Internal Trade Class 11 Notes CBSE Business Studies Chapter 10

Class 11 Internal Trade Notes CBSE Business Studies Revision Notes Chapter 10

Chapter 10 of Business Studies for Class 11 students focuses on understanding the basics of internal trade which takes place within the home country. Extramarks offers concise notes that are based on the CBSE pattern and NCERT curriculum to ensure a thorough understanding of each topic. The subject is summarised in such a way that students can finish the thorough revision of every topic efficiently before their exams. An easy-to-download option allows access even when referred offline.

Class 11 Business Studies Chater 10 Notes – Internal Trade 

Internal Trade

The exchange of goods in business can be between different parties. Transactions of buying and selling that happens within the country’s boundaries, with payments made or received in the home country are called internal trade. Traders have to complete only a few formalities. The goods in internal trade are a part of domestic production and consumption. 

Two categories of internal trade are :

  1. Wholesale trade
  2. Retail trade

Wholesale Trade 

  • It includes the purchase and sale of goods and services in large quantities for resale and intermediate use.
  • The act of individuals or businesses that sell to retailers and merchants and/ but do not sell in significant amounts to ultimate consumers.
  • Wholesalers perform crucial tasks in the distribution of goods and services. 
  • Wholesalers perform important activities such as product grading, packing into smaller lots, storage, transportation, promotion of goods and collection of market information.

Services of Wholesalers :

By placing the goods in a location and at a time when they are required for consumption or use, wholesalers provide both time and place utility.

Wholesalers provide :

  1. Manufacturers-related services
  2. Retailers-related services

Services to manufacturers :

1. Facilitating large-scale production

  • Wholesalers send a pool of orders gathered from various retailers to manufacturers.
  • Wholesalers then make the purchases in bulk, enabling manufacturers to undertake large-scale production.

2  Bearing risk

  • The wholesale merchants deal in goods under their own name.  
  • Take delivery of the goods and keep the goods purchased in large lots in their warehouses. 
  • A wide range of dangers, such as price drops, theft, spoilage, fire and others are present.

3. Financial assistance

  • They pay manufacturers in cash, so they don’t need to invest all of their capital in stocks.
  • Sometimes they also advance money to the producers for bulk orders placed by them.

4. Expert Advice

  • They are in a position to advise producers about various customer preferences and market conditions.

5. Help in the marketing function

  • They are in control of selling to retailers spread over a large geographical area, relieving the manufacturers of those duties and allowing them to concentrate on effective production.

6. Facilitate production continuity

  • Wholesalers purchase goods upon their production and store them till they are demanded by retailers and consumers, ensuring continuous production by manufacturers.

7. Storage

  • Storage of manufactured goods in the wholesale godowns reduces the burden of storage on the producers, thus providing time utility.

Services to retailers:

1) Availability of goods

  • Wholesalers keep adequate stock of the goods and allow retailers the facility of purchasing newer goods of a wider variety to keep high customer engagement
  • They decrease the retailer’s work by reducing product inventory.

2) Marketing support

  • Wholesalers perform marketing duties and provide support to the retailers and induce customers to purchase goods.
  • Retailers are benefitted as it helps them to increase demand for new products.

3) Grant of credit

  • The wholesalers provide credit to their frequent customers and build up a relatively smaller amount of working capital, allowing better management of their business.

4) Specialised knowledge

  • Wholesalers better understand consumers’ demands and can utilise this information to advise retailers about the quality, uses of the products, pricing strategies and decor of the store for more customer attraction.

5) Risk sharing 

  • Retailers can avoid the risk of storage, theft, obsolescence, price reductions and market demand fluctuations by using the services of a wholesaler.

Retail trade :

  • Retail trade refers to engagement in the sale of goods and services directly to the ultimate consumers.
  • Retailers buy the goods in large quantities from wholesalers and sell them in smaller batches to the customers.
  • They represent the final stage in the distribution of goods; From manufacturers to wholesalers and wholesalers to retailers, who then sell to consumers.

Services of Retailers

Retailers play a crucial role in the flow of goods and services from producers to final consumers. The following services are offered by them:

  • Services for manufacturers and retailers
  • Serviced for consumers

Services to Manufacturers and Wholesalers :

1) Help in the distribution of goods

  • Provide place utility to the wholesalers by selling the goods and services to the final customer over a large geographical area.

2) Personal selling 

  • Retailers undertake personal selling efforts and relieve manufacturers of this activity and encourage them to focus on higher quality production.

3) Enabling large-scale operations

  • The role undertaken by retailers relieves the manufacturers and wholesalers of individual selling activities to consumers, allowing them to work at an essentially larger scale.

4) Collecting market information

  • Being in close contact with the final customer, retailers have an insider view into customers’ tastes, which allows the formulation of better marketing strategies for the goods and services.

5) Help in Promotion

  • Retailers participate in promotional activities like sales, discounts, incentives like coupons, gifts, etc to help manufacturers and wholesalers to increase sales.

Services to Consumers

1) Regular availability of products

  • Customers are able to buy items as and when they are needed, thanks to the consistent and regular availability of a variety of goods made by various manufacturers.

2) New products information

  • The shelf space and display of retail stores provide new product information, features, etc to the customers, thus positively directing their buying behaviour.

3) Convenience in buying

  • The option of buying goods in small quantities anywhere at any time, due to the wider availability of retail stores in every residential area adds to customer’s convenience.

4) Wide selection

  • A large selection of products from various manufacturers gives customers more options.

5) After Sales services

  • Retail stores also have the advantage of offering services like home delivery, delivery of replacement parts, etc.

6) Provide credit facilities

  • Retailers offer credit facilities to their regular customers, leading to high future sale prospects from the same customers. 

Types of Retailers 

  1. Itinerant retailers
  2. Fixed shop retailers 
  • Fixed shop small stores
  • Fixed shop large stores

A. Itinerant Retailers

They are retailers who keep moving their products from one location or street to another in search of customers.

Characteristics:

  • Such traders operate with limited resources.
  • They deal in products of daily use.
  • Allow availability at the customer’s doorstep.
  • Do not have a fixed business establishment.

 Types

1) Peddlers and hawkers

  • They travel from door to door to sell non-standardised and low-value goods to customers, either on bicycle carts, hand carts, etc.
  • Provide convenient service to customers, but not always reliable quality-wise.

2) Market traders:

  • These retailers open their shops at different places on fixed days or dates and primarily serve people from lower-income backgrounds and specialise in low-cost consumer goods.
  • Usually, specialise in one single line of produced goods.

3) Street vendors

  • They sell items of daily utility like stationary, and jewellery in places of the high floating population such as bus stands or railway stations, and do not change their place of business frequently.

4) Cheap jacks:

  • They are temporary independent stores in a locality of business that deal with both customer goods and services.
  • Eg. Watches, shoes, and bucket repair shops.

B. Fixed shop retailers :

  • These retailers maintain permanent locations for buying and selling their goods and do not relocate for business.
  • Larger resources and a higher scale of operation.
  • Variety is provided as it deals with customer durables as well as non-durables.
  • More trustable businesses from the customer’s perspective.

a. Fixed shop – Small stores :

1) General stores 

  • Sell items of daily utility and establishments near local and residential areas provide facilities of convenience to customers. 
  • Daily interaction with regular customers, builds a good rapport with the shopkeeper and provides credit lending facilities to such customers.

2) Speciality shops 

  • Specialise in a single kind of goods allowing better variety in that single type of item. Eg. Men’s garment stores, Toys and gifts, school uniforms, etc.
  • Located in central places to attract more customers.

3) Street stall holders 

  • Found usually at street crossings, these stalls obtain their goods from wholesalers or local suppliers and sell cheap variety products for customer convenience.

4) Second-hand goods shop 

  • The selling of used goods occurs on stalls at busy street crossings and allows the saleability of goods at moderate prices. Antique items may also be purchased at lower costs. 
  • Such shops may have a better infrastructure if they sell goods like used cars and furniture.

b. Fixed shop- Large stores :

1) Departmental stores 

Advantages:

  • Attract a large number of customers
  • Convenience in buying
  • Attractive services
  • The economy of large-scale operations
  • Promotion of sales

Disadvantages:

  • Lack of personal attention
  • High operating cost
  • High possibility of loss
  • Inconvenient location

2) Chain Stores or Multiple Shops

Advantages:

  • Economies of sale
  • Elimination of middlemen
  • No bad debts
  • Transfer of goods
  • Diffusion of risk
  • Low cost
  • Flexibility

Disadvantages:

  • A limited selection of goods
  • Lack of initiative
  • Lack of personal touch
  • Difficult to change demand

Suitability

Only goods that are:

  • Standardised and graded
  • Easily to transport at a low cost 
  • Have a ready market for demand
  • Available in large quantities throughout the year
  • Have a less fierce market competition
  • Can be described through pictures etc.

Are suitable for this type of trading.

Goods and Services Tax

  • Following the tenet of “One Nation, One Tax,” the Indian government implemented the Goods and Services Tax (GST) on July 1 in an effort to unify the market and ensure the efficient flow of goods throughout the nation.
  • Effective taxation makes sure that public funds are used efficiently to achieve social goals for long-term development.
  • The GST has replaced 23 cesses and 17 indirect taxes (8 at the Central and 9 at the State levels), removing the need for multiple returns and assessments and streamlining how goods and services are taxed from producers to consumers throughout the supply chain.
  • GST is made up of the State GST (SGST) and the Central GST (CGST).
  • At each stage of value addition, GST CGST+SGST is levied, and the supplier uses the tax credit mechanism to offset the tax on inputs from earlier stages of the value chain.
  • All products and services are subject to taxation in one of four brackets: 5%, 12%, 18%, or 28%.
  • Tax liability develops when the Rs 20 lakh exemption amount for the taxpayer is exceeded.

Business Studies Chapter 10 Revision Notes 

For simple access, Extramarks has Class 11 Business Studies Chapter 10 Notes. Students can study comfortably and at their own pace even when there isn’t always an internet connection.

Business Studies Chapter 10 Revision Notes

The Chapter 10 Business Studies Class 11 Notes are written to help students achieve the best grades possible. They can gain a thorough understanding of the internal trade by concentrating on its fundamental ideas with the help of these Business Studies Class 11 Chapter 10 Notes. The following topics are primarily covered in these Business Studies Class 11 Notes on Chapter Internal Trade:

  • Wholesale trade
  • Retail trade
  • GST

Trade is the general term used to describe the buying and selling of goods and services for a profit regardless of where the buyers and sellers are located. It can be divided into two groups:

  1. Internal Trade
  2. External trade.

Internal Trade

The main focus of internal trade is the exchange of goods and services within a country’s borders. Due to the fact that such trade involves the production of domestic goods and is intended for domestic consumption, it is exempt from customs and import duties. Two broad categories can be used to categorise internal trade:

  1. Wholesale Trade
  2. Retail Trade

Wholesale Trade

The term “wholesale trade” refers to the buying and selling of products and services in bulk or in large quantities for resale or other intermediate uses. Wholesalers serve a variety of purposes, including distributing products and services and giving manufacturers and retailers beneficial services. 

Services of Wholesalers:

Retailers and manufacturers both benefit from the services that wholesalers offer. They are a huge asset in the supply chain for goods and services. By putting the goods at one location where they can be used or consumed, wholesalers offer both time and location benefits. The various services provided by wholesalers to various sections include:

i. Services to Wholesalers

The following are the main services that wholesalers provide to providers of goods and services:

  • Supporting massive productions
  • Bearing risks
  • Financial Support
  • Expert Opinion
  • Assistance with marketing tasks
  • Facilitate continuity of production
  • Storage

ii. Services to Retailers

The following are significant services that manufacturers provide to retailers:

  • Provision of goods
  • Marketing assistance
  • Credit grant
  • Specific expertise
  • Sharing of risk

Retail Trade

A retailer business enterprise sells products and services to final customers directly.

Services of Retailers

Between producers and final consumers, retailers play a crucial role as nodes. In the distribution of goods and services, they offer beneficial services to buyers, distributors and producers. The following are a few of the crucial services provided by retailers:

i. Services to Manufacturers and Wholesalers

The following are the most beneficial services provided by retailers to producers and wholesalers:

  • Assistance with the distribution of goods
  • Personal selling
  • Facilitating massive operations
  • Gathering market intelligence
  • Support for promotion

ii. Services to Consumers

The following are significant services that retailers provide to customers:

  • Regular product accessibility
  • Information about new products
  • Convenient purchasing
  • Numerous options
  • Post-purchase services
  • Offer credit resources

Types of Retailing Trade

In India, there are many different kinds of retailers. Retailers have been categorised in a variety of ways. For instance,

  • Depending on the “size of the business”—Large, Medium, and Small
  • Depending on the “type of ownership”: sole proprietor, partnership, cooperative store, or company
  • Depending on “merchandise handled”: department stores, supermarket and speciality retailer
  • Depending on whether they operate from a permanent location or not – Fixed shop retailers, Itinerant retailers

Itinerant Retailers

They don’t have a set location from which to conduct business. They continue moving from one street or location to another with their goods in search of customers.

Types of Itinerant Retailers Operating in India

a. Peddlers and Hawkers

b. Market traders

c. Street traders (pavement vendors)

d. Cheap Jacks

Fixed Shop Retailers

These are retail stores that keep a permanent location to market their goods. Contrary to itinerant retailers, they are not mobile. 

Types of Fixed-Shop Retailers

They can be broadly divided into the following types according to the size of operations:

a. Small Shopkeepers

  • General stores
  • Speciality shops
  • Street stallholders
  • Second-hand goods shop

b. Large Retailers

Departmental Stores

Advantages:

  • Bring in a lot of new customers
  • Convenience in purchasing
  • Appealing services
  • The cost-effectiveness of large operations
  • Increasing sales

Disadvantages:

  • Absence of personalised attention
  • High running costs
  • High likelihood of loss
  • Unfavourable location

Chain Stores or Multiple Shops

Advantages:

  • Sales economies
  • Elimination of intermediaries
  • No bad debts
  • Exchange of goods
  • Spread of risk
  • Low price
  • Flexibility

Disadvantages:

  • A small range of products
  • Inadequate initiative
  • Absence of personalization
  • Demand is hard to change

Difference between Departmental Stores and Multiple Shops:

Despite both being large stores, the difference lies on the given grounds : 

  • Location
  • Range of products
  • Services offered
  • Pricing
  • Class of customers
  • Credit facilities
  • Flexibility

Mail Order Houses: 

These businesses use the postal service to fulfil orders and sell their goods to customers. There is no direct contact between the buyer and seller.

Advantages:

  • Limited capital requirement 
  • Elimination of middlemen
  • Absence of bad debt 
  • Wide reach
  • Convenience

Limitations:

  • Lack of personal contact
  • High promotion cost
  • No after-sales service
  • No credit facilities
  • Delayed delivery
  • Possibility of abuse
  • High dependence on postal services

Consumer Cooperative Store

The organisation is owned, managed and controlled by consumers themselves. The aim is to reduce the middlemen who may influence the cost of production thus ensuring quality service to the members. These stores buy directly from manufacturers or wholesalers in large quantities and sell to the consumers at reasonable prices.

Advantages:

  • Easy information
  • Limited liability
  • Democratic management 
  • Lower prices
  • Cash Sales
  • Convenient location

Disadvantages:

  • Lack of initiative
  • Shortage of funds
  • Lack of patronage
  • Lack of business training

Supermarkets:

Supermarkets are a great option for customers due to the principles of low price appeal, broad variety and assortment, self-service, and an emphasis on merchandising appeal. Food items as well as other reasonably priced, well-known and frequently used consumer goods, including groceries, kitchenware, clothing and electronic and home appliances are typically sold here.

Advantages:

  • One roof, low cost
  • Central location
  • Wide selection
  • No bad debts
  • Benefits of being large-scale

Disadvantages:

  • No credit
  • No personal attention
  • Mishandling of goods
  • High overhead expenses
  • Huge Capital requirement

Vending Machines

The latest revolution in marketing methods includes successful coin-operated or electric vending machines which successfully sell several products like milk, platform tickets, chocolates, newspapers, etc., in many countries. Automated Teller Machines (ATM) for banking are another powerful example. Vending machines are immensely useful for the sale of cheap products of pre-packed non-perishable brands, giving a high turnover and a uniformity in size and quality.

Goods and Service Tax (GST)

The GST is a destination-based single tax that is applied to the manufacturer’s supply of goods and services to the consumer, effectively replacing many indirect taxes and transforming the nation into a single market.

Advantages:

  • Reduction in overall tax burden
  • No hidden taxes
  • Development of a harmonised national market
  • Higher disposable income in hand, education and essential needs
  • Customers have a wider choice
  • Increased economic activity
  • More employment opportunities

Role of Commerce and Industry Associations in Promotion of International Trade

By promoting their shared interests and objectives, industry associations help to strengthen domestic trade. They collaborate with the government to refocus policies that lessen obstacles, promote cross-state trade, increase transparency, etc.

Eg. ASSOCHAM– Associated Chamber of Commerce and Industry, CII – Confederation of Indian Industry, and FICCI – Federation of Indian Chambers of Commerce and Industry.

They play a crucial role in:

  • Interstate movement of goods
  • Octroi and other local services
  • Harmonisation of sales tax structure and Value Added Tax
  • Marketing of agro products and related issues
  • Weights and measures and prevention of duplication brands
  • Excise duty
  • Promoting sound infrastructure
  • Labour legislation

FAQs (Frequently Asked Questions)

1. What are some important terms used in trade?

Some of the terms used in trade include the following:

  • Cash on delivery (COD)
  • Free on Board or Free on Rail (FoB or FoR)
  • Cost, Insurance and Freight (CFF)
  • Errors and Omissions Excepted(E&OE)

2. What are the features of a departmental store?

 The features of a departmental store are as follows:

  •  Maximum service to a higher class of customers
  • Located in a central place
  • Generally formed as a joint stock company
  • Combines both functions of retailing and warehousing.
  • Centralised purchasing arrangements

3. What are the alternatives for payment in mail order houses?

The alternatives for payment in mail-order houses include:

  • Full advance payment
  • Value payable post (VPP)