1st Year Principles of Commerce Notes Ch# 13

Marketing

DEFINITION OF MARKETING

The term market and marketing are often very really used in ordinary since but it has different meaning in commerce. marketing includes business activities involved in the flow of goods and service from production to consumption.

Mr. C.C Knight says: “ Marketing embraces all those efforts made in the discovery of consumers actual and potential requirement for the commodities and service and the steps taken fro securing their adequate distributing”

According to Prof. Hall “ the word marketing describes number of association activities which move towards a common objectives: the determination of consumer demand for sale and distribution of goods and services”

In simple words all those business activities which effect the transfer of ownership of goods and services and provide for there physical distribution come within the scope of marketing. Marketing activities may be divided into two main groups;

1.those which effect the transfer of title of the goods 2. those which are involved in the physical distribution of goods from one place to another.

Market creates time, place and possession utility. It is for their creation that study is becoming more and more important every day.


NATURE AND SCOPE

Marketing is a very comprehensive term and include all efforts to

1. discover the present and potential requirement of consumer.

2. the evolution of the product which would satisfy those requirements.

3. all the effective methods of production distribution

4. all the efforts to improve and modify the products.

FUNCTION OF MARKET

Marketing function can be defined as fundamental activities or services carried out in the marketing process. These functions are performed by manufactures, marketers, wholesalers etc. However the functions are as follow.


BUYING:

Buying is an important marketing function for everyone connected with the distribution and consumptions of good. Generally the wholesaler buy from the manufactures, the retailers from the wholesalers and consumer from the retailers. The performance of this function involves the activities relating to determination of needs, selection of proper source of supply, date of shipment etc. the function also considers the quality of goods with prospects of high profit.


Selling:

The second important function is to arrange for the sale of goods. Selling involves a a wide Varity of task. These include the discovery of customers, introducing them with the available goods and encouraging them to purchase them to purchase goods. Selling add possession utility to commodities. Sometimes selling is a specialized function as in case of brokers auctioneers and other sales agent who don’t handle the goods at all but merely serves as a connection link between buyer and sellers.


Advertising:

The age of competition compels the seller to be alert in the creation of demands for their goods through auxiliaries like advertisement and salesmanship. The main objective is to draw attention of a large number of people to the products and to convince them of the excellence of the product. As a result the number of consumers increases. Without publicity the goods may not be noticed and marketing may come to stand still.


Transportation:

It creates place utility. In order to have goods must be transported from one place to another. To a very great extent the marketing system is built up upon economical and effective transportation. For the distribution of goods over a wide area, effective transportation must be available. and it should be adequate to meet the normal demands. Therefore, the efficiency of marketing depends upon quick and cheap means of transportation. With the increase in the distance between the producer and consumer the importance of transportation has further been increased.


Storage and warehouses:

Storage of good is an another important function of marketing. In many lines of business goods are produced considerably in advance of their consumption. Storing creates the utility. Because marketers often maintain extensive inventories, the consumers desire to buy is satisfied without waiting.


Standardization and grading:

It determines the form and classifies goods according to their quality. The producer standardize his goods according to the requirement of the market. It saves the time of consumers in selecting the goods. Consumer relay upon manufacturers that their goods are of uniform quality and of standard measure and size.

By grading we mean that actual sorting out the commodities according to established specification relating to size , quality , color , weight etc. Graded products facilitate buying and selling and the elements of risk is also reduced .


Financing:

It consist of the supply and management of money of money and credit. A considerable amount of time elapse between the production and the sale of good, during that period finance is required at every step. The whole marketing mechanism is based upon financing. The retailers demand credit from the wholesalers , the wholesalers from the producers and the producers from the banks and finance companies.


Risk taking:

The mere act of owning goods carries with it the burden of assuming certain risks in connection with them. Some of the risks involved relate to physical deterioration theft, damage , waste, change in demand or supply or price. It is possible to minimize some of these risk through shifting them to insurance company.


Packing:

Protecting goods from breakage, spoilage and leakage while they are being transported or stored is another important function of marketing process. Considerable efforts and research has been carried out in this fields as packing represents a vital and expensive activity.


Branding:

It is applicable to all identifying marks by which a manufacturer or wholesaler identifies his products. The brand enable the purchaser to know what he is buying.


Recording:

A considerable amount of recording is recording in order to know who made the purchase, the amount of investors. Therefore it is an important function.


Sampling:

In order to show goods to distant customers the producer has to adopt the prospect of sampling of the goods. It denoted the selection of apart of commodity from a bulk in such a way that it would be representative enough to render a correct idea about the commodity ti recipient of the sample.


Having Market Information:

It is important function and it is extremely helpful to both the consumer and the manufacturer. As markets for various articles are widening the importance of research and information in increasing. Producers are made aware of coming trends because marketers inform them of changes in consumers want supply and demand and the new market development, position of the computtors etc.


Salesmanship:

The chief objective of this stage of marketing process is to bring a potential buyer into contact with the seller. Thus this is also an important marketing function.

1st Year Principles of Commerce Notes Ch# 12

Retail Trade

INTRODUCTION 

It fulfills the requirements of the final consumer by placing the goods at his disposal for final consumption. it is the link between the wholesaler and final consumers. The retailers provide an opportunity of choices to final consumers amongst the variety of product kept by the retailer. He can also buy the goods in small quantities nearest to his door in accordance with his requirements
FUNCTION OF RETAILERS 

1. the retailers supply goods at the very door of consumers. The consumer need not to go far to purchase the good because retailers are situated at very little distance. He may bring the goods with himself or he may leave them with the retailers to be delivered at his place as soon as possible.
2. the greatest advantage of retailer is the stored goods and sell them in small quantities when the consumer requires. He thus relieves the consumers from the necessity of storing goods which may of them cannot do for the lack of resources.
3. he tries to study the taste of the consumers and keeps the goods likely be in demand. He again keep wholesale merchants in touch with changing fashion and tastes and thus enables those goods to be produced which are really in demand.
4. he keeps the large variety of goods manufactured by different manufacturer with a view to enable his consumer good choice and selection.
5. if the customer is dissatisfied by the good the retailers quite willingly makes good the complain.
6. he adopts diverse methods for reaching the customers. His beautiful display and scientific advertisement are very educative.


SMALL SCALE RETAILING

1. HOUSE TO HOUSE RETAILERS:
They are those who wander house to house selling their goods. Hawker and peddlers go into street, and different parts of the city in an effect to sell their goods. These person requires little capital and need no shop.

2. PART-TIME RETAILERS:
They are not regular retailers. They only sell goods from door to door in their spare time. they sometimes deal only in the seasonal goods and as soon as the season is over they stop selling the goods.

3. ORDINARY SHOPKEEPERS:
A large volume of retail trade is conducted by ordinary shopkeepers. They may be divided into small and big according to their scale of operations. Small shopkeepers require little capital and are established in lanes , unimportant streets. Big shopkeepers commands considerable capital and make shop in the most frequent areas in the heart of the city. Shop may be general or specialized. A general shop is the one where numerous varieties of goods of every day use are sold. A specialized shop on the other hand, is specialized in the sale of certain articles only for example fountain pens, jewelers shop.
LARGE SCALE RETAILING 

Now days, as the production of goods is done on large scale , the flow of good in the market is huge and varied. The distribution is also to be done on large scale. The flow of good in market is huge and varied. The distribution is also on large scale so as to reap the higher profits avoiding competition from small organization. When retailers purchase goods on large scale they save much as they can get many advantages from the wholesalers and manufacturers. Beside they can accumulate variety of commodities and thus attract the buyers. The large scale retailers are discussed as follows;
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1. DEPARTMENTAL STORES
Such stores requires investment of huge capital and involves considerable risk. The special features of this store is that they try to sell almost every considerable commodity of commerce, almost from an apple to an airplane. The store is divided into number of departments , suitated into the same roof, each department specializing in commodities of the nature. That is why it is known as the departmental store. it is thus an combination of large number of specialized shops, under unitary control. An attempt is thus made to supply to the customer all that he requires from this very place so that he may not require to visit any other shop.

ADVANTAGES 
The advantages of running a departmental stores are as follow;
1. The central side of departmental store gives it more advantages over a small scale retail store.
2. It provides efficient service to the customers like saving of time, car parking, telephone etc.
3. Such stores often create a demand for a commodity. A customer is sometimes induced to purchase other things also when finds them nicely placed in various section of store.
4. The price in departmental stores are less than in retailers shops because of the economy of large scale buying.
5. One department advertises for the other department.

DISADVANTAGES
1. The elaborated service provided by the store tends to increase overhead expenses.
2. The location of such stores ia sway from population residential areas. It is difficult for the large scale retailers enterprises ie departmental store to take away the share of profit of the small retailers because they are located in central parts of the city and the people living in the suburbs and the other parts may not be served.

2. MULTIPLE SHOP/ CHAIN STORE
Sometimes the manufacturer himself wants to eliminate all the intermediateries and reach consumers directly. This he does by opening multiple shops. Shops are opened in various parts of big cities and in all important cities in province or country. These shops are mean to sell only those goods in which the producer or manufacturer is interested. The range of commodities kept and sold is thus very narrow. The advantages accruing as a result of specialization are those of economy in buying together with speedy and larger turn over at lower price eg BATA shoe manufacturing company whose multiple shops are spread all over the big cities of Pakistan.

ADVANTAGES
The multiple shop system enjoys all the advantages which normally accrue to large scale enterprise namely , economies of buying in larger quantities, centralized and highly sufficient control and experts advertising of firm’s special lines. In addition to these there are the following advantages particular to multiple shops;
1. Shortages of stock at any branch may be made up by transfer from one branch to another.
2. A speedy turnover of stock is attain and be accentuated by studying sales figures to discover which of the goods are slow moving and then concentrating advertising effort on these items only.
3. As a result of speedy turnover, multiple shops are able to run their business at slightly lower cost than the other types.
4. As sales are made on cash basis , there are no bad debts and no expense of maintaining a large clerical staff.
5. The multiple stop benefits also from the fact that numerous branches can cater easily and efficiently for customers at comparatively short distance from their residence. The total number of its customers is larger than that of a single store or departmental store.
6. Each branch in itself is an advertisement for other branches and so long as the goods sold are of good quality in relation to the price, there is no limit to the number of branches that an efficient concern my control

LIMITATION
Multiple shops suffer two limitation. Firstly they have to meet heavy expenses. Much of the difference between their buying and selling prices is absorbed by high rents of big promises in busy streets, with rules proportionately higher and by provision for writing off the initial cost of new shop fronts and new equipment and by the maintenance of poorly paying branches in places where the trade is not enough. Secondly many managers and staff do not, without constant supervision, take the same interest in their duties as the proprietors would be.

3. MAIL ORDER BUSINESS

In mail order business goods are sold and delivered through the post and not across the counter. From buyers point of view, it may be describe as shopping by post. Payment is made by several methods, varying with the type of stores and customers standing. If the customer has an account, the goods are charged against it. If he is unknown the goods are supplied either on “ cash with order” basis or the goods are sent through the post office on cash on delivery basis. In later case the VPP( value payable post) system is utilized.
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ADVANTAGES
1. Expenses and expensive shop, fronts etc. Are eliminated.
2. The sales in direct touch with the buyers and therefore it is generally to know the demands of customers more easily.
3. Advertising may be more effectively carried out since the results may be checked up with fair accuracy.
4. The actual selling is reduced to routine the work being performed by low grade workers and hence cheaper labour.
The sales appeal may be designed by experts and is not dependent upon the capacity of individual salesman. The customer buys sitting at his home and therefore saves himself from botherations of different types.

DISADVANTAGES
1. The small retailer is still able to compete with mail order house in most lines and ho has “convincing appeal” in his varied shook.
2. All retail shops have the advantage of enabling customer to see and examine goods but mail order business may not provide the facility to their customer’s ordinal.
3. Heavy expenses on advertising increase the cost to the customer as compared with normal retailers.
4. Publicity through advertisement also include quality of goods; the wordings of advertisement often create confusion and also sometimes mislead the customer.
5. The sales appeal is stereotyped and may not be easily altered.
6. It is not easy to find causes of failure to affect sales nor is it easy to get the orders.

1st Year Principles of Commerce Notes Ch# 11

Finance

Introduction

It is necessary for a businessman to plan financial aspect in the early stage of starting any new business and it should not be left to chance. From the starting and to any later expansion in the firm’s business, finance plays a very important role in purchasing aspects and to meet the expenses if necessary for carrying on the business affairs. The financial needs of business are assessed by the size and the nature of work. For a large business, financial needs are high as compared to a small business. For example, the joint stock companies require large amount of funds whereas sole proprietorship and the partnership business require small amount of funds. Finance can be obtained through two major resources owners’ capital and borrowed money. The requirements of funds depend upon utilization that is how much funds will be needed for circulating and fixed capital. The capital credit obtained from any financial institution is known as borrowed money. Funds which are required to purchase any asset and to meet the expenses from the initial stages to the extension of any business is known as finance.


Kinds of Finance

Long Term Finance

Long term finance is that part of capital which is required by a business enterprise to finance its blocked or fixed assets such as land buildings, machinery and other appliances of permanent nature. In the established undertakings, it is required for extending the scale production and for the renewal and replacement of the fixed assets, or for taking the advantages of new discoveries. Thus, it is needed for considerable period of time, usually for 10 or more years and hence it involves a high cost due to higher amount of interest.

SOURCES OF LONG TERM FINANCE:

The following are the various sources of obtaining long term finance.

1. SHARES:

The initial capital is obtained by a new concern by floating shares. Shares represent equal portion into which the capital of a company is divided. Shares may be issued directly by the company or through the under writers. Selling of shares is the most important method of securing fixed capital and the contributors are the general public.


2. BONDS AND DEBENTURES:

To raise sufficient capital and to draw the attraction of those people who don’t find interest in investment, debentures are issued b y a company. Debenture is a promissory note for the repayment of money borrowed and the payment of interest at fixed rates. The contributor is again the general public.


3. GOVERNMENT LOANS:

The state aid in the form of guarantee of dividend of new companies, taking of securities, plays a definite role in the financing of industries. In our country, industrial-finance Corporation was established to give long term loans.


4. FINANCING INSTITUTIONS:

In Pakistan there are the following institutions from which different industries can take their finance for long periods:

A- PICIC:

This corporation aims at stimulating promotion of new industries, the expansion of the existing ones and the furnishing of the technical know-how as to increase production.

B- IDBP:

This bank was setup to provide credit and other facilities for the development of industries. Other institutions are NDFC, BEL, investment trusts, insurance companies and commercial banks.


5. PUBLIC DEPOSITS:

An enterprise can raise finance by the acceptance of deposits from the public directly for fixed terms and at fixed rate of interest. This method is however, dangerous and has declined in importance in recent years.


6. PLOUGHING BANK OF EARNINGS:

This is very easy method of financing and is available to only Established enterprises.re-investment of a part of the profits is an ideal means of financing, expansion and improvements.


Short Term Finance

A common problem of every business is financing day –to –day operations. Normally business finances these items out of the receipts from sales, but some times the firms financing is needed. It is required for pour hasting raw materials, additional inventory etc. for meeting purposes’ .it is required for short period ,generally foe one year .it is needs because of the fact that the stock is to kept ready before it is actually consumed.

Sources of Short Term Finance

The main sources of obtaining short–term loans are as following:


1. Commercial Banks

Finances are acquired from banks by means of loans, discounts overdrafts etc. they provide short term finance in the shape of discounting bills, granting loans and accepting bills on behalf of their customers.


2. Commercial Credit Houses

These institutions provide short term finance against mortgage of property or promissory notes.


3.Proprietor‘s Personals Funds

This is an important source of financing a small business. The proprietors themselves supply the capital of the business from their own pockets. But in large scale undertakings, this source is insufficient.


4. Borrowings from Friends and Relatives

Sometimes business is also finance by taking loans from friends and relatives. Finance from this source is very limited and uncertain.


5. Public Deposits

Some units accept deposits from the public from short period on attractive rates of interest and utilize the funds for their currents financial requirements.


6. Indigenous Bankers

There are large number of money lenders i.e. Mahajan, Sahukar, Shroff in the country who provide considerable sums for the business, though at a high rate of interest.


7. Land Mortgagment

The financial institutions give loans on short–terms to he business man or industrialists on the security of land and bearable.


Foreign Exchange Banks

These banks also provide short term funds. They mainly provide finance to the foreign business undertaking of their nationality.


9. Unsecured Loans

This type of financing includes:

A) Promissory Notes:

They are the legal instruments used in advancing banks loans. It is the major source of the short–term finance.

b) Commercial Drafts:

A draft is an instruments made by one person ordering the second person to pay a sun of money to a specified individual on sight or at a future date. Secured loans: There are times when short term financing may be accompanied by collaterals, which gives the lender the right to seize certain property if the borrower does not replay the loan.


10. Secured Loans

There are times when short term financing may be accompanied by collaterals, which gives the lender the right to seize certain property if the borrower does not repay the load.