WAEC SSCE - Commerce - 1995 (Essay)

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(a) Difference between Indigenisation and Nationalisation

Indigenisation is a government policy that transfers the ownership and control of certain businesses from foreigners to the citizens (indigenes) of a country. Ownership passes into private hands of nationals, as was done under the Nigerian Enterprises Promotion Decrees.

Nationalisation is the taking over of the ownership and control of privately owned businesses (whether foreign or local) by the government/state, so that they become public enterprises run by the state. The key difference is that indigenisation transfers ownership to private citizens, while nationalisation transfers ownership to the government.

(b) Advantages and disadvantages of Indigenisation

Five advantages:

1. It increases citizens' participation and ownership in the nation's economy.
2. It reduces the excessive control of the economy by foreigners and checks profit repatriation abroad.
3. It creates employment and managerial opportunities for nationals.
4. It encourages the growth of local entrepreneurship and indigenous skills.
5. It retains a larger share of profit and wealth within the country for national development.

Three disadvantages:

1. Shortage of local capital and skilled manpower may lead to poor management of the businesses.
2. It may discourage foreign investment and inflow of foreign capital and technology.
3. Ownership may fall into the hands of a few wealthy citizens, widening income inequality.

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(a) Five factors that determine the choice of means of transportation for goods

1. Nature of the goods: perishable, fragile or bulky goods require special or faster means, for example air or refrigerated transport for perishables.
2. Cost of transportation: the trader compares the charges of the various means and chooses the one that is economical relative to the value of the goods.
3. Urgency/speed required: where goods are needed quickly, a fast means such as air transport is chosen; where time is not pressing, cheaper and slower means are used.
4. Distance to be covered: short distances may favour road transport, while long overseas distances favour sea or air transport.
5. Availability of the means and route (accessibility): the trader chooses a means that is available and whose route reaches the destination, for example road where there is no rail line.

(b) Five factors that have contributed to the growth of Commerce

1. Improved transportation: faster and cheaper transport by road, rail, sea and air has widened markets and eased the movement of goods.
2. Development of banking: banks provide finance, safe custody and easy means of payment, which encourage trade and commercial activity.
3. Growth of communication: telephones, internet and postal services make it easy to place orders and pass information quickly between traders.
4. Provision of insurance: insurance covers commercial risks such as fire and theft, giving traders the confidence to expand their businesses.
5. Use of money and improved currency: a common medium of exchange has removed the difficulties of barter and made buying and selling easy, boosting commerce.

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(a) Five channels of distribution for consumer goods

1. Manufacturer to consumer: The producer sells directly to the final consumer without any middleman.
2. Manufacturer to retailer to consumer: The producer sells to retailers who in turn sell to consumers.
3. Manufacturer to wholesaler to retailer to consumer: The traditional channel where goods pass through wholesalers and retailers before reaching the consumer.
4. Manufacturer to agent to wholesaler to retailer to consumer: An agent is used to link the manufacturer with wholesalers, especially in foreign or distant markets.
5. Manufacturer to wholesaler to consumer: The wholesaler sells directly to the consumer, for example through cash-and-carry outlets.

(b) Five factors to consider before choosing a channel of distribution

1. Nature of the product: Perishable and fragile goods require short, quick channels, while durable goods can pass through longer channels.
2. The market: A widely scattered market needs longer channels with many middlemen, while a concentrated market can be served directly.
3. Cost of distribution: The producer chooses the channel that delivers goods at the least possible cost.
4. Financial strength of the manufacturer: A firm with large capital can afford its own outlets and direct selling, while a weaker firm depends on middlemen.
5. Degree of control desired: Where the producer wants close control over price and promotion, a short channel is preferred.

(Also acceptable: volume of goods, availability and reliability of middlemen, and the practice of competitors.)

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(a) Five roles of advertising

1. Informing: advertising tells consumers about the existence, features, uses and prices of goods and services.
2. Persuading: it convinces and encourages potential buyers to prefer and purchase a particular product.
3. Increasing sales: by widening awareness and demand, advertising boosts the volume of sales and turnover.
4. Creating and maintaining goodwill: it builds a favourable image and brand loyalty for the firm and its products, and keeps the product in the minds of customers (reminder role).
5. Introducing new products and opening new markets: it launches new goods and helps the firm reach new customers and areas.

(b) Television as an advertising medium

Three advantages:

1. It combines sight, sound and motion, giving a vivid and realistic demonstration of the product.
2. It reaches a very large and wide audience, including the literate and illiterate.
3. It has a strong and lasting impact on viewers, making the message more convincing and memorable.

Two disadvantages:

1. It is very expensive to produce and to buy air time, so small firms may not afford it.
2. The message is short-lived and passes quickly; a viewer who misses it cannot refer back to it as with print media, and it reaches only those who own and are watching a set.

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(a) The four business resources

1. Land (natural resources): all free gifts of nature used in production, such as land itself, minerals, forests, rivers and climate. Its reward is rent.
2. Labour (human resource): all human physical and mental effort directed at production, including skilled and unskilled workers. Its reward is wages/salaries.
3. Capital: man-made assets and money used to produce further wealth, such as machinery, buildings, tools and finance. Its reward is interest.
4. Entrepreneur (management): the person who organises and combines the other resources, takes business risks and makes decisions. His reward is profit.

(b) Four ways government regulates business

1. Registration and licensing: government requires businesses to register their names and obtain licences before operating, so as to control entry and standards.
2. Legislation and standards: government makes laws and sets standards (through bodies such as SON and NAFDAC) on quality, weights, measures and safety, which businesses must obey.
3. Taxation: government imposes taxes, duties and levies on businesses, and uses tax incentives or high rates to encourage or discourage particular activities.
4. Price and trade control: government fixes prices of certain goods, controls imports and exports through tariffs and quotas, and prohibits harmful or illegal trade.

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(a) Five services which NIPOST (Nigerian Postal Service) renders to the public

1. Conveyance of mails: it collects, sorts and delivers letters, parcels and packages within and outside the country.
2. Remittance of money: it enables people to send and receive money through postal orders and money orders.
3. Provision of private mail bags and post office boxes: it rents boxes and bags where customers receive their mails safely.
4. Sale of postal materials: it sells postage stamps, postcards, stamped envelopes and revenue stamps.
5. Savings and agency services: it operates savings accounts and acts as an agent for the government, for example in the sale of licences and collection of bills, and offers philatelic (stamp-collection) services.

(b) Five advantages of courier services

1. Speed: couriers deliver documents and parcels very fast, often within a guaranteed time.
2. Door-to-door delivery: items are collected from the sender and delivered directly to the receiver's address.
3. Safety and security: parcels are carefully handled, reducing loss or damage.
4. Tracking of items: senders can trace and monitor the movement of their consignments until delivery.
5. Proof of delivery and reliability: the receiver signs on delivery, giving evidence that the item was received, and the service is dependable.

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(a) Five documents used in foreign trade

1. Bill of lading
2. Certificate of origin
3. Commercial invoice
4. Indent (order)
5. Insurance certificate/policy

(Others acceptable: consular invoice, import/export licence, bill of exchange, letter of credit.)

(b) Five conditions under which an agency may be terminated

1. By mutual agreement: the principal and the agent may agree together to bring the agency to an end.
2. By performance/completion of the task: where the agency was for a specific transaction, it ends once that transaction is completed.
3. By expiry of time: if the agency was for a fixed period, it terminates automatically when that period expires.
4. By revocation or renunciation: the principal may withdraw the agent's authority, or the agent may give notice and renounce the agency.
5. By death, insanity or bankruptcy of either party: the agency ends if the principal or the agent dies, becomes insane or is declared bankrupt.

(The destruction of the subject matter or the business becoming unlawful also terminates an agency.)

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(a) Meaning of Capital

In commerce, capital is that part of wealth (man-made assets and money) which is set aside and used to produce further wealth, rather than for immediate consumption. It is one of the factors of production, and refers to all the assets, money and equipment employed in running a business to create goods and services and earn income.

(b) Five types of capital

1. Fixed capital: money invested in permanent (durable) assets that are used repeatedly in the business, such as land, buildings, machinery and vehicles.
2. Working (circulating) capital: capital used to meet the day-to-day running expenses of the business and which changes form in the course of trade, for example money for stock, wages and raw materials.
3. Liquid (floating) capital: capital held in the form of cash or assets that can quickly be turned into cash, such as bank balances and money owed by debtors.
4. Owned capital (owner's/equity capital): capital contributed by the owner(s) of the business, for example the proprietor's savings or shareholders' equity, on which no interest is fixed.
5. Loan (borrowed) capital: capital obtained from outsiders such as banks and debenture holders, which must be repaid, usually with interest.

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(a) Five reasons why a manufacturer may brand his products

1. To identify and distinguish his products: a brand name or mark sets his goods apart from those of competitors.
2. To create customer loyalty: a well-known brand encourages repeat purchases and builds a body of loyal customers.
3. To ease advertising and promotion: a brand name makes it easier to advertise and for customers to ask for the product by name.
4. To protect against imitation: a registered brand or trade mark gives legal protection against copying by rivals.
5. To command a good price and build goodwill: a reputable brand associated with quality can attract a higher price and enhance the maker's reputation.

(b) Five services rendered by the wholesaler to the manufacturer

1. Buying in bulk: the wholesaler buys goods in large quantities, relieving the manufacturer of storage and enabling steady production.
2. Warehousing/storage: he stores the goods, freeing the manufacturer's premises and bearing storage risks.
3. Provision of finance: by paying promptly (often in advance or cash), he provides the manufacturer with working capital.
4. Distribution: he breaks bulk and distributes the goods to many scattered retailers, saving the manufacturer that task.
5. Market information and promotion: he gives the manufacturer feedback on consumers' tastes and demand, and helps advertise and promote the goods, and bears part of the risk of price changes.

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(a) Meaning of a public limited liability company

A public limited liability company is an incorporated business owned by a minimum of seven members with no fixed maximum, whose shares and debentures are offered to the general public and are freely transferable. It is a separate legal entity from its owners, and the liability of each member is limited to the amount unpaid on the shares he holds. It must add the word "Plc" to its name and can only begin business after obtaining a certificate of incorporation and a certificate of trading.

(b) Five features distinguishing a public limited company from a partnership

1. Legal status: a public company is a separate legal person that can sue and be sued in its own name, whereas a partnership has no separate legal personality from its partners.
2. Liability: members of a public company enjoy limited liability, but partners (except limited partners) have unlimited liability for the firm's debts.
3. Membership: a public company has a minimum of seven members and no maximum, while a partnership has from two to a maximum of twenty members.
4. Continuity: a public company enjoys perpetual succession and is not affected by the death or exit of a member, whereas a partnership may be dissolved on the death, insanity or withdrawal of a partner.
5. Transfer of ownership and capital: shares of a public company are freely transferable and it raises large capital from the public, while a partner cannot transfer his interest without the consent of the others and the firm's capital is limited to partners' contributions. (Also, a public company must publish audited accounts, a partnership need not.)