WAEC SSCE - Commerce - 1994 (Essay)

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(a) What is transportation by pipeline?

Transportation by pipeline is the movement of liquids and gases, such as crude oil, refined petroleum products, natural gas and water, through a network of connected pipes from one place (for example an oil field or refinery) to another (for example a depot, port or consumer). The materials flow through the pipes under pressure with the aid of pumping stations.

(b) Advantages of transportation by pipeline

• It is cheap to operate once the pipeline has been laid, because it needs little labour and energy to move large volumes.
• It allows the continuous, uninterrupted flow of large quantities of liquids and gases over long distances.
• It is not affected by road traffic congestion or bad weather, so delivery is fast and reliable.
• It is safe from theft and damage since the goods travel underground and out of reach.

Disadvantages of transportation by pipeline

• The initial cost of laying the pipeline and building pumping stations is very high.
• It is limited to only liquids and gases and cannot carry solid goods or passengers.
• It is fixed in route and inflexible; it cannot be diverted easily to serve new locations.
• Leakages, bursts or sabotage (vandalism) can cause serious pollution, fire and huge losses.

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(a) What is personal selling?

Personal selling is a method of promotion in which a salesperson meets and talks directly with a prospective buyer, face to face, in order to persuade the buyer to purchase a product. It involves a personal, two-way communication between the seller and the customer, during which the salesperson explains the product, answers questions and tries to close the sale.

(b) Four reasons why firms engage in personal selling

• To persuade customers to buy: The salesperson can explain the benefits of the product convincingly and directly influence the customer's decision, thereby increasing sales.
• To give detailed explanation and demonstration: Personal selling allows the salesperson to describe and demonstrate how technical or complex products work, which advertising alone cannot do adequately.
• To provide feedback and answer questions on the spot: The salesperson can immediately answer the customer's questions, remove doubts and gather information about customers' needs and reactions for the firm.
• To build good customer relationships: Face-to-face contact helps to win the confidence and loyalty of customers, provides after-sales advice and encourages repeat purchases.

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(a) Meaning of credit

Credit is an arrangement by which a buyer receives goods, services or money now and pays for them at a later agreed date, or by instalments, instead of paying immediately. It is based on trust and the confidence that the debtor will be able and willing to pay in the future.

(b) Three ways by which banks grant credit to customers

• Bank loan: The bank lends an agreed lump sum to the customer for a fixed period. The full amount is credited to the customer's account at once, and the customer repays the principal plus interest over the agreed period.
• Bank overdraft: The bank allows a current-account customer to withdraw more than the balance in the account up to an agreed limit. Interest is charged only on the amount actually overdrawn.
• Discounting of bills of exchange: The bank buys a customer's bill of exchange before its maturity date, paying the customer the face value less a discount (interest), thereby providing immediate cash.

(c) Advantages of credit sales

• They increase sales and turnover because customers who lack ready cash are still able to buy.
• They help to attract and retain customers, thereby building goodwill and a lasting business relationship.

Disadvantages of credit sales

• There is the risk of bad debts if some customers fail to pay.
• The seller's working capital is tied up in debtors, which may create cash-flow problems.
• Extra costs are incurred in keeping records of debtors and in following up and recovering debts.

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(a) What is planning?

Planning is the management function of deciding in advance what is to be done, how it is to be done, when it is to be done and who is to do it, in order to achieve the goals of an organisation. It involves setting objectives and working out the best course of action to attain them. Planning is the first and most basic function of management on which the other functions depend.

(b) Five advantages of delegation of authority

Delegation of authority is the process by which a superior gives part of his authority and responsibility to a subordinate to carry out certain tasks. Its advantages include:

1. It reduces the workload of the superior manager: By passing routine tasks to subordinates, the manager is free to concentrate on more important and policy matters.
2. It ensures quick decisions and faster work: Since subordinates can act on the spot without always waiting for the superior, decisions are taken and work is done more quickly.
3. It trains and develops subordinates: Delegation gives subordinates the opportunity to gain experience and develop managerial skills, preparing them for higher positions.
4. It motivates subordinates: Being trusted with authority raises the morale, confidence and job satisfaction of subordinates, encouraging them to work harder.
5. It ensures continuity: Because subordinates are trained through delegation, the work of the organisation can continue smoothly even when the superior is absent, ill or has left.

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(a) Who is an agent?

An agent is a person who is employed and authorised by another person, called the principal, to act on his behalf, especially to bring the principal into a contractual or business relationship with a third party. The agent represents the principal and acts in the principal's name.

(b) Six duties of an agent

• To obey the lawful instructions of the principal and act strictly within the authority given to him.
• To exercise reasonable care, skill and diligence in carrying out the work assigned by the principal.
• To act in good faith and in the best interest of the principal, avoiding any conflict of interest.
• To render a true and proper account of all transactions and monies handled on behalf of the principal.
• To keep the principal's affairs and business secrets confidential.
• Not to make any secret profit or accept bribes from a third party; any commission or profit made must be disclosed and handed over to the principal.

(c) Three rights of an agent

• The right to be paid the agreed commission or remuneration for services rendered.
• The right to be reimbursed for all lawful expenses incurred in the course of the agency.
• The right of lien, that is, to retain the principal's goods in his possession until he is paid what is due to him.

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(a) Distinction between commercial banks and merchant banks

(b) Explanation of the types of cheque

• (i) Order cheque: A cheque made payable to a named person 'or order'. It can only be cashed by the named payee, or transferred to another person by endorsement (signing on the back).
• (ii) Bearer cheque: A cheque payable to 'bearer', that is, to whoever presents it at the bank. It passes from one person to another by mere delivery, without endorsement, and is therefore risky if lost.
• (iii) Certified cheque: A cheque that the drawer's bank has confirmed and marked as good, guaranteeing that funds are available to meet it. It assures the payee that the cheque will not be dishonoured.
• (iv) Non-negotiable cheque: A crossed cheque marked 'not negotiable'. It can still be transferred, but the transferee gets no better title than the person who gave it; if the cheque was stolen, the holder cannot claim ownership. It reduces the risk of loss through theft.

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Nationalised industries (public corporations owned by the State) differ from public limited companies (privately owned joint-stock companies) in the following ways:

1. Ownership: A nationalised industry is owned by the government on behalf of the whole nation, while a public limited company is owned by private individual shareholders who have bought its shares.
2. Source of capital: A nationalised industry obtains its capital mainly from government funds, grants and loans, whereas a public limited company raises its capital by selling shares and debentures to the public.
3. Aim or motive: A nationalised industry is set up primarily to provide essential services to the public, not mainly to make profit, while a public limited company is established mainly to maximise profit for its shareholders.
4. Formation: A nationalised industry is created by a special Act of Parliament (a statute), while a public limited company is formed by registration under the Companies Act.
5. Control and management: A nationalised industry is controlled by a board appointed by the government and is answerable to a minister and to Parliament, whereas a public limited company is managed by a board of directors elected by the shareholders at the annual general meeting.
6. Distribution of profit: Any surplus made by a nationalised industry belongs to the government and may be used for public purposes, while the profit of a public limited company is shared among shareholders as dividends.

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(a) What is production?

Production is the creation of goods and services to satisfy human wants. It covers all the activities involved in changing raw materials into finished goods and in making services available, up to the point where the goods and services reach the final consumer. Production is not complete until the goods or services get to the consumer.

(b) Activities involved in the three occupations

Industrial occupation: This is concerned with the actual production and processing of goods. It is divided into:

• Extractive: obtaining raw materials directly from nature, such as mining, farming, fishing, lumbering and quarrying.
• Manufacturing: converting raw materials into semi-finished or finished goods, for example turning cotton into cloth or crude oil into petrol.
• Constructive: assembling and building fixed structures such as roads, bridges, houses and ships.

Commercial occupation: This covers trade and the aids to trade that help to distribute the goods produced. It includes buying and selling (home and foreign trade), transportation, warehousing, banking, insurance, advertising and communication. These activities make goods available to consumers where and when they are needed.

Service occupation: This involves the provision of direct personal and professional services rather than tangible goods. It includes:

• Direct/personal services rendered to individuals, such as those of doctors, teachers, lawyers, hairdressers and musicians.
• Commercial services rendered to businesses, such as those of accountants and consultants.

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(a) Four obligations of the employer to the employee

• To pay agreed wages or salary: The employer must pay the employee the agreed remuneration promptly and in full for the work done.
• To provide a safe working environment: The employer must provide safe and healthy working conditions and the necessary tools and protective equipment for the job.
• To provide work and reasonable conditions: The employer should provide the employee with the work agreed upon and grant entitlements such as leave, rest periods and other agreed benefits.
• To indemnify or compensate the employee: The employer should reimburse expenses lawfully incurred by the employee in the course of duty and compensate the employee for injuries suffered at work in line with the law.

(b) Four duties of the employee to the employer

• To obey lawful and reasonable instructions given by the employer in the course of the work.
• To be honest and faithful: to serve the employer with loyalty, avoid making secret profit and not disclose the employer's business secrets.
• To exercise care and skill: to perform the work carefully, diligently and competently, taking proper care of the employer's property and equipment.
• To be punctual and regular: to attend work regularly, keep to the agreed hours and give the employer his full and dedicated service.

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NITEL (the Nigerian Telecommunications Limited) provided telecommunication services that supported business activities in Nigeria in the following ways:

1. Provision of telephone services: NITEL provided telephone lines that enabled businessmen to communicate quickly with customers, suppliers and branches within and outside the country, saving time and travelling costs.
2. Facilitation of speedy transmission of information: Through services such as telex, telegram and fax, NITEL allowed firms to send and receive orders, quotations and business messages rapidly, so that decisions could be made without delay.
3. Promotion of international trade: By linking Nigerian businesses with the outside world through international call and communication facilities, NITEL made it easier for exporters and importers to negotiate and conclude foreign transactions.
4. Employment and reduction of travelling: NITEL created jobs for many Nigerians and, by making distant communication possible, reduced the need for businessmen to travel physically for every transaction, thereby cutting costs.
5. Support for banking and other services: NITEL's lines carried the data and messages needed by banks, insurance firms and other institutions to transfer funds and confirm transactions, thereby speeding up commercial and financial activities.