bill of Lading: .........................................................................................................................................119
(iv) Air Waybill: ............................................................................................................................................121
9.5 DEVELOPMENT AND TRENDS IN TRANSPORTATION .......................................................................................... 121
Chartering Transport: ........................................................................................................................................121
Express Routes. ..................................................................................................................................................121
Changes in use of rail transport, mass transit system and high speed trains: ...................................................122
Increased use of freight forwarders: ..................................................................................................................122
UNIT 10 WAREHOUSING .............................................................................................................................. 124
10.1 ROLE OF WAREHOUSING ........................................................................................................................... 124
Importance of Warehouses to business and trade ............................................................................................124
Production..........................................................................................................................................................124
Prices..................................................................................................................................................................124
Regular Supply ...................................................................................................................................................124
Prepares goods and make them sale-able: ........................................................................................................124
Display of goods:................................................................................................................................................124
Services to International Trade: .........................................................................................................................124
10.2 TYPES OF WAREHOUSES:........................................................................................................................... 125
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Bonded Warehouse: ..........................................................................................................................................125

Cold Storage Warehouse: ..................................................................................................................................125
Cash and Carry warehouses: ..............................................................................................................................126
Manufacturer and Retailer Warehouses: ..........................................................................................................126
Regional Distribution Centers: ...........................................................................................................................126
UNIT 11 INSURANCE ..................................................................................................................................... 128
11.1 PURPOSES OF INSURANCE .......................................................................................................................... 128
How does Insurance help the economy? ...........................................................................................................129
The importance of pooling of Risk .....................................................................................................................129
11.2 BUSINESS AND PERSONAL RISKS .................................................................................................................. 130
Business Risks ....................................................................................................................................................130
Personal Risks ....................................................................................................................................................131
Difference between Insurable and Non Insurable Risks .....................................................................................131
11.3 PRINCIPLES OF INSURANCE ................................................................................................................. 132
Indemnity/Compensation ..................................................................................................................................132
Insurable Interest: ..............................................................................................................................................132
Utmost Good Faith: ...........................................................................................................................................132
Evaluating Insurance Quotation Depends upon ................................................................................................133
11.4 EFFECTING INSURANCE COVER .................................................................................................................... 133
Procedure:..........................................................................................................................................................133
11.5 STATISTICAL BASIS OF INSURANCE ............................................................................................................... 134
Factors affecting the Premium ..........................................................................................................................134
Premiums and its calculations: ..........................................................................................................................134
Main Documents of Insurance: ..........................................................................................................................135
Proposal Form ....................................................................................................................................................135
Cover Note .........................................................................................................................................................135
Insurance Policy .................................................................................................................................................135
Insurance Broker: ...............................................................................................................................................135
Functions of Insurance Broker: ..........................................................................................................................135
Benefits to the customers using Insurance Broker: ............................................................................................136
11.6 EFFECTING INSURANCE CLAIM .................................................................................................................... 136
Claim Form: ........................................................................................................................................................137
UNIT 12 BANKING ........................................................................................................................................ 140
Introduction .......................................................................................................................................................140
12.1 BANKING SERVICES ............................................................................................................................. 140
Services offered by the commercial banks: ........................................................................................................140
Savings Account .................................................................................................................................................140
Current Account .................................................................................................................................................140
Paying-in Slip: ....................................................................................................................................................141
Issuance of Bank Statement: .............................................................................................................................141
Night Safe Deposits:...........................................................................................................................................142
ATM (Automated Teller Machine) services: .......................................................................................................142
Internet Banking ................................................................................................................................................143
Telebanking .......................................................................................................................................................143
Bank over-draft ..................................................................................................................................................143
12.2 MEANS OF PAYMENT IN HOME AND INTERNATIONAL TRADE ............................................................. 144
Payments in Home trade ...................................................................................................................................144
Cash: ..................................................................................................................................................................144
Cheques: ............................................................................................................................................................144
Credit Transfers / Bank Giro ..............................................................................................................................145
Standing Orders / Banker’s order: .....................................................................................................................146
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Direct Debit ........................................................................................................................................................146

Comparison of Standing Order and Direct Debit: ..............................................................................................147
Credit Cards .......................................................................................................................................................147
Debit Cards ........................................................................................................................................................147
Bank Drafts / Cashier’s Cheque / Banker’s Cheque ...........................................................................................147
Factors effecting choice of method of payment ................................................................................................148
Means of payment in International trade: ........................................................................................................148
Remittances: ......................................................................................................................................................148
Electronic Transfers: ..........................................................................................................................................148
Documentary Credit (Letter of credit) ................................................................................................................148
12.3 TRENDS IN BANKING ................................................................................................................................ 148
Mobile and digital Banking / Internet Banking:.................................................................................................148
Mobile Wallets: ..................................................................................................................................................149
UNIT 13 THE BUSINESS UNIT ........................................................................................................................ 152
13.1 LOCATION OF A BUSINESS INCLUDING RETAIL UNITS ....................................................................................... 152
Location of Primary Production Units ................................................................................................................152
Location of Secondary Production Units ............................................................................................................152
Location of Tertiary Production Units ................................................................................................................153
13.2 PUBLIC AND PRIVATE SECTOR ............................................................................................................. 153
The Public Sector ................................................................................................................................................153
Types of Private Sector Organizations ...............................................................................................................153
Sole Trader .........................................................................................................................................................153
Partnership ........................................................................................................................................................154
Private Limited Company ...................................................................................................................................154
Public Limited Company.....................................................................................................................................154
Public Corporations ............................................................................................................................................155
13.4 FRANCHISES ........................................................................................................................................ 156
Franchisor: .........................................................................................................................................................156
Franchisee: .........................................................................................................................................................156
Franchise Agreement: ........................................................................................................................................156
13.5 MULTINATIONAL COMPANIES: ........................................................................................................... 158
UNIT 14 FINANCE ......................................................................................................................................... 160
14.1 SOURCES OF FINANCE ......................................................................................................................... 160
Long term and Short Term Finance ....................................................................................................................160
Long-term Financing ..........................................................................................................................................160
Shares: ...............................................................................................................................................................160
Debentures: .......................................................................................................................................................161
Mortgage: ..........................................................................................................................................................161
Loans:.................................................................................................................................................................161
Sale and Leaseback: ...........................................................................................................................................161
Short-term Financing .........................................................................................................................................161
Overdraft: ..........................................................................................................................................................161
Debt Factoring ...................................................................................................................................................161
Leasing ...............................................................................................................................................................162
Trade Credit: ......................................................................................................................................................162
Hire Purchase .....................................................................................................................................................162
Long-term vs. Short-term Financing ..................................................................................................................162
Methods of Self-Financing .................................................................................................................................163
Retained Profits: (Retained Earnings) ................................................................................................................163
Sale of Asset: ......................................................................................................................................................163
Savings: ..............................................................................................................................................................163
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Sources of Finance in particular given business situations ................................................................................164

Finance for commercial activity: ........................................................................................................................164
UNIT 15 CHANGING ENVIRONMENT OF COMMERCE.................................................................................... 168
15.1 COMMERCIAL ACTIVITY AND THE EXTERNAL ENVIRONMENT .............................................................. 168
Political Factors:.................................................................................................................................................168
Economic Factors: ..............................................................................................................................................168
Social Factors: ....................................................................................................................................................168
Technological Factors: .......................................................................................................................................169
15.2 COMMERCIAL AND ENVIRONMENTAL EFFECTS OF E-COMMERCE ....................................................... 169
E-shop: (e-store or e-tailer) ................................................................................................................................169
Commercial Effects of e-commerce: ..................................................................................................................170
15.3 COMMERCE AND THE ENVIRONMENT ................................................................................................. 171
Environmental Effects of e-commerce: ..............................................................................................................171
15.4 CONSUMER PROTECTION .................................................................................................................... 172
Importance of Consumer Protection ..................................................................................................................172
Methods of safeguarding the consumer ............................................................................................................172
Consumers Rights ..............................................................................................................................................172
Actions that a consumer can take: ....................................................................................................................173
Faulty Goods: .....................................................................................................................................................173
If after purchase, customer does not like the product: ......................................................................................173
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PREFACE
I am thankful to the Omnipotent Allah almighty for His endless blessings and never-ending love that has
enabled me to take a step ahead in my life and to strive for the best. The consumer market is
continuously changing with technological advancement and ever changing customers’ tastes and
preferences. The emergence of smart phones, in particular, has eliminated a great number of gadgets
and changed the lifestyle of whole globe. People, everywhere, are now found using smart phones. From
e-commerce and app stores to video advertising etc., the trade environment has changed altogether.
Considering this, CIE updated the syllabus for Commerce O-levels from 2018. Not only the syllabus
content has changed from traditional trade systems to technological adaptation but the examinations’
structure of the subject has also changed. Unfortunately, no book on ‘O-level commerce’, with new
technological terminologies, is available in the market so far, to provide relief to the students of
commerce. This book uses most advanced technological concepts to prepare them for CIE O-level
Examination from 2018 onwards.
This book is intended to cover the commerce content of CIE O-level syllabus comprehensively, with a
thorough discussion from basics of trade even for students with less knowledge and for non-business
students. The topics like customers’ protection, omni-channel retailing, self-service check-outs,
development of loyalty programmes, virtual retailing, mobile retailing (m-commerce), digital billboards,
social media, digital video, computer hardware (tablets, smart phones), digital banking, mobile wallet,
cashless society, closure of bank branches and commerce in the external environment have been
addressed in detail to help students get prepared for best grades. A brief list of learning objectives at the
beginning of each topic will assist readers to determine the factors they should understand while going
through the topic.
Last but not the least, I would like to thank and express my gratitude to numerous people for their
guidance and support in writing this book. In particular, I am grateful to Mr. Imran Latif first for
encouraging me to develop a book for students, as they were suffering from academic deprivation in
commerce, and then for the inputs, he made, enabling me to write this book. I remain indebted for his
constructive criticism, reviews and continuous guidance for this book.
At the end, As it is the first edition of the notes in publishing, I thank you all in advance and request for
any suggestions to make the subsequent editions more useful.
Zeeshan Sheikh
Mobile No. 0333 – 4283727
Email:sh.zeeshan@gmail.com
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O Level Commerce 7100 Syllabus Contents Detail 2018-2020

UNIT 1 PRODUCTION
1.1 The chain production
 Define the term production.
 Show understanding of the production off goods and services to satisfy human wants and needs.
1.2 Primary (extractive) industries, secondary (manufacturing and construction)

industries and tertiary activities (commercial services and direct services)
 Describe these types of industries and activities with examples.
 Explain how people working in primary industries secondary industries and tertiary activates are part
of production.
 Discuss the relative importance of each type of industry within a country.
1.3 Specialisation and division of labour

 Explain the terms specialisation and division of labour.
 Describe the different forms of specialisation by: country, region, town, firm, factory, individual
 Describe the advantages and disadvantages of division of labour to manufacturer and a worker.
1.4 Commerce
 define the terms trade and commerce showing the differences between them
 discuss how distribution assists commercial activity
 explain the nature, purposes and importance of trade, both at home and overseas
 discuss how advertising, communications, transport, warehousing, insurance, banking and finance
help trade to function
 evaluate the extent to which businesses are involved in trade and/or commerce
1.5 The relationship between industry, commerce and direct services

 Discuss ways in which industry, commerce and direct services are inter-related and interdependent
UNIT 2 RETAIL TRADE

2.1 The role of the retailer in the chain of distribution
 identify functions of the retailer as the middleman between manufacturer and consumer
 evaluate possible responses to changes in customer requirements and expectations
2.2 Types of retailer

 describe the characteristics of different types of retailer, including: large and small (hypermarkets,
supermarkets, multiples, department stores, specialityshops, unit/independent retailers, street
markets)
 discuss the advantages and disadvantages of each type of retailer
2.3 Large-scale and small-scale retailing

 discuss the advantages and disadvantages of large-scale retailing
 discuss the effects of large-scale retailers on wholesalers, other retailers and consumers
 explain why the small-scale retailer often survives, including: personal service, opening hours,
additional services provided
2.4 Selling techniques and methods and the implications of e-commerce

 discuss the importance, advantages and disadvantages of selling techniques, including: branding,
own brands, logos, packaging, self-service, after-sales service,bar-coding, Electronic Point of Sale
(EPoS), direct mail, factory outlets, shopping centers and internet auctions
 describe the use of computers to aid retailing
13
 describe characteristics of mail order, telesales, television shopping, online shopping (e-tailing) and
discuss the advantages and disadvantages to retailers and consumers of these methods of selling
 evaluate the likely implications for retail outlets and consumers of the growth of online shopping ande-
commerce
2.5 Trends in retailing

 describe trends in retailing, including: omnichannelretailing, self-service check-outs, development of
loyaltyprogrammers, virtual retailing, mobile retailing(m-commerce), shopping anywhere/anytime
UNIT 3 CONSUMER CREDIT

3.1 Use of credit
 outline the concept of credit
 analyse reasons for the increased use of credit
 discuss the advantages and disadvantages of credit tothe buyer and the seller
3.2 Types of credit

3.2.1 Hire purchase
 identify main features
 discuss advantages and disadvantages to consumersand retailers
 explain how the finance of hire purchase operatescompared with extended credit
3.2.2 Extended credit (deferred payments)

 discuss advantages and disadvantages to consumers and retailers
3.2.3 Store cards

3.2.4 Credit cards

3.2.5 Informal credit

3.3 Suitability of different types of credit

 evaluate the suitability of different methods of credit in given situations (including calculations of the
cost associated with different methods of credit)
UNIT 4 WHOLESALE TRADE

4.1 The role of the wholesaler in the chain of distribution
 explain different patterns of distribution and evaluate their use in given situations
 analyse trends in wholesaling: forces making forthe elimination and the survival of the
independentwholesaler
4.2 Functions and services of thewholesaler

 describe functions and services provided by thewholesaler
 evaluate the importance of the wholesaler to themanufacturer and retailer
14
4.3 Intermediaries
 evaluate the role of agents (including brokers andfactors) and export merchants in international trade
UNIT 5 DOCUMENTS OF TRADE

5.1 Documents of home trade
 identify and interpret key information and explain thepurposes of documents used in home trade,
including:enquiry, quotation, price list, order, invoice, advicenote, delivery note, credit note, statement
of account,receipt
5.2 Terms of payment

 define the terms cash discount, trade discount andmark-up
 calculate cash discount, trade discount and mark-upand evaluate their use in given situations
(includingcalculations)
UNIT 6 INTERNATIONAL TRADE

6.1 The importance ofinternational trade
 define the term global market
 explain the benefits of international trade to a country
 define imports, exports, visible and invisible trade
 apply these terms to given products or services
 examine the interdependence of countries within theglobal market
6.2 Balance of Trade and Balanceof Payments

 differentiate between Balance of Trade and Balance ofPayments
 calculate and interpret statistics relating to internationaltrade, including Balance of Trade and Balance
ofPayments from given figures
 explain how commercial activities may affect theBalance of Trade/Balance of Payments
6.3 Customs authorities

 describe the main functions of customs authorities,including: collection of duties, collection of
tradestatistics, enforcement of trade restrictions,supervision of bonded warehouses
 explain how the work of customs authorities affectstrade
6.4 Free trade, trading blocs andprotectionism

 describe free trade
 describe the main features and aims of a trading bloc
 discuss the advantages and disadvantages of joining atrading bloc, e.g. ASEAN, European Union,
SADC
 evaluate the importance of free ports in internationaltrade
 explain how restrictions on trade are applied, including:licences, tariffs, quotas, embargoes and their
possibleeffects on commercial activities
6.5 Difficulties faced by exportersand importers

 describe the main difficulties, including: distance,language, methods of payment,
documentation,transport, different customs, non-payment, currencies,exchange rates, duties,
competition
UNIT 7 ADVERTISING
7.1 The role of advertising
 show understanding of the purposes of advertising
15
 describe the types of advertising: informative,persuasive, collective (generic) and competitive

andexplain when they would be used
 discuss the advantages, dangers and criticisms ofadvertising when selling goods and services
7.2 Media
 identify the main forms of advertising media, including:television, radio, internet, cinema, newspapers
(localand national), magazines, trade journals, trade fairsand shows, leaflets/flyers, packaging, direct
mail,sponsorship, catalogues/brochures, digital billboards,transport vehicles, displays – point of sale
and window,neon lights, signs
 discuss the advantages and disadvantages of the mainforms of advertising media
 evaluate the factors affecting choice of medium ingiven situations
7.3 Methods of appeal (devices)

 explain methods of appeal (devices), including: colour,emotions, ambition, famous people, music
 select methods of appeal in given situations
7.4 Sales promotion

 distinguish between advertising and sales promotionand explain why businesses use sales
promotions
 describe methods of promotion, including: point ofsale, offers, sponsorship, displays,
competitions,coupons, sales periods, loss leaders
 evaluate the factors affecting choice of salespromotion methods in given situations
7.5 Trends in advertising

 describe trends, including: digital billboards, productplacement, importance of internet advertising,
mobilephone advertising, use of social media, digital video
UNIT 8 COMMUNICATIONS
8.1 Importance ofcommunications in trade and the global market
 show understanding of the importance of communications in trade and the global market
 evaluate the need for rapid and accurate communication in trade and in the global market
8.2 Methods of communications, internal and external

 describe methods of communication, including: oral, written, telephonic, electronic (including: mobile
phones, internet, intranet, email, teleconferencing, videoconferencing) and explain how each might
beused in a given situation
 discuss factors affecting choice of method in given situations
8.3 Postal services

 describe postal services
 explain in what circumstances different postal services might be used
8.4 Trends in communication

 identify trends and developments in communication, including: computer hardware (tablets,
smartphones,in-touch interfaces), use of social media, application stores (app stores) and importance
of the mobile phone as a multi-functional tool
UNIT 9 TRANSPORT
9.1 Transportation
 evaluate the importance of transportation in the chain of distribution
 describe the characteristics of different methods: road, rail, air, sea, waterways, pipeline
16
 describe different modes of transport used for road, rail, air and sea, including: passenger train,
goods train, ferry, tanker, bulk carrier, cruise liner, containership, cargo liner, delivery vans, buses,
shared taxis, passenger aircraft, freight planes
 evaluate the factors affecting choice of method in given situations
 evaluate the benefits to a business of having own transport
9.2 Containerisation
 discuss advantages and disadvantages
 discuss reasons for increased use
9.3 Ports and airports

 describe services offered at seaports and airports for the handling of goods and passengers
9.4 Transport documents

 identify and use the key information and explain the purposes of transport documents:
delivery/consignment note, bill of lading, air waybill (including calculations)
9.5 Developments and trends in transportation

 explain developments and trends in the handling of goods and passengers, including: growth of air
freight, express road routes, changes in use of rail transport, high speed trains, mass rapid transport,
importance of logistics, increased use of freight forwarders, demands on transport from global market
UNIT 10 WAREHOUSING
10.1 Role of warehousing
 describe warehousing functions
 evaluate the importance of warehousing to businesses and trade, including: links with seasonal
production, demand, protecting supply and price stability
10.2 Types of warehouse
 identify the main features of bonded, cold storage, cash and carry, manufacturers’ and retailers’
warehouses and large-scale retailers’ regional distributioncenters
 evaluate the importance of each in either home or international trade
UNIT 11 INSURANCE
11.1 Purposes of insurance
 describe the purposes, including: risk reduction, compensation, financial protection, business
confidence, investment
 evaluate the importance of pooling of risk
11.2 Business and personal risks
 identify and describe the main types of business and personal risk and explain why they are important
 distinguish between insurable and non-insurable risks
 explain why some risks are not insurable
11.3 Insurance principles
 explain the essential elements of insurance principles, including: indemnity (including contribution and
subrogation), insurable interest, utmost good faith and explain how they are applied
 evaluate the importance of insurance principles when taking out insurance and making a claim in
given situations (including calculations relating to insurance premiums and compensation payments)
11.4 Effecting insurance cover
 outline procedures, including calculating premiums
 identify the main documents of insurance, including: proposal form, cover note, policy and explain
their purposes
17
 evaluate the role of an insurance broker
11.5 Statistical basis of insurance

 analyse factors influencing the level of insurance premium
 evaluate insurance quotations
11.6 Effecting a claim

 outline procedures, including claim form
UNIT 12 BANKING
12.1 Banking services
 distinguish between deposit/savings accounts and current/cheque accounts
 describe services and documents provided to personal and business customers, including: paying-in
slip, bank statement, night safe, ATM services, internet banking, telephone banking
 explain when each service and document would be used
12.2 Means of payment for home and international trade activities

 identify the characteristics and purposes of means of payment in home and international trade,
including: cash, cheques, credit transfers, standing orders(banker’s order), direct debits, debit cards,
credit cards, electronic transfers, documentary credits (letters of credit), bank drafts
 evaluate factors affecting choice of method of payment in given situations
12.3 Trends in banking

 describe trends, including mobile and digital banking, the mobile wallet
 discuss the concept of the cashless society
 evaluate the implications of internet banking, including the closure of bank branches
UNIT 13 THE BUSINESS UNIT

13.1 Location of a business, including retail units
 evaluate factors to be considered, including: labour, markets, transport, power and raw materials,
competition, suppliers, communication, government influence in given situations
13.2 Public and private sectors

 distinguish between enterprises in the public and the private sector
 identify the characteristics of public sector enterprises
13.3 Main forms of businessorganisation in the private sector

 identify the main forms of business organisation,including: sole trader, partnership, limited
company(private and public)
 describe their characteristics relating to size, ease ofsetting up, ownership, control, liability of owners
(both limited and unlimited), documents required, provision of capital, distribution of profits
 evaluate the appropriateness of different forms of ownership in given situations
13.4 Franchises
 describe the main characteristics of franchises
 discuss the advantages and disadvantages of franchises for particular businesses
13.5 Multinationals
 define multinational company
 explain reasons for the existence of multinationals in the global economy
 evaluate the importance of multinationals in the global economy
18
 evaluate the opportunities offered to, and conflicting interests of, multinational companies locating in
individual countries
UNIT 14 FINANCE
14.1 Sources of finance
 distinguish between long-term and short-term finance
 discuss the main features, advantages and disadvantages of:
o long-term finance, e.g. shares (ordinary and preference), debentures, mortgages, loans, sale and
leaseback
o short-term finance, e.g. overdraft, factoring, leasing, trade credit, hire purchase
 describe methods of self-financing, including: retained earnings (retained profits), sale of assets,
savings
 evaluate the suitability of choice of finance (including self-financing) in given situations
14.2 Finance for commercial activity

 identify, define, calculate and examine the importance in commercial situations of capital (fixed
capital),working capital, assets and liabilities, sales turnover, rate of inventory turnover, gross profit
and profit for the year (net profit)
14.3 Improving commercial performance

 explain methods of improving sales turnover, rate of inventory turnover, profit and working capital,
including: reducing expenses, increasing mark-up, changing prices, improving marketing, introducing
new products in given situations
UNIT 15 CHANGING ENVIRONMENT OF COMMERCE

15.1 Commercial activity and the external environment
 define the term environment of commerce
 identify and explain the external PEST (political, economic, social, technological and
environmental)factors that affect commercial activities
15.2 Commercial and environmental effects ofe-commerce

 describe the characteristics of an e-shop, including: use of website, wide range of goods, delivery
dates, return option
 explain commercial effects, including: change in supply, such as retailers supplying directly from
warehouses rather than from their stores, more communications (online orders), smaller packages
leading to greater use of couriers and air transport, opening of new consumer markets such as China
and India
 explain environmental effects, including: increased use of transport for deliveries, greater vehicle
emissions, less lighting needed in stores, greater use of electricity for use of computers, search for
sustainable solutions for the movement of goods
15.3 Commerce and the environment

 identify negative impacts of commerce on the environment, including: exploitation of some countries
‘natural resources, dangerous products being extensively advertised, retail developments spoiling the
natural environment
 explain how businesses attempt to deal with environmental impacts, including: recycling, using less
 packaging, ethically-produced goods, environmentally-friendly products
15.4 Consumer protection

 evaluate the growing importance of consumer protection in the global economy
 describe the actions buyers or sellers might take in given situations, including: making a complaint,
dealing with faulty or poor quality goods or services
Unit 1 19 Production
UNIT 1
Topics
1.1 The chain production
1.2 Primary industries, secondary
PRODUCTION
industries and tertiary activities
1.3 Specialisation and division of
labour
1.4 Commerce
1.5 The relationship between
O Level industry, commerce and direct
services
Commerce Notes
Zeeshan Sheikh
Cell: 0333-42-83-727
9-F, Main Market Gulberg II, Lahore. 042-35714038
readandwrite.publications@gmail.com 0336-5314141
readandwritepublications/Shop www.readnwrite.org
UNIT 1 PRODUCTION
What is commerce?
Commerce is the study that relates to distribution of products from the producer (point of
production) to the end user (point of consumption).
Or
Commerce is the activity of buying and selling goods and services especially on large scale “against a
monetary value”
Commerce also refers to exchange of goods and services of value, between businesses or entities.
1.1 THE CHAIN OF PRODUCTION

Products are the goods and services (or even the ideas) produced by an individual or a company, to
satisfy needs and wants of the customers.
Production is any activity which serves to satisfy human needs and wants. It means changing the form
of resources and adding value to them according to the desires of the consumers. The aim of production
is to fulfill human needs and wants.
Chain of production
The chain of production involves a series of stages, which add value (added value is equal to selling price
less cost of materials) to the end product.
Production chain is the steps taken to convert raw materials into goods. It combines all the three stages
of production (primary, secondary and tertiary) and ends when the form of good is changed. Production
cycle completes only when goods reach to the point of consumption i-e to the consumer.
At times, production is also referred as creation of utility* which states that raw materials are
transformed into some useful products which were not useful earlier that will result in satisfaction of
human needs and wants. In simple words we can describe production as Goods and services are
produced to satisfy needs and wants of the people.
* Creation of Utility can be of different types. (All are considered as production)
Utility of form: Any activity that changes the form of a product so that it becomes more useful to the
consumer for example conversion of leather skins into useable jackets.
Utility of place: Any activity of transferring goods or services to a location which is within easier access
to the consumer, for example transfer of goods from factories to nearby retail shops.
Utility of time: Any activity to make the product available in time when it is needed by the consumers, for
example availability of wheat throughout the year.
Producer is a business entity or a person who produces goods and services to satisfy need and wants.
Consumers are the ultimate users of goods and services produced.
Needs and Wants
Needs Are the items without which a person cannot survive. They include food to eat, shelter, water,
cloths etc. Hence are the things necessary for living.
Wants are those goods and services which are not compulsory for living but makes life easier. These
are the products and services without which human can survive and they consume those products to
please themselves. e.g. holidays, branded cloths and cars etc.
1.2 PRIMARY INDUSTRIES, SECONDARY INDUSTRIES AND TERTIARY

ACTIVITIES
Production is classified into three categories (or braches of production) i-e primary production, secondary
production and tertiary production. But before going into their details let us discuss that production can be
of two types.
Production Types
Direct Indirect
(Self - production) (Aimed to market)
Direct Production and Indirect production.
Direct production is when a person produces what he needs by himself, it is called direct production.
It is sometimes also referred as self production.
e.g. Growing vegetables needed by the family in the home garden itself, or making a chair at home to be
used by the family for sitting.
When goods, services and ideas are produced with the intention of selling them in the market it is called
as indirect production. It is because goods are produced aiming at the market. Most of the
production activity in world belongs to indirect production.
Primary, Secondary and Tertiary Sector of Production:
Categories of production
Primary production Secondary production Tertiary production

(Natural resources) (manufacturing industrial) (Services)
Exhausting Non Exhaustive Manufacturing Construction Processing Commercial/ Personal / Direct

(resources are Renewable e.g. Textile e.g. Building (semi finished Individual e.g. e.g. teachers
not replaced) e.g. fishing goods) e.g. finance lawyers
e.g. missing food processing Insurance
for bakeries
Now, as discussed earlier, categories of production can be described as follows.
Primary production (or agricultural productions)

This is the first stage of production. Primary sector involves changing natural resources into primary
products. These are the industries which utilize resources in their natural form itself. They can be
categorized as: Agriculture, forestry, animal production (farm products) and Fisheries etc.
Primary sector also includes Extractive industries which are concerned with the physical taking out of
metals and minerals from the Earth. For Example: Mining, Quarrying, Dredging etc.
There are two main types of primary production.

a) Exhaustive industries are those industries that take resources from nature and are not
replaced e.g. mining and querying etc.
b) Non-exhaustive industries take resources from renewable sources e.g. fishing, farming etc.
Products in primary production are in unusable form therefore they have to be moved to secondary stage
of production.
Secondary production (or industrial / manufacturing production)

It is the second stage of production. This includes industries that produce finished goods by changing the
basic material obtained from primary industries with the help of machinery and other tools. There are
three main categories of the products in secondary sector;
i. Manufacturing (transforming products of primary sector into manufactured products) e. g.

Textile production, Car manufacturing, welding, assembling, stitching etc.
ii. Construction (The industry where land development is done.)

e. g. Repairing, building or renovating
and
iii. Processing (changing raw material into semi manufactured goods)

e.g. Food processing to be used in bakeries etc.
Now, products are ready to be used by the consumers, but are at wrong place, therefore they are moved
to tertiary stage.
Tertiary production (or Service Production)

It is the third and last stage of production. Tertiary sector is the service industry which only provides
services to its customers. Examples: Doctors, Banking, Haircutting, Teaching
It assists industry to function, by providing commercial services and direct personal services.
Commercial Services (or indirect services)
All services which are related to distribution of goods and services from producers to customers for
example communication, finance, insurance, retailing and wholesaling.
Personal Services (or Direct Services)
Provision of personal services directly to the consumer without anyone else involved for example teacher,
actor and tailor.
How are manufacturing and tertiary activities inter-related?
 Manufacturing is concerned with producing and transforming goods from raw materials while tertiary
activities are concerned with the distribution of finished goods from the factory to the final consumer.
 Without tertiary activities, finished goods would not be sold because there would not be any
advertising, no finance to build factories, no storage facility, and no transport to the retailer/wholesaler
and no communication between buyer and seller.
 Manufacturing would not be able to take place as goods will remain in stock and so it is dependent on
tertiary activities (e.g. retailing) to get the goods to the right person at the right time.
 As manufacturing becomes more specialized, the manufacturer will become more dependent on
others to provide tertiary services.
 The manufacturer may set up some of the tertiary activities himself – advertise, have warehouses,
have his own transport he may also have his own retail outlet, e.g. factory shop but usually he sells to
wholesaler or retailer.
 Tertiary activities are also concerned with trading in services, advertising and communicating these
services and so are not entirely inter-related with manufacturing.
 The manufacturer will need to insure the factory/its contents against risk, e.g. public liability,
employer’s liability
1.3 SPECIALIZATION AND DIVISION OF LABOR
Specialization
When working people continuously do some work that they select according to their ability or skills, they
get a special ability or a competency in doing it. It is called specialization. e.g.: A carpenter has special
ability in making furniture. The special competency he gets by involving in it for a long time that is to
produce quality and artistic furniture, is specialization. Hence specialization is to do something at which
one is best at.
Specialization is attained because of division of labor in which work is divided into stages. Division of
labor is separation of work process into tasks and each task is performed by a separate person or group.
Therefore, division of labor is referred as breaking down of a productive activity into simpler tasks so that
a person specializes in that task can perform it.
Advantages of Specialization
To Manufacturer To Workers To consumers
Reduced costs enable
Increased productivity (output per Increased productivity (output per
consumers to get products at
worker) worker)
cheaper prices
Higher living standards
Producer concentrates on one Less efforts because of capital
because of higher purchasing
product intensive methods of production
power
Production can move from labor Workers get skilled and can get
intensive to capital intensive employed in different work
techniques (automation). places.
Economies of scale can be
achieved (through low average Less time consuming.
cost of production).
Reduces labor cost as production
Increases concentration on work.
moves to automation
Better efficiency because of better
Enables to produce better quality
techniques and updated
products.
technology
Less time consuming as mobility of

workers is restricted.
Mass production.
Increases life of tools and
equipment
Disadvantages of Specialization
To manufacturer To workers To consumers
Standardized output (choice of
Machinery replaces labor and
Boredom (work becomes boring). customer decreases and
hence unemployment
probably no customization).
De-motivated staff. Boredom leading to lower quality Decline in craftsmanship.
Interdependency increases (as if Because of repeating one part of
one person is on leave, whole production, employees feel less
production process stops). pride of accomplishment.
Less job variety
Forms of Specialization
Specialisation
(Produce what one is best at)
Country Level Region level Town/City level Firm level

e.g Arab Region e.g Punjab e.g Sailkot for e.g Nestle in
for Oil for agriculture sports goods consumer goods
Occupation level
e.g famous doctors
Specialization at regional level (by a number of countries) occurs when a group of countries produce a
particular or similar product at large level (normally through natural resources) e.g. Arab (middle east)
region is well known for oil production, South Africa, Zimbabwe, Zambia etc. have large Deposits of
diamonds, gold, copper etc.
Specialization at country level occurs when a certain country devotes itself mainly to produce
certain products which it exports to other countries. Through this, a country produces what they do best or
can produce most economically. e.g. Pakistan is world famous for making sports goods and footballs,
Singapore, Maldives and Dubai are famous for their tourist industries etc.
Specialization at region level occurs when a particular region in a country devotes its self in
producing certain types of products, which is used by all the country. e.g. in Pakistan, Punjab province is
known for agricultural products, Baluchistan for Mining and Quarrying, Bordeaux region in France is well
known for its wine production etc.
Specialization at town / city level occurs when a particular city in a country devotes its self in
producing certain types of products, which is used by all the country. e.g. Sialkot is famous for
specialization in its sports goods industry.
Specialization at firm level / Specialization in workplace occur when a firm is divided into
departments and within departments individual workers have their own specialized duty.
Specialization by occupation As specialization enables individual workers to concentrate on jobs

for which they are most suited. Professionals e.g. doctors, teachers or lawyers become specialists in their
respective fields.
1.4 COMMERCE
Commerce is the study that relates to distribution of products from the producer (point of
production) to the end user (point of consumption).
or
Commerce is the activity of buying and selling goods and services especially on large scale “against a
monetary value”
Commerce also refers to exchange of goods and services of value, between businesses or entities.
Commerce
Trade Aids to trade

(buying and selling
something against money
Banking Communication Ware Advertising

Home trade Foreign trade & finance housing
(within the (across borders) Transport Insurance
same counting)
Exports Imports
wholesale trade Retail Trade
(bulk) (to end user)
Trade and Aids to Trade

Trade is buying and selling of goods and services to make a profit. If people do not trade against
involvement of money, it is not trade. The exchange of goods and services without exchange of money is
called bartering.
Types of Trade
Home Trade is buying and selling of goods and services within international boundaries of the country.
The buyer and seller are residents of the same country hence they speak the same language and trade in
same currency. Goods are transported easily using railways or through highways between the cities and
because of a good knowledge of local market, terms of trade are easily set.
Home trade can further be classified as:

Wholesale trade is buying in bulk from producer or manufacturer. Wholesaler breaks the bulk and
sells to the retailer in small quantities.
On the other hand Retail trade is concerned with selling of goods and services to the ultimate user (i-e
the consumer)
Foreign Trade is buying and selling of goods and services across the globe. In this, both buyer and
seller are from different countries therefore it is more complicated than home trade. A common currency
for trade have to be set, language barriers have to be dealt with, transportation of goods become
technical and normally terms and conditions have to be made considering different legislation among
countries too.
In foreign trade, export trade means sale of goods and services to buyer in other countries while import
trade means buying goods and services from sellers in other countries.
Purpose / Importance of Foreign (overseas) trade
 Better standard of living through better exports and through using better quality imported products.
 Mass production produces surplus which can be sold out in international (bigger) markets
 More exports mean a favorable balance of payment and better current account.
 Countries are able to use the products they are not self-sufficient in and normally imported products
are of better quality than locally manufactured products.
 Enabled the growth of service sector (i-e insurance, transportation, banking etc.)
 Low cost of production can be achieved in exports industries through economies of scale and
imported goods may also be available to consumers in relatively cheap prices.
Comparison of Home Trade and Foreign Trade
Home and foreign trade are similar in various prospects e.g. trade is done to make profits, satisfies needs
and wants of consumers, both types are dependent upon aids to trade, surplus goods are sold,
specialization is achieved.
Differences in home and foreign trade can be summed up in table below:
Home Trade Foreign Trade

Same currency is involved. Different currencies are involved.
Same government policies. Different government policies.
Simple Documents. Complex Documents.
Mode of payment is Online transfer, FTT, Letter
Mode of Payment is cash, cheque etc.
of Credit, Bill of exchange etc.
Small and big quantities are involved. Only large quantities are involved.
Done within national boundaries. Done across the globe.
Same units of measurements. Different units of measurement.
Import/Export taxes/customs
Only local taxes are involved.
duties/protectionism are involved.
Same culture and language Different culture and languages.
Mode of transportation is through land or rail. Mode of transportation is through sea or air.
Aids to Trade are the services which are required to facilitate trade. That means aids to trade are
commercial services that help trade to function. There are several aids to trade which are as follows:
Aids to Trade Function

Banking and
Provides Finance and Services. Help transfer of payments against trade.
Finance
Movement of goods, raw material, equipment and people from one place to the
Transport
other. It enables transfer of goods to complete chain of distribution.
Communication To transmit and receive information quickly. Enabled e-commerce also.
Insurance Allows protection from losses that may result from risks in production and trade.
Warehousing Provides storage of goods after processing or manufacturing or after purchase.
Inform customers about products, persuade them to buy the product, inform them
Advertising
about availability and new changes in product.
Government Services to Commerce

1. Information Services
2. Co-coordinating Bodies
3. Financial Assistance
1.5 THE RELATIONSHIP BETWEEN INDUSTRY, COMMERCE AND

DIRECT SERVICES
Industry is highly interdependent (depending upon one another) upon commercial activity and some direct
services to carry out its functions. No country can produce all the goods and services it requires for its
general public, therefore they are interdependent on other countries. Because of better aids to trade
mechanism, countries are now more interdependent. Unless there is production, there would be no need
for commercial activity. Hence industry, commercial activity and direct services are heavily dependent
upon each other now. And their significance has increased because of better financial facilities, improved
transportation and high technology communication.
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Commerce O Level Notes 166

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Commerce O Level Notes 166

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1

3-C, Gulberg II , Lahore. 042-35714038

Title Commerce Notes O Level

Published by Read and Write Publication

UNIT 5 DOCUMENTS OF TRADE ........................................................................................................................ 68

Types of Advertising .............................................................................................................................................88

Teleconferencing and Video-conferencing.........................................................................................................107

Bonded Warehouse: ..........................................................................................................................................125

Direct Debit ........................................................................................................................................................146

Sources of Finance in particular given business situations ................................................................................164

O Level Commerce 7100 Syllabus Contents Detail 2018-2020

1.2 Primary (extractive) industries, secondary (manufacturing and construction)

1.3 Specialisation and division of labour

1.5 The relationship between industry, commerce and direct services

UNIT 2 RETAIL TRADE

2.2 Types of retailer

2.3 Large-scale and small-scale retailing

2.4 Selling techniques and methods and the implications of e-commerce

2.5 Trends in retailing

UNIT 3 CONSUMER CREDIT

3.2 Types of credit

3.2.2 Extended credit (deferred payments)

3.2.3 Store cards

3.2.4 Credit cards

3.2.5 Informal credit

3.3 Suitability of different types of credit

UNIT 4 WHOLESALE TRADE

4.2 Functions and services of thewholesaler

UNIT 5 DOCUMENTS OF TRADE

5.2 Terms of payment

UNIT 6 INTERNATIONAL TRADE

6.2 Balance of Trade and Balanceof Payments

6.3 Customs authorities

6.4 Free trade, trading blocs andprotectionism

6.5 Difficulties faced by exportersand importers

 describe the types of advertising: informative,persuasive, collective (generic) and competitive

7.3 Methods of appeal (devices)

7.4 Sales promotion

7.5 Trends in advertising

8.2 Methods of communications, internal and external

8.3 Postal services

8.4 Trends in communication

9.3 Ports and airports

9.4 Transport documents

9.5 Developments and trends in transportation

 evaluate the role of an insurance broker

11.5 Statistical basis of insurance

11.6 Effecting a claim

12.2 Means of payment for home and international trade activities

12.3 Trends in banking

UNIT 13 THE BUSINESS UNIT

13.2 Public and private sectors

13.3 Main forms of businessorganisation in the private sector

14.2 Finance for commercial activity

14.3 Improving commercial performance

UNIT 15 CHANGING ENVIRONMENT OF COMMERCE

15.2 Commercial and environmental effects ofe-commerce

15.3 Commerce and the environment

15.4 Consumer protection

9-F, Main Market Gulberg II, Lahore. 042-35714038

1.1 THE CHAIN OF PRODUCTION

Needs and Wants