Unit 3

UNIT 3
Syllabus-Unit 3
Classification of Business Activities: Industry and Commerce
• Industry – Types: Primary, Secondary and Tertiary
• Commerce: -Trade:
• Internal:
•• Wholesale: - Meaning, Functions, Importance, Limitations.
• • Retail: - Meaning, Functions, Importance and Limitations,
• • Meaning of Itinerant and Non- Itinerant traders,
• Types of Non- Itinerant traders
• Multiple shops, Departmental stores, Mail order business, consumer co-
operatives
• Franchise: Their Distinctive features and suitability to different types of
businesses.
• External - Importance, Export – Import Procedures (Documentation not
required)
Industry – Types: Primary, Secondary and Tertiary
• Word doc shared with students
• Detailed industry analysis of India, China, US in class- for

general awareness of students
Commerce: Trade
• Word doc shared with students
RETAIL
Retail
• Retailing encompasses the business activities involved in
selling goods & services to consumers for their personal,
family, or household use. It includes every sale to the final
consumer – ranging from cars to apparel to meals at
restaurants to movie tickets.
Retailer- functions
• Retailers often act as the contact between manufacturers,
wholesalers, & customers.
• Retailers collect an assortment (variety) from various sources,
buy in large quantity, & sell in small amount.
• Retailers communicate with customers, wholesalers &
manufacturers.
• Shoppers learn about the availability & characteristics of goods
& services, store hours, sales etc., from retailers advt., sales
people & displays.
• Manufacturers & wholesalers are informed by their retailers with
regard to sales forecast, delivery delays, customer complaints,
defective items, inventory turnover and so on. Many goods &
services have been modified due to retailer feedback.
Benefits
• Reach more customers
• Reduce costs
• Improve cash flow
• Increase sales more rapidly
• Consumer dealing is their area of expertise
• Manufacturers also do operate retail facilities (besides

selling at conventional retailers)- as is the case of
Samsungs own retail and samsung mobiles sold at
smaller retailers. In running their stores, these firms
compete the full range of retailing functions & compete
with conventional retailers.
Retailer-Manufacturer relationship : common
concerns
Retailers are part of distribution channel, so manufacturers
(wholesalers) are concerned about:
• Caliber of displays
• Customer service
• Store hours
• Retailer‘s reliability as business partners
• Both parties should work together to maintain an image,

assign shelf space, allot profits & costs, & advertise.
Limitations
• Loss of focus
• Lower capacity and inventory
• Lower profit margin
• Very competitive space
WHOLESALE
Wholesaler
• According to Philip Kotler, “ Wholesaling consist of the
sale and all activities in selling goods or services to those
who buy for resale or business use.”
• According to American Marketing Association

“Wholesalers sell to retailer or other merchants and or
industrial, institutional and commercial users, but do not
sell in significant to ultimate consumers.”
Functions
• Wholesalers generally buy merchandise directly from the
producers in large quantity mainly in cash.
• They are trading concerns that stocks the large quantity of
goods, supply or sell goods to the directly or through their
agents in small quantities.
• Wholesalers are in financially good health. They purchase
goods in cash from the manufacturer and sell to the
retailers on cash or credit.
• They deal in limited product line or products.
• They maintain warehouses at different places in the
country to facilitate the trade at minimum transportation
charges.
Functions
• Selling and Promoting
• Bulk Breaking
• Warehousing
• Transportation
• Financing
• Risk Bearing- Insurance
• Market Information
Importance : Wholesaler-Manufacturer relation
Services to the Manufacturers
• Stocking.
• Market Information.
• Expertise Knowledge
• Risk Reduction.
Limitations
• Some of them do not give complete information to
suppliers for selfish reasons
• Cannot be relied on to do equitable distribution
• At times, do not want company and customers to meet
• Tend to hoard goods and influence pricing
Franchising
• Franchising involves a contractual arrangement between
a franchisor & a retail franchisee, which allows the
franchisee to conduct business under a established name
& according to a given pattern of business
• The franchisee pays an initial fees & a monthly %age of
the gross sales in exchange for the rights to sell goods &
services in an area.
Structural arrangements
Three structural arrangements dominate retail franchising
• Manufacturer-retailer – A manufacturer gives independent
franchisees the right to sell goods & related services
through licensing agreement. (Eg., Auto/truck dealers like
GM, Petroleum products dealers like IOC).
• Wholesaler-retailer Voluntary - A wholesaler sets up a
franchise system & grants franchises to individual retailer.
(Eg., Auto accessories stores, Consumer electronics
stores- Dell ).
• Service sponsor-retailer – A service firm licenses
individual retailers so they can offer specific service
packages to customers. (Eg., McDoland‘s)
Advantages of Franchisors
• A national & global presence is developed more quickly &
with less investment.
• Agreement require franchisees to abide by stringent
operating rules set by franchisors.
• Even after franchisees have paid for their outlets,
franchisors receive royalties
Disadvantages of Franchisors
• Franchisees harm the overall reputation if they do not
adhere to company standards.
• Lack of uniformity among outlets adversely affects
customer loyalty.
• Intra-franchise competition is not desirable.
• Ineffective franchised units directly injure franchisors‘
profitability.
Class Self Study topic
• Multiple shops, Departmental stores, Mail order business,
consumer co-operatives- definitions only
EXTERNAL TRADE
External Trade
• External Trade is also known as Foreign Trade. Trade
between two countries is known as External Trade. It
includes exports and Imports. It facilitates efficient
utilization of resources.
• When buying and selling of goods take place across the
national boundaries of different countries it is called
External trade. It is also known as Foreign trade or
International trade
• External Trade = Export + Import

Importance of External Trade
• Increase in sales and profit.
• Improves quality of products
• Advancement in technology
• Diversification of products and markets
• Price competitiveness
• Accelerates economic growth
• Promotes co-operation among nations.
External Trade - Importance, Export – Import
Procedures (Documentation not required)
• Detailed word doc shared with students

THANK YOU

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Unit 3

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UNIT 3

• Word doc shared with students

• Detailed industry analysis of India, China, US in class- for

• Manufacturers also do operate retail facilities (besides

• Both parties should work together to maintain an image,

• According to American Marketing Association

• External Trade = Export + Import

• Detailed word doc shared with students

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