WAEC SSCE - Commerce - 1992 (Essay)

Maelezo ya Majibu

(a) Services provided by NIPOST

(i) Business Reply Service: A service that allows a business to receive replies from its customers without the customers paying the postage. The firm prints special reply cards or envelopes; when customers post them, the firm (not the customer) is charged the postage plus a fee. It encourages customers to respond to enquiries and orders.

(ii) Express Delivery: A speed service in which urgent letters and parcels are given priority handling and delivered faster than ordinary mail on payment of an extra charge.

(iii) Poste Restante: A service in which letters are addressed to and held at a named post office to be collected by travellers or persons who have no fixed or permanent address, until they call for them.

(iv) Cash on Delivery (C.O.D.): A service under which the post office delivers goods (a parcel) to the addressee, collects the price of the goods from him on delivery, and remits the money to the sender.

(v) Recorded Delivery: A service in which a record is kept of the posting and delivery of an item, and the addressee signs on receipt, providing proof that the item was delivered. It is used mainly for documents whose value is more sentimental than monetary.

(b) Five ways in which communication is important to commerce

1. Placing and receiving orders: Buyers and sellers use communication to make enquiries, send quotations, place orders and confirm supplies.
2. Advertising and sales promotion: It enables producers and traders to inform and persuade customers about their goods and services.
3. Linking distant markets: It connects buyers and sellers who are far apart, thereby making trade over long distances possible.
4. Speedy transmission of information: It allows prices, market conditions and business decisions to be passed quickly, aiding prompt decision-making.
5. Effecting payments and settling accounts: Communication makes it possible to send money, cheques, invoices and receipts between traders.

(Other valid points: it aids the coordination of business activities and maintains good relations with customers.)

Maelezo ya Majibu

(a) Five reasons why consumers need protection

1. Ignorance of consumers: Many consumers do not know the true quality, ingredients or value of goods and can easily be deceived.
2. Sale of harmful and adulterated goods: Some traders sell fake, expired, adulterated or unsafe products that can harm the health and life of consumers.
3. Exploitation through overpricing: Consumers need protection from sellers who overcharge, hoard goods or create artificial scarcity to raise prices.
4. Misleading advertisements and labelling: False claims, wrong weights and measures, and deceptive labels can mislead consumers into buying the wrong goods.
5. Weak bargaining position: The individual consumer is usually weaker and less informed than the seller, especially a monopolist, and so needs support to obtain fair treatment.

(Other valid reasons: to guarantee the safety of consumers, and to provide a channel of redress when cheated.)

(b) Five government legislations aimed at protecting the consumer

1. Weights and Measures Act: Ensures that traders use correct weights and measures so that buyers get the right quantity.
2. Food and Drugs Act: Prohibits the sale of adulterated, harmful or expired food and drugs.
3. Standards Organisation of Nigeria (SON) Act: Sets and enforces quality standards for locally made and imported goods.
4. National Agency for Food and Drug Administration and Control (NAFDAC) Act: Regulates and controls the manufacture, importation and sale of food, drugs, cosmetics and chemicals.
5. Consumer Protection Council (Federal Competition and Consumer Protection) Act: Establishes a body to receive and settle consumer complaints and protect consumers' interests.

(Other valid examples: the Price Control Act, and the Trade Descriptions/Merchandise Marks legislation.)

Maelezo ya Majibu

(a) Five types of business environment

1. Economic environment: The economic factors surrounding a business such as income levels, inflation, interest rates, taxation and the general state of the economy.
2. Social/cultural environment: The customs, beliefs, values, tastes, religion and way of life of the people among whom the business operates.
3. Political/legal environment: The system of government, laws, policies and regulations that affect how the business is run.
4. Technological environment: The state of technology, machinery, tools and methods of production available to the business.
5. Physical/geographical environment: The natural surroundings such as climate, location, land, and availability of raw materials that affect the business.

(Other valid types: competitive environment, and international/global environment.)

(b) Why companies continue to advertise in spite of criticisms

1. To inform the public: Advertising remains the most effective way of telling existing and potential customers about products, their features, uses and prices.
2. To increase and sustain sales: It creates and maintains demand for the product, and firms that stop advertising usually lose sales to competitors.
3. To meet competition: Rival firms advertise, so a company must also advertise to protect and expand its own share of the market.
4. To introduce new products: Advertising is needed to launch new goods and to educate consumers on how to use them.
5. To build and maintain goodwill: It creates a favourable image and reminds customers of the brand, thereby keeping the firm's name alive in their minds.
6. To boost large-scale production: By expanding the market, advertising enables mass production and its economies, which lower unit costs.

Thus, although advertising is criticised as costly and sometimes misleading, its benefits in creating awareness, sustaining sales and meeting competition make companies continue to use it.

Maelezo ya Majibu

Five obstacles working against the achievement of the objectives of ECOWAS

1. Language and colonial barriers: Member states are divided into English-, French- and Portuguese-speaking blocs with different colonial ties and loyalties, which makes cooperation and integration difficult.
2. Differences in currencies: The member countries use different currencies (naira, CFA franc, cedi, etc.), and the absence of a single currency hinders trade and free flow of payments within the region.
3. Loss of customs revenue: Many members depend heavily on import and export duties for government revenue, so they are reluctant to remove tariffs on goods from fellow member states as free-trade requires.
4. Political instability and mistrust: Frequent coups, wars, border disputes and mutual suspicion among leaders disrupt cooperation and the implementation of agreed protocols.
5. Production of similar goods: Most member states produce the same primary products (such as cocoa, groundnut and crude oil) and therefore have little to trade among themselves, competing instead for the same overseas markets.

(Other valid obstacles: poor transport and communication links between member states; smuggling and illegal trade; over-dependence on developed countries outside the region; and non-payment of financial contributions by members.)

Maelezo ya Majibu

(a) Importance of warehousing to commerce

1. Storage of goods: A warehouse provides a safe place to keep goods from the time they are produced until they are needed or sold, thereby preventing loss and damage.
2. Bridging the gap between production and consumption: It holds goods over time so that they are available to consumers steadily even though production may be seasonal.
3. Ensuring steady supply and price stability: By storing surplus goods and releasing them gradually, warehousing prevents glut and scarcity and helps to keep prices stable.
4. Storage of seasonal goods: Goods produced only at certain seasons (such as farm crops) can be stored and made available throughout the year.
5. Preparation of goods for sale: Goods can be sorted, graded, blended, packed and branded in the warehouse before distribution.
6. Facilitating large-scale buying: It enables traders to buy in bulk and store, thereby enjoying quantity discounts and lower transport costs.

(A further point: bonded warehouses hold imported goods until duty is paid, aiding the flow of foreign trade.)

(b) Factors to consider in siting a small retail shop

1. Nearness to customers: The shop should be located where there are many potential buyers so as to attract enough patronage.
2. Nearness to source of supply: Being close to suppliers reduces transport cost and delay in restocking.
3. Availability of transport and good roads: The site should be accessible to customers and delivery vehicles.
4. Cost of rent/land: The rent must be affordable and reasonable in relation to the expected turnover.
5. Nature of competition: The trader should consider the number and strength of rival shops in the area.
6. Availability of essential facilities: The site should have amenities such as electricity, water, security and parking space.
7. Nature of the goods sold: Perishable or convenience goods need a site close to consumers, while durable/shopping goods can be sited in a central market.

Maelezo ya Majibu

(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 stated objectives. It involves setting goals, forecasting future conditions, and choosing the best course of action from among alternatives to reach those goals. It is the first and most basic function of management upon which all other functions depend.

(b) Benefits of planning in business management

1. It gives direction: Planning sets clear objectives and shows the path to follow, so that everybody in the organisation works towards the same goal.
2. It reduces uncertainty and risk: By forecasting the future, planning helps managers to anticipate problems and prepare for them in advance.
3. It ensures efficient use of resources: Planning helps to allocate men, money, materials and machines properly, thereby avoiding waste.
4. It provides a basis for control: Plans set the standards against which actual performance is measured, making control possible.
5. It aids coordination: Planning harmonises the activities of different departments so that they work together smoothly.
6. It aids decision-making: It provides a framework within which sound decisions can be taken.

(c) Four functions of the personnel department

1. Recruitment and selection: It advertises vacancies, interviews applicants and employs suitable staff.
2. Training and development: It arranges training programmes to improve the skills and efficiency of employees.
3. Welfare and staff relations: It sees to the welfare of workers and maintains good relations between management and staff.
4. Wages, promotion and record-keeping: It handles wages and salaries, promotions, transfers, discipline and keeps records of all employees.

(Other valid functions: manpower planning, and handling of retirement, discipline and termination.)

Maelezo ya Majibu

(a) Four types of cooperative societies

1. Consumer cooperative society: Formed by consumers who join together to buy goods in bulk directly from manufacturers or wholesalers and sell to members at fair prices, thereby eliminating the middleman.
2. Producer (producers') cooperative society: Formed by producers such as farmers or craftsmen who pool resources to obtain inputs, produce and market their goods jointly for better prices.
3. Retail/wholesale cooperative society: Formed to carry on trading in goods; a wholesale cooperative buys in bulk and supplies member retail societies, which in turn sell to consumers.
4. Thrift and credit (cooperative credit) society: Formed by members who pool their savings so as to grant loans to one another at low interest rates for productive or personal needs.

(Other valid types: producer-marketing societies, farmers' multipurpose societies, and cooperative building/housing societies.)

(b) Three advantages of cooperative societies

1. Bulk buying and better prices: By buying in large quantities, members enjoy lower prices and quantity discounts.
2. Sharing of surplus: Profit (surplus) is shared among members in proportion to their patronage or contribution, so members gain directly.
3. Access to cheap credit and mutual help: Members can obtain loans at low interest and receive support from fellow members.

Three problems of cooperative societies

1. Shortage of capital: Members are usually people of small means, so the society often lacks enough funds to expand.
2. Poor/inefficient management: Management is often in the hands of members who may lack business and managerial skills, leading to poor performance.
3. Dishonesty and mistrust: Fraud, embezzlement of funds and lack of trust among members can weaken or collapse the society.

(Other valid problems: apathy of members, and internal quarrels/disagreements.)

Maelezo ya Majibu

(a) What is personal selling?

Personal selling is a form of promotion in which a salesperson makes direct, face-to-face contact with a prospective buyer in order to inform, persuade and convince the buyer to purchase a product. It involves an oral presentation and a two-way conversation between the seller (or the firm's sales representative) and the customer, aimed at making a sale and building a lasting relationship.

(b) Five ways in which personal selling is important to a firm

1. Persuasion and closing sales: The salesperson can persuade the customer directly and answer objections on the spot, which helps to close sales and increase turnover.
2. Provision of information and feedback: The salesman explains the features and uses of the product to customers and also brings back useful information about customers' tastes, complaints and competitors to the firm.
3. Flexibility of approach: The salesperson can adjust the sales message to suit each individual customer, unlike advertising which gives the same message to everyone.
4. Building customer relationships and goodwill: Regular personal contact creates confidence, loyalty and goodwill, encouraging customers to keep buying from the firm.
5. Introduction of new products: Personal selling is effective for launching and demonstrating new or technical products that customers need to see and understand before buying.

(Other valid points: it provides after-sales service and advice; it helps to reduce the level of unsold stock.)

Maelezo ya Majibu

(a) The Second Tier Security Market (SSM)

The Second Tier Security Market is a section of the stock exchange created to enable small and medium-sized companies that cannot meet the strict listing requirements of the main (first tier) market to raise capital and have their shares quoted. Its listing conditions are less stringent: a smaller amount of paid-up capital is required, a smaller proportion of shares needs to be offered to the public, and the company needs fewer years of trading record. It therefore gives growing indigenous companies access to the capital market while they gradually build up towards the standards of the first tier market.

(b) Justification for the existence of the Second Tier Security Market

1. Access to capital for small firms: It allows small and medium-scale companies, which cannot satisfy the tough conditions of the main market, to raise long-term capital by selling shares to the public.
2. Encouragement of indigenous enterprise: It supports and promotes the growth of locally owned businesses, thereby aiding indigenisation and economic development.
3. Broadening of share ownership: It widens the ownership of businesses by allowing more members of the public to invest in small companies.
4. Nursery for the first tier market: It serves as a training ground where small companies grow and later graduate to the first tier market.
5. Encouragement of savings and investment: By offering more investment outlets, it mobilises private savings into productive investment.
6. Relaxed listing requirements: Its less costly and less rigid quotation rules make it easier and cheaper for small firms to be listed than on the main market.

Maelezo ya Majibu

(a) Five benefits Nigeria derives from international trade

1. Earning of foreign exchange: Exports of goods such as crude oil and cocoa earn foreign currency used to pay for imports and settle foreign debts.
2. Obtaining goods not produced locally: Nigeria imports machinery, drugs and other goods that it cannot produce, or cannot produce in sufficient quantity, at home.
3. Wider market for local producers: International trade provides a large overseas market that enables local firms to sell surplus output and expand production.
4. Employment and income generation: The production, handling and shipping of exports and imports create jobs and raise incomes for many Nigerians.
5. Promotion of specialisation and international relations: It allows the country to specialise in what it produces best and fosters friendly economic and political ties with other nations.

(Other valid benefits: source of government revenue through customs duties; transfer of technology and skills.)

(b) Five problems likely to be faced by a businessman selling goods overseas

1. Trade restrictions: Foreign governments may impose tariffs, quotas, embargoes or import bans that limit or prevent the sale of his goods.
2. Foreign exchange and currency problems: Differences in currencies, exchange-rate fluctuations and difficulty in obtaining foreign exchange make pricing and payment risky.
3. Language and cultural barriers: Differences in language, taste, custom and religion make it hard to communicate with and satisfy foreign customers.
4. Problems of distance and transportation: Long distances raise the cost of transport, cause delays, and increase the risk of loss or damage to goods in transit.
5. Risk of non-payment and credit difficulties: It is hard to assess the creditworthiness of distant buyers, so there is a greater risk of bad debts and delayed payment.

(Other valid problems: complex documentation and customs procedures; differences in weights, measures and standards; political instability in the buyer's country.)