1st Year Principles of Commerce Notes Ch# 05

Middlemen and Their Different Kinds


INTRODUCTION

“ A business concern that is specialized in rendering services immediately involved in the purchase or sale of the goods in the process of distribution is known as middle man.”

There term middle man included all those who operates between producer and consumers. They function in buying and selling if the commodity. The wholesalers and retailers are middleman dealing in the ordinary function of buying and selling. There are other such as brokers. Commission agents, dealers and merchants who assist the buyers ans sellers in the market.
KINDS OF MIDDLEMEN

Some of the middle men are explained as follow


1. BROKER:

A broker is an agent involved to buying and selling on behalf of principal for a commission. He does not hold any stock nor deals with his own name. his function is only to negotiate and make contract of sales and purchases on behalf of others. He is paid for his labour called as brokerage. There are different classes of brokers. They are produce broker, stock broker, insurance broker and ship broker.


2. FACTOR:

He is an agent whose function is to receive goods from his principal for sale in commission. He can sell goods in his own name, pledge goods in his own possession receive payments and gives receipts. He is liable on contract of sale he enters into on behalf of his principal. A factor is also called a consignment broker.


3. COMMISSION AGENT:

He acts on behalf of foreign importer. His function is to buy goods on behalf of client abroad and to dispatch them in accordance with the instructions. He receives a commission for his service.


4. UNDERWRITER:

They enter into agreement with promoters of newly started company which have not been taken up by the public. For this guarantee they are paid commission known as underwritten commission.


5.DEL CREDERE AGENT:

He is an agent who in consideration for extra remuneration called del credere commission. Guarantees to his principal that the third person with whom he enters into contracts shall perform their obligation. Thus such an agent guarantees to his principal that he will only sell to person who will pay for what they buy and if the buyer does not pay, he will pay.

6. TRAVELLING AGENT:

Sometimes wholesalers appoints number of agents who goes from place to place , show catalogues, price lists etc. to retailers , book orders and forward them to their principals who executes them. They receive their commission in return of their service.


7. SELLING AGENT:

Sometimes wholesalers and manufactures appoints certain shop-keepers in different parts of the country as their selling agents. These agents receive commission on all sales in addition to the expenses which they have incurred on behalf of principal.


8. AUCTIONEERS:

An auctioneer is an agent who sells goods by auction ie to the highest bidder in public competition. He has no authority to hold the goods sold and can deliver the goods only on receipt of price. He is the agent of the vender.


9. FORWARDING AGENT: This is the type of agent who is engaged in forwarding the goods to there destination on certain charges.


10. CLEARING AGENT:

This agent is involved in clearing the imports on behalf of their principal. The duties include taking the delivery of the goods from the ship and attending to custom formalities for certain commission.


DISTINCTION BETWEEN FACTOR AND BROKER

Factor

1. He has the possession of goods or documents which entitle him to the possession.

2. He carries out the trade with his name.

3. He is himself liable in respect of the contract of sale.

4. He receives payment from the customer and gives him discharge.

5. He has lion in respect on goods in respect of his commission. Broker


Broker

1. He has no possession of the goods which he sells.

2. He brings together both the parties to a transaction. The sale is made in the name of the principal.

3. He is not liable in respect of such contracts.

4. He does not receive payment of the value of the goods from the customer and cannot give his discharge.

5. He has lien on goods.

1st Year Principles of Commerce Notes Ch# 04

Chamber of Commerce

 Introduction 

Chamber of commerce and industry is a voluntary non-trading association of persons who are directly or indirectly connected with commerce and industry. Its purpose is to promote trade and business and protect the business interest of its members. Thus, only the businessmen, industrialists, bankers and professional men like accountants, auditors are entitled to be members of the Chamber of Commerce. The Chamber of Commerce is organized on regional basis. The businessmen of a particular area form such organization e.g. Karachi Chamber of Commerce, Lahore Chamber of Commerce, Peshawar Chamber of Commerce.
Chamber of Commerce may be formed under Companies Ordinance as a Joint Stock Company or under Trade Union Act. Usually, the liability of the members is limited by guarantee. The members pay an annual fee to the Chamber of Commerce. Generally Chamber of Commerce and Industry is governed by a board of directors and a president. The board appoints a secretary who is responsible for discharging all the work of the organization. He formulates the program, holds the meeting and manages the office.


Functions of Chamber of Commerce 

1. It helps to develop trade and industry of a country and looks after and protects their interest.
2. It collects all sorts of information concerning commerce and industry and maintains numerous records which are necessary in connection therein.
3. It issues reports and Journals at regular intervals full of information regarding commerce and industry for its own members as well as for the general public.
4. Advisory services on labour practices and disputes are provided.
5. It helps the members in recovering debts.
6. It provides trade reference information about financial status of its members.
7. It protects trademarks and patterns and thereby encourages the cause of national commerce and industry.
8. It acts as arbitrator in case there is any dispute between businessmen.
9. It helps the exporters and importers by furnishing information of various natures in connection with import and export.
10. It issues export certificate and certificates of origin which are very common instruments in international commerce.
11. It advances commercial and technical education in the country.
12. Nowadays, an active part is played by the Chamber in influencing economic policy of the government. It examines the budget every year and suggests appropriated modification in the tax proposals.
13. It invites the attention of the government and public on matters affecting trade, commerce and industry of the country

1st Year Principles of Commerce Notes Ch# 03

Co-Operative Society

INTRODUCTION

Co-operative society is voluntary association of small producers or consumers for their mutual benefits. It is formed for producing and supplying goods in accordance with the needs and requirements of the member who compose it. The members form and carry on the business of co-operative societies themselves. They are the owners, workers and mangers of the society. They have democratic control over its organization and management. It is formed for the purpose of achieving economic, social and educative benefits. Profit making is not the man aim of such organizations. Its aim is to eliminate the services of middlemen. It brings benefits for the welfare of the members with the help of applying the principals of all for each and each for all into practice. Its success depends on how much mutual co-operation in between the members has been developed.


CHARACTERISTICS OF CO-OPERATIVE SOCIETY:

The following are the main features of the Co-operative society:-


1. OBJECT:

Its main aim is to bring mutual benefit to the members who compose it. Money making is not the main aim of the Co-operative Society. The Society looks after the welfare of the members. It aims producing and supplying goods to meet requirement of the members.


2. CAPITAL:

It collects capital from the members. The members purchase shares in the cooperative society and provide necessary capital to it. The cooperate society is divided into fix number of shares. To become a member of the society one must purchase at least one share.


3. MEMBERSHIP:

There must be at least 15 members in a cooperative society. But one cannot become a member of the society unless he attains the age of maturity.


4. DEMOCRATIC PRINCIPLE:

The cooperate society is based on the principle of democracy. Every member enjoys rights. Everyone has got only one vote. Policies of the society can be criticized by the members. So the members have a democratic control over the affairs of the society.


6. TRANSFERABILITY OF SHARE:

The shares of the cooperative society can be transferred to the members of the society. They cannot be transferred to nonmember.


7. DIVISION OF PROFIT:

Although it is not the main idea of the cooperative society to earn profit at any cost yet it often earns a handsome profit. The profit of the society is distributed to the members on the paid up capital but the profits of the consumers cooperative society are distributed in proportion to their total purchases during the trading period.

7. ENTITY:

The cooperative society has a separate artificial entity. Thus its entity is independent of the members.

ADVANTAGES OF COOPERATIVE SOCIETY

1. ELIMINATION OF MIDDLEMAN:

The consumers get their requirements direct from the producers or they supply their own requirements. hence the cooperative society eliminated middleman and makes the goods available to the consumers at cheaper rate.


2. ECONOMY:

Certain economies can be enjoyed by the members of cooperative society in the field of production an distribution. The society has not to bother from marketing the goods. the members are its regular customers and it need not advertise its good in the market.


3.CAPTURE MARKET:

The cooperative society sells goods at a cheaper rate. hence it can easily attract a good number of customers.


4. NO SURPLUS STOCK:

The society has got regular customers so it has not to keep any surplus stock in hand.


5. SAVING OF MANAGEMENT EXPENSE:

Sometimes the members render free services to manage the affairs of the society. They do not demand any remuneration.


6. EDUCATIVE VALUE:

The members are able to learn the principles of cooperation. They learn how to render services for the mutual benefits of themselves. They learn about economic and social aspects of human life.


7. PROVISION FOR THE MAINTENANCE OF THE POOR:

Poor people accumulate and invest their small saving in the society which brings for them a better standard of living particularly it increases the income of agriculturists and the people who have been engaged in small and cottage industry.


8. SOCIAL BENEFITS:

It develops self-confidence and self -reliance among the general people. They learn the principal 'Self-help is the best help'. At the same time it develops them a sense of cooperation and sacrifices.


9. PROVISION FOR EMPLOYMENT:

It solves unemployment problems of the under developed countries. People find employment in small and cottage industries to earn their livelihood.


10. INTEGRATION:

Under this system of production and distribution a complete integration between the manufacturers wholesalers and the retailers is possible.


11. EQUAL DISTRIBUTION OF WEALTH;

Under the system of production and distribution wealth cannot be concentrated in few hands. Equal distribution of wealth takes place under this system.


12. EQUAL STATUS:

There is no master servant relationship in between the members of cooperative society. All are the owners managers, and workers of the cooperative society.

DISADVANTAGES OF COOPERATIVE SOCIETY

1. LACK OF CAPITAL:

It suffers from lack of capital because it is an organization of poor people. They cannot afford large amount of capital so they cannot afford to expand the size of the business.


2. LACK OF INTEREST:

As the market for the products of cooperative society has been guaranteed so the organizers and managers do not pay keen interest in the management of cooperative society.


3. LACK OF EFFICIENT PERSON:

It fails to accommodate men of talent, skills and initiative because it requires free services from them. Such people may not be interested to join the cooperative society.


4. LACK OF COOPERATION:

It requires cooperation and selflessness and other facilities which are rarely found in the general people. There is no scarcity of mean minded people living within individuals of the society. The society remains for its success.


5. UN-EDUCATION:

Most of the members of the cooperative society are uneducated and unskilled. So the management of the society may fall in the clutches of selfish people.

6. FREQUENT CHANGE IN DEMAND OF GOODS:

The cooperative society cannot be carried on successively in the fields where the demand for goods changes frequently.