1st Year Principles of Commerce Notes Ch# 06

Importance of Advertising

DEFINITION

“Advertising is an art of providing market information through the various media of communication such as magazines, newspapers, television, radio etc. at the expense of the company for the purpose of increasing or maintaining effective demand and making easy the sale specific goods and services.”
PURPOSE OF ADVERTISING

The purpose of advertising is:

1) to enable the public to know the features and uses of the products and overcome traditions and prejudice that may reduce competition.

2) to make easy and increase the sale of present products, to maintain consumer’s awareness, to bring it equal with advertisement of competing firms and to reduce the amount of personal sales efforts required to receive an order.

3) to introduce a new product model of service in the market.


MEDIA OF ADVERTISING

Media means the source in which the advertisement appears. It is a singular as well as plural term. Various types of advertising media are explained as under:-


A. RADIO

Today radio has become very important and can be utilized for advertising the goods which are sold either within the country or all. Today’s commercial services of radio Pakistan are becoming very popular day by day .but life of this advertisement is very short .


B. MAGAZINES

Magazines can be used for the products which are sold out all over the country .this type of advertisement is not flexible as changes cannot be made in the advertisement copy easily it is becomes the copy of the advertisement is to be submitted to the advertising company 4 to 5 weeks earlier.


C. NEWSPAPERS

These newspapers which are daily or weekly are used for advertising the goods of local businessman . a newspaper has a very short life as it is destroyed usually after a period of 24 hours .


D. MEAN SIGNS

It means advertisement through bulbs . this type of advertisement media is becoming popular day by day in big cities of Pakistan like Karachi ,Lahore and Rawalpindi.


E. ADVERTISING BY POST

Small firms advertise their products through letters ,postcards ,catalogue etc.


F. ADVERTISING BY TELEVISION This type of advertisement delivered through a television is a combination of spoken words and visual presentation of products and their benefits .


G. DIRECT MAIL

It is widely used and includes postcards ,letters, catalogues, folders, booklets etc. they have variability of coverage .large and small business both can use it. basis of this kind of advertising is mailing list .this list which has the names of the persons to whom the letters are sent is compiled from time to time from many sources . It needs utmost care and up to datedness. This list can be made extremely selective regarding geographical and consumer interest .It is costly because of printing. Postage ,typing and packing.


H. CAR CARDS

They are used in street cars , buses , subways and rail road cars where they may be seen by people on the way to shopping trips etc. They are effective for all i.e national ,regional and local advertising .They are flexible and reached the people to whom the magazines don’t reach.


I. PACKAGES ,LABELS AND INSERTS

Advertising copy on package must be brief and should have pictures and brand name , qualities , companies name etc. Some are bottles and some are board packages.


J. WINDOW DRESSING

Usually big shop decorates there windows of shop so as to attract customers. This is also one of the media of advertising. The window is dressed in such a way that it may attract attention of the buyers.

K. SAMPLING

Some firms distribute there products free of cost so as to advertise its product to secure sales volume in future.

ADVANTAGES OF ADVERTISING

1. It creates demand for a new article by arousing interest of the public.

2. It increase the sales volume of establish articles constantly keeping the selling points afresh in minds of the customer.

3. It educates the general public about new use or uses of a product.

4. It reduces competition.

5. It creates goodwill by continues reminder to the public about the trademarks etc.

6. It increases additional sales by encouraging present customers in using the articles more frequently and in increased quantities.

7. It facilitates the job of the salesman and dealers by introduction the products to the public.

8. It reduces prices as the production volume increases, which in turn reduces the overhead expense.

9. It insures better quality, improving the quality of goods to have better appeals to the customer.

10. It increases the employment because production increases.


DISADVANTAGES OF ADVERTISING

1. It results sometimes in exaggeration ( over-valuation) and misrepresentation. Such advertisement misleads the public and loses the confidence of the public in the enterprises.

2. It expands the market for the articles of luxury and comfort, because the goods which are needed to meet primary needs of life are not usually advertised.

3. It causes economic loss due to rapid changes in style creation of new objects of consumption and changes in style are waste and determinate to human good.

4. Advertising is impersonal and cannot answer the question asked for by the buyers.

5. It results in monopoly through brands.


IS ADVERTISING A WASTE?

It is not a waste at all. It is an aid to business expansion. Advertisement help buyers who usually do not know or are really aware of the existence of the seller. It expands the sellers market by spreading information about the product. Some people say the advertising increase the cost of production which is to be borne by the customer. It is completely wrong. It creates new demands of commodities and the service which lead t a production on large scale and when the production increases the cost of advertising is not waste but brings gain in the business.


DIFFERENCE BETWEEN ADVERTISEMENT AND PUBLICITY

ADVERTISING

1. Some definite message is communicated.

2. It is paid form of publicity.

3. It is non personal.

4. Its sponsor is known.


PUBLICITY

1. It is generally done in form of news, articles, features written in newspaper.

2. No direct payment is involved.

3. It may be personal.

4. Its sponsor is not always known.

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