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What is commerce?
Commerce is concerned with the distribution and exchange of goods and services and includes all the types of activities, the support and the movement of goods from the producer to the consumer.
Trade is a branch of commerce which involves buying and selling of goods and services.
Commercial activities are divided into 2:
ELEMENTS OF COMMERCE FLOW CHART
Why should we study commerce?
Importance of commerce
Aids to trade
Sometimes known as auxiliary services. Include:
These are necessary for life and man cannot do without them. They include:
Food- Is the first need as without food man would soon die. It’s necessary in the right quality and quantity so health is maintained.
Clothing-Is the second need. Clothing mostly depends on the climatic conditions of the area one lives in.
Shelter- Is the third need. Shelter is a place built to protect people from the elements and other harm.
These are things which are not necessary and we can live without them e.g. beer, cinema etc.
We cannot die as a result of missing a bottle of beer or cigarette.
How canwe satisfy our own needs?
Producer and consumer
Producer-Is a person who makes goods or offers services for the people.
Consumer- Is a person who receives goods and services produced by others.
Producer goods- These are goods produced and are used to produce other goods e.g. machines, printer etc.
Consumer goods- Goods produced for the purpose of consumption
Development of commerce in Tanzania
How did money come into the hands of Tanzanians?
Money was first introduced by German colonies. They started large farms of sisal, cotton, groundnuts and people were forced to work in their farms and paid wages in terms of money.
The colonialists also introduced polytax which ensured that one needs to work so that he has money to pay polytax.
The colonialists built railway lines semi processing industries and opened some shops selling goods from abroad.
Tanganyika became independent on 9th December 1961. We inherited colonial structure which we mostly made up of institutions such as Bantas and insurance companies and a few public service institutions.
In 7th July 1969, Tanzania announced Arusha declaration with its policy of socialism and self-reliance. This is what guided Tanzania’s future economic decision.
After Arusha declaration whose main aim was nationalism of all major means of production, the following were implemented:
Is the exchange of goods for other goods.
Barter trade existed before the introduction of money
Problems of barter trade
How were these problems solved?
They were solved by the introduction of money.
Principles of barter trade
DEVELOPMENT OF COMMERCE IN TANZANIA
Ancient period- stone age
No commerce- People lived on fruits, digging roots and hunting animals by stones to satisfy their needs
No division- Each family was its own, they didn’t depend on many things, were self reliant
No specialization-Man went out hunting and women remained at home. Fire discovery was by 3 groups of people:
Division of labor
Is a process of dividing works among the people; each person is doing a different job from another.
Specialization is a process whereby each individual is specialized in his/her own field.
Aim of division of labor
The main is to increase output. The job is divided into various stages.
Several workers for each stage are employed. Each employee is given a small task which if repeated will be easy for him. Hence, he will master it and be done more quickly and accurately.
Advantages of specialization.
If a person is specialized in a certain task, he will work faster and better and thus save time and money.
People have different natural attitude. Under specialization, an individual pursues occupations for which they are most suited.
When one does something repeatedly, he becomes skillful at his job.
The increase of productivity both in quality and quantity leading to higher living standards.
It’s due to use of machines.
Disadvantages of specialization
When a task is done repeatedly, the worker can easily be tired or bored
Sometimes when people specialize in a certain field of work, the field may not be able to accept all of them.
Specializing is only one line of production. It’s very risky when commodities get a better substitute.
Types of specialization
Was carried out under primitive conditions e.g. carpenters-furniture
It’s broken down into several parts. Job is carried out by one person or group
E.g. a bread making factory
It’s when a person decided to produce the entire commodity by himself.
A country specializes in producing commodity e.g. Tanzania produces sisal
It’s the creation of utilities. It can also be explained as the process of bringing about a physical change in goods so as to make it useful.
Usage of goods to satisfy human wants or needs. Man creates utility in the products e.g. a stone in the mountains can be used to build a house.
Levels of production
Concerned with the extraction of raw materials from their natural state e.g. farming, fishing
Concerned with transformation of raw materials into finished goods. Secondary production is divided into two parts which are:
Provides services for other industries. They don’t produce tangible good e.g. Public services such as civil services, police and army.
Types/branches of production
Industries-Is the place where goods are manufactured and changed into useful form
Commerce-Is concerned with the distribution and exchange of goods and services and includes all types of activities, the support and movement of goods from one place to another.
Direct services-Are services which facilitate production to take place for example public and personal service.
FACTORS OF PRODUCTION
Are agents necessary for production to take place. They can be put under 2 categories:
Also necessary for most forms of production. Include:
Basic factors of production
– Land as a production factor doesn’t mean only the earth’ssurface; it has a wider meaning and includes:
Refers to man’s mental and physical capabilities directed at creation of utilities. However, there are three conditions necessary to be called labor, they are:
Capital as a factor of production includes items that will assist in human labor such as tools, equipment, machines and means of transport used by people involved in production.
It usually refers to money invested by the owner of the business
OTHER FACTORS OF BUSINESS
To co-ordinate the above mentioned factors of production, we need the efforts of managers and organizer with the view of making the process efficient.
There should be someone to undertake the entire project and arrange and pay for all factors of production.
FORMS OF PRODUCTION
Simply means changing raw materials to finished goods e.g. a tree to furniture
Involves changing of a goods place from where it is not needed or from its natural habitat to where the final consumer is e.g. removing fish from sea to market
Means making of material available at a time when they should be available. The process is achieved through warehousing e.g. fruits are canned
Refers to the production of services needed to facilitate the creation, place and time utilities. It includes among other things the provision of financial and market services.
COST OF PRODUCTION
The cost of production of a certain output of a commodity is the sum of all payments to the factors of production engaged in production of that commodity.
Types of costs
iii. Prime costs include all variable costs and some fixed costs.
COST OF PRODUCTION FORMULAE
– FC-Fixed Costs
– VC-Variable Costs
– MC-Marginal Costs
– TC-Total Costs
– AC-Average costs
– AFC-Average Fixed Costs
– AVC-Average Variable Costs
– IQ-Units of Output
MC=CHANGE IN TC/CHANGE IN IQ
A retailer is a trader whobuys goods in large quantities and sells them in small quantities to the consumer. He may buy the goods from a producer, wholesaler or a large scale retailer. Retail trade is the act of selling goods to the final consumer hence, a producer may be involved in retail trade but is not a retailer
Functions of a retailer
Advantages/Importance of having retailers.
TYPES OF SMALL SCALE RETAILERS
There are 7 types:
These are retailers who carry goods selling them from one place to another. Mostly found in populated areas like towns.
– They bring goods to the consumer
– They need small capital to start their business
– They don’t have extra expenses for rent, transport
– They use a lot of energy while moving
– Many times they sell defective goods
– Their sales fluctuate regularly as they don’t have regular customers
Move with their goods from one place to another by walking. Carry commodities like sweets, gums. Peddlers use bicycles and motorbikes to sell their goods.
Are retailers who sit and sell their goods along the roads. They are found near bus stands, marketplaces and sell goods like maize, nuts etc.
Small scale retailers whose volume of stock is larger compared to roadside retailers. Goods are carried on vans, Lorries and trucks and they move from town to town selling their goods.
Retailers who sell products of one manufacturer only who finances them e.g. Nike, Adidas
-Manufacturers ensure continuous supply
– Loss will go to the manufacturer
– Retailer can sell products of one manufacturer only, hence doesn’t have variety.
Goods are sold to final consumer through coin operated machines. Especially for goods like soft drinks and candy.
– Serve customers without any attendant.
– Are operated 24 hours a day
– Are accurate
– Sell a limited variety of products
– Are expensive to install and maintain
– No credit facilities offered
– Customers cannot bargain for prices
– Customers can use fake or old coins.
Large scale retailers
Main features of large scale retailers:
– Large capital
– Fixed premises
– Profit margin relatively high
– Variety of goods stock
– Large business size
Classes of large scale retailers
– Multiple shops
– Departmental stores
– Mail order business
– Co-operative business
– Saves time
– Regular customers
– Very spacious
– Variety of goods
– Self services
Are larger than supermarkets and provide larger number of services.
Are single shops under one roof and different management. Each of the department sells different goods.
Are shops managed by one person and sell the same goods. They’re built alike and can be easily recognized by people e.g. Nike
Are large scale retailers who sell a wide variety of goods. They’re formed by a group of people who contribute capital. Their objective is to sell goods to members and general public at reasonable prices. Some of their products include food stuff, milk etc.