WAEC SSCE - Commerce - 2016 (Essay)

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(a) What is turnover in commerce?

Turnover is the total value of sales made by a business within a given period, usually one year. It may also be described as the rate of stock-turn, that is, the number of times the average stock of a trader is sold and replaced within a trading period. It is calculated as:

\[ \text{Rate of stock-turn} = \frac{\text{Cost of goods sold}}{\text{Average stock at cost}} \]

A high turnover generally means goods are selling quickly.

(b) Six factors that determine the turnover of a product

1. Price of the product: Goods that are reasonably priced tend to sell faster and record higher turnover than over-priced goods.
2. Quality of the product: Good-quality, durable and attractive goods sell more quickly than inferior ones, raising turnover.
3. Nature of the product: Perishable and everyday necessities (such as bread and vegetables) have a faster turnover than durable goods (such as furniture).
4. Advertising and sales promotion: Effective advertising creates awareness and demand, increasing the rate at which goods are sold.
5. Location of the business: A shop sited in a busy, densely populated area attracts more customers and sells more than one in a remote area.
6. Level of income of consumers: When people's incomes are high, they buy more, so turnover rises; low income reduces sales.

(Other valid factors include the level of competition, seasonal changes in demand, and the efficiency of the sales staff.)

Maelezo ya Majibu

(a) Five media of public relations

1. Print media: newspapers, magazines and journals carrying press releases and feature articles.
2. Electronic media: radio, television and cinema broadcasts, interviews and jingles.
3. Posters and handbills.
4. The internet: websites, social media and company web pages.
5. Seminars, workshops and conferences (sponsored events and exhibitions are also acceptable).

(b) Five types of after-sales services

1. Advice on product usage.
2. Home delivery of the goods bought.
3. Installation of industrial equipment.
4. Demonstration of how to use the product.
5. Maintenance and repair services, including free replacement of a faulty part under guarantee or of the entire product under warranty.

(c) Five benefits of after-sales services

1. They retain customers who patronise a particular seller.
2. They offer a guarantee, in the form of repair or routine maintenance, which creates goodwill and confidence in the buyer.
3. They are used as a competitive tool by sellers to attract more patronage.
4. They help the buyer to cope with the greater complexity of the goods being manufactured.
5. They assure the consumer that the seller will support the product being sold, and give the buyer the opportunity to ask questions not asked at the time of purchase.

Maelezo ya Majibu

The following are business documents used mainly in the movement and transport of goods.

1. Consignment Note

A consignment note is a document that accompanies goods sent by road or rail. It is prepared by the sender (consignor) and gives details of the goods, the sender, the receiver (consignee) and the carriage charges.

Two uses:

• It serves as evidence of the contract of carriage between the sender and the carrier.
• It gives the receiver full details of the goods being delivered so that they can be checked on arrival.

2. Delivery Note

A delivery note is a document sent by the seller along with the goods to the buyer, listing the goods being delivered. The buyer signs a copy to acknowledge receipt.

Two uses:

• It enables the buyer to check that the goods delivered agree with the goods ordered.
• The signed copy serves as proof (evidence) that the goods were actually delivered and received.

3. Bill of Lading

A bill of lading is a document used in sea transport. It is issued by the shipping company to the exporter and acknowledges that the goods have been received on board for shipment.

Two uses:

• It is a document of title to the goods, so whoever holds it can claim the goods at the port of destination.
• It serves as a receipt for the goods shipped and as evidence of the contract of carriage by sea.

4. Bill of Sight

A bill of sight is a document that an importer presents to the customs authorities when he does not have full details of the goods he is expecting. It allows the goods to be landed and inspected before duty is finally assessed.

Two uses:

• It enables the importer to inspect goods of unknown description before paying the correct duty.
• It allows the customs to grant provisional clearance so that the goods can be examined and the accurate duty determined.

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(a) What is entrepôt trade?

Entrepôt trade (also called re-export trade) is a form of international trade in which goods are imported into a country not for consumption within that country but for the purpose of re-exporting them to other countries, usually after some processing, sorting, grading or repackaging. The goods pass through the intermediary country's warehouses and are then shipped abroad. Such a country is called an entrepôt or a re-export centre.

(b) Three advantages and three disadvantages of international trade

Advantages

1. It enables specialisation: Countries concentrate on producing what they can make best and cheapest, then exchange for what they lack.
2. It widens the range of goods available: Consumers can enjoy goods and services that cannot be produced at home, such as machinery and foreign foods.
3. It is a source of government revenue and foreign exchange: Import and export duties provide revenue, while exports earn the country foreign currency.

Disadvantages

1. It can lead to over-dependence: A country may rely too heavily on others for essential goods, which is dangerous in times of war or crisis.
2. It may ruin infant/local industries: Cheap imported goods can outsell and destroy young home industries.
3. It encourages the dumping of harmful or substandard goods: Foreign firms may flood the market with inferior or dangerous products.

(Other valid points include unfavourable balance of trade/payments and the spread of harmful cultural influences.)

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(a) Distinction between a broker and a factor

A broker is a mercantile agent who brings buyers and sellers together to make a contract but does not take possession of the goods and does not sell in his own name. He earns a commission called brokerage. A factor (also called a commission agent) is a mercantile agent who is given possession of the goods and sells them in his own name, often on credit, in return for a commission.

(b) Three duties of an employer to an employee

1. Payment of agreed wages/salary: The employer must pay the worker as and when due.
2. Provision of a safe working environment: The employer must ensure the workplace is safe and healthy.
3. Provision of work and tools: The employer should provide the work to be done and the necessary tools or equipment.

(Other acceptable duties: payment of compensation for injury sustained at work, and provision of leave and other entitlements.)

(c) Four duties of an employee to an employer

1. Obedience to lawful instructions: The worker must carry out reasonable and lawful orders given by the employer.
2. Faithful and honest service: The employee must serve diligently and not defraud the employer.
3. Proper care of the employer's property: The worker should use the employer's tools and materials carefully and avoid waste.
4. Keeping trade secrets confidential: The employee must not disclose the employer's business secrets to outsiders.

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(a) Four reasons people still engage in hawking

1. Small capital requirement: Hawking needs very little money to start, so it is attractive to poor people who cannot rent a shop.
2. Unemployment: Many people take to hawking because they cannot find paid jobs, and it offers a means of survival.
3. Goods are brought to the buyer's doorstep: Hawkers move about with their goods, making it convenient for customers who have no time to visit the market.
4. No overhead costs like rent and rates: Since hawkers do not operate from fixed premises, they avoid shop rent, electricity bills and other running costs.

(Other reasons: quick sale of perishable goods, and flexibility to move to areas where demand is high.)

(b) The four factors of production

1. Land: This refers to all the natural resources or free gifts of nature used in production, such as the soil, forests, rivers, mineral deposits and climate. Its reward is rent.
2. Labour: This is the human effort, both physical and mental, applied to production. It includes the work of the farmer, teacher, doctor and factory worker. Its reward is wages or salary.
3. Capital: This refers to all man-made assets used to produce other goods and services, such as machinery, tools, factory buildings and money invested in business. Its reward is interest.
4. Entrepreneur (organisation): This is the person who organises and coordinates the other three factors, bears the risk of the business and takes major decisions. His reward is profit.

Maelezo ya Majibu

The following are classes (branches) of insurance:

(a) Marine insurance

This is insurance that covers risks connected with the sea and sea transport. It protects against loss of or damage to the ship (hull), the cargo it carries, and the freight, arising from perils such as storms, collision, sinking and piracy. It may cover the voyage or a period of time.

(b) Accident insurance

This class covers a wide range of risks not connected with marine, fire or life. It includes cover against personal injury or death by accident, motor accidents, burglary, theft and employer's liability. The insurer pays compensation when the insured suffers loss or injury from the accident insured against.

(c) Group insurance

This is a single policy that covers a number of people, usually the employees of one organisation, under one master contract. The lives or persons of the whole group are insured together, often paid for by the employer, and each member enjoys cover without taking out a separate individual policy.

(d) Fidelity Guarantee insurance

This protects an employer against loss caused by the dishonesty, fraud or embezzlement of his employees, especially those who handle cash or goods. If such a trusted employee defrauds the employer, the insurance company makes good the loss.

(e) Consequential Loss Insurance

Also called loss-of-profit or business-interruption insurance, this covers the loss of profit and continuing standing expenses (such as rent and salaries) that a business suffers because its operations are interrupted after an insured event such as fire. It compensates for the indirect losses that follow the direct damage.

Maelezo ya Majibu

(a) Four functions of money

1. Medium of exchange: Money is generally accepted in payment for goods and services, so it removes the difficulties of trade by barter.
2. Measure of value (unit of account): Money provides a common standard for expressing and comparing the value of different goods and services.
3. Store of value: Money can be saved and kept for future use because it retains its value over a reasonable period.
4. Standard for deferred payments: Money makes it possible to buy now and pay later, so debts, wages and future obligations can be fixed in money terms.

(b) Six advantages of payment by cheque

1. Safety: Payment by cheque avoids the risk of carrying large sums of cash that could be lost or stolen.
2. Convenience: A single cheque can be used to settle a very large debt without counting bundles of notes.
3. Proof of payment: The paid (returned) cheque and the counterfoil serve as evidence that payment was made.
4. Crossing gives extra security: A crossed cheque can only be paid into a bank account, so it cannot easily be cashed by a thief.
5. Stopping payment is possible: The drawer can instruct the bank to stop payment on a cheque if the need arises, for example if it is lost.
6. Payment can be made at a distance: A cheque can be sent by post to a creditor in another town, avoiding the need to travel with cash.

Maelezo ya Majibu

(a) What is market segmentation?

Market segmentation is the process of dividing a large, varied market into smaller groups (segments) of buyers who have similar needs, tastes or characteristics, so that the seller can design products and marketing programmes to suit each group. Markets may be segmented on the basis of age, sex, income, taste, geographical location or occupation.

(b) Six functions of marketing

1. Buying: Marketing involves buying goods and raw materials in the right quantity and quality for resale or production.
2. Selling: It involves persuading customers to purchase goods and services, which brings in revenue to the business.
3. Transportation: Marketing moves goods from the place of production to where they are needed by consumers, creating place utility.
4. Storage (warehousing): It involves keeping goods safely from the time of production until they are demanded, creating time utility.
5. Grading and standardisation: Goods are sorted into grades of uniform quality and size so that buyers can order by description.
6. Advertising and sales promotion: Marketing informs and persuades customers about goods and services to create and increase demand.

(Other valid functions: financing, risk-bearing, and market research.)

Maelezo ya Majibu

A courier firm is a private organisation that offers fast, secure and specialised delivery of documents and parcels from one point to another, while a telecommunication firm provides the transmission of information (voice, data and images) over a distance.

(a) Four functions rendered by a courier firm

1. Speedy delivery of documents and parcels: It conveys letters, contracts and small packages from the sender to the receiver within a very short time, often faster than the ordinary post.
2. Door-to-door collection and delivery: The firm picks up items directly from the sender's premises and delivers them to the receiver's doorstep, saving the customer time and travel.
3. Tracking of consignments: It provides a reference or tracking number so that both sender and receiver can monitor the movement and current location of the item until it is delivered.
4. Safe custody and insurance of items: Goods are handled with care and are usually insured against loss or damage, so the sender is compensated if anything goes wrong in transit.
5. Provision of proof of delivery: The receiver signs for the item, giving documentary evidence that the consignment reached its destination.

(b) Six functions rendered by a telecommunication firm

1. Provision of telephone services: It enables people and businesses to make voice calls to one another locally and internationally.
2. Internet and data services: It provides access to the internet, enabling e-mail, web browsing, e-commerce and video conferencing.
3. Transmission of text messages: It carries short message service (SMS) and multimedia messages between subscribers.
4. Broadcasting support: It provides the links and networks used by radio and television stations to transmit programmes.
5. Facsimile (fax) transmission: It allows the electronic sending of copies of documents from one machine to another over the network.
6. Money transfer and mobile payment services: Modern telecom firms support mobile money, allowing subscribers to send, receive and pay for goods and services electronically.

Maelezo ya Majibu

Five ways in which commerce is important in the life of a nation

1. Distribution of goods and services: Commerce, through trade and its aids, moves goods from producers to consumers, ensuring that goods produced in one part of the country or world reach those who need them elsewhere.
2. Creation of employment: The many branches of commerce (trade, banking, insurance, transport, warehousing, advertising) provide jobs for large numbers of people, raising incomes and living standards.
3. Encourages large-scale production and specialisation: By providing a wide market and efficient distribution, commerce enables firms and regions to specialise and produce in bulk, which lowers cost and raises output.
4. Source of government revenue and foreign exchange: Import and export duties, and taxes on trading activities, provide revenue to the government, while exports earn foreign exchange used to import needed goods.
5. Raises the standard of living: By making a wide variety of goods and services available at the right time, place and price, commerce satisfies consumers' wants and improves welfare.

(Other points: it promotes international relations and cooperation through international trade; it aids industrial and economic development by linking industries with markets and finance.)

Maelezo ya Majibu

(a) Five features each of the following business units

Cooperative Society

1. Open and voluntary membership: Anyone who is willing may join, and members are free to leave.
2. Democratic control: Each member has one vote regardless of the number of shares held (one member, one vote).
3. Ownership by members: The society is owned and financed by its members through shares and contributions.
4. Distribution of surplus by patronage: Profits are shared among members in proportion to their patronage or dealings, not according to shares held.
5. Service motive: Its main aim is to promote the welfare of members rather than to maximise profit.

Mail Order Business

1. Selling by post/online: Goods are ordered and delivered through the post office or courier without the buyer visiting a shop.
2. Use of catalogues and advertisements: Customers select goods from catalogues, price lists or advertisements.
3. No shop or showroom is needed: The trader operates from a warehouse or office, saving rent on a prime shop.
4. Wide geographical coverage: It reaches customers in distant and rural areas who have no access to large shops.
5. Payment before or on delivery: Customers usually pay in advance or on delivery (cash on delivery).

(b) Five ways by which a partnership could be brought to an end (dissolved)

1. Death of a partner: The partnership is dissolved on the death of a partner unless the agreement provides otherwise.
2. Bankruptcy/insolvency of a partner: If a partner becomes bankrupt, the firm may be dissolved.
3. Mutual agreement: The partners may agree among themselves to end the business.
4. Expiry of the agreed term or completion of the venture: A partnership formed for a fixed period or for a particular project ends when the time expires or the project is completed.
5. By order of the court: The court may dissolve the firm where a partner becomes insane, is guilty of misconduct, or the business can only be carried on at a loss.

(Other valid ways: withdrawal or retirement of a partner, and the business becoming illegal.)

Maelezo ya Majibu

(a) Five reasons road transport would be preferred to rail transport

1. Door-to-door service: Vehicles can pick up and deliver goods right at the sender's and receiver's premises, whereas trains only move between fixed stations.
2. Flexibility of route and timing: Road vehicles can use many different routes and travel at any time, while trains are tied to fixed tracks and timetables.
3. Lower cost for short distances and small loads: Road transport is cheaper for conveying small quantities of goods over short distances.
4. Wider coverage/accessibility: Roads reach remote villages and interior areas that railway lines do not serve.
5. Suitability for perishable and urgent goods: Road transport is faster and more direct for short trips, so it is good for perishable and urgent consignments.

(Other valid reasons: it requires less capital to start than a railway, and loading/offloading is quicker.)

(b) Five functions of the Airport Authority

1. Construction and maintenance of airports: It builds, equips and maintains runways, terminals and other airport facilities.
2. Provision of air-traffic control: It guides aircraft during take-off, flight and landing to ensure safety.
3. Ensuring security and safety: It screens passengers and cargo and provides security to protect lives and property at the airport.
4. Provision of navigational and communication aids: It supplies weather information, radar and radio facilities to assist pilots.
5. Regulation of airport operations and collection of charges: It controls the activities of airlines at the airport and collects landing, parking and other charges as revenue.

(Other valid functions: provision of firefighting and emergency services, and provision of passenger facilities such as lounges.)

Maelezo ya Majibu

(a) Four functions of a wholesaler to a retailer

1. Breaking bulk: he buys in large quantities and sells to retailers in the smaller quantities they can handle.
2. Granting credit: he supplies goods to trusted retailers on credit, helping them trade with little capital.
3. Provision of storage: by warehousing goods, he saves the retailer the cost and risk of storing large stocks.
4. Provision of information and advice: he informs retailers about new products, prices and market conditions, and delivers goods to them.

(b) Five advantages of small-scale over large-scale retail business

1. Small capital requirement: it needs little capital to start and run, so it is easy to set up.
2. Personal contact with customers: the owner knows his customers personally and can give them individual attention and advice.
3. Flexibility: it can quickly adjust its stock and adapt to changes in customers' tastes and local demand.
4. Nearness to customers: it is usually located within the neighbourhood, making it convenient for buyers.
5. Granting of credit and quick decisions: the owner can readily give credit to known customers and take prompt decisions since he manages the business himself, and running costs are low.

Maelezo ya Majibu

(a) Four features of a self-service shop

1. Goods are openly displayed on shelves with prices clearly marked (pre-packed and price-labelled).
2. Customers pick the goods themselves into baskets or trolleys without the help of shop attendants.
3. Payment is made once at a central checkout (cash) point near the exit.
4. There are few sales assistants; the shop relies on a wide variety of goods and self-selection by customers.

(b) Four disadvantages of a self-service shop

1. There is a high risk of shoplifting/pilfering since goods are openly displayed.
2. It requires large capital to set up the shelves, wide stock and checkout facilities.
3. There is no personal attention or advice to guide customers on their choice.
4. Customers may waste time queuing at the checkout during busy periods, and there is difficulty selling goods that need demonstration or bargaining.

(c) Four importance of working capital to a business

1. It is used to purchase stock and raw materials needed for daily trading.
2. It enables the business to pay running expenses such as wages, rent and utility bills.
3. It allows the business to grant credit to customers and still meet its obligations, keeping the business solvent and liquid.
4. It helps the business take advantage of cash discounts and settle its short-term debts promptly, ensuring smooth day-to-day operations.