Division of labor and Specialization

Division of labour refers to the breaking down of a work into a number

of tasks so that each process or task is carried by a separate person or
group.
For example, in a car factory, one person might install tires, another person
paints the car, and someone else checks for quality.
On the other hand specialization is the practice of focusing on doing
one specific task or producing one type of product such that one
becomes an expert at it.
Eg. In a car factory above, a person or group which only paints a car
everyday will become an expert on the work.
Advantages of division of labour
1. It saves time and energy by reducing the need to move from one task to another.
2. It saves tools as each worker only needs specific tools for their task
3. It improves quality of work due to high concentration on a single task.
4. It increases skills through repetitive practice.
5. It helps boost output over time
6. It promotes teamwork

Disadvantages of division of labour

1. It leads to boredom since doing the same task repeatedly can make workers feel
uninterested
2. It promotes overspecialization - workers become too specialized and lack skills in
other areas.
3. It creates dependence on others, so if one worker makes a mistake, it can affect the
entire production process.
4. It limits creativity, as repeating the same task can reduce workers' creativity.
5. It increases the risk of unemployment due to overspecialization
Home Trade(Domestic Trade)

Home trade is that trade carried within the boundaries of a particular country.
It is hence the buying and selling of goods and services within a country.

In home trade both the buyer and the seller are from the same country and
transactions are generally conducted in the local currency.
Home trade/Domestic trade is further divided into two main types: retail trade
and wholesale trade.
Retail Trade
Retail Trade: Is that trade which involves buying goods from wholesalers/producers
and selling them in smaller quantities directly to consumers
The person involved in retail trade is called a retailer

Characteristics of retail trade

1. Goods are sold in small quantities
2. It involves sale of goods to final consumers
3. Sales variety of products
4. Involves regular transactions, as consumers buy goods on a daily, weekly and
monthly basis.
5. Often provide customer services including assistance with product selection,
returns, and after-sales support
6. Usually takes place in stores, shops, malls, online platforms, or markets, which
are easily accessible to consumers.
Types of Retailers

Retailers are divided into two types each with sub-parts; Small scale retailers and large
scale retailers.

(a) Small scale Retailers

(i) Itinerant/Roaming retailers.
These are mobile traders who sell their goods on door to door basis.
They deal in low priced articles like fruits, vegetables, fish, glassware, clothing, books
etc.
Their major means of transport is their feet or bicycles.
(ii) Hawkers & Peddlers
Hawkers are small-scale petty retailers moving from door to door in residential areas to
sell their goods by using a convenient vehicle to carry goods from door to door.
Peddlers are also persons who trade on foot, but carry their goods on their head or
shoulders. Peddlers go from house to house providing personal services directly at the
door of the customer.
Small scale Retailers cont.…

(iii) Street Traders.

These are retailers who sell goods directly on the streets or in public places, often
without a permanent storefront.
They typically set up temporary stalls, kiosks, or simply display their products on
sidewalks, market areas, or busy streets.
In big cities likes Dar es Salaam, Mwanza, Arusha e.t.c.
It is common to find small bookshops, shoe-repairers, leather bag repairers and
other household goods located in front of railway stations or near road crossing.
(iv) Market Traders.
These are retailers who sell goods at fixed or temporary areas in a market setting
Most of the big villages and small towns in Tanzania have regular market days. E.g.
Sunday markets.
Types of Retailers cont.…

(b) Large scale retailers

These include the following;

(i) Chain stores (or multiple shops).

These are number of shops or outlets (at least ten or more) owned and operated by
one organization and selling similar type of products.
Examples of multiple shops are Pizza hut, McDonalds & Starbucks

(ii) Departmental stores.

This is the collection of shops under one roof and one management.
It is divided into departments, each department buys merchandise separately, control
its own stocks, and makes its own polices but all are under one unified control and
management.
Examples of departmental stores are Shoprite, Woolworth, Marks and spencer &
Walmart.
Large scale retailers cont.…..

(iii) Supermarkets.
A supermarket is a self-service retail outlet having several check points offering full
range of foodstuffs, and household requirements.
A common feature of this type of retail business is ‘self service’.
This means that every item carries a price tag; a customer simply moves through
the shop from shelf to shelf picking up items he/she needs.
She then proceed to one of the numerous exit counters where the cashier lifts all
her items from her trolley and inform her of the total amount due.
Functions of a Retailer

1. Buying goods to sale based on customer demands

2. Storage of goods: A retailer maintains a ready stock of goods and displays them
in his shop.
3. Selling of goods: The retailer sells goods in small quantities according to the
demand and choice of consumers.
4. Grading and Packing of goods: The retailer grades the goods which are not
graded by manufacturers and wholesalers. He packs goods in small lots for the
convenience of consumers.
5. Bearing risks associated with stocks: A retailer always keeps stock of goods in
anticipation of demand, bearing the risk of loss due to fire, theft, spoilage, price
fluctuations, etc.
Functions of a Retailer cont.….

1. Transportation of goods: Retailers often carry goods from wholesalers to their

shops.
2. Marketing and promotion of products: Retailers help to promote products
through displays, advertising, and special offers, encouraging customers to buy.
3. Provision of Information about the goods: Retailers provide information to
customers about the goods, including features, usage, and price.
Advantages of Retail trade
1. Requires small capital to establish
2. Involves fewer running costs
3. Requires less legal formalities
4. It is flexible to change according to market taste
5. Sell varieties of products at one point
6. Provide details about products

Disadvantages of Retail Trade

1. Goods sold at relatively high price
2. Operate under high levels of competition
3. Profits earned per each item sold tends to be very small
4. Depends on suppliers for stock which may lead to delays
5. Deterioration of some products
6. Take long to respond to market
Wholesale Trade
Wholesale trade: Is that trade which involves buying goods in large quantities (bulk)
from producers and selling them in large quantities.

Characteristics of wholesale trade

1. Deals with bulk buying and selling
2. Buy products directly from manufacturers
3. Is more restricted to one or few goods
4. Usually do not sell directly to consumers but to other businesses
5. Usually have large storage facilities
Functions of wholesalers

1. Provide a link between manufacturers and retailers

2. Provide Credit Facilities to Retailers: Wholesalers often offer credit, allowing
retailers to buy goods without immediate payment.
3. Provide Warehousing and Storage Facilities: This ensures a constant
supply of goods is available to retailers.
4. Bear risks associated with holding stock, such as damage, theft, or market
price fluctuations.
5. Providing market Information useful for producers and retailers.
6. Bulk Buying and Breaking Bulk: Wholesalers buy in large quantities from
producers and sell in smaller, manageable quantities to retailers.
7. Arrange Transportation and Distribution of goods: Wholesalers arrange for
the transportation of goods from producers to their warehouses and then to
retailers.
Advantages of wholesale Trade
1. Attracts discounts through bulk buying which lower the cost of goods
2. Reduces Risk Burden for Producers and Retailers
3. Maintain constant supply of goods to retailers through their warehousing
and storage facilities as well as transportation arrangements
4. Allow retailers to buy goods without immediate payment
5. Provide useful information to producers and retailers to plan for their
activities

Disadvantages of wholesale trade

1. Requires Large and Costly Storage Space
2. Requires high initial capital
3. Bears high risks of holding large stocks.
4. Face many challenges in handling Large quantities
5. Lacks Direct Consumer Feedback
Distribution Channel

Channel of distribution refers to a set of intermediaries/institutions

which perform all of the activities utilized to move a product and its title
from production point to sales or consumption point.
A channel of distribution is the path or route that goods and services
follow from the producer to the final consumer.
It includes all the steps, organizations, and individuals involved in
making a product available to buyers.
There are two types of distribution channels; Direct distribution channel
and Indirect distribution channel
Distribution Channel cont.…

(i) Direct distribution channel:

 Is that channel whereby producers sell their goods and services

directly to the consumers.
 There are no middlemen present between the manufacturer and
consumers.

E.g. Producer Consumer

Distribution Channel cont.…

(2) Indirect distribution channel:

 Is that channel whereby intermediaries (middlemen) are involved in the distribution process.
 These intermediaries can include wholesalers, distributors, and retailers.
 E.g:

P W R C
or
P W J R C

Where
P = producer, W = wholesaler
R = retailer, J= jobber C=customer

Note: The functions of the distribution channel are the combined functions of retailers and wholesalers.
Importance of Home Trade

1. It facilitates economic growth through production of goods and

services.
2. It provides employment to people.
3. Helps to improve people’s standard of living.
4. Generates revenue for the government through tax.
5. Encourages innovations.
Problems Faced in Home Trade

1. Poor Transport infrastructures: Poor infrastructure, traffic congestion, and

inadequate transportation systems can lead to delays and increased costs.
2. Competition among businesses: The presence of numerous local businesses in
the same market can lead to stiff competition, reducing profits of businesses.
3. Difficult Legal and Regulatory requirements: Home trade is subject to various
local laws, regulations, and taxes that often create business challenges.
4. Limited Access to Technology.
5. Supply Chain Disruptions: Unforeseen events in the supply chain, such as natural
disasters, strikes, or shortages of raw materials, can affect the availability of
goods in the local market.
6. Shifts in consumer preferences
International Trade/Foreign Trade or External Trade.

International trade can be defined as trade between two or more nations

It is hence the exchange (buying and selling) of goods and services between
countries.
Transactions in international trade are usually made through foreign
currencies.
It hence requires converting payments from the buyer’s currency into the
seller’s currency.

Forms of International Trade:

International trade may be bilateral or multilateral.
Bilateral trade is trade between two countries WHILE
Multilateral trade is trade among many countries.
Types Of International Trade

International trade mainly involves:

(i) Import Trade. Is the trade which involves buying goods from a foreign country
for domestic use. E.g. Tanzania imports Petroleum from Libya.
It allows consumers and businesses within a country to access goods
that may not be available or produced within their country.
Goods and Services bought by a country from another country are known
as imports.
(ii) Export Trade; Is that trade which involves the selling of domestically produced
goods or services to other countries (foreign countries).
It is important for a country’s economy as it brings in foreign currencies.
Goods and Services sold by a country to a foreign country (another
country) are known as exports.
Types Of International Trade

(iii) Entrepot Trade. Is that trade which involves a country importing of goods
from one country and exporting the same to other foreign countries.
The goods may be brought in temporarily, stored, and then sent to
another country after some minor processing or without significant
changes

Note:
 The balance between a country's exports and imports is referred to as its
trade balance.
 A country will have a trade surplus if it exports more than it imports, and a
trade deficit if it imports more than it exports.
 This balance affects the country’s economy, currency value, and trade
policies.
Why Nations Trade

1. Differences in Resource Availability: Countries trade because they lack

certain resources. For example, some countries have oil, while others
have gold.
2. Differences in Cost of Production: Different production costs make it
cheaper to buy certain goods from abroad rather than producing them
domestically.
3. To Attract the Benefits of Specialization: Countries trade in order to
specialize in what they produce best.
4. To earn Foreign Currency: Countries export goods to earn foreign
currency, which helps to import from other countries.
5. To Enable Citizens to Enjoy a Higher Standard of Living: International
trade allows access to a variety of goods and services that may not be
available domestically.
Advantages of International Trade

1. It provides access to more goods and services among countries

2. Enables countries to specialize in areas their best areas of production
3. Provides Foreign Currency among countries that helps them to import
4. Facilitates transfer of technology among countries
5. Creates employment opportunities
6. Promotes good relationship among countries.
7. Is a source of government revenue through tax on imports and exports
8. Promotes competition that increase efficiency in production
Disadvantages of International Trade

1. May affect the growth of domestic industries through competition

2. Creates dependency on other countries: Relying too much on imports can make
a country dependent on others for important goods.
3. May spread of problems like diseases and war: Economic problems in one
country can spread to others through trade.
4. May cause cultural destruction: International trade may lead to foreign products
and ideas replacing local culture
5. May lead to the penetration of harmful goods in a country.
Problems facing developing Countries in International Trade

1. Limited Access to foreign Markets: Developing countries may face barriers like
tariffs and trade restrictions in developed countries
2. Dependence on Exports of Raw Materials which face price fluctuations
3. Poor infrastructures including transport, communication, and logistics
infrastructures.
4. Poor technology and Innovation leading to low quality goods
5. Differences in languages
6. Intense competition from other countries
7. Unfair trade practices from developed countries: Richer countries may use unfair
practices, like subsidies or dumping
Importance of commerce

1. Commerce satisfies human wants by making goods and services available

to people.
2. It generates employment opportunities to people.
3. Commerce promotes industrial and economic development.
4. Commerce helps to improve people’s standard of living.
5. Commerce promotes division of labour and specialization.