BUSINESS STUDIES (319)

Senior Secondary Level

(Part-2)

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 ADVISORY COMMITTEE
Prof. Saroj Sharma Dr. Rajiv Kumar Singh
Chairperson Director (Academic)
NIOS, Noida (UP) NIOS, Noida (UP)

CURRICULUM COMMITTEE
Prof. Kiran Pandya Ms. Shivani Nagrath Dr. Rohini Singh
Drs Kiran and Pallavi Patel Global Lecturer in Commerce, Associate Professor,
University (KPGU), Vadodara Summer Fields School, Shaheed Sukhdev College of
Dr. Uma Singh Kailash Colony, New Delhi Business Studies
Associate Professor, ARSD Dr. Anupriya Pandey Dr. Kumar Bijoy
College, University of Delhi Assistant Professor, Assistant Professor,
SOMS, IGNOU Shaheed Sukhdev College
Sh. Aditi Ranjan Raut of Business Studies
Deputy Director Ms. Anshul Kharbanda
(Acad), NIOS Academic Officer
NIOS

COURSE WRITERS
Prof. Gopinath Dr. Sonali Ahuja Dua Dr. Nandita Mishra
(Retd.) Head & Dean, Associate Professor, Senior Lecturer,
Dept. of Business Administrotive Gargi College, Univ. of Delhi Linköping University Sweden
DDU Gorakhpur University

EDITORIAL BOARD
Prof. Gopinath Ms. Arti Singh Dr. Nidhi Kesari
(Retd.) Head & Dean, Dept. PGT Commerce, Assistant Professor, Shaheed
of Business Administrotion DPS Noida Sukhdev College of Business
DDU Gorakhpur University Studies Delhi
Ms. Kanta Vadehra
Dr. Sonali Ahuja Dua Communication Skills & Training Sh. Manish Sharma
Associate Professor, Consultant Assistant Professor, Apeejay Stya
Gargi College, Univ. of Delhi Dr. Nandita Mishra University, Gurugram
Dr. Priya Solomon Senior Lecturer, Ms. Sonia Kapoor
Associate Professor, Linköping University Sweden PGT Business Studies,
Amity University, Noida Dr. Uma Singh Apeejay School, Noida
Dr. Vijeta Singh Associate Professor, ARSD Ms. Anshul Kharbanda
Assistant Professor, College, Univ. of Delhi Academic Officer,
Amity University, Noida NIOS, Noida
COURSE CO-ORDINATOR
Ms. Anshul Kharbanda,
Academic Officer, NIOS

GRAPHIC DESIGNING and DTP

Graphic Artist, NIOS M/s Multigraphics,
Karol Bagh, New Delhi
 A Word with You

Dear Learner,

I welcome you to this course in Business Studies for the Senior Secondary level. We all know the
importance of business in our everyday life. It not only fulfills our basic needs but also provides us
comfort and makes our lives easier. It is a dynamic process that keeps on changing as per the
requirements and demands of the society. The procedure and practices of business in the past are
completely different from modern days. It is more exposed to risk and uncertainties than what it
was in past. The use of modern technology, government’s policies and the consumption pattern of
the people have made the business more sensitive and globally competitive. Therefore, a systematic
effort is required to understand, analyse and respond to the changes that affect the functioning of
business in the present-day society.

Keeping in mind the above, the curriculum in the subject of Business Studies at Senior Secondary
level has been designed in such a way that it will enable the learners to face the real life situations
of business world with confidence whenever they decide to embark upon their business journey.
The whole learning material of the subject has been divided into 6 modules for your convenience.
Each module has provision for Tutor Marked Assignment or TMA also.

Learning experiences considered essential for Business Studies are described in the first two modules.
The module on Introduction to Business has lessons on Nature and Scope of Business; Support
Services; Business Environment, Forms of Business and Company Form of Business whereas the
module on Business Management and its Functions incorporates lessons on Fundamentals of
Management; Planning and Organising, Staffing and Directing and Co-ordination and Controlling.
The third module will prove to be instrumental to you when you will be in need of financing your
business. The said module contains lessons on Financial Planning and Management, Short Term
and Long Term Sources of Finance and Financial Markets.

The fourth module introduces you to the concept of Marketing, Marketing Mix, Advertising and
Salesmanship and end with a discussion on Consumer Protection. The fifth module caters to the
need of internal and external trade. This module will acquaint you with various types of trades and
also help you in understanding the role of WTO.
The sixth module on Avenues in Business and Employment will be helpful to you when you decide
to go for employment. The objective is to make the learners aware about the world of employment
so that after gaining knowledge they can either start their own ventures or become employed
somewhere else to earn their livelihood.

For your practice, a sample question paper along with the question paper design and marking
scheme is provided at the end of the book.

To make your learning process interesting and useful we have changed the layout of the pages. You
will also find some attractive icons in the lesson symbolising the content of different sections. The
details are given separately under the heading ‘How to study your lessons’. Some new sections
like, Do and Learn, Key Terms, Role Play etc. have also been added.

I am sure that you will find the lessons and their approach interesting and would be able to apply
your knowledge in the real-life situations. So read all the lessons of this course carefully and be
prepared for the examination with confidence. If you face any difficulty in your studies, please feel
free to write to me. Your suggestions are valuable for us.

Good luck and happy learning.

-Course Coordinator
How to use the Study Material

Congratulations! You have accepted the challenge to be a self-learner. NIOS is with you at every
step and has developed the material with the help of a team of experts, keeping you in mind. A format
supporting independent learning has been followed. If you follow the instructions given, then you will
be able to get the best out of this material. The relevant icons used in the material will guide you.
These icons have been explained below for your convenience.

Title: will give a clear indication of the contents within. Do read it.
Introduction: This will introduce you to the lesson linking it to the previous one.
Objectives: These are statements that explain what you are expected to learn from the
lesson. The objectives will also help you to check what you have learnt after you have
gone through the lesson. Do read them.

Notes: Each page carries empty space in the side margins, for you to write important
points or make notes.

Intext Questions: Very short answer self check questions are asked after every sec-
tion, the answers to which are given at the end of the lesson. These will help you to check
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help in recapitulation and revision. You are welcome to add your own points to it also.

Terminal Exercises: These are long and short questions that provide an opportunity to
practice for a clear understanding of the whole topic.

Do You Know: This box provides additional information. The text in boxes is important
and must be given attention. It is not meant for evaluation, but only to improve your
general knowledge.

Answers : These will help you to know how correctly you have answered the questions.

Activities: Certain activities have been suggested for better understanding of the
concept.

www Web site: These websites provide extended learning. Necessary information has been
included in the content and you may refer to these for more information.
 Part-1
Module 1: Introduction to Business
1. NATURE AND SCOPE OF BUSINESS 1
2. BUSINESS SUPPORT SERVICES 27
3. BUSINESS ENVIRONMENT 67
4. FORMS OF BUSINESS ORGANISATIONS 93
5. COMPANY FORM OF BUSINESS ORGANISATION 121
Module 2: Business Management and its Functions
6. FUNDAMENTALS OF MANAGEMENT 163
7. PLANNING AND ORGANISING 187
8. STAFFING AND DIRECTING 211
9. CO-ORDINATION AND CONTROLLING 249
Module 3: Business Finance
10. FINANCIAL PLANNING AND MANAGEMENT 261
11. SHORT TERM SOURCES OF FINANCE 295
12. LONG-TERM SOURCES OF BUSINESS FINANCE 321
13. FINANCIAL MARKET 343

Part-2
Module 4: Marketing
14. INTRODUCTION TO MARKETING 1
15. THE MARKETING MIX 23
16. ADVERTISING AND SALESMANSHIP 49
17. CONSUMER PROTECTION 77
Module 5: Trade
18. INTERNAL TRADE 99
19. EXTERNAL TRADE 133
Module 6: Awareness in Business and Employment
20. SELF-EMPLOYMENT 157
21. JOB EMPLOYMENT 175
22. SKILL DEVELOPMENT 195
23. MODERN MODES OF BUSINESS 215

Note:- These Lesson are for Formative Assessments (TMA)

 Contents
Module 4: Marketing

14. INTRODUCTION TO MARKETING 1

15. THE MARKETING MIX 23

16. ADVERTISING AND SALESMANSHIP 49

17. CONSUMER PROTECTION 77

Module 5: Trade

18. INTERNAL TRADE 99

19. EXTERNAL TRADE 133

Module 6: Awareness in Business and Employment

20. SELF-EMPLOYMENT 157

21. JOB EMPLOYMENT 175

22. SKILL DEVELOPMENT 195

23. MODERN MODES OF BUSINESS 215

Note:- These Lesson are for Formative Assessments (TMA)

INTRODUCTION TO MARKETING Module - 4
Marketing

14

INTRODUCTION TO MARKETING Note

We use a large variety of goods and services in our daily life. These include items like
toothpaste, toothbrush, soap, oil, clothes, food items, telephone, electricity and many
more. How do all these goods and services reach our home? Obviously, the business
houses that produce the goods and services have to ensure that these are to be sold,
and so they make efforts to make the consumers/users aware about their products
and place them at convenient points to the consumers. This involves a number of
activities such as product planning, pricing, promotion, use of middlemen (wholesalers,
retailer etc.) for sale, warehousing, transportation etc. All these activities taken together
are termed as Marketing. In this lesson, you will learn about the concept of marketing,
its importance, objectives and functions.

LEARNING OUTCOMES
 describes the meaning of marketing and its various components.

 explains the important role marketing plays in a business organization.

 distinguishes between the concept of Marketing and Selling.

 describes the various objectives of marketing and its different functions.

14.1 MEANING OF MARKETING

For satisfying our needs and wants, we buy various good and services on daily basis
from the nearby shops, shopping malls or e-commerce websites. These goods and
services may be produced at different locations and not necessarily at the place of the
consumption or use. There are various products which may be produced in some

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Module - 4 INTRODUCTION TO MARKETING

Marketing foreign countries but available in a nearby store or a shopping mall for your consumption.
If you go to the market to buy a readymade shirt you will find that there are several
options available for you in terms of quality of cloth used, design, colour, price etc. and
you can buy what suits you the most. It may be a shirt produced in our country or at
some foreign location.

This implies that the marketers assess the needs of the consumers, their tastes and
Note preferences and produces the products accordingly. Also, manufacturers must be making
a lot of efforts to ensure that their products are in demand and reaches the ultimate
consumers all over the globe. They also ensure that people are aware about the product
and its features through different campaigns.

All these activities are said to be a part of marketing function of any organisation.
Thus, marketing refers to the process of ascertaining consumers' needs and supplying
various goods and services to the final consumers or users to satisfy those
needs.Marketing refers to all those activities undertaken by a company to promote the
buying or selling of a product or service.It includes advertising, selling, delivering
products and maintaining relationships with consumers.

The American Marketing Association defines marketing "as the activity, set of
institutions, and processes for creating, communicating, delivering, and exchanging
offerings that have value for customers, clients, partners, and society at large."

14.1.1 TRADITIONAL CONCEPT OF MARKETING

According to the traditional concept, marketing consists of those activities which are
concerned with the transfer of ownership of goods from producers to consumers. It
focuses on selling goods and services that have been produced. Thus, all those activities
which are concerned with persuasion and sale of goods and services are called
marketing. The emphasis of marketing is on sale of goods and services and little attention
is paid to consumer satisfaction. This concept has the following implications:

(a) The main focus of this concept is on product, i.e., we have a product and it has
to be sold. So, we have to persuade the consumers to buy our product.

(b) All efforts of the marketing team are concentrated on selling the product. The
marketer adopts all means like personal selling and sales promotion to boost the
sales.

(c) The ultimate goal of all marketing activities is to earn profit through maximisation
of sales.

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INTRODUCTION TO MARKETING Module - 4
14.1.2 MODERN CONCEPT OF MARKETING Marketing

The Modern concept of Marketing stresses on the needs and wants of the consumer.
Consumers' needs and wants are the guiding spirit of an organisation and the marketer
focuses on the delivery of such goods and services that can satisfy the needs and
wants of the customer or consumer. Thus, marketing starts with identifying consumer
needs and then planning the production of goods and services accordingly to provide
maximum satisfaction to the consumer.All activities (manufacturing, research and Note
development, quality control, distribution, selling etc.) are directed towards the
satisfaction of the consumers. Thus, the main implications of the modern concept of
marketing are:

(a) The focus of this concept is on customer satisfaction. The marketing activities
start with an assessment of the customers' needs and plan the production of
goods and services that can satisfy these needs most effectively. This also applies
to all other marketing activities like pricing, packaging, distribution and sales
promotion.

(b) All marketing activities like product planning, pricing, packaging, distribution
and sales promotion are combined into one as co-ordinated marketing effort.
This is called integrating marketing. It implies:

(i) developing a product that can satisfy the needs of the consumers;

(ii) taking promotional measures so that consumers are aware about the
features, quality, and availability of the products;

(iii) pricing the product i.e. keeping in mind the target consumers' purchasing
power and willingness to pay;

(iv) packaging and grading so as to make the product to make it more

attractive and undertaking sales promotion measures to motivate consumers
to buy the product; and

(v) taking various other measures (e.g., after sales service) to satisfy the
consumers' needs.

(c) The main aim of all these efforts is to earn profit but through customer
satisfaction. This implies that, if the customers are satisfied, they will continue
to buy, and many new customers will be added. This will lead to increased sales
and so also the profits.

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Module - 4 INTRODUCTION TO MARKETING

Marketing (d) It may be noted that with growing awareness of the social relevance of business,
marketing has to take into account the social needs and ensure that while
enhancing consumer satisfaction, it also aims at society's long-term
interest.

Comparison of Traditional Concept of Marketing and Modern Concept of

Marketing
Note
Basis Traditional Concept of Modern Concept of
Marketing Marketing

Focus on Product Customers' need

Means Selling Co-ordinated marketing

efforts

Ends Profits through Profits through customer

maximisation of sales satisfaction

14.1.3 MARKETING MANAGEMENT PHILOSOPHIES

There are numerous marketing concepts which are used by marketers which are
characterised according to the philosophy of the producer. Some of these marketing
concepts exist to date, while some others are outdated and have been taken over by
other marketing concepts. Seeing the outlook of the producers, the marketing concept
may be looked at in the following ways:

Fig. 14.1 Marketing Concept

i. Production Concept: During the era of Production concept, it was believed

that customers primarily want products that arewidely available and affordable.

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 INTRODUCTION TO MARKETING Module - 4
The focus of the Marketer was on mass production in order to reduce the cost Marketing
of the product. A limitation of this concept was that quality conscious customers
hesitated in buying.

ii. Product Concept-: This marketing concept holds the belief that consumers
prefer those products that are high in quality and performance. Price and
availability don't influence their purchase decision. As variety of products came
in the society, customers began to prefer product of good quality and features. Note
For example, normal toothpaste may not be preferred when compared with
toothpaste with salt [or with any other protective items]. Since the main focus of
the marketers is the product quality, they often lose or fail to appeal to customers
whose demands are driven by other factors like price, availability, usability, etc.

iii. Selling Concept : In order to survive and grow, business firms adopted
aggressive selling techniques to attract customers to buy their product. The selling
concept holds the belief that customers would buy a company's products only if
the company were to sell these products aggressively. The marketeers following
the selling concept were of the viewpoint that repeated sales are rare and focus
of the organisation shall be on selling the products through aggressive selling.Sales
persons started using unfair practices like cheating the customers with defective
products as their main target was to earn money from the product.

iv. Marketing Concept : A company that believes in the marketing concept places
the consumer at the center of the organisation. The primary task of any business
is to study the needs, wants and preferences of the potential customers and
produce goods and services as per the needs of those customers. All marketing
activities must be directed towards the satisfaction of the needs and wants of the
customer.Under the marketing concept, customer satisfaction is the key to
maximise profits.

v. Societal Marketing Concept: In order to survive and grow, business must

satisfy the interest of society and the interest of customers. The societal marketing
concept highlights the needs and wants of a target market and the delivery of
better value than its competitors and at the same time it also emphasizes the
importance of the well-being of customers and society as a whole (consumer
welfare or societal welfare). The societal marketing concept calls upon
marketeers to build social and ethical considerations into their marketing practices.
Public health, education, environmental protection etc. are some of the social
goals to be considered.

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Module - 4 INTRODUCTION TO MARKETING

Marketing Comparative Analysis of the Marketing Management Philosophies

Basis Production Product Selling Marketing Societal

Concept Concept Concept Concept Marketing
Concept

Quantity of the Quality and Selling existing Satisfaction of Well-being

Note Focus
product performance products the needs and of
wants of the customers
customer and society
as a whole

Availability and Product feature Aggressive Integrated Integrated

Means
affordability of improvement selling and marketing marketing
product promotion

Profit Profit Profit Profit Profit

Profit
maximization maximization maximization maximization maximization
maximization
through mass through quality through sales through through
production volume customer customer
satisfaction satisfaction
and social
welfare

INTEXT QUESTIONS 14.1

1. Define the term 'marketing'.

2. Followings are the statements related to different concepts of marketing. Identify

those pertain to modern concept by mentioning 'MCM' and traditional concept
by mentioning 'TCM' in the space given against each statement.
(a) It focuses on customer's need.
(b) It focuses on product.
(c) It focuses on selling satisfaction.
(d) It focuses on selling goods and services.
(e) It focuses on earning profit by maximisation of sales.
(f) It focuses on earning profit through maximisation
of customer satisfaction.

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 INTRODUCTION TO MARKETING Module - 4
3. Complete the answer with the right choice. Marketing

i) As per the Production concept, it is believed that customers primarily buy products
that are________________

a) High in quality and performance

b) Widely available and affordable

Note
c) Sold aggressively

d) As per the needs of the customers

ii) As per the Product concept, it is believed that customers primarily buy products
that are________________

a) High in quality and performance

b) Widely available and affordable

c) Sold aggressively

d) As per the needs of the customers

iii) As per the Selling concept, it is believed that customers primarily buy products
that are________________

a) High in quality and performance

b) Widely available and affordable

c) Sold aggressively

d) As per the needs of the customers

iv) As per the Marketing concept, it is believed that customers primarily buy products
that are________________

a) High in quality and performance

b) Widely available and affordable

c) Sold aggressively

d) As per the needs of the customers

(v) At the heart of any marketing programme is the ________the firm's tangible
offering to the market.

a. service offer

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Module - 4 INTRODUCTION TO MARKETING

Marketing b. product

c. sales support team

d. packaging

(vi) Marketing is a process which aims at:

(a) Production
Note
(b) Profit making

(c) Satisfaction of customer needs

(d) Selling Products

3. 'Ford plans to reduce their greenhouse gas emissions using their EcoBoost engine
to increase fuel efficiency. It also plans to introduce 40 electrified vehicles (electric
and hybrid) by 2022.' Identify the marketing management philosophy followed
by Ford.

4. Name the concepts a)Find wants and fill them b) produce the product and
sell it.

14.2 DIFFERENCE BETWEEN MARKETING AND

SELLING

The terms 'marketing' and 'selling' are related but not synonymous. 'Marketing' as
stated earlier, emphasizes on earning profits through customer satisfaction. In marketing,
the focus is on the consumers' needs and their satisfaction. 'Selling' on the other hand
focuses on product and emphasizes on selling what has been produced. In fact, it is a
small part of the wide process of marketing wherein emphasis is initially on promotion
of goods and services and eventually on increase in sales volume.

Marketing has a long term perspective of winning over consumer loyalty to the product
by providing him maximum satisfaction. However, selling has short-term prospective
of only increasing the sales volume.

In marketing, the consumer is the king whose needs must be satisfied. In selling, the
product is supreme and the entire focus is on its sale. Marketing starts before production
and continues even after the exchange of goods and services has taken place. It is so
because provision of after sale service is an important component of marketing process.
Selling starts after the production and ends as soon as the exchange of goods and
services has taken place.

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INTRODUCTION TO MARKETING Module - 4
Marketing
Basis of difference Marketing Selling

1. Emphasis Emphasis is on the customer Emphasis is on the transfer of

needs and wants title of ownership of the
product

2. Scope Marketing includes selling and Selling is confined to

Note
other activities like various persuasion of customers to
pro motional measures, buy firm's goods and services.
marketing research, after sales
service, etc.

3. Start and End It starts with research on Selling st arts aft er t he

consumer needs, wants, production process is over
preference, likes, dislike etc., and ends when the product is
and continues even after the sold to the customer
sales have taken place.

4. Route to profit Earning pro fit thro ugh Earning pro fit thro ugh
maximisation maximisation of customers' maximisation of sales.
satisfaction.

It is an integrated approach to Fragmented approach to

5. Approach
achieve long-term goals like achieve short- term gain.
creating, maintaining and
retaining the customers.

Marketing is customer Selling is seller oriented

6. Orientation
oriented

Relevant Terms of Marketing

o Market : Normally people understand the term market as a place where goods
are bought and sold, i.e. it may be a physical market place or a virtual market.
But, in the context of Marketing, it may be viewed as a group of buyers for a
particular product or service. For example, the market for Accountancy textbooks
consists of students in Commerce and specialised Accountancy Programmes;
the market for ladies readymade garments consists of girls and women, and so
on.

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Module - 4 INTRODUCTION TO MARKETING

Marketing Types of Market

According to Area According to Goods According to Volume

and Commodities of transaction

 Local Market  Fruit Market  Wholesale Market

 Regional Market  Furniture Market  Retail Market

Note  Rural Market  Stock Market and

 National Market so on.

 International Market

o Marketeer: It refers to the person who organises the various marketing

activities such as market research, product planning, pricing, distribution etc.

o Seller: It refers to a person or organisation who is directly involved in the

process of exchange of goods and services for money. This includes the
wholesaler, retailer, etc.

o Buyer: A buyer is one who is directly involved in the process of purchase

of goods and services. He/she is one who selects the goods, makes payment
and takes the delivery.

o Consumer: One who actually uses the product or service. For example,
you bought a shirt and gifted it to your friend who uses it. Here your friend is the
consumer and you are a buyer. However, a consumer can also be the buyer.

o Customer: A customer usually refers to the person who takes the buying
decision. For example, in a family, father decides on the brand of the toothpaste
to be used by his children. Here, the children are the consumers and the father is
the customer. A customer can also be the consumer. Similarly, the buyer may be
different from the customer or one can be the customer as well as the buyer.

o Virtual Market : Markets may be physical like a retail outlet, where people
meet face-to-face, or virtual like an online market, where there is no direct
physical contact between buyers and sellers. The buyer and sellers can,
now-a-days, interact with each other by using Internet. This is called virtual
market.

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INTRODUCTION TO MARKETING Module - 4
Marketing
INTEXT QUESTIONS 14.2
1. Following is a list of statements regarding features of 'marketing' and 'selling'.
Identify the features of marketing by mentioning 'M' and of selling by mentioning
'S' in the space given against each.

(a) It starts after the production process is over.

Note
(b) All activities revolve around the product that has been produced.

(c) Customer is the central point.

(d) Satisfaction of the customer is the main focus.

(e) Target is to achieve shot-term gain.

(f) It is an integrated approach to achieve long-term goals.

2. Complete the following table.

Types of Market

According to Area (a) Local Market

(b) Regional Market

(c) __________________

(d) __________________

(e) International Market

According to Volume (a) ___________________

of transaction (b) Wholesale Market

14.3 IMPORTANCE OF MARKETING

(a) Marketing helps business to keep pace with the changing tastes, fashions
and preferences of the customers. It works out primarily because ascertaining
consumer needs and wants is a regular phenomenon and improvement in existing
products and introduction of new product keeps on taking place. Marketing
thus, contributes in providing better products and services to the consumers and
improve their standard of living.

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Module - 4 INTRODUCTION TO MARKETING

Marketing (b) Marketing helps in making products available at all places and throughout the
year. We are able to get Kashmir shawls and Assam Tea all over India and get
seasonal fruits like apples and oranges round the year due to proper warehousing
or proper packaging. Thus, marketing creates time and place utilities.

(c) Marketing plays an important role in the development of the economy. Various
functions and sub-functions of marketing like advertising; personal selling;
Note packaging; transportation; etc. generate employment for a large number of
people, and accelerate growth of business.

(d) Marketing helps the business in increasing its sales volume, generating
revenue and ensuring its success in the long run.

(e) Marketing also helps the business in meeting competition most

effectively.

14.4 OBJECTIVES OF MARKETING

After knowing the points of importance of marketing let us discuss the basic objectives
of marketing.

Fig. 14.2 Objectives of Marketing

(a) Provide Satisfaction to Customers: All marketing activities are directed

towards customer satisfaction. Marketing starts with ascertaining consumers'
needs and produce goods that satisfy those needs most effectively. Not only
that, the pricing and distribution functions of marketing are also planned
accordingly.

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INTRODUCTION TO MARKETING Module - 4
(b) Increase in Demand: Through advertising and other sales-promotional efforts, Marketing
marketing aims at creating additional demand for their products. Satisfied
customers also help in creating new customers with the help of positive word of
mouth communications. For example, if you buy a 'gel pen' and feel satisfied,
next time also you will buy the same pen and may recommend it to others about
it, which may also buy the same on your recommendation.

(c) Provide Better Quality Products to the Customers: This is the basic Note
objective of marketing. The business houses try to update and upgrade their
knowledge and technology to continuously provide better products. If they do
not do so, they will be phased out through competition.

(d) Create Goodwill for the Organisation: Another objective of marketing is to

build a good public image and create goodwill for the organisation. This helps in
maintaining loyalty to the product and accepting new products of the same
company.

(e) Generate Profitable Sales Volume: The ultimate objective of all marketing
efforts is to generate profitable sales volumes for the business. Taking care of
customer needs and wants by providing the required goods and services at
prices they can afford, and at places and time that are convenient to them ultimately
leads to increased sales and profits.

INTEXT QUESTIONS 14.3

1. State any two points of importance of marketing to consumer.

2. Given below are words in two columns, A and B. You have to match the words
of column A with words of column B, so that the matched words describe an objective
of marketing. Write the serial number of words in column B against the matched
words of column A.

A B

(a) Customer (i) Goodwill

(b) Increase in (ii) Sales volume

(c) Profitable (iii) Product

(d) Better Quality (iv) Satisfaction

(e) Create (v) Demand

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Module - 4 INTRODUCTION TO MARKETING

Marketing
14.5 FUNCTIONS PERFORMED IN MARKETING
You have learnt that marketing is the performance of those business activities that
direct the flow of goods and services from producers to consumers or users. Let us
now learn what those activities are. These are briefly discussed below:

Note

Fig. 14.3 Functions of Marketing

1. Marketing Research: Marketing research involves collection and analysis of

facts relevant to various aspects of marketing. It is a process of collecting and
analysing information regarding customer needs and buying habits, the nature of
competition in the market, prevailing prices, distribution network, effectiveness
of advertising media, etc. Marketing research gathers information and analyses
facts for arriving at rational decisions and developing suitable marketing strategies.

2. Product Planning and Development: As you know marketing starts much

before the actual production. The marketeers gather information regarding what
are the needs of the consumers and then decide upon what to produce. So, the
task of marketing begins with planning and designing a product for the consumers.
It can also be done while modifying and improving an already existing product.

For example, now-a-days we find much better soaps and detergent powders
than we used to get earlier. Similarly, we have many new products introduced
almost on a regular basis.

3. Buying and Assembling: It involves what to buy, of what quality, how much
from whom, when and at what price. People in business buy to increase sales or
to decrease costs. Purchasing agents are much influenced by quality, service
and price. The products that the retailers buy for resale are determined by the

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INTRODUCTION TO MARKETING Module - 4
needs and preferences of their customers. A manufacturer buys raw materials, Marketing
spare parts, machinery, equipment, etc. for carrying out his production process
and other related activities. A wholesaler buys products to resell them to the
retailers.

4. Packaging: Packaging involves putting the goods in attractive packets according

to the usage and convenience of consumers. Important considerations to be
kept in view in this connection are the size of the package and the type of Note
packaging material used. Goods may be packaged in bottles (plastic or glass),
boxes (made of tin, glass, paper, plastic), cans or bags. The size of the package
generally varies from a few grams to a few kilograms, one piece to a number of
pieces of a product, or in any other suitable quantity in terms of weight, count,
length etc. Packaging is also used as a promotional tool as suitable and attractive
packaging influences the customers. It may be noted that packaging is different
from packing, which refers to putting goods in suitable containers for transportation
purposes.

5. Standardisation and Grading: Standardisation refers to development of

standards for production of goods with respect to shape, design, colour and
other characteristics. If products are standardised, customers are able to identify
a product and its characteristics very well and goods can be sold by sample or
description. Standardisation helps in promoting the sale of the product by
increasing consumers' confidence in the product quality.

Grading involves separating products into different classes on the basis of certain
pre determined standards relating to size and quality. Grading is required in case
of agricultural, forest and mineral products such as cotton, sugar cane, iron ore,
coal, timber, etc.

6. Branding: Branding means giving an attractive name, symbol or identity mark

to the product to make a product different from others so that it is known by that
name or symbol or mark. For example, Surf is the brand name of a detergent
powder produced by Hindustan Unilever Limited (HUL). Similarly, you must
be familiar with brands like Colgate for toothpaste, Lux for soap and so on.

7. Pricing the Product: Pricing involves decisions regarding fixation of

productprices, keeping in view the product costs, the capacity of customers to
pay, and the prices of the competitive products. It is an important decision as it
influences the sales and so also the profits. So, pricing has to be done very
carefully.

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Marketing 8. Promotion of the Product: Promotional activities include advertising, personal

selling, sales promotion and publicity. All promotional activities involve
communication with the existing and prospective customers whereby they are
made aware of the product, its distinctive features, price, availability etc. The
objective of promotional activities is to motivate the customers to buy the product.

9. Distribution: Distribution refers to those activities that are undertaken for sale
Note of products to the customers and the physical transfer thereof. The first aspect
i.e., sale of product involves use of middlemen such as wholesalers and retailers
whose services are used for making the products available at convenient points
to the ultimate consumers. The second aspect i.e., physical transfer involves
transportation and warehousing of goods from the point of production to the
point of sale or the consumer. The objective of distribution activities is to ensure
that consumers get the goods and services at the place and time most convenient
to them and in the desired quantity.

10. Selling: Selling is an important function of marketing whereby the ownership of

goods and services is transferred from the seller to the buyer for a consideration
known as price. To initiate and complete the process of selling, the seller has to
inform the prospective buyer about availability of goods, the nature and uses of
products, their prices and the needs of the customers that may be effectively
satisfied by the product. In the process, the seller arouses customers' interest in
the product and persuades them to buy it.

11. Storage and Warehousing: Storage refers to holding and preserving goods
from the time of their procurement or production till the time of their sale. In
other words, storage involves making suitable arrangements for preserving the
goods till the goods are bought and delivered to the consumers. Warehousing is
synonymous to storage but is normally used for large-scale storage facility for
goods and commodities. You must have seen cold stores where vegetables like
tomato, cabbage, potato etc. are stored to be consumed throughout the year. It
is essential to store raw material and finished goods to be used later by the
company for production or for resale.

12. Transportation: Transportation refers to the physical movement of goods

from one place to another. In marketing, transport as an activity refers to physical
movement of raw materials as well as finished goods from the place of production
to place of consumption. Goods are transported through various means like
railways, roadways, waterways and airways. For heavy and bulky goods, the
railways and waterways are the best. For other goods, it depends upon the

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demand, cost involved, urgency, nature of the goods etc. to decide about a Marketing
suitable means of transportation.

INTEXT QUESTIONS 14.4

1. Complete the crossword puzzle:

1 2 9 Note

4 3

10

Clues:

ACROSS

1. giving an attractive name to the product

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Module - 4 INTRODUCTION TO MARKETING

Marketing 4. communicating and persuading the customers to purchase the product

6. fixation of the amount to be paid by the customers

8. collecting and analysing information to develop marketing strategies

10. physical movement of goods

DOWN
Note
2. activities for physical transfer of goods

3. development of products according to pre-determined specifications

5. putting goods in suitable containers for transportation purposes.

7. large- scale storage

9. separation of goods into different classes on the basis of size and quality

2. Following are the statements pertaining to functions performed in marketing.

Identify the function of marketing from each statement and write it in the space
provided.

(a) Physical movement of goods from one place to another. ( )

(b) Holding and preserving goods from the time of their procurement or
production till the time of their sale. ( )

(c) Collection and analysis of relevant facts to solve marketing problems.

( )

(d) This includes advertising, personal selling, sales promotion and publicity.
( )
(e) Separating products into different classes on the basis of certain
predetermined standards. ( )

TERMINAL EXERCISE

Very Short Answer Questions

1. Define the term Market.

2. Who is termed as Marketeer?

3. What is meant by the term 'Grading'?

4. What is the purpose of marketing as per traditional concept?

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5. Name the four activities included in promotion of the product. Marketing

Short Answer Questions

1. Explain the modern concept of marketing.

2. Distinguish between traditional and modern concept of marketing.

3. Explain 'packaging' as a function of marketing.

Note
4. What is meant by integrated marketing?

5. Explain the significance of marketing research.

Long Answer Question

1. State any four points of the importance of marketing.

2. Do you think marketing and selling are synonymous terms? Give reason.

3. Explain any three objectives of marketing.

4. Describe any four important functions of marketing.

5. Define marketing and distinguish it from selling.

ANSWERS TO INTEXT QUESTIONS

14.1

1. Marketing is defined as the activity, set of institutions, and processes for creating,
communicating, delivering, and exchanging offerings that have value for customers,
clients, partners, and society at large.

2.

(a) It focuses on customer's need. MCM

(b) It focuses on product. TCM

(c) It focuses on selling satisfaction. MCM

(d) It focuses on selling goods and services. TCM

(e) It focuses on earning profit by maximisation of sales. TCM

(f) It focuses on earning profit through maximisation of

customer satisfaction. MCM

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Module - 4 INTRODUCTION TO MARKETING

Marketing 3. i) b) Widely available and affordable

ii) a) High in quality and performance
iii) c) Sold aggressively
iv) d) As per the needs of the customers
(v) (b)

Note (vi) (c)

3. Societal marketing concept
4. (a) Marketing (b) selling
14.2
1.
(a) It starts after the production process is over. S

(b) All activities revolve around the product that has been produced. S

(c) Customer is the central point. M

(d) Satisfaction of the customer is the main focus. M

(e) Target is to achieve shot-term gain. S

(f) It is an integrated approach to achieve long-term goals. M

2.

Types of Market

According to Area (a) Local Market

(b) Regional Market

(c) Rural Market

(d) National Market

(e) International Market

According to Volume (a) Retail Market

of transaction (b) Wholesale Market

14.3
1. (a) Marketing provides better products and services to the customers.
(b) Marketing helps in making products available irrespective of time and
place.

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INTRODUCTION TO MARKETING Module - 4
2. (a) iv (b) v (c) ii (d) iii (e) i Marketing

14.4
1. (a) Transportation (b) Storage and warehousing
(c) Marketing research (d) Promotion of Product
(e) Grading

B R A N D I
N G G Note

I R

S A

P R O M O T I O N D S

R I T

P I N A

A B G N

W C U D

M A R K E T I N G R E S E A R C H

R I I R

E N O D

H G N P R I C I N G

O I S

U A

S T R A N S P O R T A T I O N

I I

N O

G N

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Marketing
DO AND LEARN
Assume yourself as a Marketeer and ask atleast three of your friends or family members
as to what products they want, which may simplify their work in future? The products
may not necessarily be available right now but could be made available in the future.
The Activity would help you in identifying the needs of the customer.
Note

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THE MARKETING MIX Module - 4
Marketing

15

THE MARKETING MIX Note

One of the major objectives of any organisation is to become a market leader. In

order to achieve this objective, it is important that every marketeer should provide
goods and services which are as per the needs and wants of the customers, at the
price which a consumer is willing to pay, at the place which is approachable or convenient
for a buyer, and by using an appropriate media which will inform the consumers about
the product and its characteristics.

So the marketing manager concentrates on four major decision areas while planning
the marketing activities, namely, (i) products, (ii) price, (iii) place (distribution) and (iv)
promotion. These 4 'P's are called as elements of marketing and together they constitute
the marketing mix. All these decisions are inter-related because a decision in one area
affects decisions in other areas. In this lesson you will learn about the basic aspects
relating to these 4'P's viz., product, price, place and promotion.

LEARNING OUTCOMES
 explains the 7 Ps of Marketing mix;

 explains the meaning and classification of product as a marketing mix component;

 describes the factors of pressing and the various approaches to explain processing;

 identifies the meaning of place as distribution channel and importance of selecting

appropriate channel; and

 develops an understanding of the concept of promotion mix.

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Marketing
15.1 CUSTOMER: KING OF THE MARKET
"A customer is the most important visitor in our premises. He is not dependent on us;
we are dependent on him. He is not an interruption in our work. He is the purpose of
it. He is not an outsider in our business. He is a part of it. We are not doing him a
favour by serving him. He is doing us a favour by giving us an opportunity to do so."

Note The quote about the customer well defines the importance of customers for any business.
In a similar way, "Customer is the King" is an age-old business mantra which highlights
the importance of customers (and would-be customers) in every business. The success
of any business depends on its customers and business organisations should focus on
providing their best services for the satisfaction of their customers. Marketing managers
should formulate their marketing programme (4Ps) and efforts in such a way that the
firm can offer maximum possible satisfaction to the target consumers.

15.2 CONCEPT AND COMPONENTS OF MARKETING MIX

Marketing involves a number of activities. To begin with, an organisation may decide
on its target group of customers to be served. Once the target group is decided, the
product is to be placed in the market by providing the appropriate product, price,
distribution and promotional efforts. These are to be combined or mixed in an
appropriate proportion so as to achieve the marketing goal.Such a mix of product,
price, distribution (place) and promotional efforts is known as 'Marketing Mix'. It is
about putting the right product in the right place, at the right time, and at the right price.

Each firm strives to build up such a composition of 4'P's, which can create highest
level of consumer satisfaction and at the same time meet its organisational objectives.
Thus, this mix is assembled keeping in mind the needs of target customers, and it
varies from one organisation to another depending upon its available resources and
marketing objectives. Marketeers keep on changing their marketing mix elements in
order to keep their marketing offer relevant and competitive. Let us now have a brief
idea of the four components of the marketing mix:

Product: A product is anything that is offered by a marketeer to satisfy a need or want

of the consumer. Products generally include goods and services offered by the
organisation. Goods like a pair of shoes, a plate of noodles, a lipstick, and services
like a haircut or a cell phone service, are all products. We are paying not for the
tangible product but for the benefit it will provide. So, in simple words, a product can
be described as a bundle of benefits which a marketeer offers to the consumer for a
price. While buying a pair of shoes, we are actually buying comfort for our feet, while

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buying a lipstick we are actually paying for beauty because lipstick is likely to make us Marketing
look good. A product can also take the form of a service like an air travel,
telecommunication, etc. where we are not buying a physical good but the services
provided by the service provider like a hair cut in a saloon, travel services during air
travel, etc. Products are not only restricted to physical goods and services and may
include experiences, events, places, organisations, information, and ideas.

Price: Price is the amount charged for a product or service. It may be a price that you Note
pay for buying a physical good like shirt or a rent for an apartment, tuition fee for
education, etc. Fixing the price of the product is a tricky job. Many factors like demand
for a product, cost involved, consumer's ability and willingness to pay, prices charged
by competitors for similar products, government restrictions etc. have to be kept in
mind while fixing the price. In fact, pricing is a very crucial decision area as it has its
effect on demand for the product and also on the profitability of the firm. In the entire
marketing mix, price is the one element that helps in generating revenue for the
organisation whereas all other decisions produce cost. Price is also one of the most
flexible elements: It can be changed quickly, unlike product features and channel
commitments.

Place: Goods are produced to be sold to the consumers. It must be made available to
the consumers at a place where they can conveniently buy it for their consumption or
usage. Woolen Clothes are manufactured on a large scale in Ludhiana-Punjab which
are available in nearby shops or a shopping malls. So, it is necessary that the product
is available at shops in your town. But to make the goods available at the store which
you can easily reach involves a chain of individuals and institutions like distributors,
wholesalers and retailers who constitute firm's distribution network (also called a channel
of distribution). The organisation has to decide whether to sell directly to the retailer or
through the distributors/wholesaler etc. The firm can even plan to sell the goods directly
to consumers. The choice is guided by a host of factors about which you will learn
later in this lesson.

Promotion: If the product is manufactured keeping the consumer needs in mind, is

rightly priced and made available at outlets convenient to them but the consumer is not
made aware of its price, features, availability etc, its marketing effort may not be
successful. Therefore promotion is an important ingredient of the marketing mix as it
refers to a process of informing, persuading and influencing a consumer to make a
choice of the product to be bought. Promotion is done through means of personal
selling, advertising, publicity and sales promotion. It is done mainly with a view to
provide information to prospective consumers about the availability, characteristics

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Module - 4 THE MARKETING MIX

Marketing and uses of a product. It arouses potential consumer's interest in the product which
helps him in comparing it with competitors' product and make his choice. The rise of
print and electronic media has immensely helped the process of promotion.

Having acquainted ourselves with the broad nature of the four components of marketing
mix, let us now learn some important aspects of each one of these in detail in the
following sections.
Note

Fig. 15.1Target Customer

INTEXT QUESTIONS 15.1

1. List the four components of the marketing mix

2. Give one word/phrase for the following statements:

(a) The crucial decision area of marketing that has direct effect on demand for the
product and profitability of the firm.

(b) The component of marketing that relates to channels of distribution.

(c) The components that are combined to achieve the marketing goal.

(d) The goods and services offered by the organisation for sale.

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(e) The ingredient of marketing mix relating to informing, persuading and influencing Marketing
a consumer to make a choice of the product to be bought.

15.3 CONCEPT OF PRODUCT AND ITS CLASSIFICATION

As stated earlier, products refer to the goods and services offered by the organisation
for sale. Here the marketeers have to recognise that consumers are not simply interested
in the physical features of a product but a set of tangible and intangible attributes that Note
satisfy their wants. For example, when a consumer buys a washing machine he is not
buying simply a machine but a gadget that helps him in washing clothes. It also needs
to be noted that the term product refers to anything that can be offered to a market for
attention, acquisition, or use. Thus, the term product is defined as "anything that can be
offered to a market to satisfy a want". In simple words, a product can be described as
a bundle of benefits which a marketeer offers to the consumer for a price. It normally
includes physical objects and services. In a broader sense, however, it not only includes
physical objects and services but also the supporting services like brand name, packaging
accessories, installation, after sales service etc. and may also include experiences,
events, places, otganisations, information, and ideas. Look at the definitions by Stanton
and McCarthy as given below.

15.3.1 PRODUCT

"Product is a set of tangible and intangible attributes including packaging, colour, price,
manufacturer's prestige, retailer's prestige and manufacturer's and retailer's services
which buyer may accept as offering satisfaction of wants and services"

— William J. Stanton

"A product is more than just a physical product with its related functional and aesthetic
features. It includes accessories, installation, instructions on use, the package, perhaps
a brand name, which fulfills some psychological needs and the assurances that service
facilities will be available to meet the customer needs after the purchase"

—Jerome McCarthy

Effective marketeers see themselves as providers of product benefits, not merely the
product features or product itself. The marketeer must understand how to classify the
product on the basis of three characteristics: durability, tangibility, and usage as each
product classification is associated with a different marketing-mix strategy.

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Marketing

Note

Source: Kotler Fig. 15.2 Target Market

15.3.2 PRODUCT CLASSIFICATION

Products can be broadly classified on the basis of (1) use, (2) durability, and (3)
tangibility. Let us have a brief idea about the various categories and their exact nature
under each head. In marketing the terms 'product' and 'goods' are often used
interchangeably.

Fig. 15.3 Types of Goods

1. Based on use, the product can be classified as:

(a) Consumer Goods : Goods meant for personal consumption by the households
or ultimate consumers are called consumer goods. This includes items like toiletries,

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groceries, clothes etc. Based on consumers' buying behaviour the consumer goods Marketing
can be further classified as :

(i) Convenience Goods : Do you remember, the last time when you bought a
packet of butter or a soft drink or a grocery item? Perhaps you don't remember,
or you will say last week or yesterday. Reason is, these goods belong to the
categories of convenience goods which are bought frequently without much
planning or shopping effort and are also consumed quickly. Buying decision in Note
case of these goods does not involve much pre-planning.Such goods are usually
sold at convenient retail outlets.

(ii) Shopping Goods : These are goods which are purchased less frequently and
are used very slowly like clothes, shoes, household appliances. In case of these
goods, consumers make choice of a product considering its suitability, price,
style, quality and products of competitors and substitutes, if any. In other words,
the consumers usually spend a considerable amount of time and effort to finalise
their purchase decision as they lack complete information prior to their shopping
trip. It may be noted that shopping goods involve much more expenses than
convenience goods.

(iii) Speciality Goods: Because of some special characteristics of certain categories

of goods people generally put special efforts to buy them. They are ready to buy
these goods at prices at which they are offered and also put in extra time to
locate the seller to make the purchase. The nearest car dealer may be ten
kilometres away but the buyer will go there to inspect and purchase it. In fact,
prior to making a trip to buy the product he/she will collect complete information
about the various brands. Examples of speciality goods are cameras, TV sets,
new automobiles etc.

(b) Industrial Goods : Goods meant for consumption or use as inputs in production
of other products or provision of some service are termed as 'industrial goods'. These
are meant for non-personal and commercial use and include (i) raw materials, (ii)
machinery, (iii) components, and (iv) operating supplies (such as lubricants, stationery
etc). The buyers of industrial goods are supposed to be knowledgeable, cost conscious
and rational in their purchase and therefore, the marketeers follow different pricing,
distribution and promotional strategies for these goods.

It may be noted that the same product may be classified as consumer goods as well as
industrial goods depending upon its end use. Take for example the case of coconut oil.
When it is used as hair oil or cooking oil, it is treated as consumer goods and when

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Marketing used for manufacturing a bath soap it is termed as industrial goods. However, the way
these products are marketed to these two groups are very different because purchase
by industrial buyer is usually large in quantity and bought either directly from the
manufacturer or the local distributor.

2. Based on Durability, the Products can be Classified as :

(a) Durable Goods: Durable goods are products which are used for a long
Note
periodi.e., for months or years together. Examples of such goods are refrigerator,
car, washing machine etc. Such goods generally require more of personal selling
efforts and have high profit margins. In case of these goods, seller's reputation
and pre-sale and after-sale service are important determinants of the purchase
decision.

(b) Non-durable Goods: Non-durable goods are products that are normally
consumed in one go or last for a few uses. Examples of such products are soap,
salt, pickles, sauce etc. These items are consumed quickly and we purchase
these goods more often. Such items are generally made available by the producer
through large number of convenient retail outlets. Profit margins on such items
are usually kept low and heavy advertising is done to attract people towards
their trial and use.

3. Based on Tangibility, the Products can be Classified as:

(a) Tangible Goods: Most goods, whether these are consumer goods or industrial
goods and whether these are durable or non-durable, fall in this category as they
have a physical form, that can be touched and seen. Thus, all items like groceries,
cars, raw-materials, machinery etc. fall in the category of tangible goods.

(b) Intangible Goods : Intangible goods refer to services provided to the individual
consumers or to the organisational buyers (industrial, commercial, institutional,
government etc.). Services are essentially intangible activities which provide want
or need satisfaction. Medical treatment, postal, banking and insurance services
etc., all fall in this category.

15.4 COMPONENTS OF PRODUCT MIX

In order to design the most relevant product mix, importance should be given to the
following elements or components of the mix :

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Marketing
Components Of Product Mix

Note
Fig. 15.4 Product Mix components

1. Product Characteristics: It includes variety, quality, design, features, warranties

and return, related with the Product. The product should be available in different
varieties to target a larger target audience or customers. Necessary efforts should
be made to maintain the product quality. A Product or service package should
have necessary features that serves the need of the client. Warranty may be
given which helps in increasing the trust among buyers while making a purchase
decision.

2. Branding: It is the process of giving a name, sign, symbol, logo or design to a

product.A brand is an identification of a product. The American Marketing
Association defines a brand as a name, term, sign, symbol, or design, or a
combination of these, intended to identify the goods or services of one seller or
group of sellers and to differentiate them from those of competitors. The part of
the brand which can be spoken is called the brand name e.g., Dettol, Nike etc.
The part of brand which cannot be spoken but can be recognised is the brand
mark. e.g. arrow sign of Nike, star of Mercedes Car, Golden Arches (which
resembles 'M') of McDonalds, etc. A brand that is given legal protection against
its use by other firms, is called a trade mark. e.g.,logo of SBI is the trade mark
of State Bank of India.

The Blue colour, the font and the lower case letters are what the word 'Facebook'
immediately remind us of. These are the aspects of Facebook's brand mark.

Advantages/Benefits of Branding

1. Product Differentiation : Customers demand the product by calling its brand

name. For e.g. Lux, Coke etc. Thus, it helps in product differentiation.

2. Differential Pricing: Branding helps companies to adopt differential pricing

for its products. Customers are ready to accept that price because of its quality.

3. Easy introduction of product: Companies which use their brand name find it
easy to market a new product.

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Marketing 3. Packaging: It is the act of designing and producing appropriate container or

cover for the product.

Levels of Packaging:There are three levels of packaging. These are:

i. Primary Package: It refers to immediate packing of product. e.g., tube of

ointment.

Note ii. Secondary Package: It refers to additional packaging which gives protection
to the product. e.g., Cardboard box used to keep ointment tube. Such containers
and boxes are dispensed units when we start using the inside material from the
primary package.

iii. Transportation Packaging or Final Packaging: It refers to further packaging

components necessary for storage or transportation. e.g., boxes of ointments
are transported in corrugated boxes each containing 50/100 items.

Packaging protects the product from damage. It helps in identifying a product. It

enables convenient handling of the product. As packaging increases the sale of a product,
it acts as a silent salesman.

Primary Secondary Transport

Packing Packing Packing

Fig. 15.5 Levels of Packing

4. Labelling: Label is a part on the cover of the product which includes its name,
contents, ownership, expiry date, manufacturing date etc. A label helps in
identifying the product. It contains information about the product which is useful
for the customer.Labels also helps in grading the product. Finally, it also helps in
promoting the product as colorful labels helps in getting the attention of the
buyers.

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Marketing

Note

Fig. 15.5 Levels of Packing

INTEXT QUESTIONS 15.2

1. Classify the following products into consumer goods and industrial goods and
further classify them into convenience goods, shopping goods and speciality
goods, if they are consumer goods :

(a) Stationery for the office (b) Washing machine for use at home

(c) A car for family use (d) Oil for manufacturing soap

(e) A pair of shoes for yourself (f) An electric lift for lifting weight in the
workshop

(g) A packet of biscuits for your breakfast

2. For the following categories of goods, give two examples of each, from the
products that you see around you.

(a) Intangible goods (b) Durable goods (c) Non-durable goods

3. (a) Categorise the following products as tangible or intangible products.

(i) Cricket Bat (ii) Ball (iii) Boarding a bus

(iv) 'Pollution check' (v) Pen (vi) Getting medical advice from
a doctor

(b) Categorise the following products as durable and non-durable consumer

goods.

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Module - 4 THE MARKETING MIX

Marketing (i) Refrigerator (ii) Salt (iii) Soap

(iv) Washing Machine (v) Television (vi) Cooking oil
(vii) Sauce (viii) Note Book

4. Smita purchased a bottle of vinegar from the local grocery shop. The information
provided on the bottle was not clear. She fell sick on consuming it. She filed a
case under Consumer Protection Act and got the relief.
Note
(a) Identify the important aspect neglected by the marketeer in the above case.

15.5 PRICING AND FACTORS AFFECTING PRICING

DECISIONS

As stated earlier, price is the consideration in terms of money paid by consumers for
the bundle of benefits he/she derives from using the product/ service. In simple terms,
it is the exchange value of goods and services in terms of money. Pricing (determination
of price to be charged) is another important element of marketing mix and it plays a
crucial role in the success of a product in the market. If the price fixed is high, it is likely
to have an adverse effect on the sales volume. If, on the other hand, it is too low, it will
adversely affect the profitability. Hence, it has to be fixed after taking various aspects
into consideration. The factors usually taken into account while determining the price
of a product can be broadly described as follows:

Fig. 15.6 Pricing Decisions

(a) Cost: No business can survive unless it covers its cost of production and
distribution. For a large number of products, the retail prices are determined by
adding a reasonable profit margin to the cost. Higher the cost, higher is likely to
be the price, lower the cost, lower would be the price.

(b) Demand: Demand also affects the price in a big way. When there is limited
supply of a product and the demand is high, people buy even if high prices are
charged by the producer. But how high the price would be depends on the
capacity and willingness of the prospective buyers. In simple words, the marketeer
may charge higher prices if the goods or services are in demand whereas the

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THE MARKETING MIX Module - 4
discounts are to be offered if demand of goods and services is less, to attract Marketing
more customers. On the other hand, each price charged by a marketeer will
lead to a different level of demand. In general, there is a negative relationship
between price and quantity demanded, i.e. higher the prices, lower will be the
demand and vice versa.

(c) Competition:The price charged by the competitor for similar product is an

important determinant of price. A marketeer would not like to charge a price Note
higher than the competitor for fear of losing customers. Also, he may avoid
charging a price lower than the competitor as it may result in a price war among
the competitors.

(d) Marketing Objectives:A firm may have different marketing objectives such
as maximisation of profit, maximisation of sales, bigger market share, survival in
the market and so on. The prices have to be determined accordingly. For
example, if the objective is to maximise sales or have a bigger market share, a
low price will be fixed.

(e) Government Regulation:Prices of some essential products are regulated by

the government under the Essential Commodities Act. For example, prior to
liberalisation of the economy, cement and steel prices were decided by the
government. Hence, it is essential that the existing statutory limits, if any, are also
kept in view while determining the prices of products by the producers.

15.6 METHODS OF PRICE FIXATION

Methods of fixing the price can be broadly divided into the following categories:

1. Cost Based Pricing: Under this method, price of the product is fixed by adding
the amount of desired profit margin to the cost of the product. If a particular
soap costs the marketeer Rs. 8 and he desires a profit of 25%, the price of the
soap is fixed at Rs 8 + (8×25/100) = Rs.10. While calculating the price in this
way, all costs -variable as well as fixed - incurred in manufacturing the product
are taken into consideration.

2. Competition Based Pricing: In case of products where market is highly

competitive and there is negligible difference in quality of competing brands,
price is usually fixed closer to the price of the competing brands. It is also
known as 'going-rate pricing'. The firm decides its price largely after seeing the
prices of competitors. The firm might charge the same, more, or less than its
major competitors' charges. For example, A new ketchup manufacturer may

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Module - 4 THE MARKETING MIX

Marketing charge a similar price as of its competitor. This type of pricing is most common
with the goods like, bread, steel, cement, telecom services etc.

3. Demand Based Pricing: At times, prices are determined by the demand for
the product. Under this method, without paying much attention to cost and
competitors' prices, the marketeers try to ascertain the demand for the product.
If the demand is high they decide to take advantage and fix a high price. If the
Note demand is low, they fix low prices for their product. At times, they resort to
differential prices and charge different prices from different groups of customers
depending upon the irperceived values and capacity to pay. Take the case of
cinema halls where the rates of tickets differ for the different sets of rows in the
hall.

4. Objective Based Pricing: This method is applicable to introduction of new

(innovative) products. If, at the introductory stage of the products, the
organisation wishes to penetrate the market i.e., to capture large parts of the
market and discourage the prospective competitors to enter into the fray, it fixes
a low price. Alternatively, the organisation may decide to skim the market i.e., to
earn high profit by taking advantage of a group of customers who give more
importance to their status or distinction and are willing to pay even a higher price
for it. In such a situation they fix a quite high price at the introductory stage of
their product and market it to only those customers who can afford it.

5. Sealed-Bid Pricing: This kind of Competitive-oriented pricing is common

when firms submit sealed bids for different projects or work. Many government
departments invite competitive bids from the marketeers through tenders for
making big purchases. In bidding, each firm decides their price on expectations
of how other marketeers or competitors will price rather than deciding price on
the basis of firm's own costs or demand.

INTEXT QUESTIONS 15.3

1. List the main factors affecting pricing decision of a firm.

2. Which method of price fixation is being referred to here :

(a) Hari fixes the price of shirts that he manufactures and sells at a price 10%
higher than its cost.

(b) Mannat introduces a new brand of biscuits at a low introductory price.

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(c) Sheetal fixes the price of her glassware keeping in mind the prices for Marketing
similar products in the nearby shops.

(d) Rahul, a fruit-seller, increases the price of mangoes if there is a heavy

demand for them during the summer season.

(e) Pinky charges a high price for the exclusive designer handkerchiefs that
she designs for a selective group of customers.
Note
(f) Jahnavi lowers the price of the vegetables at her shop in the evening, so
that customers purchase them even when they are not as fresh as they
were in the morning time.

15.7 CHANNELS OF DISTRIBUTION

You are aware that while a manufacturer of a product is located at one place, its
consumers are located at innumerable places spread all over the country or the world.
The manufacturer has to ensure the availability of his goods to the consumers at
convenient points for their purchase. He may do so directly or, as stated earlier, through
a chain of middlemen like distributors, wholesalers and retailers. The path or route
adopted by him for the purpose is known as channel of distribution. A channel of
distribution thus, refers to the pathway used by the manufacturer for transfer
of the ownership of goods and its physical transfer to the consumers and the
user/buyers (industrial buyers).

According to Stanton "A distribution channel consists of the set of people and
firms involved in the transfer of title to a product as the product moves from
producer to ultimate consumer or business user". Basically it refers to the vital
links connecting the manufacturers and producers and the ultimate consumers/users. It
includes both the producer and the end user and also the middlemen/agents engaged
in the process of transfer of title of goods.

Primarily a channel of distribution performs the following functions:

(a) It helps in establishing a regular contact with the customers and provides them
the necessary information relating to the goods.

(b) It facilitates the transfer of ownership as well as the delivery of goods.

(c) It helps in financing by giving credit facility.

(d) It assists the provision of after-sales services, if necessary.

(e) It assumes all risks connected with carrying out the distribution function.

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Marketing (f) It helps in placing orders with the manufacturers.

15.8 TYPES OF CHANNELS OF DISTRIBUTION

Generally, we do not buy goods directly from the producers. The producers/
manufacturers usually use services of one or more middlemen to supply their goods to
the consumers. But sometimes, they do have direct contact with the customers with no
Note middlemen involved. This is true more for industrial goods where the customers are
highly knowledgeable and their individual purchases are large. The various channels
used for distribution of consumer goods can be described as follows:

T hree
Stage
Two Stage
One Stage
Zero Stage

Fig. 15.6 Channels of Sistribution

(a) Zero Stage Channel of Distribution: Zero stage distribution channel exists
where there is direct sale of goods by the producer to the consumer. This direct
contact with the consumer can be made through door-to-door salesmen, own
retail outlets or even through direct mail. Also in case of perishable products and
certain technical household products, door-to-door sale is an easier way of
convincing consumer to make a purchase.

Eureka Forbes, for example, sells its water purifiers directly through their own
sales staff.

Manufacturer  Consumer

(b) One Stage Channel of Distribution: In this case, there is one middleman i.e.,
the retailer. The manufacturers sell their goods to retailers who in turn sell it to

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the consumers. This type of distribution channel is preferred by manufacturers Marketing
of consumer durables like refrigerator, air conditioner, washing machine, etc.
where individual purchase involves large amount. It is also used for distribution
through large scale retailers such as departmental stores (Big Bazaar, Spencer)
and super markets.

e.g. MARUTI sells cars through company approved retailers.

Note
Manufacturer  Retailer  Consumer

(c) Two Stage Channel of Distribution: This is the most commonly used channel
of distribution for the sale of consumer goods. In this case, there are two
middlemen used, namely, wholesaler and retailer. This is applicable to products
where markets are spread over a large area, value of individual purchase is
small and the frequency of purchase is high.

e.g. For soaps, oils, clothes, rice this distribution network is preferred.

Manufacturer  Wholesaler Retailer Consumer

(d) Three Stage Channel of Distribution: When the number of wholesalers used
is large and they are scattered throughout the country, the manufacturers often
use the services of mercantile agents who act as a link between the producer
and the wholesaler. They are also sometimes known as distributors.

This method is preferred when a large market is to be covered.

Manufacturer Agent Wholesaler Retailer Consumer

INTEXT QUESTIONS 15.4

1. Which type of channel of distribution will be suitable in each of the following
cases? Name it and draw a labelled diagram (in the space given below) depicting
the channel.

(a) For a perishable product

(b) Where large number of wholesalers are involved and are scattered
throughout the country.

(c) For durable products like washing machines.

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Marketing
15.9 FACTORS AFFECTING THE CHOICE OF
DISTRIBUTION CHANNEL

Choice of an appropriate distribution channel is very important as the pricing as well

as promotion strategy are dependent upon the distribution channel selected. Not only
that, the route with which the product follows its journey from the manufacturer to the
consumer also involves certain costs. This in turn, affects not only the price of the
Note
product but also the profits. Choice of inappropriate channels of distribution may
result in lesser profits for the manufacturer and higher price for the consumer. Hence,
the manufacturer has to be careful while finalising the channel of distribution to be
used. He should pay attention to the following factors while making his choice.

(a) Nature of Market: There are many aspects of market which determine the
choice of channel of distribution. Say for example, where the number of buyers
is limited, they are concentrated at few locations and their individual purchases
are large as is the case with industrial buyers, direct sale may be the most preferred
choice. But in case where the number of buyers is large with small individual
purchase and they are scattered, then there will be need for use of middlemen.

(b) Nature of Product: Nature of the product considerably affects the choice of
channel of distribution. In case the product is of technical nature involving a
good amount of pre-sale and after-sale services, the sale is generally done through
retailers without involving the wholesalers. But in most of the consumer goods
having small value, bought frequently in small quantities, a long channel involving
agents, wholesalers and retailers is used as the goods need to be stored at
convenient locations. Items like toiletries, groceries, etc. fall in this category. As
against this, in case of items like industrial machinery, having large value and
involving specialised technical service and long negotiation period, direct sale is
preferred.

(c) Nature of the Company: A firm having enough financial resources can afford
to have both its own distribution force and retail outlet. But most business firms
prefer not to create their own distribution channel and concentrate on
manufacturing. The firms who wish to control the distribution network prefer a
shorter channel.

(d) Middlemen Consideration: If the right kind of middlemen having the necessary
experience, contacts, financial strength and integrity are available, their use is
preferred as they can ensure success of newly introduced products. Cost factors
also have to be kept in view as all middlemen add their own margin of profit to

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the price of the products. But from experience it is learnt that where the volume Marketing
of sales is adequate, the use of middlemen is often found economical and less
cumbersome as against direct sale.

15.10 PROMOTION
The Promotion Mix refers to the blend of several promotional tools used by the
marketeer to create, maintain and increase the demand for goods and services. The Note
marketeer's task is to find the right promotion mix for a particular brand for reaching a
broader audience. It includes the process of informing and persuading the consumers
to buy certain product. By using this process, the marketeers convey persuasive
message and information to its potential customers.

The main objective of promotion is to seek buyers' attention towards the product with
a view to:

 arouse his interest in the product;

 inform him about its availability; and

 inform him as to how it is different from others.

It is thus a persuasive communication and also serves as a reminder. A firm uses

different tools for its promotional activities which are as follows:

Fig. 15.7 Promotion Mix

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Marketing 1. Advertising: Advertising is the most commonly used tool for informing the
present and prospective consumers about the product, its quality, features,
availability, etc. It is a paid form of non-personal communication through
different media about a product, idea, a service or an organisation by an
identified sponsor. It can be done through print media like newspaper,
magazines, billboards, electronic media like radio, television, etc. Advertising
Note can help in building a long term image or the product or can be used to trigger
quick sales. It is a very flexible and comparatively low cost tool of promotion. It
can help in reaching geographically dispersed buyers efficiently.

2. Publicity: This is a non-paid process of generating wide range of

communication to contribute a favourable attitude towards the product
and the organisation. You may have seen articles in newspapers about an
organisation, its products and policies. The other tools of publicity are press
conference, publications and news in the electronic media etc. It is published or
broadcasted without charging any money from the firm. Marketeers often spend
a lot of time and effort in getting news items placed in the media for creation of
a favourable image of the company and its products.

3. Personal Selling:You must have come across representatives of different

companies knocking at your door and persuading you to buy their product. It is
a direct presentation of the product to the consumers or prospective
buyers. It refers to the use of salespersons to persuade the buyers to act
favourably and buy the product. It is most effective promotional tool in case of
industrial goods.

4. Sales Promotion: This refers to short-term and temporary incentives to

purchase or induce trials of new goods. The tools include contests, games,
gifts, trade shows, discounts, etc. Sales promotional activities are often carried
out at retail levels. It also includes sampling and demonstrations at the shops,
stores etc. which helps in creating a favourable response towards the product as
the prospective buyer may taste or use the product before buying a product
which may create likelihood towards the product.

5. Direct Marketing: It include tools like direct mail, telemarketing, TV Shopping,

Internet marketing, etc. Direct Marketing campaign may include a customized
message normally addressed to a specific person or group of persons. For
example, you may have seen some campaigns to buy their products like
bedsheets, kitchen set, Indian sarees etc. on TV shopping channels.

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Marketing
INTEXT QUESTIONS 15.5
1. What are the main objectives of promotion? List them.

2. State the main factors affecting the choice of distribution channels.

3. Which element of the promotion mix is being referred to in the following

statements. Write it in the space provided.
Note
(a) It is a temporary incentive to induce trial or purchase of a new product.
( )

(b) It does not cost money but may involve considerable time and effort by
the marketeer. ( )

(c) It is an effective promotion tool for machines, lubricant etc. ( )

(d) Press conference, publications and news in the electronic media are its
various tools. ( )

(e) It is a paid form of non-personal communication by an identified sponsor.

( )

(f) It is done through popular media like radio, television, magazines,

newspapers. ( )

4. Tick the right choice.

i. To which tool of marketing mix does 'Brand Name' relate?

a) Product b) Price c) Place d) Promotion

ii. Identity the philosophy in management which suggests that aggressive selling
and promotional efforts are needed to sell products.

a) Production concept b) Product concept

c) Sales concept d) Societal concept

iii. A cold drinks manufacturing company is using chemicals to make its product
(cold drinks). Name the marketing philosophy which is ignored here.

a) Production concept b) Product concept

c) Sales concept d) Societal concept

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Marketing 5. Which tool of promotion will primarily be used for the following:

a. To get good corporate image without being paid for.

b. An existing product meant for mass usage by literate people.

c. To introduce a new product to a particular class of people through door to door

visits.
Note
TERMINAL EXERCISE
Very Short Answer Questions

1. Define the term 'Advertising'.

2. What is meant by the term 'product'?

3. Give two examples each of tangible products and intangible products.

4. What are speciality goods? Give one example.

5. Define the term 'promotion'.

6. What do you mean by labelling?

7. What is the purpose of packaging a product?

8. What is meant by the 'product concept of marketing'?

Short Answer Questions

1. What are 'convenience goods' and 'shopping goods'. Explain giving examples
for each type.

2. Explain 'cost based pricing' and 'objective based pricing'.

3. State four functions performed by channel of distribution.

4. Describe the various factors affecting choice of distribution channels.

5. What are durable and non-durable goods? Give two examples of each of them.

6. Write short notes on the elements of promotion.

7. State the functions of packaging.

Long Answer Questions

1. What is meant by the Marketing Mix? Describe the four components of

marketing mix.

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THE MARKETING MIX Module - 4
2. Describe the classification and sub-classification of products on the basis of Marketing
their use.

3. Explain the four broad methods of price fixation of a product.

4. 'Promotion includes four main tools'. Explain each of these tools.

5. "Channels of distribution are a vital link between manufactures and consumers".

Describe this statement with the help of diagrams by mentioning the four types Note
of channels of distribution.

6. 'Developing the product according to customer needs is an important concept

of marketing management'. Explain briefly.

7. Differentiate between Publicity and Advertising.

8. Explain briefly the components of product mix.

9. Critically examine the objections of advertisement.

ANSWERS TO INTEXT QUESTIONS

15.1

1. (a) Product (b) Price (c) Place (d) Promotion

2. (a) Price (b) Place (c) Marketing mix (d) Product

(e) Promotion

15.2

1. (a) Industrial goods

(b) Consumer goods- shopping goods

(c) Consumer goods - specialty goods

(d) Industrial goods

(e) Consumer goods - shopping goods

(f) Industrial goods

(g) Consumer goods - convenience goods

3. (a) Tangible Intangible

(i) Cricket bat (iii) Boarding a bus

(ii) Ball (iv) Pollution check

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Marketing (v) Pen (vi) Getting medical advice from a doctor

(b) Durable Non-durable

(i) Refrigerator (ii) Salt

(iv) Washing machine (iii) Soap

(v) Television (vi) Cooking oil

Note
(vii) Sauce

(viii) Note book

4. Labelling

15.3

1. (a) Cost (b) Demand (c) Competition

(d) Marketing objectives (e) Government regulation

2. (a) Cost-based pricing (b) Objective-based pricing

(c) Competition-based pricing (d) Demand-based pricing

(e) Objective-based pricing (f) Demand-based pricing

15.4

1. (a) Zero stage channel of distribution

(b) Three stage channel of distribution

(c) One stage channel of distribution

15.5

1. (a) arouse buyer's interest in the product

(b) inform buyer about its availability

(c) inform him/her how it is different from other products

2. (a) Nature of market (c) Nature of product

(b) Nature of the company (d) Middlemen consideration

3. (a) Sales promotion (d) Publicity

(b) Publicity (e) Advertising

(c) Personal Selling (f) Advertising

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4. (i) a (ii) c (iii) d Marketing

5. a. Public Relation; b. Advertising; c. Personal Selling

DO AND LEARN
Make a list of atleast five different types of products. Classify them into the product
categories that you have studied (viz. consumer goods, industrial goods, durable and
Note
non-durable, tangible and intangible goods). Find out about the type of channel of
distribution that is used for these five products.Also, find out about the promotional
activities that are generally associated with the products.Note your findings and tabulate
them as follows:

S.No. Name of the Product category Type ofchannel of Promotion

product According to (a) distribution used Activities
use (b) durability
and (c) tangibility
1.
2.
3.
4.
5.

ROLE PLAY
Mani and Prasad are good friends. Mani is a marketing executive working for an
MNC and Prasad is a small scale businessman making plastic toys:

Mani : Hi Prasad! How are you?

Prasad : Hello ! Mani, nice to see you.

Mani : How you business going on?

Prasad : Not very well.

Mani : Why?

Prasad : For the past 3 years my sales turnover has not increased. It is quite
disturbing.

Mani : I understand, but tell me how is your distribution of the product done.

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Module - 4 THE MARKETING MIX

Marketing Prasad : I sell the toys in the local market and in the nearby town. I have a dealer.
That's it.

Mani : No, you have to analyse your distribution channel. Let us sit down and
do some work. I think you should have at least three channels
ofdistribution.

Prasad : Why?
Note
Play the role of Mani and explain to Prasad the three suitable channels he should
adopt for the plastic toys.

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Marketing

16

ADVERTISING AND SALESMANSHIP Note

You must have seen a number of advertisements in TV, radio, cinema hall, billboard
(hoarding/ a very large board on which advertisements are shown, especially at the
sides of a road), newspapers and magazines. These advertisements are related to a
variety of products ranging from daily use items like oil, soap, shampoo, clothes to
durable goods like television, refrigerator, automobile etc. For each product, a number
of companies advertise their brand, as in case of washing powder - Surf, Ariel, Tide,
Wheel, Rin, Nirma, etc., and in case of television or LCD - Videocon, Sony, Samsung,
LG, Sansui, etc. For services also, the marketeers advertise through these tools.

The main purpose of advertising is to inform the prospective customers about the
availability, quality, features and price of the products and services and motivate
them to buy the same. Besides advertising, sales promotion and personal selling are
the other tools commonly used by the firms for promotion of their products and
services. You must have encountered some salesperson while buying shirts, shoes,
mobile phones, etc. who tell you about the price, features and quality of the product
you are buying. These salespersons are playing an important role in persuading the
customers. In this lesson, you will learn about these tools which are used by marketeers
to create, maintain and increase the demand for their goods and services.

LEARNING OUTCOMES
 describes advertising and distinguish between advertising and publicity;
 discribes salesmanship and attributes of a good salesman; and
 explains sales promotion and various sales promotion tools.

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Marketing
16.1 ADVERTISING
While watching a movie in a cinema hall or a television at home you must have noticed
that suddenly there is a break and some movie star or a sports star appears on the
screen displaying a product, indicating its special features, prices etc. This is followed
by similar appearances relating to other products before the movie is resumed. These
displays are known as advertisements which are used by different firms to inform a
Note
targeted group of customers about their product, its quality, availability, price etc.
Likewise, you come across a number of advertisements for a variety of products in
the newspapers and magazines. Advertising as a promotional tool is used by the
marketeers either to build up a long-term image of the product or to generate quick
sales. With the help of Advertising, Marketeers can reach geographically dispersed
buyers efficiently. Certain forms of advertisement like TV Advertisements require a
large budget, whereas for other forms of advertisement small budget is required, e.g.
newspapers or magazines, etc.

According to American Marketing Association "Advertising, is any paid form of

non-personal presentation and promotion of ideas, goods and services by an
identified sponsor."

Fig. 16.1 Features of Advertisement

Thus, advertising is

(i) Paid form of Communication: Advertisements appearing in the

newspapers,television, cinema halls etc. are duly paid for. The firms have to pay
huge amounts for use of space in newspapers or time slot in television and
radio etc.
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ADVERTISING AND SALESMANSHIP Module - 4
(ii) Non-personal Presentation of Message: In advertisements there is no face Marketing
to face communication as it happens in case of personal selling. These are
presentations through mass media and as such are impersonal in nature.

(iii) Promoting Goods or Services: Advertising is done with a specific objective

of promoting a product or service and increasing the sale.

(iv) Issued by an Identified Sponsor: The advertisers who sponsor the

Note
advertisements are duly identifiable in the advertised messages. Take the case of
advertisement of Lifebuoy soap on TV wherein the name and symbol of HUL
also appears.

Product Sponsor Media

Lifebuoy Hindustan Unilever Ltd. TV/Radio/Newspaper

Chyawanprash Dabur India Ltd. TV/Newspaper

Tide Proctor & Gamble TV/Newspaper

16.1.1 PUBLICITY

Publicity is like advertising. But it is a non-paid form of communication which may be

carried out in a form of news in the mass media about a product or about an organisation.
Publicity can be positive or negative. Maggi Ketch-up and Maggi Masala gained
popularity due to favourable publicity about Maggi Noodles. But, there was substantial
decline in the sales of some products with the spread of negative news associated with
those products in the market.Organisations have very little or no control on the message
being spread or how the message will be spread. So, we can say publicity is a powerful
tool of communication as it can make or break a product/company.

16.1.2 DISTINCTION BETWEEN ADVERTISING AND PUBLICITY

Advertising is different from publicity which is a communication of any significant

information about a company or its product to the public through non-personal
media without any payment by the concerned business firm. Thus, publicity is
basically information about the product, service or a business firm which is
communicated voluntarily by the media and is of commercial significance to
the firm. The information may be passed through media like magazines, newspapers,
radio, T.V. in the form of debates, discussions, news items, reports, editorials etc. The
company does not pay anything to the media for such activities. Look at these.

1. While reading the newspaper you may get news about an ongoing trade fair in
your state. It talks about the products of different companies exhibited there.

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Marketing After reading this news item, you may feel interested in having a look at or
buying one or more of these products.

2. In a newspaper there may be a column on review of movies. You read the

ratings given to different movies by critics and at times, feel interested in watching
a particular movie.

3. In the television news, sometimes we get information about the quarterly financial
Note
results of companies. This may motivate us to buy shares of such companies.

In all the above instances, there is information about the product or services or the firm
which is communicated through print or electronic media, leading to significant responses
by the public. Can it be called advertising? No, these are non-sponsored and have not
been paid for. As such, these are instances of publicity, and not advertising.

Difference between Advertising and Publicity

16.1.3 OBJECTIVES OF ADVERTISING

Advertising Publicity

Payment It is a paid form of The sponsor does not make any

dissemination of information. payment to the media as the
The firm has to pay for the use information is published/
of space and time. communicated voluntarily.
Identified There is an identified There is no identified sponsor.Media
Sponsor sponsor,that is, the business communicates the information as it
firm which wants to advertise considers it news worthy.
its products or services is
known.
Control The advertising firm has full The concerned firm has no control
control over the content, type, over the contents, type,and size of
size, duration and frequencyof the information.
the message.

Purpose It is intended to give This may have favourable or

favo urable and positive unfavourable impression on the
impression abo ut t he public about the company and its
company and its products. products.
Target Prospective Customers or General Public
Audience buyers

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The main objective of advertising is to help a business firm to promote its products and Marketing
increase the sales. But, there are some other goals which a firm can achieve with the
help of advertising. The objectives to be achieved through advertising are as follows:

1. Introduction of New Product: Business firms keep on introducing new

products in the market and have to inform the prospective customers about its
features, price, usage, availability etc. Advertising not only attracts their attention
but also helps them in forming an opinion about the product and making the best Note
purchase decisions.

2. Increase in Sale: Advertising helps in increasing the sales of the firm's products.
It also helps in turning non-users of products to users of products and also in
attracting the consumers of competitor's products. Business firms make use of
advertising to inform the consumers about the advantages and superiority of
their product.

3. Maintaining Existing Buyers: Now-a-days new products keep on entering

the market at a fast pace and consumers tend to switch over to the new products.
Advertising is used to remind the consumers about how good their products or
services are and that they are still in the market as old and reliable ones. The
idea is to prevent decline in the sale of their product in the market.

4. Create and Enhance Goodwill of the Firm: Advertising helps in building

reputation of the business house. Through advertising, the firms can communicate
their achievements to the consumers and clarify any misconceptions or doubts in
the mind of the public about themselves or their products, if any. This helps in
creating a good image of their firm in the minds of consumers, workers, investors,
government and so on.

5. Dealer Support: Another objective of advertisement is to provide the necessary

support to firm's dealers and distributors. Hence, some advertisements, besides
the information about the product characteristics, price etc., include a list of
dealers and distributors.

6. Create and Enhance Brand Image: Advertising is also used for creating abrand
image which helps in building customers' loyalty. When customers develop brand
loyalty, they do not shift to other brands easily. Brand image gets enhanced with
repeated advertisements.

7. Helps in Personal Selling: Advertising facilitates the process of personal

selling.The salesperson's job is made easier if the customer has familiarity with
the product. This is achieved through advertising. A customer is more receptive

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Marketing to the salesperson if he/she already has some idea about the product.

INTEXT QUESTIONS 16.1

1. The following sentences give the characteristics of advertising and publicity. You
are required to put 'A' for characteristics of advertisement and 'P' for publicity in
the boxes given against each sentence.
Note
(a) It is paid form of dissemination of information.

(b) There is no identified sponsor.

(c) There is an identified sponsor.

(d) This may leave favourable or unfavourable impression on the public about
the company and its products.

2. Read the following and indicate which objective of advertising the company is
trying to achieve. Write the objective in brackets.

(a) A washing powder manufacturing company issuing an advertisement about

protection of the girl child.( )

(b) A consumer durables company bringing out an advertisement giving a list

of dealers selling its products.( )

(c) A company using a celebrity to advertise their product. ( )

(d) A company manufacturing technical products issuing an advertisement

showing use and operation of its products.( )

16.1.4 ADVANTAGES OF ADVERTISING

In today's competitive world there area large number of products competing with
each other. Hence, it is necessary that information regarding features, prices and
availability of the product is frequently communicated to the consumers so as to ensure
a reasonable market share for the manufacturer. Not only that, it also helps the
consumers to make a right choice. So, advertising today benefits not only the business
houses who manufacture the products but also the consumers and society. Let us now
have a brief idea of how advertising benefits the manufacturers, consumers and the
society.

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Benefits to Manufacturers Marketing

1. Advertising helps the manufacturers in introducing new products, maintaining

customers of existing products and in increasing their sales by attracting new
customers.

2. It helps in spreading the message about the company, its product, products'
features, prices etc. to widely spread customers.
Note
3. It also helps the business houses in creating and enhancing their goodwill.

4. It makes the job of salespersons easier by keeping the customer informed about
the product.

5. Advertising is an important tool for fighting competition in the market effectively

by giving the customers a comparative picture of its products vis-a-vis the
competitors' products.

Benefits to Consumers

1. Advertising helps the consumers in getting useful information about the products,
prices, quality, terms of sale, after-sales services, etc.

2. Advertising also guides the customers about the right use of the product.

3. It helps them to make a comparative analysis and make their choice.

4. Advertising is the main source of information for those who live in remote areas
and cannot be easily approached by salespersons.

Benefits to Society

1. The enhanced competition resulting from advertising motivates the producers to

make improvements in their existing products and find out better alternatives
through Research and Development (R&D) activity. So it helps in providing
more convenience, comfort and better life style to the people.

2. Advertising also works as a guide and teacher for people who do not know
about many products and their multiple uses, if any.

3. It generates employment for thousands of people who are connected with the
advertising world in different capacities.

4. Advertising generates huge revenue for both print and electronic media. This
helps the availability of newspapers, magazines and television programmes at
affordable prices due to mass reach.

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Marketing 16.1.5 LIMITATIONS OF ADVERTISING

Many people consider advertising to be a wasteful activity and sometimes harmful for
the customers and the society in many ways. Their arguments against advertisement
are as follows:

(i) Advertising Multiplies Wants: People tend to desire and buy products as
they see in advertisement even if they do not actually need or afford them. This
Note
multiplication of wants may put them under financial and psychological pressure.

(ii) Advertising adds to the Cost and Price of Product: Money spent on
advertising eventually results in increased cost of the product, which is passed
on to the consumers through increased prices. You must have noticed that the
brands which are advertised heavily in different media are found to be priced
higher as compared to those which are not so heavily advertised.

(iii) Creation of Monopoly: Business firms which can spend heavily on advertising
are usually the ones who grab a bigger share of the market. Such firms generally
have a largest share of the market. This results in unequal opportunity for small
producers to make a place for themselves in the market as they do not get a fair
opportunity to compete. And as a result the bigger firm may create a monopoly.

(iv) Advertising may Affect the Value-system of Society: Advertising may

introduce ideas or concepts alien to our culture. These new values generated or
propagated by advertising may affect our social, moral and ethical values adversely.
Appeals related to sex, horror etc. are sometimes used in objectionable ways in
the advertisement to attract attention.

(v) Motivation for Wrong or Dangerous deeds: The way advertisements project
people consuming liquor, cigarettes or pan-masala, may tempt people to try and
then get addicted to such products which are not good for health. Similarly,
models are shown doing dangerous acts like jumping from the top of a hill which
some children may try to copy and may face the accidents.

(vi) Advertising may not Increase overall Demand: Advertising does not always
increase demand. In many cases, a number of firms manufacturing similar products
may advertise vigorously. This may not result in an increase in the total demand
for the product but simply shift demand from one brand to another.

(vii) One Way Communication: Advertisers share their message with a large
audience through different media but do not get the immediate feedback as it is
a one-way communication from Marketeer to a larger target audience.

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Marketing
INTEXT QUESTIONS 16.2
1. In the flow chart given below, the benefits of advertisement are given under
three heads. You are required to state two important points of benefit under
each head.

(i)
Note
(a) Benefits to
Manufacturers

(ii)

(i)

(b) Benefits to
Consumers

(ii)

(i)

(c) Benefits to
Society
(ii)

2. State any two limitations of advertising.

16.1.6 MEDIA OF ADVERTISING

Advertising media are the means through which messages regarding products and
services are transmitted from the advertising firm to people at whom that product is
targeted. Many types of media are available for this purpose. These are enumerated
below.

 Newspapers: Newspaper is a good means of advertising since a big

proportionof our country's population read newspapers published in Hindi, English
and the various regional languages.

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Marketing Newspaper is among the most suitable media for:

A. Advertising consumer products used by masses. Such products include

durables like TV, Refrigerator, Cycle, Scooter, Washing Machine etc.
and non-durables like soaps, shampoos, oils, etc.

B. It is also suitable for advertising many services like banking, insurance,

transportation, etc.
Note
However, it is not suitable for

A. Advertising products which have limited number of buyers like industrial

products or products used by specific professionals like engineers, doctors
etc.

B. Similarly, it is not suitable for products which have very few buyers like art
& crafts, expensive designer jewellery, furniture etc. For such products,
advertising in the newspaper is not considered appropriate.

 Television: Television is an important source of entertainment. It shows varieties

of programme on different channels and in different languages. As it is available
24X7, advertising of different products can be done on different channels during
the day as well as night. It has the ability to attract the attention of different
segments of consumers according to their viewership. For example, products
used by children such as chocolates, school bags, chewing gums, toys, etc. can
be advertised during programmes like cartoon network, storytelling etc., which
are specifically meant for children. Similarly, household products and cosmetics
can be more effectively advertised during programmes watched by women in
the family.

It is a medium of advertising with a lot of flexibility and reach as visuals are more
effective than audio and print media. It has the added advantage of reaching out
to the illiterate consumers.

Just like newspapers, this medium can be used for products of mass-use, like
consumer durables, non-durables etc. But it cannot be used effectively and
efficiently for specialised products meant for professionals or for industrial
products. For introduction of new products, repeated advertising in television
programmes is of immense help. However, the major limitation of this medium is
the heavy cost. Hence, only large enterprises are in a position to use this media.

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Marketing

Note

Fig. 16.2 Media of Advertising

 Radio : Radio is the most common source of entertainment for rural masses
and the people in the semi-urban areas. However, the addition of FM radio has
brought back the lost importance of radio in urban areas. The radio programmes
too have a lot of advertising before and during the programme. Krishi Sandesh
programme (for farmers) for example has advertisements on pesticides, fertilizers,
tractors etc. Advertising on radio is popular in India because a number of villages
do not have electricity and television transmission facility. Hence, radio still remains
a popular medium of advertising for rural people. Like television, radio is also a
source of entertainment, news and views. But, arrival of large number of channels
on television has reduced the popularity of radio and consequently its use for
advertising. But now-a-days, advertisement on different FM Radio channel is
again gaining popularity as you may listen to it during your journey in a car. Daily
commuters do listen to the Radio while travelling from home to office and vice
versa.

 Magazines and Journals : Magazines and Journals are the print media of
advertising. These are published periodically i.e., weekly, fortnightly, monthly,
quarterly, half yearly or annually.

Their circulation is limited and most magazines are generally targeted at specific
segment of readers. Hence, advertisers use this media selectively according to

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Marketing the target customers to be reached. For example, the health care products can
be advertised in magazines like Health and Nutrition, sports goods in magazine
like Sports Star, medicines and medical equipment in different medical journals
and so on.

 Films: Films are an important source of entertainment in India and as such an

important medium of advertisement. Advertisements are generally shown before
Note the start of the show or during interval. It can be used for advertising products of
mass consumption like cosmetics, toiletries, medicines, etc. People from all strata
of society visit cinema halls. But with limited reach, this is a comparatively costly
medium.

 Outdoor Advertising: While travelling by bus or train, you must have noticed
anumber of advertisements on the walls, billboards, outside and inside the buses
and trains. Even while walking on the road you must have seen advertisement of
different products--shops, schools, coaching institutes-- written on the back of
a scooters, rickshaws, and buses etc. These are examples of outdoor advertising
which are usually in the form of hoardings, displays on walls of buildings, public
places like railway station etc., and are generally used for advertising products
like shoes, lotions, creams, fans, cycles etc. These are also done through electronic
displays. Lights and neon signs are used during night at different places with
advertisement messages illuminating at regular interval. Another media of
advertisement in outdoor advertising is vehicular displays. The space outside
buses, company trucks (used to carry company's own products) can be used
to attract and inform the customers about the product, availability, price etc.

It may be noted that the cost of hoardings/neon signs etc. is quite high due to
heavy initial expenditure on their preparation and installation. The rent paid for
locating these at public places is also quite high. Despite this, all outdoor media
are less expensive as compared to print, television and radio advertising. However,
their reach is highly limited.

INTEXT QUESTIONS 16.3

1. Complete the following table by writing the names of the products advertised
most frequently in the given medium.

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Marketing
Medium Products Advertised

Newspaper 1. ..................................................................

2. ..................................................................

3. ..................................................................
Note

Television 1. ..................................................................

2. ..................................................................

3. ..................................................................

Radio 1. ..................................................................

2. ..................................................................

3. ..................................................................

Magazines 1. ..................................................................

2. ..................................................................

3. ..................................................................

2. Which medium/media of advertising will be most suitable in the following cases:

(a) For advertising products of mass consumption for all strata of society.
( )

(b) To reach a selective target group or a specific segment of readers. ( )

(c) To catch the attention of people at traffic lights, in traffic jams or when
they are travelling by train. ( )

(d) To reach out to illiterate consumers as well as to use the visual medium
effectively. ( )

(e) To reach a wide range of the literate population of the country. ( )

(f) For advertising to people in rural, semi-urban and the urban areas. ( )

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Marketing
16.2 SALESMANSHIP
Imagine one of your friends has gone to a readymade garment shop to buy a shirt for
his younger brother. The salesperson has shown him the latest collection of garments.
By the time the process of sale is concluded, he may also purchase one shirt for
himself. The reason for such unplanned purchase is the effect of salesmanship. The
salesperson at the counter may have first assessed his interest in the new fabric available
Note
and then tried to persuade him to buy another shirt for himself. This whole exercise of
assessing the need, activating it and ultimately satisfying it by selling the product is
termed as salesmanship or personal selling. It is a process of assisting and persuading
the prospective customers to buy a product in a face-to-face situation. In other words,
salesmanship simply means selling through personal communication. For successful
selling, the salesperson usually goes through a selling process which involves the
following seven steps.

(i) Prospecting


(ii) Pre approach

(iii) Approach

(iv) Presentation and demonstration

(v) Answering the queries/objections and their clarification

(vi) Action or ending the process of sale

(vii) Follow up or after-sales service

Prospecting by a salesman refers to identifying the prospective buyers in his

area of operation. Having done this, he has to obtain the necessary information
about the targeted customer, his capacity to pay, choice and preferences etc.

After this, in pre-approach activity, he approaches the customer to gain his

attention, greets him and makes his presentation i.e., informs the customer

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about the product, its quality, features, price etc. and demonstrates its use, if required. Marketing

Then he handles the customer's queries, persuades him to make his final
decision and ends the process of sale with receiving his order and thanking him.
Finally, he ensures the delivery of goods and provides information about the necessary
after-sales service. You must have also experienced the same while buying products
like shoes, cosmetics, detergent at your doorstep, sunglasses in a market, etc.
Note
16.2.1 IMPORTANCE OF SALESMANSHIP

The flow of goods from the producers to the consumers may not be possible without
the involvement of salespersons. The salespersons play an important role in the process
of sale. Starting from the conversation with the consumer to concluding a sale, they
actually act as an important link between the manufacturer and the consumer. They
ensure the sale of products and so also provide satisfaction to customers. Thus, it is
not only the business houses which benefit from salesmanship but also the consumers
and the society. The benefits of salesmanship are discussed below:

A. Benefits to Consumers:

 A salesperson acts as a friend and a guide to the consumers.

 By making conversation with salesperson, the customer gets help in

identifying the product of his need and the price range that suits him.

 The salesperson explains to the customers the uses and the operational
aspects of a product.

 By giving the requisite information about the company and the product,
the salesperson provides confidence to the customers to try something
new which might be better and/or cheaper.

 The salesperson also provides information about the necessary after-

sales service to the customers. You must have also experienced it while
buying a mobile phone or any electronic gadget in the recent past.

B. Benefits to the Business:

 Salesmanship helps a business in increasing its sales.

 Identification of new customers and persuading them to buy can be done

effectively through personal selling.

 Since the salesperson comes in direct contact with the customers,

understands the needs and preferences of the customers and thus, can

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Marketing help the businessman in planning for the right type of products and
introducing the necessary improvements therein.

 In case of products of technical nature, the role of salesmanship is very

important as the salesperson can personally explain the functioning of the
product, its use and precautions to be taken in its use. This ensures proper
handling of the product, and boosts customer's confidence in his choice
Note of the product.

C. Benefits to the Society:

 Salesmanship facilitates the process of production, distribution and

consumption.

 Salespersons help in collecting market information, credit information,

delivering goods and collecting payments.

 They help in matching demand with supply because they know what the
consumers want.

 They also inform the consumers about the introduction of new products,
if any.

 By increasing sales, they help in the growth of business.

16.2.2 QUALITIES OF A GOOD SALESPERSON

There are a number of shops selling the same product in the market but you may
prefer visiting a particular shop for buying a specific category of products. Why? This
happens primarily because of the way the staff of the shop attends you. The salesperson
at the counter welcomes you with a smile, shows keen interest in your purchase and
explains about the different varieties of the product in such a way that it becomes
easier for you to make a decision. So, besides the availability of the product, its price
etc., it is the effort or behavior of the salesmanship towards you that makes a difference
and builds your preference for a shop. Let us now understand the basic qualities which
a salesperson must possess to be able to attract and retain a customer like you.
Salesmanship is a tough and challenging job which requires a mixture of physical and
mental qualities. Some of the common qualities which a salesperson must possess are
as follows.

(a) Good Personality: Personality is a mixture of many traits like physical

appearance, dressing-up, way of talking, manners, pitch of voice, habits,etc.
Personality of a salesperson should be such that the moment he/she comes in

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contact with the customer, he/she looks friendly and the customer is ready to Marketing
start a conversation.

(b) Mental Qualities: A salesperson must have the quality of alertness, imagination,
foresightedness, empathy etc. They should have the ability to read the customer's
mind and behave accordingly. There may be certain doubts or apprehensions in
the mind of the customer regarding the product. Only a salesperson with these
mental qualities will be able to solve the customer's problems. A good salesperson Note
should be able to match the product with the customer's need and ability to pay.

Fig. 16.3 Qualities of a Good Salesperson

(c) Good Behaviour: A salesperson should be a well behaved person with ability
to interact with people comfortably. should be cooperative so that they can help
people in making up their minds by patiently answering all their questions. Patience
and humility will help them in not only holding the attention of the customer but
also in getting them interested in purchasing the product.

(d) Knowledge: While buying a television set normally we ask the salesperson a
number of questions about the features of the latest model. If the salesperson
fails to answer our queries or if we are not satisfied with the reply, we may leave
that shop and visit another shop where all of our queries are answered by the
salespersons. This is possible only when the salesperson has detailed knowledge

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Marketing of the product. They should know every detail relating to the product and the
company They are is representing. They should be able to explain the various
features of the product, the way it is to be used and the precautions to be taken
and so on. Knowledge about competitors' product is also a must so that the
salesperson can explain the superiority of their product.

(e) Ability to Communicate and Persuade: If a salesperson can communicate

Note properly and effectively then they will be able to clear the biggest hurdle of
making the prospective customer listen to them. The salesperson must speak
confidently, clearly and audibly. Good communication ability coupled with good
knowledge about the product helps the salesperson in persuading the customer
to buy the product.

(f) Persistence: The salesperson must know the art of persistence. It requires a
sense of determination to convince the customers to buy. They must not give up
easily. Without being offensive, he/she must persuade the customer to finalise
the purchase with a sense of satisfaction.

INTEXT QUESTIONS 16.4

1. Complete the flow chart with correct steps in the selling process.

Pre-approach

Approach

Answering the queries/objections and their clarification

After-sales service

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2. State briefly the benefits of salesmanship to: Marketing

(a) Consumers

(b) Business

(c) Society

2. The following sentences give the benefits of salesmanship. You are required to
Note
put 'B' for benefits provided to business, 'C' for benefits provided to Consumers
and 'S' for benefits provided to the society in the boxes given against each
sentence.

a. By giving the requisite information about the company and the product,
provides confidence in accepting or rejecting the sale.

b. Helps in planning for the right type of products and introducing the
necessary improvements therein.

c. Explains the uses and the operational aspects of a product.

d. Facilitates the process of production, distribution and consumption.

e. Ensures proper handling of the product.

3. List any two qualities of a good salesperson.

16.3 SALES PROMOTION

In the market, sometimes we see few special offers like 'Buy one get one free offer';
50 gm. extra in a 250 gm pack of a particular brand of tea, or one glass or bowl free
with a pack of 500 gm. There are innumerable examples where the manufacturer or
the seller tries to tempt you to buy his product by offering discounts, extra quantity or
a chance to win grand prizes, etc. All such activities are known as sales promotion.

Promotional activities other than advertising, salesmanship and publicity which

help in increasing the market demand of the product may be part of the sales
promotion. It is a non-repetitive and one-time communication process. Advertising
offers a reason to buy whereas sales promotion offers an incentive to buy. According
to American Marketing Association "Sales Promotion includes those
marketing activities, other than personalselling, advertising and publicity that
stimulate consumer purchasing and dealer effectiveness such as displays,
shows and exhibitions, documentation and various non-recurrent selling efforts
not in the ordinary routine".

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Marketing All elements of a promotion mix such as personal selling, advertising, publicity are
used to inform people about the availability of a product, its characteristics and features
and to create desire in the mind of the people to buy the product. Sales promotion is
an effort in the same direction and is another important element of the promotion mix
which includes displays, free sample, cash refund offers, trade fairs, exhibitions, discount
coupons, deferred payment plans, prizes, free trials, etc. These sales promotion tools
Note are widely used these days and competing with advertisement as a tool for promoting
the companies' offerings.

16.3.1 OBJECTIVES OF SALES PROMOTION

Different sales promotional tools have different objectives. For example, while a free
sample may motivate a consumer to buy a product for the first time, a free check-up
for existing durable product like television, refrigerator etc. may affect future purchase
decision of the buyer. Some of the objectives of sales promotion are listed below:

1. Information to Customers: Sales promotion activities inform the potential

buyer about the availability, features, uses etc. of the product. Thus, it offers
additional support to promotional activities like advertising, publicity and
personal selling (salesmanship).

2. Persuades Customers: Sales Promotion activities aim at arousing

customers'interest in the product and persuading them to buy the same.

3. Increase in Sales Volume: It aims at increasing sales. It is specially done

during the periods when customer may not buy the product because it may not
have immediate use, like a room cooler in winter, and a room heater in summer.
The sales promotion schemes are a big help in making off-season sales and also
in tempting the buyers to make quick decisions to purchase.

4. Incentive to Retailers: The main objective of sales promotional activities is to

offer promotional support to retailers. Sales promotion schemes make sales
easier. Incentive schemes help in getting shelf space for such products in new
retail outlets.

5. Create Product Identity: A number of brands of a particular product are

available in the market and it is very difficult to distinguish one from the other as
all have similar features, prices, variety etc. Under sales promotion programme,
product identity is established by offering additional features and
incentives. This helps in building consumers' preference for the specific
products and brands.

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16.3.2 DIFFERENCE BETWEEN ADVERTISING AND SALES Marketing
PROMOTION

Basis Advertising Sales Promotion

(a) Objectives Objective of advertising is to create a The objective of salespromotion is to
favourable consideration for the stimulate the consumers to buy
product. the product. Note
(b) Effect It has a long term effect. It has a short term effect and useful
for increasing immediate sales.

(c) Nature Advertising is recurring in nature. It is non-recurring and one time

communication process.

(d) Approach Advertising offers a reason to buy Sales promotion offers an incentive
to buy.

(e) Result Generally slow, can be seen over time. Instant

16.3.3 TOOLS USED IN SALES PROMOTION

Sometimes we get a small pack of tea, shampoo, soap or floor cleaner free from the
manufacturer or producers. Have you ever thought why do companies distribute their

Fig. 16.4 Tools used in sales promotion

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Marketing products free like this? Because, their main intention is to attract the consumers' attention
towards the product and then make them feel tempted to buy the product. This is how
they promote sales. Some of such promotional tools are given below:

1. Distribution of Free Samples: As mentioned above, distribution of free

samples is a commonly used sales promotion tool. It is a good method for
introducing a new product or a brand in the market. Such free samples can be
Note distributed at the door step, through fairs, or even through retail stores. Sometimes
you may find free samples of shampoo, ketchup, deodorants, etc. along with the
newspapers.
2. Bonus Offer: At times marketeers offer extra quantity with standard products
without any additional charge to the customer.
3. Price-off: To increase sales, or to reduce competition, many business firms cut
down prices. Prices may also be cut down during off season to maintain certain
volume of sales. You may found a deodorant with a reduced price as a
promotional or introductory offer. This is generally common with the newly
introduced products or variants of a product.
4. Exchange Offer: Under this scheme, companies generally attract the customers
by offering a price cut on purchase of new product in exchange for an old product.
Recently, you must have seen many advertisements talking about such offers on
purchase of new refrigerator, television, washing machine, motorbike, cars, etc.
5. Fairs and Exhibitions: Trade fairs, exhibitions and fashion shows are important
outlets of sales promotion. They provide a forum for demonstration and exhibition
of products. A lot of important information about the product can be
communicated to the customers through leaflets, brochures etc. during fairs and
exhibitions. Especially in case of technical products like computer and electronic
households' gadgets, live demonstrations are undertaken. This cultivates
customers' interest and boosts their confidence in the product.
6. Free Offer: Many companies give 'free' offers to boost the sales of their
products.They offer products of similar or related nature with the purchase of
main products. For example, Soap or hair oil free with a bottle of shampoo, etc.
7. Money Refund Offer: Of late, another method being used by marketeers to
boost consumer's confidence in a product is a promise of total refund of money
spent on the product if the buyer is not happy with the product's performance.
Such offers not only arouse the customers' interest in the product but also
motivates them to make a trial.

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8. Discount Coupon: Discount Coupon is a certificate that entitles the holders Marketing
aspecified discount on purchase of a product. Such discount coupon may be
issued by the company by mail or through the dealers. They can also be issued
through newspapers.
9. Deferred Payment Plan: During 1980's, some of the airlines offered deferred
payment plans - 'Travel today pay fare later' for air journeys for promoting
travel. It was quite a success. This plan is quite common now-a-days in case of Note
TVs and air-conditioners.
10. Contests: There may be a contest like a quiz related to the product or slogan
writing. In case of quizzes, the questions are generally prepared in a way that
consumer feels forced to know about the company and the product in the hope
of winning a prize. These contests can be held on television, radio and through
the magazines.
11. Chance to meet a Movie Star/Sports Star: You must have seen offers with
some products where on the purchase you get a chance to meet a Movie Star or
a Sports Star who is popular and promoting the product.
Activity

While reading newspaper and watching television, note down the sales promotion
tools being used by different companies. Give any five examples of such tools in
detail.

INTEXT QUESTIONS 16.5

1. State the main objectives of sales promotion.
2. Name the sales promotion tools being referred here:
(a) A sachet of a new brand of shampoo attached to a magazine for use by its
readers. ( )
(b) 10% talcum powder extra in a 250 gram tin. ( )
(c) A crossword puzzle on information about a new magazine for children.
( )
(d) A comb free with a bottle of hair oil. ( )
(e) Books being sold at the annual book fair in your town. ( )
(f) A ceiling fan being offered at a discounted price to customers during winters.
( )

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Marketing
TERMINAL EXERCISE
Very Short Answer Questions

1. Define the term advertising.

2. What is publicity?

Note 3. Define personal selling.

4. State the meaning of Sales Promotion.

5. Explain 'Bonus offer' as a tool of sales promotion.

Short Answer Questions

1. What are the main objectives of advertising? Explain briefly.

2. How is publicity different from advertising?

3. Name four items each, which are best suited for advertisement in 'Magazines
and Journals' and through 'Films'.

4. What are the limitations of advertising?

5. State the importance of personal selling for the society.

Long Answer Questions

1. "Advertising plays an important role in business and society". Discuss.

2. What is the right media for advertising consumer durable products? Discuss.

3. A manufacturer of detergent powder wants to introduce detergent cake in the

market under a new brand name. Which sales promotion tools should he use to
attract the customers? Give reasons in support of your answer.

4. One reputed company wants to recruit salesmen for retail stores. Can you identify
the qualities they should look for in the prospective candidates?

5. What are the objectives of Sales promotion? Explain in brief, giving a list of
various popular sales promotion tools.

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Marketing
ANSWERS TO INTEXT QUESTIONS
16.1

1. (a) A

(b) P

(c) A Note

(d) P

2. (a) Create and enhance goodwill of the firm

(b) Dealer support

(c) Create and enhance brand image

(d) Helps personal selling

16.2

1. (a) Benefit to Manufactures

(i) Introduction of new products

(ii) Creating and enhancing goodwill

(b) Benefits to Consumers

(i) Information about product, prices etc.

(ii) Guides the consumers about proper use

(c) Benefits to society

(i) Generates employment

(ii) Generates huge revenue for print and electronic media

2. (a) Advertising multiplies wants

(b) Advertising adds to the cost and prices of product.

16.3

2. (a) Films Advertising

(b) Magazines and Journals

(c) Outdoor advertising

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Marketing (d) Television

(e) Newspapers

(f) Radio

16.4

1. (a) Prospecting
Note
(b) Presentation and demonstration

(c) Action or closing the sale

2. (a) C

(b) B

(c) C

(d) S

(e) B

3. (a) Good personality

(b) Mental qualities

16.5

1. (a) Information to customers

(b) Persuades Customers

(c) Increase sales

(d) Incentive to retailers

(e) Create product identify

2. (a) Distribution of free sample

(b) Bonus offer

(c) Contests or Quizzes

(d) Freeoffer

(e) Fairs and exhibitions

(f) Price-off

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Marketing
DO AND LEARN
1. Visit any two retail shops selling the same type of goods (may be readymade
garments or electronic goods) in your locality. Note down the different qualities
of the salespersons you noticed during your conversation. Prepare a comparative
chart and draw conclusions giving suitable reasons about the quality of
salesmanship in both the retail shops.
Note
2. Make a list of 10 different types of products. Find out the media used for their
advertising. Also find out the different sales promotion tools being used by the
marketeers to promote that product. Tabulate your findings as shown below.

Name of Product Advertising Media Sales Promotion tools

Ball pen Newspapers, Television used Fairs and
Exhibitions

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

ROLE PLAY
Abhay has a small factory that manufactures biscuits while his friend Suryakant is a
fresh MBA graduate. Both are discussing about promotion of Abhay's products.

Abhay : People hardly know about my brand of biscuits. How do I

increase my sales?

Suryakant : Simple Advertise your product.

Abhay : But advertising is an expensive option.

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Marketing Suryakant : No, No. But you must make choice of the right media. You
can advertise through your local cable channel on television
initially and then through other popular television channels.

Abhay : Any other method to increase my sale.

Suryakant : Yes. Use promotional schemes; send people for door-to-door

Note selling.

Abhay : All, this sounds a little difficult.

Two friends sat down and discussed various ways of promoting the products keeping
in mind cost and return involved in advertising in different media, different kinds of
sales promotion offers, salesmanship etc.

Continue the conversation between them, taking the role of Suryakant and asking
your friend to play Abhay's role.

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WHAT HAVE YOU LEARNT
CONSUMER PROTECTION Module - 4
Marketing

17

CONSUMER PROTECTION Note

A consumer is said to be a king in a free market economy .The earlier approach of

caveat emptor ,which means "Let the buyer beware", has now been changed to
caveat venditor which means "Let the seller beware".You may have often heard
a lot of instances of the consumer being exploited by the sellers and facing problems
during the purchase,use and consumption of goods and services due to unfair trade
practices such as adulteration, false and misleading advertisement, hoarding , black
marketing etc . All this calls for appropriate legal protection to be provided to the
consumer.

This is why the Consumer Protection Act was first introduced in 1986, which has now
been repealed and the new Consumer Protection Act was enforced on 20th July,2020
replacing the previous act.

LEARNING OUTCOMES
 develop an understanding of a consumer and importance of consumer protection;

 identifies the importance of explaining the rights and responsibilities of consumers;

and

 explains the measures adopted to protect a consumer.

17.1 MEANING OF CONSUMER

"A Consumer" means any person who-
(i) buys any goods for a consideration which has been paid or promised or partly
paid and partly promised, or under any system of deferred payment and includes

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Marketing any user of such goods other than the person who buys such goods for
consideration paid or promised or partly paid or partly promised, or under any
system of deferred payment, when such use is made with the approval of such
person, but does not include a person who obtains such goods for resale or for
any commercial purpose; or

(ii) hires or avails of any service for a consideration which has been paid or promised
Note or partly paid and partly promised, or under any system of deferred payment
and includes any beneficiary of such service other than the person who hires or
avails of the services for consideration paid or promised, or partly paid and
partly promised, or under any system of deferred payment, when such services
are availed of with the approval of the first mentioned person, but does not
include a person who avails of such service for any commercial purpose.

17.2 CONCEPT OF CONSUMER PROTECTION

Consumer protection means safeguarding the interest and rights of consumers. In other
words, it refers to the measures adopted for the protection of consumers from
unscrupulous and unethical malpractices by the business and to provide them with
speedy redressal of their grievances. The most common business malpractices leading
to consumer exploitation are given below:

(a) Sale of adulterated goods i.e., adding something inferior to the product being
sold.

(b) Sale of spurious goods i.e., selling something of little value instead of the real
product.

(c) Sale of sub-standard goods i.e., sale of goods which do not confirm to prescribed
quality standards.

(d) Sale of duplicate goods.

(e) Use of false weights and measures leading to underweight.

(f) Hoarding and black-marketing leading to scarcity and rise in price.

(g) Charging more than the Maximum Retail Price (MRP) fixed for the product.

(h) Supply of defective goods.

(i) Misleading advertisements i.e., advertisements falsely claiming a product or service

to be of superior quality, grade or standard.

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(j) Supply of inferior services i.e., quality of service lower than the quality agreed Marketing
upon.

(k) E-commerce will now be governed by all the laws that apply to direct selling. All
the e-commerce platforms will have to disclose sellers' details, such as their
address, website, email, etc and other conditions related to refund, exchange,
terms of contract and warranty on their website to increase transparency.
Note
The above instances show the exploitation of consumers in the context of goods and
services. In a democratic nation like India, should we allow this to happen? So, the
measures adopted by the government or non-government organisations (NGOs) for
safeguarding the interests of the consumers constitute consumer protection.

Examples of Consumer Exploitation in India:

 Coca Cola was found guilty of supplying drinks unfit for human
consumption,which was upheld by the State Consumer Commission and had to
pay Rs. 1 lakh for damages to the consumer .

 The after sales service provider of the television set charged Rs 500 as service
charge though he repaired the set within the warranty period.

 The tickets issued to different passengers on the same day for the same journey
showed the same seat number.

 Penalty of Rs. 50 was charged by SBI after issuing the cheque book to the
customer showing that the balance available in the account was less than the
minimum required balance for issue of cheque book

 The supply of cooking gas cylinder to the consumers is found to be underweight

17.3 IMPORTANCE OF CONSUMER PROTECTION

Consumer Protection has a vast agenda. It includes educating consumers about their
rights and responsibilities and also helps in getting their grievances redressed. Consumer
Protection is imperative to both the consumers and the business.

The importance of consumer protection from the consumers' point of view can be
understood from the following points:

(i) Consumer Ignorance

In the light of widespread ignorance of consumers, it is necessary to educate

consumers about the rights and reliefs available to them so as to prevent consumer
exploitation.

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Marketing (ii) Unorganised Consumers

Consumers need to be organised in the form of consumer organisations which

would look after their interests. Though, in India, consumer organisations have
been set up , adequate protection is required to be given to consumers till these
organisations become powerful enough to protect and promote the interests of
consumers.
Note
(iii) Widespread Exploitation of Consumers

Consumers need protection against unscrupulous, exploitative and unfair trade

practices like defective and unsafe products, adulteration, false and misleading
advertising, hoarding, black-marketing etc.

From the point of view of Business

A business must also lay emphasis on protecting the consumers and adequately satisfying
them. This is important because of the following reasons:

(i) Long-term Interest of Business

Enlightened businesses realise that it is in their long-term interest to satisfy their

customers. Satisfied customers not only lead to repeat sales but also help to gain
prospective customers.

(ii) Business uses Society's Resources

Business organisations use resources which belong to the society and thus, have
a responsibility to supply such products and render such services which are in
public interest .

(iii) Social Responsibility

A business has social responsibility towards various interest groups. Business

organisations make money by selling goods and providing services to consumers
thus, their interest has to be well taken care of.

(iv) Moral Justification

It is the moral duty of any business to take care of consumer's interest and avoid
any form of their exploitation.

(v) Government Intervention

A business engaging in any form of exploitative trade practices would invite

government intervention or action. This can impair and tarnish the image of the
company.
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Marketing
INTEXT QUESTIONS 17.1
1) Give five instances of your daily life in which you see yourself as a consumer.

2) Put ( / ) mark in the box provided to identify consumer exploitation.

(a) Turmeric powder sold with mixture of yellow colour.

(b) Purchased a table fan with two years warranty. Note

(c) Packet of noodles, marked on the label as 100 gms, but actually it
weighs 80 gms.

(d) A passenger travelled in a deluxe bus but the seat was very much
uncomfortable.

17.4 RIGHTS OF THE CONSUMERS

Fig. 17.1 Rights of Consumers

1) Right to Safety

Right to Safety means right to be protected against the marketing of goods and
services, which are hazardous to life and property. The purchased goods and
services availed should not only meet their immediate needs, but also fulfil long-
term interests. Before purchasing, consumers should insist on the quality of the
products (ISI, AGMARK) as well as on the guarantee of the products and
services.

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Marketing 2) Right to be Informed

Refers to the right to be informed about the quality, quantity, potency, purity,
standard and price of goods so as to protect the consumer against unfair trade
practices.This will enable him to desist from falling prey to high pressure selling
techniques and act wisely.

3) Right to Choose
Note
This means the right to be assured of access to a variety of goods and services
at competitive prices. In case of monopolies, it means the right to be assured of
satisfactory quality and service at a fair price.

4) Right to be Heard

It implies that the consumer's interests will receive due consideration at

appropriate forums and they will be represented in various forums formed to
consider the consumer's welfare.The Consumers should form non-political and
non-commercial consumer organisations which can be represented in various
committees formed by the Government and other bodies in matters relating to
consumers.

5) Right to Seek redressal

This means the right to seek redressal against unfair trade practices or unscrupulous
exploitation of consumers and the right to fair settlement of the genuine grievances
of the consumer. Consumers must lodge complaints for their genuine grievances.

6) Right to Consumer Education

It implies that the consumer has a right to acquire the knowledge and skill to be
an informed consumer throughout life.Ignorance of consumers, particularly of
rural consumers, is mainly responsible for their exploitation.

17.5 RESPONSIBILITIES OF A CONSUMER

1. Consumer must Exercise his Right

Under Consumer Protection Act, the consumer is granted various rights such as
right to safety, right to choose etc. But these rights will be useful only when the
consumer exercises these rights. The consumer must file a complaint,be aware
of his rights and exercise them whenever required.

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2. Cautious Consumer Marketing

The consumer should not believe the words of seller blindly. He must insist on
getting full information about the goods or services.

3. Filing Complaints for the Redressal of Genuine Grievances

Most of the time consumer ignores the loss he suffers on purchase of defective
good or service.The consumer must file a complaint even for a small loss. This Note
awareness among consumers will make the sellers more conscious to supply
quality product.

4. Consumer must be Quality-Conscious

The problems of supply of sub-standard goods, adulterated products and

duplicate products can be solved only when the consumer looks for quality
marks such as ISI mark, Agmark etc. while purchasing the goods or services.

5. Do not be carried away by Advertisements

The advertisements often exaggerate the qualities or features of product or

service. The consumer must compare the actual use of the product with the use
shown in advertisement and insist to stop showing exaggerated qualities if required.

6. Insist on Cash Memo

To file a complaint the consumer needs the evidence of purchase, and a cash
memo is the proof that the consumer has paid for the goods or service. A seller
is bound to give a cash memo even if the buyer does not ask for it.

7. Form consumer societies

Form consumer societies which could play an active part in educating consumers
and safeguarding their interest and protecting them from exploitation by sellers .

8. Be environment friendly

The consumer must respect the environment; avoid waste littering and contribution
to pollution.

INTEXT QUESTIONS 17.2

1) List the various rights that you have as a consumer.

2) Identify the relevant rights of a consumer being violated in the following instances.

(a) A bottle of acid sold but the cap was not properly sealed.

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Marketing (b) Medicine sold without date of manufacturing and date of expiry printed
on its packet.

(c ) The seller compels the consumer to purchase the available product.

(d) The common consumers are not aware of their rights, right path and
procedure for filing the complaints.

Note 3) Match the following Marks indicating the quality with the corresponding products:

Marks indicating quality Product

I. a. Processed Foods

II. b. Agricultural Goods

III. c. Jewellery

IV. d. Industrial Products

17.6 WAYS AND MEANS OF CONSUMER PROTECTION

In India large numbers of consumers living below poverty line, are illiterate and unaware
of their rights. So, consumer protection movement cannot be the same as followed by
developed countries.In India it has to be a social movement wherein people of all
walks of life have to play their role. Following are some ways and means of consumer
protection followed in India:

1. Self-Regulation by Business

Large business houses have realised that they can prosper and grow for a long
period of time only by giving due importance to consumers. Socially responsible
firms follow quality standards and have started a customer grievance cell to
attend the complaints of consumers.

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2. Business Associations Marketing

Various business associations such as Federation of Indian Chamber of

Commerce and Industry (FICCI) and Confederation of Indian Industry (CII)
have framed codes of conduct which lay down guidelines for dealing with
customers.

3. Awareness Programme
Note
To increase the level of awareness among the consumers the Government of
India has initiated various publicity measures. It regularly brings out journals,
brochures, booklets and various posters. It observes World Consumer Rights
Day on 15 March and National Consumers Day on 24 December every year.

4. Consumer Organisations

Consumer organisations play an important role in educating consumers regarding

their rights and duties. These organisations also help consumers to get relief in
case of exploitation by the seller.

Examples of such organisations are:- CERC (Consumer Education and

Research Centre), Ahmedabad; VOICE (Voluntary Organisation in the Interest
of Consumer Education), New Delhi ; CGSI (Consumer Guidance Society of
India)

5. Government

The Government of India has framed a set of laws and legislations to protect the
interests of consumers and the most important act framed by the government is
Consumer Protection Act 2019. This Act has provided three tier redressal
agencies, i. e., District Forum, National Commission and State Commission.

6. Lok Adalat

Lok Adalats are the effective and economical system for quick redressal of the
public grievances. The aggrieved party can directly approach the adalats with
his grievance, and his issues are discussed on the spot and decisions are taken
immediately. Cases of electricity billing, telephone billings, road accidents etc.
can be taken up in Lok Adalat for spot settlement. Infact, Indian Railways,
Mahanagar Telephone Nigam Limited and Delhi Vidyut Board hold LokAdalats
regularly to settle user's grievances on the spot.

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Marketing 7. Public Interest Litigation

Public Interest Litigation (PIL) is a scheme under which any person can move to
the court of law in the interest of the society. It involves efforts to provide legal
remedy to un-represented groups and interests. Such groups may consist of
consumers, minorities, poor persons, environmentalists and others. Any person
or organisation, though not a party to the grievances, can approach the court for
Note remedial action in case of any social atrocities.

8. Consumer Welfare Fund

The government has created a consumer welfare fund for providing financial
assistance to strengthen the voluntary consumer movement in the country,
particularly in rural areas. This fund is mainly used for setting up facilities for
training and research in consumer education, complaint handling, counselling
and guidance mechanisms, product testing labs, and so on.

9. Legislative Measures

A number of laws have been enacted in India to safeguard the interest of

consumers and protect them from unscrupulous and unethical practices of the
businessmen. Some of these Acts are as follows:

(i) Drug Control Act, 1950

(ii) Agricultural Products (Grading and Marketing) Act, 1937

(iii) Industries (Development and Regulation) Act, 1951

(iv) Prevention of Food Adulteration Act, 1954

(v) Essential Commodities Act, 1955

(vi) The Standards of Weights and Measures Act, 1956

(vii) Monopolies and Restrictive Trade Practices Act,1969

(viii) Prevention of Black-marketing and Maintenance of Essential Supplies

Act, 1980

(ix) Bureau of Indian Standards Act, 1986

The object and interest of almost all these enactments are mainly punitive, though
some of these are also preventive in nature.

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Marketing
INTEXT QUESTIONS 17.3
1) Fill in the blanks
(a) World Consumer Right Day is observed on………...................
(b) National Consumer Day is observed on……............................
2) State the various ways and means of consumer protection.
Note
3) Give the full form of the following:
(a) VOICE (b) CGSI

17.7 CONSUMER PROTECTION ACT

The Consumer Protection Act was first passed in 1986 and it came into force from 1
July 1987. The new Consumer Protection Act 2019 received the assent of the President
on the 9th August, 2019 and was enforced on 20th July, 2020.The basic aim of the
Consumer Protection Act, 2019 is to save the rights of the consumers by establishing
authorities for timely and effective administration and settlement of consumers' disputes.

Key features of the Consumer Protection Act, 2019

1. Establishment of the Central Consumer Protection Authority (CCPA)

The Act has the provision of the establishment of the CCPA which will protect,
promote and enforce the rights of consumers. The CCPA will regulate cases
related to unfair trade practices, misleading advertisements, and violation of
consumer rights.

The CCPA will have the right to impose a penalty on the violators and passing
orders to recall goods or withdraw services, discontinuation of the unfair trade
practices and reimbursement of the price paid by the consumers.

The Central Consumer Protection Authority will have an investigation wing to

enquire and investigate such violations. The CCPA will be headed by the Director-
General.

2. Rights of consumers

i. To have information about the quantity, quality, purity, potency, price, and
standard of goods or services.
ii. To be protected from hazardous goods and services.
iii. To be protected from unfair or restrictive trade practices.
iv. To have a variety of goods or services at competitive prices.

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Marketing 3. Prohibition and Penalty for a Misleading Advertisement

The Central Consumer Protection Authority (CCPA) will have the power to
impose fine on the endorser or manufacturer of up to 2-year imprisonment for
misleading or false advertisement ( e.g. Laxmi Dhan Warsha Yantra).

Worth to mention that repeated offense, may attract a fine of Rs 50 lakh and
imprisonment of up to 5 years.
Note
4. Consumer Disputes Redressal Commission

The act has the provision of the establishment of the Consumer Disputes
Redressal Commissions (CDRCs) at the national, state and district levels.

The CDRCs will entertain complaints related to;

i. Overcharging or deceptive charging

ii. Unfair or restrictive trade practices

iii. Sale of hazardous goods and services which may be hazardous to life.

iv. Sale of defective goods or services

5. Covers E-Commerce Transactions

The New Act has widened the definition of 'consumer'. The definition now
includes any person who buys any goods, whether through offline or online
transactions, electronic means, teleshopping, direct selling or multi-level marketing.
The earlier Act did not specifically include e-commerce transactions, and this
lacuna has been addressed by the New Act.

6. Enhancement of Pecuniary Jurisdiction

Revised pecuniary limits have been fixed under the New Act. Accordingly, the
district forum can now entertain consumer complaints where the value of goods
or services paid does not exceed INR 10,000,000 (Indian Rupees Ten Million).
The State Commission can entertain disputes where such value exceeds INR
10,000,000 (Indian Rupees Ten Million) but does not exceed INR 100,000,000
(Indian Rupees One Hundred Million), and the National Commission can exercise
jurisdiction where such value exceeds INR 100,000,000 (Indian Rupees One
Hundred Million).

7. E-Filing of Complaints

The New Act provides flexibility to the consumer to file complaints with the

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jurisdictional consumer forum located at the place of residence or work of the Marketing
consumer. This is unlike the current practice of filing it at the place of purchase
or where the seller has its registered office address. The New Act also contains
enabling provisions for consumers to file complaints electronically and for hearing
and/or examining parties through video-conferencing. This is aimed to provide
procedural ease and reduce inconvenience and harassment for the consumers.

8. Establishment of Central Consumer Protection Authority Note

The New Act proposes the establishment of a regulatory authority known as the
Central Consumer Protection Authority (CCPA), with wide powers of
enforcement. The CCPA will have an investigation wing, headed by a Director-
General, which may conduct inquiry or investigation into consumer law violations.

The CCPA has been granted wide powers to take suo-moto actions, recall
products, order reimbursement of the price of goods/services, cancel licenses
and file class action suits, if a consumer complaint affects more than 1 (one)
individual.

9. Product Liability & Penal Consequences

The New Act has introduced the concept of product liability and brings within
its scope, the product manufacturer, product service provider and product seller,
for any claim for compensation. The term 'product seller' is defined to include a
person who is involved in placing the product for a commercial purpose and as
such would include e-commerce platforms as well. The defense that e-commerce
platforms merely act as 'platforms' or 'aggregators' will not be accepted. There
are increased liability/ risks for manufacturers as compared to product service
providers and product sellers, considering that under the New Act, manufacturers
will be liable in product liability action even where he proves that he was not
negligent or fraudulent in making the express warranty of a product. Certain
exceptions have been provided under the New Act from liability claims, such as,
that the product seller will not be liable where the product has been misused,
altered or modified.

10. Unfair Trade Practices

The New Act introduces a special broad definition of Unfair Trade Practices,
which also includes sharing of personal information given by the consumer in
confidence, unless such disclosure is made in accordance with the provisions of
any other law.

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Marketing 11. Provision for Alternate Dispute Resolution

The New Act provides for mediation as an Alternate Dispute Resolution

mechanism, making the process of dispute adjudication simpler and quicker.
This will help with the speedier resolution of disputes and reduce pressure on
consumer courts, who already have numerous cases pending before them.

Note 17.8 WHO CAN FILE A COMPLAINT?

The following persons can file a complaint under Consumer Protection Act 2019:

(a) one or more consumers;

(b) any recognised voluntary consumer association whether the consumer is a member
of that association or not;

(c) the Central or any State Government;

(d) one or more consumers where there are numerous consumers having the same
interest.

(e) legal heir or representative in case of death of a consumer; and

(f) where the consumer is a minor, the complaint can be filed by his parent or legal
guardian.

17.9 FILING OF A CONSUMER COMPLAINT

Before filing the complaint with the consumer forum it is advised that the consumer
gives notice to another party about a defect in the product (goods or services) etc. and
see whether the other party is willing to pay the damages or replace the product. If it
is done, then the dispute is settled then and there. But if the other party neglects or
refuses, then the consumer needs to approach the respective forum and file the complaint.

Before filing the complaint, consumer first needs to decide in which jurisdiction of
consumer forum his case lies.

Jurisdiction of Consumer Forums

The consumer should file his complaint to a consumer forum which has both territorial
and pecuniary jurisdiction to decide the matter.

Territorial Jurisdiction Complaint should be instituted with a district forum (section

11), state commission (section 17) or National Commission (section 21) within the
local limits of whose jurisdiction the case lies.

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Pecuniary Jurisdiction Consumer complaints can be filed with respect to value Marketing
enumerated as below:

 District forum - up to 1 crore

 State Commission - 1 crore to 10 crores

 National Commission - more than 10 crores

Note
The procedure of complaint filing in Consumer Forums:

Step 1. The complaint can be made on simple paper, stamp paper is not necessary for
it.

Step 2. The complaint should be drafted stating the facts necessary for establishing the
cause of action. Following things needs to be mentioned in complaint by the consumer:

a) Name and complete details of the complainant and opposite party or parties.

b) Date and time of purchase of goods or services availed and the amount paid for
them.

c) Particulars of dispute; like a defect in goods or inferior quality of service etc.

d) Particulars of the relief sought in the complaint.

e) Particulars of goods purchased with numbers or details of services availed.

f) Copies of all those documents can be attached which support the contention of
the consumer and are necessary to establish the cause of action like a copy of
bills of goods bought or service availed, warranty receipt, copy of the complaint
made to the trader asking to compensate for the loss.
Step 3. The compensation claimed should be specified in the complaint and along with
it, the consumer can also ask for refunds, damages,litigation expenditure etc. But these
amount should be detailed under different heads and in accordance with pecuniary
jurisdiction of respective consumer forums.

Step 4. The statement of jurisdiction should be made in the complaint as to how the
case falls within the jurisdiction of the consumer forum.

Step 5. A verification affidavit should be affixed with the complaint stating that all the
facts and claims made in the complaint are true and correct.

Step 6. At the end of the complaint, the signature should be put. The consumer may
argue his case on his own or through his authorized representative. The complaint
made with the district forum or state commission needs to be filed in three sets and

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Marketing when made with the national commission needs to be filed in four sets with additional
sets for each opposite party.

Step 7. The complaint has to be filed within two years from the date on which the
cause of action arose. In case of delay sufficient reasons have to be given to the forum
so it may allow the complaint to be filed.

What complaints can be filed?

Note
"Complaint" means any allegation in writing, made by a complainant for obtaining any
relief provided by or under this Act, that-

(i) an unfair contract or unfair trade practice or a restrictive trade practice has been
adopted by any trader or service provider;

(ii) the goods bought by him or agreed to be bought by him suffer from one or more
defects;

(iii) the services hired or availed of or agreed to be hired or availed of by him suffer
from any deficiency;

(iv) a trader or a service provider, as the case may be, has charged for the goods or
for the services mentioned in the complaint, a price in excess of the price:
- fixed by or under any law for the time being in force; or
- displayed on the goods or any package containing such goods; or
- displayed on the price list exhibited by him by or under any law for the
time being in force; or
- agreed between the parties;

(v) the goods, which are hazardous to life and safety when used, are being offered
for sale to the public:

- in contravention of standards relating to safety of such goods as required

to be complied with, by or under any law for the time being in force;

- where the trader knows that the goods so offered are unsafe to the public;

(vi) the services which are hazardous or likely to be hazardous to life and safety of
the public when used, are being offered by a person who provides any service
and who knows it to be injurious to life and safety;

(vii) a claim for product liability action lies against the product manufacturer, product
seller or product service provider, as the case may be;

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What are the reliefs available to consumers? Marketing

Depending on the nature of complaint and the relief sought by the consumer, and the
facts of the case, the Redressal Forum/Commission may order one or more of the
following reliefs:

(a) Removal of defects from the goods or deficiencies in services in question.

(b) Replacement of the defective goods. Note
(c) Refund of the price paid.
(d) Award of compensation for loss or injury suffered.
(e) Discontinuance of unfair trade practices or restrictive trade practice or not to
repeat them.
(f) Withdrawal of hazardous or dangerous goods from being offered for sale.
(g) Provision of adequate refund to aggrieved parties.

Time limit for filing the case

The complaint should not be raised through a registered or regular post. It should be
filed within 2 years of the date on which the dispute arose. The complainant is required
to file four copies of the complaint and additional copies for each opposite party.

17.10 MACHINERY FOR SETTLEMENT OF GRIEVANCES

1. District Forum

This is established by the state governments in each of its districts.

(a) Composition

Each District Commission shall consist of- (a) a President; and (b) not less than
two and not more than such number of members as may be prescribed, in
consultation with the Central Government.

(b) Jurisdiction

A written complaint can be filed before the District Consumer forum where the
value of goods or services and the compensation claimed does not exceed
Rs. 1 crore .

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Marketing (c) Appeal

If a consumer is not satisfied by the decision of the District forum, he can challenge
the same before the State Commission, within 30 days of the order.

2. State Commission

This is established by the state governments in their respective states.

Note (a) Composition: Each State Commission shall consist of-

(1) a President; and

(2) not less than four or not more than such number of members as may be
prescribed in consultation with the Central Government

(b) Jurisdiction: A written complaint can be filed before the State Commission
where the value of goods or services and the compensation claimed exceed Rs.
One crore but does not exceed Rs.ten crores.

(c) Appeal: In case the aggrieved party is not satisfied with the order of the State
Commission he can appeal to the National Commission within 30 days of passing
of the order.

3. National Commission

The National commission was constituted in 1988 by the central government.

(a) Composition: The National Commission shall consist of-

(1) a President; and

(2) not less than four and not more than such number of members as may be
prescribed.

(b) Jurisdiction: All complaints pertaining to those goods or services and

compensation whose value is more than Rs. ten crores can be filed directly
before the National Commission.

(c) Appeal: An appeal can be filed against the order of the National Commission to
the Supreme Court within 30 days from the date of order passed.

4. Central Consumer Protection Authority:

(This concept has already been explained under 17.7 Consumer Protection Act)

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Marketing
INTEXT QUESTIONS 17.4
1) Who files a complaint in case the consumer is a minor?

2) Define a complaint.

3) What is the pecuniary jurisdiction of :

(a) District forum Note

(b) National commission

4) Name any 3 persons who can file a complaint.

TERMINAL EXERCISE

Very Short Answer Questions

1. Give the meaning of a Consumer.

2. What is meant by consumer protection?

3. What do you mean by consumer awareness?

4. State any two examples of consumer exploitation.

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Marketing 5. Mention any four standard quality certification marks.

6. What kind of cases can be filed in a State Commission?

Short Answer Questions

1. Explain the composition and jurisdiction of the state commission.

2. State the purpose of creating the Consumer Welfare Fund.

Note
3. Who can file a complaint for redressal of grievances under the Consumer
Protection Act 2019?

4. State any three responsibilities that a consumer should keep in mind while making
a purchase.

5. Explain ways and means of consumer protection in India.

Long Answer Questions

1. Explain the needs for consumer protection.

2. Describe the right of a consumer as per CPA . Explain the role of consumer
organisation for consumer protection.

3. Briefly explain the importance of consumer protection to customers.

4. A shopkeeper sold you some spices claiming that it was pure. Later a laboratory
test showed that these were adulterated. As a consumer what action would you
like to take against this wrongful act of the shopkeeper?

5. Explain the redressal mechanism available to consumers under the Consumer

Protection Act 2019.

ANSWERS TO INTEXT QUESTIONS

17.1

2.(a)  (b)  (c)  (d) 

17.2

1. (a) the relevant laws which are aimed at preventing unfair trade practices,

(b) the ways and means which dishonest traders and producers may adopt to
deceive the consumers,

(c) the procedure to be followed by consumers while making complaints.

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2. (a) Right to safety Marketing

(b) Right to be informed

(c) Right to choose

(d) Right to consumer education

3. I. c is the mark of Bureau of Indian Standards (BIS) used for marking the
Note
purity of jewellery

II. d is the mark of ISI used for marking the quality of industrial products

III. b is the Agmark used for marking the purity of agricultural products

IV. a is the mark of Fruit Products

17.3

1) World Consumer Right Day :15th March

National Consumer Day : 24th December

3) VOICE (Voluntary Organisation in the Interest of Consumer Education)

CGSI (Consumer Guidance Society of India)

17.4

1) Where the consumer is a minor, the complaint can be filed by his parent or legal
guardian.

3) District Commission :upto 1 crore

National Commission : Exceeds 10 crores

DO AND LEARN
Find out from persons in your family and of your locality about the products that they
have bought and are using, like groceries, clothing and durable goods like Radio, T.V.,
Cycle, Scooter etc.

Make a list of about 10 such products and also note down against each item, after
asking these people, the problems that they face in using these products (safety hazard,
poor quality, not durable, etc.)

Identify which of their rights as consumers are violated as a result of each of these
problems. Also, mention how these problems could have been avoided through
responsible consumer behaviour by these people?

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Marketing
ROLE PLAY:
A consumer returns to a phone shop with a mobile phone that he had purchased the
previous week. The consumer complains that people find it very hard to hear him
when speaking on the phone. The consumer wants this problem rectified.

Consumer I purchased this phone last week and people complain that they find it
Note very hard to hear me on it.

Retailer Ok, do you have the box that it came in with you?

Consumer Yes I do have it and I also have the receipt.

Retailer I want you to go outside the shop and I will ring you and see can I
establish if there is a problem

Consumer That's great !

Retailer Hello, can you describe the weather conditions out there please ?

Consumer (No response.)

Retailer Thank you, you can come back in now.

Consumer Ok

Retailer Yes there appears to be an echo on the phone which makes it very
hard to hear you.

Consumer That might explain the reason for it being very hard to conduct a
conversation.

Retailer I will need to send this phone back to the manufacturer for them to
conduct a proper technical examination. In the meantime I will give
you a phone to keep you going for the next few days. The manufacturer
will either give you a new phone or repair this one for you. I will
contact you as soon as I get directions from them.

Consumer Thank you for your help and assistance and I will look forward to
hearing from you.

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Trade

18

INTERNAL TRADE Note

You may be consuming a variety of products in your daily life - a notebook, a pen,
soap, garments, vegetables and fruits to mobile phones, radio, television, fans and
furniture. Where do you go to buy all these products? Your answer will be , 'from the
nearby market'. Sometimes during special occasions like a festival or a marriage we
prefer going to a market that may be located at a distance from our residence to get
more variety or better priced products. Now the question that arises is, how do all
these products reach the market? There are a number of firms/people who are engaged
in this activity of bringing the product from the place of production to the market and
then making it available to the final consumers. They act as a link or intermediary
between the producers and the consumers. In this lesson, we will learn about the
firms/people who link the producers and consumers within a particular country and
also about the various options available to the consumers to buy the products for their
consumption.

LEARNING OUTCOMES
After studying this lesson, you will be able to:

 describes the important role played by internal trade in business;

 distinguishes between the different types of middlemen and the role played by
them.

 differentiates between the various types of retail stores and their importance;
and

 explains the different trends of distribution and their significance in internal trade.

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Trade
18.1 MEANING OF INTERNAL TRADE
You know that the goods produced in a country may be sold within the country or
outside the country. When buying and selling of goods and services takes place within
the geographical boundaries of a country, it is referred to as internal trade. It may take
place between buyers and sellers in the same locality, village, town or city; or may be
in different states, but definitely within the same country. Internal trade is also called
Note
domestic trade or home trade.

To clarify the concept of internal trade let us now learn about its salient features.

Features of Internal Trade

(a) The buying and selling of goods takes place within the boundaries of the home
(domestic) country.

(b) Payment for goods and services is made in the currency of the home country.

(c) It involves transactions between the producers, consumers and the middlemen.

(d) It consists of a distribution network of middlemen and agencies engaged in

exchange of goods and services.

18.2 CLASSIFICATION OF INTERNAL TRADE

Generally we buy goods of our daily use from the local shopkeepers. These
shopkeepers buy goods in bulk and sell them to us as per our demand. But do you
know from where these shopkeepers buy those goods? They generally buy goods in
large quantity either from the producers directly or from any other shops that sell
goods in bulk. Thus, we find that some shopkeepers buy goods in bulk and sell to
others in bulk while others buy in bulk and sell in small quantities as per the demand of
the customers. Thus, on the basis of volume of goods traded we can classify internal
trade as:

1. Wholesale trade 2. Retail trade

18.2.1 WHOLESALE TRADE

Wholesale trade refers to buying of goods in large quantity from producers or

manufacturers for sale to other traders or buyers in small quantities. Those
who are engaged in wholesale trade are called wholesalers. They act as a link between
the manufacturers or producers and the small traders. Generally they specialise
and deal in only one or a few products.

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Functions of the Wholesalers Trade

1. Procurement of Goods: The wholesalers purchase goods from different

manufacturers and hold sufficient stock.

2. Grading and Packing: The wholesalers divide the goods according to their
size,weight, shape and quality. In this way they prepare the goods in small lots
for sale to retailers.
Note
3. Transporting: The wholesalers transport the goods from the production centres
to their godowns and from there to the retailers. Some wholesalers have their
own vehicles for transportation of goods.

4. Warehousing: The wholesalers keep the stock for retailers in the warehouse
so as to make goods available to the retailers whenever they need them.

5. Financing: The wholesalers buy goods from the manufacturers and sometimes
make advance payment. They sell goods to retailers on credit. In this way, they
finance the manufactures as well as the retailers.

6. Risk Bearing: The wholesaler bear the risk of changes in demand during
storage.They also bear the risk of damage of goods, risk of bad debt etc.

7. Providing Market Information: The wholesalers collect information about

changes in the taste, fashion, buying habits etc. of consumers from the retailers,
then they pass this information to the manufacturers, so that the manufactures
may produce goods according to the needs and demand of the consumers.

8. Selling: Retailers are widely scattered all over the country. Many wholesalers
employ sales persons to take orders from the retailers. Thus, the wholesalers
help in selling goods.

Services Provided by the Wholesalers

Wholesalers provide services to the manufacturers and the retailers.

1. Services to Manufacturers : Wholesalers render the following services to

the manufacturers :

a) Bulk Buying: Wholesalers collect orders from a large number of

retailersand buy goods in large quantities from manufacturers.

b) Warehousing Facility: Wholesalers relieve the manufacturers from storing

function by holding large stock of goods in their own warehouse. Therefore,
manufacturer is relieved of the function of warehousing.

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Trade 2. Service to Retailers :

a. Regular Supply:The wholesalers keep a large stock of goods for

retailers.They ensure that the goods are available to retailers at all times.
In this way they maintain regular supply of goods to the retailers.

b) Financial Help: The wholesalers generally sell goods to retailers on

credit.The retailers will make payment to wholesalers on the basis of the
Note
sales made. So with less capital they can easily run the business properly.

c) Advertisement: The wholesalers advertise their goods regularly so the

process of selling goods becomes easy for the retailers.

d) Market Information: The wholesalers provide up-to-date information

about new products to the retailers. The wholesalers advice retailers on
matters like price, quality and time of purchase and sale.

e) Risk Protection: The wholesalers keep huge stock of goods and sell to
retailers on credit. As a result, retailers have to bear less risk.

18.2.2 RETAIL TRADE

Retail trade refers to buying goods from the manufacturers or wholesalers and selling
the same to the final consumers. The retail trader generally deals in a variety of goods.
Those who are engaged in retail trade are called retailers. Retailers sell goods in small
quantities as per the demand of the consumers.

Characteristics of Retail Trade

Following are the characteristics of retail trade:
(a) Retail trade generally involves dealing in a variety of items.
(b) A retailer makes purchases from producers or wholesalers in bulk for sale to the
consumers in small quantities.
(c) Retail trade is normally carried on or near the main markets.
(d) Generally retail trade involves buying on credit from the wholesalers and selling
for cash to the consumers.
(e) A retailer has indirect relation with the manufacturer (through the wholesalers)
but a direct link with the consumers.
Services Provided by Retailers

Retailers provide the following services to the consumers and wholesalers:

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1. Services to Consumers Trade

a) Regular Supply of Goods: Retailers maintain a ready stock of goods

for sale to consumers.

b) Convenient Location: Retail outlets are situated near residential area

and remain open for long hours. The consumers can buy the goods from
the retailers at their convenience.
Note
c) Wide Choice: Retailers stock a wide variety of products. Consumers
like to purchase all products from the same shop. So, retailers stock
products of different companies providing a wide choice to the consumers.

d) Home Delivery: Some retailers supply goods to the homes of consumers

without any extra charge.

e) Consumer Education: When a new product comes in the market, retailer

clearly explains the features, merits and uses of the product to the final
consumers.

2. Services to the Wholesalers

a) Market Information: Retailers supply valuable information to the

wholesalers about changes in tastes, fashion etc. of consumers.

b) Help in Distribution: Retailers relieve the manufacturers and wholesalers

of the burden of collecting and executing a large number of small orders
from a number of consumers.

c) Large Scale Production: Retailers help manufacturers operate at alarge

scale.

d) Sell New Products: New products will be displayed in retail outlets in an

attractive manner so as to persuade consumers to buy these products.

INTEXT QUESTIONS 18.1

1. State any two features of 'internal trade'.

2. Identify the following and write 'WT' for wholesale trade and 'RT' for retail
trade.

(a) Dealing in limited variety of products.

(b) Goods purchased from wholesalers for resale.

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Trade (c) Providing facilities like grading and packaging.

(d) Buying of goods in bulk from the manufacturers.

(e) Trading activities carried on near the residential areas.

18.3 MIDDLEMEN IN INTERNAL TRADE

Note Both wholesalers and retailers act as a link between producers and consumers in the
chain of distribution of products. They are called middlemen as they come in the
middle, i.e., between the producers and the consumers in the chain of distribution of
products.

Chain of Distribution

The middlemen provide useful services to both producers and consumers. For the
producer, they free him of the complexities of arranging for transport, warehousing,
financing and marketing of his products to a large extent. The responsibility of the
producer gets limited to producing the product. Largely all efforts to sell and distribute
the same are taken up by these middlemen. For the consumers too, these middlemen
are beneficial as they make the products available at the place and time of convenience
to them.

Now let us, learn in detail the role of the wholesalers and retailers in the chain of
distribution.

18.3.1 ROLE OF MIDDLEMEN IN THE DISTRIBUTION OF GOODS

(a) Role of Wholesalers: The wholesalers through their services offer a number
of benefits to the producers and retailers. They save the time and effort of the
producers and allow them to concentrate on production of the goods while
distribution is taken care of by the wholesalers. They deal with goods in bulk
and reap the benefit of economies of scale. They provide goods in relatively
small quantities to the retailers and provide them with facility of credit purchase.
They provide information to the producers about the consumers' preferences,
changing taste and fashion, market demand etc. Wholesalers also bear the risk
involved in holding of stock of goods and their transportation.

(b) Role of the Retailers: Retailers are engaged in selling the product to the end
users or the consumers. They cater to the demand of the customers by providing
a variety of products procured from different locations. The retailers may offer
credit facility to the customers. They also offer pre-sales and after-sales services
and communicate to the consumers the technique of usage of the products.

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They act as salesmen of the product and persuade buyers to purchase goods Trade
and services. They provide information to the manufacturers or wholesalers the
feedback or consumer's response to the product.

18.3.2 EVALUATION OF THE ROLE OF MIDDLEMEN IN THE CHAIN

OF DISTRIBUTION

As seen above, the middlemen provide a number of services in the process of

Note
distribution. Do they charge any money for their services? Yes, these services of
middlemen do not come free of cost. They do charge their share of profit margin in
return for the product for the services they provide. This increases the sale price of the
product considerably, as compared to the cost incurred in producing it.

For example, a pen that costs Rs. 5 to produce, may be sold by the producers to the
wholesalers for Rs. 6. In turn the wholesaler may sell it to the retailer for Rs. 7, who in
turn may sell it to the ultimate consumer for Rs. 8.50. The middlemen's share of profit
here is Rs. 3.50 that has added considerably to the price of the product.

It is often debated that the middlemen do not serve any useful purpose, but only
escalate the price of a product unnecessarily. However, we must not forget that they
render useful services to the producers and the consumers. To that extent, they are
justified to get their share of profit in the sale of the product. But it should be reasonable
and not too high so as to become a burden on the consumers.

We must also consider some of the problems that arise from the presence of middlemen
in the chain of distribution.

If there are too many middlemen between the manufacturers and the consumers, each
charging his share of profit or commission, the final consumer ends up paying a very
high price for the goods. Some middlemen indulge in unfair trade practices like hoarding
and adulteration to increase their gains from the business. They, at times, promote the
sale of inferior quality goods and exploit the consumers to get a high profit margin for
themselves. The middlemen do not bear risk such as loss due to strikes, lockouts,
changes in fashion and consumption habits. These have to be primarily borne by the
producers. Sometimes, the transfer of goods from one middleman to another causes
delay in the smooth flow of goods, instead of facilitating it.

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Trade Nonetheless, when we compare the benefits of middlemen with the problems they
pose, their benefits definitely outweigh the problems. In conclusion one can clearly say
that the middlemen play the role of a vital link between producers and consumers in
the chain of distribution.

Now, let us compare the wholesale trade with retail trade.

18.3.3 DIFFERENCE BETWEEN WHOLESALE TRADE AND RETAIL

Note
TRADE

Following are the differences between wholesale trade and retail trade:

Basis Wholesale trade Retail trade

1. Number of items Deals in a few items. Deals in a variety of items
2. Quantity of goods Large Small
bought and sold
3. Source of purchase Manufacturers Wholesalers/producers
4. Main activity Sells goods to the retailers. Sells goods for
consumption or final use.
5. Amount of capital Large Small
required
6. Nature of Direct link with the Indirect link with the
relationship producers and indirect producers and direct
with producers/ link with the consumers. link with the consumers.
consumers.
7. Location Located in the same Located near residential
area along with other areas.
wholesalers dealing
in similar products.
8. Display Does not require elaborate Requires attractive display
display of goods. of Products.

INTEXT QUESTIONS 18.2

1. The middlemen should be eliminated. Do you agree? Give one reason.

2. Correct the following sentences.

(a) A wholesaler has direct link with the consumers.
(b) The amount of capital required is less in case of wholesale trade.

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(c) Producer is a middleman in the chain of distribution. Trade

(d) Presence of too many middlemen increases the price of the product.
(e) The wholesaler purchases goods from the retailer.

18.4 TYPES OF RETAIL TRADE

You have learnt about retail trade in the previous section. In your village or town, you
Note
buy products from the nearby shops in small quantities. In cities you can buy a product
from a large shop or a variety of products from a large number of counters in one big
shop. They are all engaged in retail business.

We can classify the retail business on the basis of size as small scale, medium scale
and large scale. On the basis of forms of ownership, it may be sole proprietorship,
partnership, cooperative society or Joint Stock Company. But the most common way
of classifying retail business is whether they have any fixed place of business or not.
On this basis, one can have two categories of retail business:

1. Itinerant Retailing 2. Fixed shop Retailing

18.4.1 ITINERANT RETAILING

Itinerant retailing is a type of small-scale retail trade in which retailers move

around and sell a variety of items directly to the consumers. They do not have
a fixed shop where they can sell. You must have seen them distributing newspapers
early in the morning; selling peanuts, bangles, toys etc. in buses and trains; selling fruits
and vegetables in your locality using a cart, selling ice-cream, namkeens etc. on a
cycle; selling rice, earthen pots or even carpets by using a cart, etc. You can also see
them on pavements in your locality.

In towns and cities we come across different type of itinerant retailers.

1. There are traders who sell their articles on fixed days at different market places.
In villages these market places are called "Haat" and in towns or cities they are
called "weekly bazaars".

2. The itinerant retailing also includes persons selling products from door to door.
In most cases, the price of items is not fixed and mostly settled through bargaining.
Moreover, in most cases the items sold are not branded products.

18.4.2. FIXED SHOP RETAILING

Here, the retailers sell goods and services from a fixed place known as 'shop'. They
do not have to move from place to place to serve their customers. These shops are

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Trade usually located at market places or commercial areas or near residential localities.
These shops normally deal with a limited variety of goods. On the basis of the volume
of transaction or size of their operation, fixed shop retailing can be classified as:

(a) Small scale fixed shop retailing, and

(b) Large scale fixed shop retailing.

Note Let us know about these two categories.

(a) Fixed Shop Retailing - Small Scale

In every locality you find fixed shop retailers dealing with goods and services on
a small scale. They deal with limited variety and limited quantity of goods and
cater to the needs of a local area. They require less capital and provide goods to
a limited number of customers. The grocery shops of your locality come under
the category of small-scale fixed shop retailing. On the basis of the nature of
goods they deal in, we can classify these retailing businesses as:

(i) General store or Variety store (ii) Single line store

(iii) Specialty store (iv) Second-hand Goods shop

Let us understand the details of these stores.

(i) General Store

These stores, as the name suggests, deal with a variety of items of general use. They
sell products mostly required by people for their daily use. For example, in a variety
store you can find different items of toiletry, hosiery, biscuits and snacks items, grocery,
cosmetics, gift items and stationery, etc. Normally these retailers make direct sale by
cash only. However, for their regular customers, these retailers may give discount,
provide credit facility and also
free home delivery of goods.

(ii) Single Line Store

These sto res deal wit h a

specific line of goods. You must
have seen medicine shops,
bookshops, toy shops, ready-
made garment shops, etc.

Fig. 18.1 General Store

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These are all single line stores. They sell goods of different size, brands, designs, styles Trade
and quality of the same product line.

(iii) Specialty Store

These stores deal with products of a specific brand or company. All varieties of any
particular brand or manufacturer are made available in these stores. You must have
seen stores, like Woodland shoe shops where products starting from shoes to apparel
Note
produced by Woodland Company are made available to the customers.

(iv) Second-hand Goods Shop

Fig. 18.2 Second-hand Goods Shop

Now-a-days in cities and towns we find shops selling second-hand goods or used
goods. These shops generally sell goods like books, furniture, clothes and other
household items.

INTEXT QUESTIONS 18.3

1. What is meant by 'Itinerant Retailing'?

2. Identify the types of retailing business.

(a) Stores dealing with a particular line of good like books, toys etc.

(b) Stores dealing with a variety of goods of a particular brand.

(c) Stores dealing with a variety of goods of daily use.

(d) Selling goods on the pavement of a city.

(e) Stores selling used books or garments at cheaper price.

(b) Fixed Shop Retailing - Large Scale

Apart from small-sized outlets, as discussed above, there are a number of large-sized
retail shops that sell products on a large-scale. They come under large-scale fixed

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Trade shop retail trading category.

Large-scale retail trade is the type in which single type of goods or a variety of goods
is made available to a large number of consumers either in a big shop under a single
roof or in various shops at the convenience of customers or directly delivered to the
doorstep of the customers.

Types of Large-scale Retail Trade

Note
In India, generally we find the following types of Large-scale Retail Business:

(i) Departmental Store (ii) Multiple Shops

(iii) Super Market (iv) Consumer Cooperative Store

(v) Mail Order Retailing (vi) Franchise

Let us now discuss in detail all these types of retail trade.

(i) Departmental Stores

Departmental Store is a large-scale retail shop where a large variety of goods are sold
in a single building.

Features of Departmental Store

i. The entire building is divided into a number of departments or sections.

ii. In each department specific type of goods like stationery items, books, electronic
goods, garments, jewellery etc. are made available.

iii. All these departments are centrally controlled under one management. Once
you enter such a store you can do all your shopping by moving from one
department to another.

iv. To encourage people to do all their shopping in one store, these stores also
provide facilities like restaurant, telephone, toilet, ATM etc., for the convenience
of customers.

v. These stores also provide the facility like free home delivery of goods, execution
of telephonic order for goods, credit facility, etc.

vi. It is generally located at the main commercial centres of the cities and towns, so
that customers from different localities can easily come to buy goods as per their
convenience.

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vii. Big Bazar, Vishal Megamart, Ebony, Shoppers' stop are some of the leading Trade
departmental stores in our country.

Note

Fig. 18.3 Departmental Store

Merits of Departmental Stores

(a) They sell a large variety of goods to the consumers, under one roof. So it saves
time and effort of the customers.

(b) Departmental stores offer wide variety of goods produced by different

manufacturers.

(c) They buy large volumes of goods, at a time directly from the manufacturers, and
get good amount of discount from them. They are able to reap the benefits of the
economies of scale with reference to large-scale operations.

(d) Since these stores are organised on a large-scale basis, they can afford to employ
efficient and competent staff to provide the best services.
(e) Each department that is a part of the departmental store in a way advertises for
the other departments. While visiting one department customers are attracted to
see and even buy the goods displayed in other departments.

Inspite of these advantages, departmental stores have certain limitations .

Limitations of Departmental Stores

(a) Large amount of capital investment is required to start and run a departmental
store.

(b) They are generally located at places far from residential areas, so they are not
very convenient for buying goods of daily use.

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Trade (c) The operating cost of the departmental stores is very high since it includes cost
of location (in the form of rent or purchase price of building), decoration of
building, salary of a large number of employees and provision of various facilities
for the convenience of customers.

(d) There is no direct contact between the owners and customers in departmental
stores. It is the employees of the store who interact with the customers. The
Note owners do not get first hand information about the taste, preferences, likes and
dislikes of the customers.

Multiple Shops

In the previous section, we learnt that in a departmental store, the whole business is
carried on in one building and the customers are attracted to it. Now we shall learn
about multiple shops under which big manufacturers approach customers by setting
up shops near the customers.

Have you ever observed that there are some retail stores running in your town/city
having the same name, same decoration and dealing in the same type of products
under a single brand name? Yes, you may say, there is Raymonds, Nirula's, McDonalds,
Haldiram, Domino etc. These are multiple shops.

Features of Multiple Shops:

i. They sell similar range of commodities at the same price in all their shops.

ii. These shops are usually owned and run by big manufacturers/producers.

iii. They open a number of branches at different localities in a city or in different

cities and towns in a country. These shops are also called 'Chain Stores'.

iv. Multiple shops deal with similar types of goods mostly of everyday use e.g.,
shoes, textiles, watches, automobile products, etc.

v. The price is uniform for similar items in all the shops.

vi. These shops are usually conveniently located in the main market place or in busy
shopping centre.

Merits of Multiple Shops

The multiple shops offer the following advantages to buyers and sellers. Let us learn
about them:

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(a) All multiple shops are often built alike, that helps customers to recognise these Trade
shops easily. They have similar window display, interior decoration of the shop
and arrangement of the counter, furniture, sign boards etc.

(b) They facilitate elimination of middlemen (wholesalers and retailers) in the process
of distribution.

(c) These shops enjoy the benefits of large-scale purchase or production of goods
Note
(centralised purchase/production). Also, due to common advertisements these
shops are able to save on the cost of advertising.

(d) The customers can get the goods at a cheaper rate because of low operating
cost and elimination of middlemen in the process of distribution.

(e) Since the customers get genuine and standardised goods directly from the
manufacturers, chances of duplication of goods and cheating do not arise in
these shops. Also, standard quality and uniform price of products help in winning
the confidence of the customers.

Limitations of Multiple Shops

Inspite of all the above merits, multiple shops also suffer from the following limitations.

(a) These shops deal in a limited variety of products and restrict the choice offered
to the customers.

(b) Sales are made on cash basis only and the customer cannot avail of credit facilities
from these shops.

(c) Customers cannot bargain with sales person while buying the product. The prices
of the products are fixed by the head office and individual shops have no control
over it.

(d) Each of the multiple shops is generally managed by the branch managers and
they strictly follow the instructions of the head office. Often, they do not take
initiative or special interest in satisfying the customers.

INTEXT QUESTIONS 18.4

1. The decoration, display, signs boards etc. of the multiple shops are built alike.
Why? Give reason.

2. Answer the following.

(a) Who owns the departmental stores?

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Trade (b) Who owns the multiple shops?

(c) Which stores deal with variety of goods under one roof?

(d) Who manages the day to day affairs of the multiple shops?

(iii) Super Markets

Super Market is another kind of large-scale retail organisation from where we can buy
Note most of our household requirements for a week or a month in one visit. Let us learn
about this form of large scale retailing system in detail.

Super Market is a large scale retail store that sells a wide variety of products
like food items, vegetables, fruits, groceries, utensils, clothes, electronic
appliances, household goods etc. all under one roof. It is set up with the objective
of selling goods of daily necessity to general public at a reasonable price by eliminating
the middlemen in the process of distribution. These stores are centrally located and
also establish their branches near the residential areas. As compared to the departmental
stores, super markets do not offer free home delivery facility, credit facilities etc. You
will also not find salespersons to convince the customers to buy the goods. Here,
customers pick up the items of their needs and bring it to the cash counter, make the
payment and take the delivery of the goods.

Merits of Super Markets

Let us understand the merits of super markets.

(a) Super markets deal with a wide range of goods of daily household needs.

(b) It provides standard quality items to the customers. Chances of adulteration and
duplication are minimal/almost nil.

(c) Due to economies of large-scale purchase and avoidance of middlemen the

goods are available at a cheaper price in super market.

(d) In a super market normally services of salesmen and shop assistants are not
available. This reduces the cost of operation.

(e) A customer can find goods of different brands at one place. This makes
comparison and selection easy. You can take your own time to select items of
your choice.

Limitations of Super Markets

Following are some of the limitations of super markets:

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(a) Super markets require large amount of capital to start and run them. Trade

(b) Because of insufficient funds, benefits of professional management are not

available to the super bazaar.

(c) Goods are sold to the customers only on cash basis. Credit facility is not available
to them.

(d) Super markets follow the principle of self service. So the items which require the Note
service of salespersons are normally not sold by the super market.

(iv) Consumer Cooperative Stores

Consumer Cooperative Store is another form of large scale retail trade which
is owned by the cooperative society. When the consumers of a particular area or
group find it difficult to get the items of daily necessity they usually form a cooperative
society and run the retailing business. The consumer cooperative stores purchase the
goods directly from manufacturers or dealers and make them available at a cheaper
price. Let us learn about the various merits of consumer cooperative stores.

Merits of Consumer Cooperative Stores

(a) The consumer cooperative stores generally provide the goods at a price lower
than the market, because they eliminate the profits of middlemen in the process
of distribution.
(b) These stores sell the goods on cash basis. So the risk of bad debts is avoided.
(c) These stores are generally located near the residential area for the convenience
of the members as well as general public.
(d) The profits earned by the consumer cooperative stores are distributed among
the members as bonus.
Limitations of Consumer Cooperative Stores

(a) The consumer cooperative stores generally suffer from the limitations of
inadequate funds because these stores are formed by the people belonging to
the limited income group.

(b) Lack of fund or resources restrict the growth and expansion of business.

(c) These stores are managed by the members who may not have sufficient
experience in business management. Again, due to limited funds, it is also not
possible to engage professional managers.

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Trade
INTEXT QUESTIONS 18.5
1. List five items of daily necessity that are available in super markets.

2. Rewrite the following sentences making necessary corrections:

(a) Consumer cooperative stores are generally located at far off places from
the residential area.
Note
(b) The presence of sales person is very much required in super markets.

(c) The profit earned by the consumer cooperative stores is distributed among
the members.

(d) Professional managers are engaged in the consumer cooperative stores to

manage the day-to-day affairs.

(v) Mail Order Retailing

As the name suggests, this form of retailing makes use of the mail system (postal and
courier) to communicate with and deliver the goods to the customers. You must be
wondering how the customer comes to know about this retailer and the products he/
she is selling without visiting the shop? To answer this question, let's now discuss the
details of how the mail order retailing system operates.

The mail order retailers places the advertisements in newspapers, magazines, television,
social media etc. or publicise their products in booklets, catalogues, brochures and
handouts. These advertisements, leaflets, brochures etc. contain an order form or
other details on how to order the product apart from a detailed description of the
product being sold. On seeing the advertisement the interested customers can place
an order by post and the retailer on receiving the order, dispatches the goods by post
or courier. The payment for the same is either made by the customer through
the money order or demand draft (at the time of ordering the goods) or through
cash-on-delivery/VPP (Value Payable Post) arrangement (i.e., payment is made
by the customer on receiving delivery of goods, not in advance).

This method of sale can be conveniently used by the buyer to order goods of his
choice while sitting at home and the seller can sell his products even to customers living
in very remote areas. However, this system is not suitable for all types of goods.
Goods that do not need personal inspection and which can be understood by
description only (books, plants seeds, cutlery) and light weight, non-perishable products
(certain medicines, cosmetics, readymade garments, relatively low-valued electronic
gadgets, cameras etc.) that occupy less space are suitable for mail order retailing.

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Goods having high demand in the market and those having delivery charges relatively Trade
lower than their price are also suitable.

Merits of Mail Order Retailing

The mail order retailing system has the following merits:

(a) It is economical to start and run such a business because no shop has to be set-
up for it. This saves the cost of rent for the shop, its decoration, employment of Note
salespersons etc.

(b) There is not only low capital investment but also efficient use of that capital in
mail order retailing. There is no wastage of money in transporting the goods
from one middleman to another. Goods are directly dispatched to the customers.
Moreover there is no requirement of maintaining a stock of the finished product
or display of goods in shelf for sale. Goods may be manufactured or procured
after receiving an order from the customer. This reduces the need to block the
capital in maintaining stock of goods to minimum.

(c) Mail order retailers have a wide geographical reach. They can cater to customers
scattered over a wide area (in different countries also). The only requirement is
that there should be postal or courier services available in that area.

(d) Customers can order goods from the convenience of their home and receive the
goods at their doorstep under this system. People living in remote areas also get
access to a wide variety of goods.

(e) Customers also derive benefit from the comparatively low price that the mail
order retailers offer due to their low operating cost.

Limitations of Mail Order Retailing

Mail order retailing has certain limitations which are given as under:

(a) Since there is no opportunity for the customer to personally examine the goods
that he/she is buying, there is a probability that the customer may not get the
desired product. The product may vary in size, colour, design etc. from the one
that is shown in the advertisement or catalogue.

(b) There is no personal, face-to-face contact between the customer and the retailer.
As a result, the customer is unable to clear all his doubts regarding the product,
its use and its maintenance.

(c) Products that are ordered through this mode take some time to reach the customer.
The customers have to wait till the order reaches the retailer, then the procurement

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Trade and dispatch of goods by him and finally the goods reach the customer. Hence,
this is not suitable for perishable products or products required immediately or
at short notice.

(d) Mail order retailing is not suitable for all products. Items of daily consumption,
bulky or voluminous articles and perishable goods cannot be bought and sold
through it.
Note
(e) Mail order retailing is conducted mainly on cash basis. Credit facility is not
provided to the customers.

After going through the merits and limitations of mail order retailing, a question
may arise in our minds - Is mail order retailing a popular form of trade in our
country? Even though this system exists since a long time, its use is not widespread.
Have you wondered why is it not so popular, especially in our country?

Apart from its limitations that have been discussed above, there are certain
other reasons why this business has not been very popular in India. A large
section of our population is still illiterate due to which they are neither able to
read the advertisements/catalogues of mail order retailing nor place an order for
such goods. Due to some instances offraud and other malpractices by certain
retailers, customers do not have much faith in mail order retailers. Possibility of
fraud is more in this case than in face-to-face purchase of products from shops.
Also, lack of credit facility dissuades a large section of our population from
purchasing goods through the mail order system.

(vi) Franchise

You might have seen some restaurants, card and gift shops, readymade garments
shops that carry the same brand name/trademark and have almost the same decoration.
They sell the same products, yet they are not chain stores/multiple shops. This is
because they are not controlled and managed by a single owner. You may be wondering
how these different shops are able to use the same brand name, sell the same product
etc. even though they are not under the same management. Moreover, these shops are
run independently by different people in different localities. This is made possible through
a retail arrangement called 'Franchise'.

Franchise is a form of retailing wherein two parties enter into an agreement in which
one party authorises others to sell or produce and sell specified goods and services.
The party that develops a product/service or is the owner of an expertise is called the
'Franchiser'. The other party, called the 'Franchisee' is an independent business unit
that buys the right to sell the product/service of the franchiser in exchange of a specified

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amount of money. The franchisee functions as a retailer. He operates in certain Trade
geographical areas that he is permitted to, as per his agreement with the franchiser.

Franchising has gained popularity in our country, especially in the past decade. There
are many businesses like fast-food joints and restaurants (e.g., McDonalds, Wimpy's),
gifts and greeting cards shops (Hallmark, Archies), readymade garments (Benetton,
Numero Uno, Petals), computer education (NIIT, Aptech) that have grown nation-
wide and are flourishing with the help of franchise arrangements. Note

Features of Franchise

Let us now know more about franchise by looking at its features:

(a) It is based on an agreement between the franchiser and the franchisee, wherein
they enter into a commercial relationship, generally for an agreed period of
time.

(b) Under this agreement, the franchisee gets the right to use a particular brand
name, process or product owned by the franchiser, for the purpose of retailing,
in return for a fee.

(c) The fee is generally paid partly as an initial payment at the time of entering into
the contract and partly on regular payments either monthly, quarterly or annually.
This regular payment may be paid by the franchisee as a percentage of his sales
volume or profit or a fixed amount agreed upon in the contract.

(d) The franchiser may also be required to invest money in arranging a large space
in prime locations, in furnishing it and in procuring stock for the outlet. In most
cases all franchise outlets are required to maintain uniform pre-determined
decoration, method of serving customers, type of products etc.

(e) Franchise as a system of retailing is suitable for brands that have earned a name
for themselves in the market. Only then can a franchisee benefit from using that
name over a new brand.

(f) The franchiser is very cautious while choosing franchisees for his goods or
services. Only competent persons with requisite entrepreneurial skills and
commitment to quality/customer-satisfaction, in addition to, of course, a sound
financial position will be able to run this business successfully. A franchisee who
fails will bring disrepute to the brand and also hamper the franchiser's future
business prospects.

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Trade Merits of Franchise

(a) The franchiser can expand his business without investing additional capital. The
franchisee invests this money and also pays fee to the franchiser in return of the
right to use the brand name, products etc.

(b) The franchisee can capitalise on the goodwill of the existing brand of the franchiser.

Note (c) The customer gets assurance of standardised goods and services both in terms
of quality and price. With the network of franchisees, the product and service
becomes widely available to consumers.

Limitations of Franchise

(a) The Franchiser does not have close control over the activities of the franchisee.
The franchisee's poor performance in dealing with customers may bring a bad
name to the brand due to which the franchiser's business may be adversely
affected.

(b) If the franchisee is not able to make adequate profit out of the franchise business,
the franchise fee may become a burden for him.

(c) If consumers have complaints regarding the product/service, he may face a

problem about whom to go to, the franchiser or the franchisee. Each may blame
the other for the problem and not take on the responsibility of redressal of the
grievance.

INTEXT QUESTIONS 18.6

1. Name any five products that are suitable for mail order retailing.

2. Define the following terms.

(a) Franchise (b) Franchiser (c) Franchisee

18.5 RECENT TRENDS IN DISTRIBUTION

With the advancement in the information technology (i.e., use of computers, telephone,
internet etc.) methods of distribution of goods from producers to consumers have
witnessed new developments. Today consumers can conveniently buy products of
their choice without leaving their home or office, any time during the day or night.
Certain channels of distribution eliminate the long and expensive chain of middlemen.
Manufacturers are directly approaching consumers, either through their websites using
Internet or through their agents (direct selling).

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Some of the recent trends in distribution are discussed below. Trade

(a) Direct Marketing : Under this method of distribution the manufacturers

bypass the chain of middlemen and approach the consumers directly and
sell them the goods and services, without the help of wholesalers and retailers.
The manufacturers inform the prospective customers about their products and
its uses through advertisements (in newspapers, television, radio, social media)
or catalogues, letters and brochures. If the customer wants to buy the product, Note
he/she may place an order to the manufacturers over the telephone or through a
letter sent by post or e-mail. The product gets delivered to the customer through
courier, post or by salespersons.

The benefit of direct marketing to the producer as well as consumer is in the

form of doing away with the profit margin of middlemen. The manufacturer is
able to supply goods to the consumer at a lower price, even after keeping a
larger share of profit margin as compared to the situation of distribution through
middlemen. Also, the time consuming process of the product changing hands
from the producer to the wholesaler, then to the retailer and finally to the
consumers, is avoided. Transactions are faster when the producer is face-to-
face with the consumer. Also, the producer gets direct feedback from the
customers for improvement in the products.

Direct marketing may be classified into different types, based on the mode of
communication used by the manufacturers to approach the customers. The
manufacturers may use
 Printed catalogues to inform the customers about the products called
Catalogue Retailing;
 Television advertisements called Televised Shopping; and
 Brochures, letters etc. sent by mail called Direct Mail Retailing.

Products that can be conveniently and safely sent to the customers by post/courier
and whose utility and description can be easily communicated through a catalogue,
letter or television advertisement, are generally sold using the method of direct marketing.
This includes books, magazines, physical exercise equipments, certain types of furniture
etc.

(b) Internet Marketing: With the widespread use of computers and Internet,
today it is possible to buy and sell products over the internet, through websites
maintained by producers. Products can be ordered instantly from anywhere in
the world, 24-hours of the day, from the convenience of one's home or a nearby

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Trade cyber-cafe.

On the website we can see the picture of the product, read about it and then
order it, just with the click on the mouse of the computer. The payment for the
product may be made using a credit card or by bank draft etc.

Internet marketing makes it convenient to do shopping anytime, anywhere and it

is easy to compare prices of the same product charged by different producers.
Note
The only thing we have to do is to open different websites on the Internet. There
is no need to physically go from one shop to the other, or one market to the
other.

We can buy all types of products from flowers to foods, clothes to computers,
from the producer located even at a far-off place in some other country or
continent. The producer is able to cater to a larger number of customers sitting
anywhere in the world, efficiently and speedily, using Internet marketing.

But a drawback of this means of distribution is that the consumer can only see
the image of the product. He/she cannot see the actual product nor touch it, try
it nor witness a live demonstration of its use. Full information about the product
may not be available on the website.

(c) Telemarketing : Some producers/manufacturers approach the consumers

overthe telephone, to tell them about the product and its uses and ultimately
persuade them to buy the product. This method is often used to sell credit cards,
subscription to certain books and journals and also membership of certain clubs
etc.

A marketing representative of the concerned producer calls up prospective

customers over the telephone and tells them about the product and its uses.
While interacting the caller can gauge the interest level of the customer towards
the product and influence his decision to buy the product. If the customer is
willing to buy the product, it is delivered to him by courier or post.

Nowadays, if a large number of customers are to be approached through telemarketing;

computerised calling system is used instead of a person calling up customers. The
desired telephone numbers are dialled mechanically and the computer plays a pre-
recorded voice message for the consumer. The consumer is given the option, after
hearing the message, to record his own message that may be a query about the product
or the order to purchase the product.

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18.5.1 RETAILING IN THE CHANGING TIMES Trade

You have read in the previous sections about the different forms of retailing, from
hawkers and peddlers to huge departmental stores; from local general stores to mail
order retailing to Internet Marketing and Telemarketing.

As business has evolved over the ages, retailing, an important and dynamic part of it,
has also kept pace with the changes. However, in the recent past there have been such
Note
drastic and far-reaching developments in this field that it is said that we are presently
experiencing a 'retailing revolution', not only in India, but the world over.

Retailing has come a long way today in our country, from the local Kirana shops that
existed since long, long ago. The focus now is not only on making retailing more
convenient for the customer but also on making shopping an enjoyable experience for
him/her.

The shift in approach in retailing aims at earning profit by offering customers more
choice, more conveniences and better facilities.

Let us now read about some of the interesting trends that have emerged in retailing,that
you may have also observed on your own.

 In keeping with the changing lifestyles of consumers where they now have more
purchasing power but lesser time, retailers are offering services like free home
delivery, packed food products (milk, juice etc.), after-sales services,
convenience of shopping for different products under one roof (departmental
stores) and shopping through the Internet, e-mail, post, SMS or telephone.

 Many businessmen who were earlier focusing only on manufacturing of

products, are now venturing into retailing (vertical integration). They are
either opening their own exclusive showrooms/outlets under their brand name
or tying up with existing retailers or employing direct selling agents (that link the
manufacturer to the consumer by directly selling goods to final consumers,
eliminating wholesalers and other retailers from the chain).

 In order to encourage consumers to buy products, retailers are offering

attractive schemes of financing for purchase of products, especially for
consumer durables like refrigerators, television, air-conditioners etc. Very low
rates of interest are charged by the retailer for financing the product. Some
retailers also have tie-ups with banks for the purpose of providing consumer
finance.

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Trade  With a view to offer variety to consumers with convenience and easy accessibility,
today retailing includes automatic vending machines. Through these machines,
consumers can buy items like newspapers, magazines, chocolates, contraceptives,
cold drink cans and so on by inserting requisite denomination of coins and pressing
a button. The item gets delivered from the machine without any human intervention.

 Shopping malls have been another outcome of the 'retail revolution' in urban
Note areas. They are like a huge shopping complex, housed in a single building,
generally offering services like parking space, recreational facilities like cinema
halls, variety of food outlets/restaurants (food courts) apart from a number of
shops selling different goods. They may include a departmental store spread
over multiple storeys/ floors, apart from a number of other independent shops,
all under the same roof. Shopping malls have gained popularity with consumers
because they offer a convenient shopping experience to them, due to the many
other facilities that they provide They are generally designed in such a way that
they are accessible to the differently abled persons also with facilities like ramps,
wheel chairs etc.

 Another development in recent times has been the use of multiple channels
for retailing a single product i.e., selling the product through mail order as well
as through departmental stores or through itinerant retailers, general stores as
well as over the Internet at the same time (for e.g., Amul Ice cream is sold
through pushcarts, in local grocery shops, in departmental stores, and over the
Amul.com website).

Some retail outlets are also using multiple format retailing, where the retail outlet
combines the features of two different types of retailers. For e.g., a departmental
store and chain store combination in the form of a chain of departmental stores
across different parts of the country like Big Bazar, Vishal Megamart.

 The combination of a super market and a departmental store forms a

hypermarket. It is a large scale retail facility which provides enormous range of
products under one roof. A consumer can buy all his/her weekly or monthly
requirements in one trip from the hypermarket.

Thus, we can see that trade within the country (internal trade) may assume different
forms, depending on the needs and demands of consumers. Newer features in existing
forms or newer forms of retailing keep developing with changing times and changing
consumer preferences.

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18.5.2 CHAMBER OF COMMERCE AND INDUSTRY Trade

Chamber of commerce is a voluntary association of business people. Manufacturers,

merchants and other business persons in a particular region or country will be the
members of Chamber of Commerce and Industry. This organisation is formed to
promote general business interests of all the members. Chamber of Commerce
promotes the growth of commerce and industry in a particular region or country. This
is a non-profit making organisation. Note

18.5.3 DOCUMENTS USED IN INTERNAL TRADE

Following documents are used in internal trade :

1. Proforma Invoice : It is a document sent prior to the actual sale to the buyer. It
informs the buyer about the amount he is required to pay for the specified goods
purchased by him. It provides almost the same information as an invoice provides.

It is sent in the following cases:

a) When goods are sent on consignment basis.

b) When goods are sent abroad.

c) When supplier expects payment before dispatch of goods.

2. Invoice: It is a document sent by the seller to the buyer when goods are supplied.It
is a document which shows the rates and terms of payment at which goods will
be dispatched. Invoice perform the following functions:

a) It help the buyer to locate error in the order and supply of goods.

b) It is a basis for recording transactions.

c) It informs the buyer about the dispatch of goods.

d) Seller can have an idea of the amount to be collected from buyer.

3. Debit Note: It is a document prepared by one party (either by the seller or the
buyer) to inform the other party (either the seller or the buyer) that receiver's
account has been debited with the specified amount and for the specified reasons.

Seller may send a debit note to the buyer in the following cases:

a) When the goods are undercharged in the invoice.

b) When some goods are not included in the invoice by mistake.

c) When some more items have been sent than invoiced.

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Trade Buyer may send a debit note to the seller in the following cases:

a) When the goods are returned by the purchaser to the seller and seller is ready to
give allowance to the buyer for the same.

b) When the seller failed to sent same goods charged in the invoice.

c) When the price charged in the invoice is higher.

Note 4. Credit Note: It is a document prepared by one party (buyer or seller) to be
sent to another party (buyer or seller) to inform the receiver that his account has
been credited with the amount mentioned and for the reasons stated therein.

A seller may send a credit note to the buyer in the following cases:

a) When goods are returned by the purchaser.

b) When same goods are damaged and acceptance has been made by the buyer at
a reduced price.

c) When less goods have been sent than invoiced.

A buyer may send a credit note to the seller in the following cases:

a) When the seller has by mistake sent more goods than invoiced.

b) When same item has not been charged in the invoice by mistake.

18.5.4 LORRY RECEIPT (LR)

When the goods are sent through a transport company, a Lorry Receipt is issued by
Transport Company at the time of booking.

1. Name, address and phone number of the transporter.

2. Name, address and phone number of the sender.

3. Name, address and phone number of the person to whom the goods are likely
to be delivered.

18.5.5 TERMS OF TRADE

i. Cash on Delivery (COD): It is a type of transaction in which payment for goods

is made at the time of delivery. If the purchaser does not make payment when
the goods are delivered, then the goodwill be returned to the seller.

ii. Free on Board (FOB): This includes all charges at the post of shipment upto the
loading of goods on board the ship and export duty, if any.

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iii. Cost Insurance and Freight (CIF): This includes the cost of goods, all expenses Trade
incurred for taking the goods to the port of destination and insurance charges.

iv. Errors and Omissions Excepted (E & OE) : It is an expression that is used as
a disclaimer against clerical errors.

INTEXT QUESTIONS 18.7

Note
1. What is meant by 'Shopping Mall'?

2. Name the method of distribution in the following cases :

(a) The manufacturer approaches the customers directly.

(b) The marketing representative calls the customers over telephone.

(c) Sale of goods and service by using internet.

(d) Sale of goods through machines without any human intervention.

TERMINAL EXERCISE
Very Short Answer Questions

1. What is meant by 'Internal Trade'?

2. State the meaning of multiple shops.

3. Mention any two benefits of wholesaler.

4. Define the term 'Franchise'.

5. Name any four types of large scale retailing business.

Short Answer Questions

1. Explain the role of wholesaler in the distribution channel.

2. State any four merits of departmental stores.

3. Give any four points of distinction between a retailer and a wholesaler.

4. Explain the merits of super markets.

5. What is meant by 'mail order retailing'?

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Trade Long Answer Questions

1. State the features of departmental Stores. How is a departmental store different

from multiple shops?

2. Describe the role of middlemen in the channel of distribution.

3. What is meant by Consumer Cooperative Store? Explain its merits in brief.

Note 4. Explain the features of Franchise as a form of large scale retailing business.

5. Describe in brief the recent trends in distribution.

ANSWERS TO INTEXT QUESTIONS

18.1 2. WT : (a), (c), (d) RT : (b), (e)

18.2 2. (a) A retailer has a direct link with the consumers.

(b) The amount of capital is less in case of retail trade.

(c) Wholesaler/Retailer is a middleman in the chain of distribution.

(d) No change

(e) The retailer purchases goods from the wholesaler.

18.3 2. (a) Single line store (b) Specialty store

(c) General store or variety store (d) Itinerant retailing

(e) Second hand-goods shop

18.4 1. (a) Same ownership (b) Easy to recognise

2. (a) Big businessman (Individual or group)

(b) Big manufacturers or producers

(c) Departmental store

(d) Branch manager or anybody appointed by the owner.

18.5 1. (a) Food items (b) Vegetables (c) Fruits

(d) Groceries (e) Utensils

2. (a) Consumer Cooperative Stores are generally located near the

residential areas.

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(b) The presence of salesperson is not required in super markets. Trade

(c) No change

(d) The Consumer Cooperative Stores are managed by the

members who may not have professional expertise in business
management.

18.6 1. (a) Medicine (b) Books (c) Toys Note

(d) Cosmetics (e) Plant seeds

2. (a) Franchise is a form of retailing where two parties enter into an

agreement in which one party authorises the other to sell or
produce and sell specified goods and services.

(b) The party that develops a product/service or is the owner of

an expertise who authorises other to sell or produce and sell a
particular item.

(c) The party that buys the rights to sell or produce and sell any
item under the contract of franchise is known as franchisee.

18.7 2. (a) Direct marketing (b) Telemarketing

(c) Internet Marketing (d) Automatic vending machine

DO AND LEARN
1. Visit at least five retail shops in your locality and record the following to get a
clear picture.

(a) Name of the store if any.

(b) Location of the store.

(c) Variety of products being sold.

(d) Place of procurement of the products (whether from wholesalers or

producers).

(e) Transportation used.

(f) After-sales service, if any provided.

(g) Any information that the retailer communicates to the wholesalers/

producers.

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Trade (h) Any other relevant information.

2. Identify at least twenty different retail shops of your locality and classify them
according to the different types you learnt in this lesson. Prepare a chart.

3. Given below is a word search, the clues are given below to help you find the
word. Identify the word and encircle/ highlight in the word search.(First one is
done for you)
Note
a. They sell goods of different sizes, brands, designs, styles and quality of the
same product line.(SPECIALITY SHOPS)
b. These stores deal with products of a specific brand or company /
(S_ _ _ _ _ L _ _ _ S_ _ _ ES)
c. This is a large-scale retail shop where a large variety of goods are sold in
a single building.(_E _ _ _ _M_ _ _ _ _ S _ _ _ _)
d. They open a number of branches at different localities in a city or in different
cities and towns in a country. ( _ _A_ _ S _ _ _ _)
e. This method of sale is suitable for goods that do not need personal
inspection and whose use can be understood by description only./
(M _ _ _ _ _ _ _ _H_ _ _ _ _ _)
f. A form of retailing wherein two parties enter into an agreement in which
one party authorises other to sell or produce and sell specified goods and
services.(F_ _ _C_ _ _ _ )
g. Under this method of distribution the manufacturers bypass the chain of
middlemen and approach the consumers directly and sell them the goods
and services. (D_ _ _ _ _M_ _ _ _ _ _ _ _)
h. It is a document prepared by one party (buyer or seller) to be sent to
another party (buyer or seller) to inform the receiver that his account has
been credited with the amount mentioned. (_R_ _ I _ _ _ _ E)
i. Itinforms the buyer about the amount he is required to pay for the specified
goods purchased by him(P_ _ F _ _ _ _IN_ _ _ _ _)
j. It is a document prepared by one party (either by the seller or thebuyer)
to inform the other party that receiver's account has been debited with the
specified amount and for the specified reasons. (_ _ _ IT N_ _ _)

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k. When the goods are sent through a transport company, this document is Trade
issued by Transport Company at the time of booking.
(_ _ _ _ _ R _ _ _ _ _T)

Z J E C B D A K Y X O M U P C S L D N T
T A V H D C B G P V Q M I W J E D I A P
X W Y V W H X C K N W Y W F Y R T R R I
G G O T R F Y V E H Y Q K W E O L E L E
L N N P A W R T E C L Z P R Q T P C I C Note
K T I I T U T A Y V U G O A Z S F T N E
E R O T S L A T N E M T R A P E D M C R
P I P T E U H L V C S R R F B N J A S Y
Y T F Y I K O Q Q N H O C R S I X R O R
Z X D N F C R H I G L I C V D L T K J R
U G O S R D O A R E D K S C T E A E A O
P F Y T G B H A M E S W B E Z L N T D L
Y Q E J D C U K P E D Z G N E G P I E O
C R E D I T N O T E L R L Y X N Y N B M
P C Z S G G P Z C A R E O T H I D G I H
I K M U P N V V M F V O T L F S L B T J
N R P R O F O R M A I N V O I C E K N Q
B I T U H R V S M N I G W P L A A I O Z
I Q A S C V K V W E R Q H V Z X M C T T
S P O H S Y T I L A I C E P S M W Z E W

ROLE PLAY
Satish, the younger brother of Suresh came to Delhi for the first time. Suresh took him
around Delhi to see the place. He was amazed to see the shopping complexes and the
market places.

One day Suresh along with his mother had to go for monthly purchases. He took
Satish along with them. Following is the conversation among them.

Satish : Bhaiya, I think it will take a whole day.

Suresh : Why do you say that?

Satish : You have to buy things of different variety and that too for a whole
month.

Suresh : So what?

Satish : It is going to be a tiring day.

Suresh : Why?

Satish : Naturally we will have to go different shops to buy the variety of

things that we need.

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Trade
What about our food? We will have to carry the things and look for
lunch too?

Suresh : Don’t worry brother! Have you ever heard of Departmental Store?

Satish : What? Departmental Store? What is that?

Suresh : Well! Let me explain.

Note
You are required to continue the conversation while assuming the role of Suresh and

explain to Satish all about Departmental Store.

Solution for Do and Learn activity 3

Word Search

a. Speciality Shop b. Single line Stores c. Departmental Store

d. Chain Store e. Mail Order Housing f. Franchise

g. Direct Marketing h. Credit Note i. Proforma Invoice

j. Debit Note k. Lorry Receipt

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EXTERNAL TRADE Module - 5
Trade

19

EXTERNAL TRADE Note

With the development of human society and progress in science and technology, the
scope of trade has also widened. It has now crossed the geographical boundaries of
countries across the globe. Today, we can buy goods of our need from other countries
and also sell our surplus goods abroad without facing any difficulty. When the business
firms of two different countries participate in the process of buying and selling of
goods it is termed as External Trade. External trade also facilitates efficient allocation
of resources. Now you think yourself, is there any difference in the nature and procedure
of this type of trade from the type of trade about which you have already learnt in the
previous lesson? Now let us try to find out the answer to such questions.

LEARNING OUTCOMES
 explains what is external trade and its importance for business;

 identifies the challenges faced by external trade from a business prospective;

 distinguishes between export and import trade procedures; and

 identifies the various measures adopted to promote export in the economy.

19.1 EXTERNAL TRADE - MEANING

You know that no country in the world possesses everything needed by its people. So
they all have to depend on other countries of the world to meet their requirement of
certain items. For example, a country may be rich in iron and steel but poor in aluminium.
So it has to meet its requirement of aluminium from countries with surplus production
of aluminium. Not only that, the countries having excess production of certain items

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Trade find it beneficial to sell them to some other countries and buy items in which they are
deficient from others. It is also observed that some countries attain specialisation in
production of certain products by virtue of adopting advanced technology while others
find it difficult or expensive to produce it in their own country. They prefer to buy those
products from the former. Thus, uneven distribution of natural resources and
specialisation attained in production of certain items gives rise to exchange of goods
Note and services between different countries. Such exchange is termed as "External Trade".
It is also known as Foreign Trade or International Trade.
When buying and selling of goods take place across the national boundaries
of different countries it is called External trade. It is also known as Foreign
trade or International trade.

19.2 TYPES OF EXTERNAL TRADE

On the basis of sale and purchase of goods and services, external trade can be divided
into three kinds. These are:

(a) Import trade (b) Export trade (c) Entrepot trade

Let us discuss these in detail .

(a) Import Trade: When the business firm of a country purchases goods from the
firm of another country, it is called Import trade. For example, when Indian
government purchases petroleum products, electronic goods, gold, machineries,
etc., from other countries it is termed as import trade.

(b) Export Trade: When the firm of a country sells goods to the firm of another
country, it is called Export trade. For example, the sale of iron and steel, tea,
coffee, coal, etc. by Indian companies to other countries is known as its export
trade.

(c) Entrepot Trade: When the firm of a country imports goods for the purpose of
exporting the same to the firms of some other country with or without making
any change, it is known as entrepot trade or re-export trade for that country.
For example, if an Indian company imports rubber from Thailand and exports it
to Japan then it is called Entrepot trade for India. Now you must be thinking,
why India comes between Thailand and Japan. Why doesn't Japan directly
imports rubber from Thailand? Let us see what could be the possible reasons
for this.

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In India formulation of policies concerning external trade comes under Trade
the authority of Ministry of Commerce and Industry.

A country cannot import goods directly from others because of the following reasons:

o Non-accessibility of Trade Routes: The exporting country may not have

any accessible trade routes connecting the importing country; or

o Processing/Finishing Required: The goods imported may require processing Note

or finishing before exporting. And these facilities may be lacking in the exporting
or importing countries;

o Lack of Trade Agreement: There may not be any trade agreement between
both the countries. Let's understand this, Thailand, Japan and India are Asian
countries. Thailand imported electronic goods from Japan and exported it to
India as the latter does not have any trade agreement with Japan. In this example
Thailand carried out "enterpot" trade.

Visible and Invisible Trade

Visible trade refers to imports and exports of tangible goods, whereas
invisible trade of a country includes services received from other countries
or services rendered to other countries. Shipping and insurance services,
services to foreign tourists, services of foreign technicians, interest on
loans etc., are some of the example of invisible trade. Visible trade is also
known as merchandise trade.

19.3 IMPORTANCE OF EXTERNAL TRADE

External Trade is an important indicator of the economic condition of a nation. Both
importing and exporting countries are benefitted by external trade. While exporting
country earns more foreign exchange by exporting its surplus, the importing country at
the same time gets the opportunity to use better products and raise the standard of
living of its people. Let us discuss in detail about the importance of external trade.

(a) Promotes Specialisation: External trade promotes specialisation. When there

is expansion in the demand for a particular commodity, its producer is encouraged
to specialise in its production. For example, there is demand of Japanese
electronic goods all over the world. The result is that Japan's efficacy and
competency in this field has developed enormously. Similarly our country has
specialised in tea, coffee and sugar production.

(b) Improves Standard of Living: On account of import trade, a country can

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Trade consume goods, which it does not produce. On the other hand, it earns foreign
exchange through export trade. The import and export trade thus, help in raising
standard of living in a country.

(c) Enhances Competition: External trade enhances competition, which compels

the domestic firms to improve technology of production, production process
and quality of the products. It ultimately benefits the consumers in getting better
Note quality products at competitive prices. It also provides a large variety of goods.

(d) Generates Employment Opportunities: External trade facilitates the growth

of agricultural, commercial as well as industrial activities, which in turn generates
more and more employment opportunities for the people of country.

Tracing the History of External Trade in India

In India, external trade as a concept dates back to as old as Indus valley civilization
(3300-1300 BCE) wherein the traders carried out trade with contemporary
civilizations like Babylon, Mesopotamia and Persia. They exchanged goods like
gold, silver, copper and turquoise. There are evidences which exhibit that Harrapan
era traders participated in maritime trade network spanning from Central Asia to
modern day West Asia such as Iraq, Iran, Kuwait and Syria. In the modern day
Iraq (ancient Mesopotamian civilization), archaeological sites have found Harappan
seals and jewellery. The period of early Harappan period (3200-2600 BCE) also
showed cultural similarities when it comes to designs of pottery, seals, figurines
and ornaments between Harappan and Central Asian civilizations. Some of the
Harappan sites like Lothal, Surkotada and Balakot were important trading coastal
cities which were facilitating external trade. In the Lothal site of Harappan civilization
a circular buttoned seal from Persian Gulf had been found which indicates that
trade links existed between these two coastal cities.

(e) Price Equalisation: External trade leads to equalisation of prices of goods and
commodities in the world. Whenever the prices of commodities tend to rise
because of short supply it can be checked by importing more goods. Similarly
when the prices of products decline because of availability of excessive item,
the country may export that surplus to other countries of the world.

(f) International Relations: External trade brings the people of two different
countries to come closer and to understand the need and requirement of each
other. International trade leads to cultural and trade related exchanges. All these
activities promote harmonious and cordial relations among the nations.

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(g) Economic Growth: Economic growth of every country depends to a large Trade
extent on the volume of external trade. If a country specialises in any product, it
needs to produce more to meet the worldwide demand. So, by producing and
exporting more goods and services it can accelerate the economic growth of the
country.

(h) Efficient Utilisation of Natural Resources: External trade is a means through

which the natural resources of various countries can be efficiently and properly Note
utilised. For example, a country may be rich in minerals but due to lack of
technological advancement it is not able to extract those minerals from the earth.
So it can import modern equipments and machineries from advanced countries
and make proper utilisation of those natural resources.

INTEXT QUESTIONS 19.1

1. Mention any two reasons for 'entrepot trade'.

2. How does external trade improve the standard of living of the people?

3. State whether there is Export trade, Import trade or 'Entrepot trade' in the
following cases pertaining to India.
(a) India purchased petroleum products from a foreign company.
(b) USA sold Engineering products to India.
(c) India bought goods from Russia and sold to Sri Lanka.
(d) UK bought jewellery/gold items/pearls from India.
(e) Germany bought Telecom services from India.

19.4 DIFFICULTIES FACED IN EXTERNAL TRADE

In internal trade generally buyers and sellers meet together and transactions take place
as per their convenience. But in external trade the situation is completely different. It
takes a long procedure to buy and sell the goods and services. The business people
generally face a number of problems in carrying out foreign trade. The various difficulties,
which are faced by the buyers and sellers engaged in external trade are described as
follows:

(a) Geographical Distance: External trade involves transport of goods over long
distances, except for neighbouring countries. Distance between various countries
makes it difficult to establish quick and close trade contact between the importers
and exporters.

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Trade (b) More Risky in Nature: In external trade goods are exposed to greater degree
of risk.Risk in transit of goods is more because of long distance. Transit of
goods may be affected due to poor weather, enemy actions, sea pirates though
some of these risks can be covered and mitigated through insurance coverage
but it inflates the cost of goods shipped. Risks in foreign trade also arise out of
instability in exchange rates.
Note (c) Difficulties of Transport and Communication: Long distances incidental to
external trade create difficulties of proper and quick means of transport and
communication. Though modern means of communication have solved this
problem, it is quite costly and cannot be used for securing all sorts of information.
Loading and unloading of goods often takes long time and also involves large
expenses which increases the cost of goods.

(d) Legal and Custom Related Restrictions: External trade is subject to various
restrictions by way of customs,tariff, quotas and exchange regulations, which
restrict the scope of external trade.

(e) Study of Foreign Markets: Markets for different products have their own
characteristics as regards demand, intensity of competition, buyers' preferences,
etc. Thus, an extensive study of foreign markets is required for success in external
trade. This is not easily possible from an individual exporter's or importer's point
of view.

(f) Change in Rules and Regulations: Every country has framed its own rules
and regulations for its external trade in order to protect its economic and political
interests. These rules change from time to time. So the traders find it difficult to
acquaint themselves with the rules and regulations and procedures followed by
different countries.

(g) Fluctuations in Exchange Rate : One of the greatest risks associated with
external trade is that prices of products is subject to movement in the exchange
rate of the countries which changes frequently-followed by either appreciation
or deprecation in the value of currency of any country. Taking into account ever
changing currency fluctuations,is a difficult task for business firms.

By foreign exchange rate we mean, the rate at which a unit of currency of a

particular country is exchanged with a unit of currency of a foreign country. For
example, the exchange rate of Indian rupee and US dollar is 75.64 INR as on
June, 26, 2020. This rate keeps on changing according to fluctuations in the
purchasing power of the foreign currency.

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You are requested to find out the present exchange rate of Indian currency and American Trade
dollar. One US$ = Rs. _____ as on _______. In India foreign exchange rate
management comes under the authority of RBI.

19.5 FACILITATORS OF EXTERNAL TRADE

In the previous section we discussed about some of the problems and difficulties
which are faced by the importers as well as exporters. After knowing all these do you Note
think that the traders will alone be able to carry out the business successfully? The
answer is obviously NO. The traders need support from others in the process of
buying and selling. The persons or institutions that provide various kinds of support
are termed as facilitators of external trade. Let us learn about some of such facilitators.
1. Indent Houses/Indent Firms: They help importer and exporter in sending
and receiving the order of goods along with other instructions.
2. Export Houses: These are organisations involved in export promotion activities,
such as state trading corporations (STC), Minerals and Metals Trading
Corporation (MMTC), Handicrafts and Handloom Export Corporation (HHEC)
and Central Cottage Industries Corporation (CCIC) etc.
3. Forwarding Agents: They act on behalf of exporters to complete all the
formalities of loading the goods on the ship.
4. Clearing Agents: Clearing agents act on behalf of the importer and complete
all formalities required for clearing the goods from the port of destination. He
takes delivery of the goods from the customs authority and sends the goods by
rail/road to the place of importer.
5. Shipping Company: It carries goods on payment of freight charges, and
undertakes to deliver the same to the importer.
6. Insurance Company: It bears the loss or damage to the goods against insured
risks right from the godown (warehouse) of the exporter to the godown of the
importer.
7. Trade Commissioners: These officials are appointed by the government in
their embassies to represent the country's trade-interests abroad. They collect
information relating to trade relations and disseminate the same among traders.
They also advise the traders on matters relating to imports and exports.
(h) Trade Representatives: These officials provide guidance to exporters abroad
on behalf of the government of their own country. They make efforts to secure payment
for goods and also advise on legal matters.

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Trade
INTEXT QUESTIONS 19.2
1. How can a clearing agent help the importer?

2. State any four difficulties faced by buyers and sellers in External trade.

3. Match the following facilitations:

Note Column I Column II

(a) Export Houses (i) Carries goods on payment of freight charge.

(b) Indent Houses (ii) Agent ready to bear the loss/damage.

(c) Clearing Agents (iii) Organisation involved in Export promotion

activities.

(d) Shipping Company (iv) Help in receiving orders to goods with in

structions.

(e) Insurance Company (v) Complete all formalities for clearing goods
from destination.

Essential Requirements for Exporter and Importer

If you want to start an export-import business then first you have to obtain the following
legal documents.

1. Import Export Code (IEC) Number: The IEC number is granted bythe
Director General of Foreign Trade. Every firm dealing with export-import business
must obtain this number without which no documents relating to external trade
will be forwarded.

2. Registration-cum-Membership Certificate (RCMC): The Government

provides certain facilities and benefits to the exporters and importers under its
EXIM policy. To avail such facilities every firm must obtain the Registration-
cum-Membership Certificate from the appropriate export promotion council.
Export promotion councils are different organizations set up by the Government
to promote and develop exports of different categories of products.

19.6 PROCEDURE FOR EXPORT TRADE

The general procedure adopted for exporting goods to a foreign country is as follows:

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Trade

Note

Fig. 19.1 Procedure for export trade

1. Receipt of Enquiry and Sending Quotations: The importer of goods first

sends an enquiry to different exporters requesting them to send information about
price, quality, terms of payment etc. In reply to the enquiry, the exporters then
send the quotation mentioning details about the products, price, quality, mode of
delivery, terms and conditions if any.

2. Receipt of an Indent or Export Order: If the prospective importer finds the

terms and conditions acceptable, then he places an order for export of goods
which is known as indent. An indent contains a description of the goods
ordered, price to be paid, terms and conditions of delivery, packing of
goods and other details. On receipt of indent if the exporter finds it satisfactory,
then he forwards his acceptance to export the goods.

3. Credit Enquiry: The exporter must ensure that there is no risk of default in
payment. He should verify the credit-worthiness of the importer. For this purpose
he may ask the importer to send a letter of credit, bank guarantee or any other
guarantee.

4. Obtaining Export Licence: Each and every country has its own import and
export policy for free goods and restricted goods. An exporter in India has to
complete various formalities and apply for export license to the appropriate
authority. If the authority is satisfied it will issue the export license. To get an
export license, the exporter must have (i) an Export-Import Code (IEC) number
(ii) Registration Cum Membership Certificate (RCMC) from appropriate export
promotion council and (iii) Registration with Export Credit and Guarantee
Corporation (ECGC). The registation with ECGC safeguards against risk of
non-payments.

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Trade 5. Production or Procurement of Goods: The exporter has to produce the goods
or buy them from the market. The goods must be in accordance with the
instructions given in the indent regarding the quality, quantity, price, etc.

6. Pre-shipment Inspection: To ensure that only good quality products are

exported from our country, the Government of India has made compulsory pre-
shipment inspection of goods by certain authorised agencies .
Note
7. Excise Clearance: In India, manufactured products are subject to excise duty
under the Central Excise Act. Therefore excise clearance certificate is must for
the goods to be exported. It may be noted here that the Government of India
has exempted excise duty in many cases if the goods are manufactured exclusively
for the purpose of export.

8. Packing and Marking of the Goods: Packing should be done strictly

according to the instructions given in the indent. If loss arises due to defective
packing, the exporter may have to bear it. If necessary, grading should be done
before packing. The packages should be properly marked according to
instructions, if any, so that they may be easily recognised.

9. Appointment of Forwarding Agent: Packed goods may be despatched to

the port directly by the exporter or through a forwarding agent. If the goods are
stored in any location, the exporter may appoint a forwarding agent who will
perform all the formalities on behalf of the exporter before shipping the goods.
The forwarding agent will charge commission for this work.

10. Despatch of Goods by Rail/Road: The exporter has to despatch the goods
by rail/road to the port town. He will send the R/R (railway receipt) to the
forwarding agent along with other instructions. The agent will take delivery of
the goods and complete other formalities before shipping them to the importer.

11. Formalities to be completed by forwarding agent:

(a) Obtaining the Custom Permit: The agent has to apply to the custom
office giving full details of the goods to be shipped in order to receive the
custom permit. If goods are duty free then custom permit is given
immediately, otherwise it will be necessary to complete other formalities.

(b) Obtaining Shipping Order: The agent has to secure adequate space in
the ship for loading of goods. For this purpose he has to sign an agreement
with the shipping company for issue of the shipping order which will enable
him to put the goods in the ship.

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(c) Completion of Shipping Bill and Payment of Export Duty: The Agent Trade
has to fill in three copies of shipping bill and submit them to the custom-
house. On the basis of the bill, duty is calculated by the custom authority.
The agent has to make payment of the duty and get the original and third
copy of the shipping bill from the custom authority.

(d) Payment of Dock Dues: The agent has to make arrangement for carrying
the goods to the dock. For this purpose, two copies of properly completed Note
'Dock Challan' are submitted to the dock authorities along with one copy
each of shipping bill and shipping order. After dock charges are received,
the dock authorities retain one copy of dock challan and return the duly
signed second copy to the agent.

(e) Custom's Verification before Loading of Goods: As soon as the ship

touches the port, the dock authorities start loading the goods on it. Before
the goods are actually loaded, custom officials verify them to know if
there is anything on which duty remains to be paid or which is not mentioned
in the shipping bill. The captain or his assistant (mate) will receive goods
only when shipping order has been produced before him.

(f) Mate's Receipt: The captain or mate will issue a receipt known as "mate's
receipt" after the goods have been loaded. This receipt contains particulars
like quantity of goods, number of packets, condition of packing, etc.

(g) Bill of Lading: The forwarding agent has to present the mate's receipt at
the office of the shipping company and in exchange will get a document
known as Bill of Lading. He has to fill in three blank forms of bills of
lading giving details regarding the goods, destination, name of the ship,
date and place of loading and name and address of the person to whom
delivery is to be made. If the freight is paid in advance the bill of lading is
marked 'freight paid'. Otherwise it is marked 'freight forward' which means
freight will be paid at the port of destination.

(h) Insurance of Cargo: As a safeguard against marine risks, it is necessary

to insure the goods. Insurance must be done strictly according to the
instructions, if any, of the importer as given in the indent. If there is no
instruction, the exporter himself should insure the goods. The insurance
policy is sent to the importer along with the bill of lading and other
documents.

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Trade (i) Advice to the exporter: The agent then informs the exporter about the
shipment of goods and other related matters. He will send the bill of lading,
insurance policy, shipping bill etc. to the exporter along with a statement
showing his expenses and remuneration.

12. Preparation of Export Invoice and Consular Invoice: Having received the
advice from the forwarding agent, the exporter prepares an export invoice known
Note as foreign invoice. This invoice states the quantity of goods sent and amount due
from the importer. Custom regulations of many countries require consular invoice
for the purpose of easy clearance of goods at the port of destination in the
importing country. If it is required by the importer then the exporter has to arrange
for such a document also.

13. Securing Payment: There are two alternative methods by which payment canbe
received by the exporter.

(a) Letter of Credit: The exporter can get immediate payment on the strength
of the letter of credit which is issued by the importer's bank in favour of
the exporter. The exporter has to draw the bill in order to get the payment
from the local branch of the bank (in home country), which has issued the
letter of credit on behalf of the importer.

(b) Letter of Hypothecation: If the exporter wants to receive payment

immediately, he can get the bill (accepted by the importer) discounted
with his bank. But for this purpose, he has to give a letter of hypothecation
to his bank. Letter of hypothecation is a letter addressed to a bank
attached with the bill of exchange which is accepted by the importer.
Through his letter of hypothecation, the exporter authorises the bank to
sell the goods in case of dishonour of the bill by the importer so that the
bank can realise the amount advanced by it to the exporter.

INTEXT QUESTIONS 19.3

1. Define 'Letter of Credit'.
2. Name the document referred to in each of the following cases.
(a) Agreement signed with the shipping company to enable to put goods on
the ship. ( )
(b) Document issued by the captain of the ship after loading the goods on the
ship. ( )

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(c) Assured payment on the strength of a document issued by the importer's Trade
bank. ( )
(d) Document which authorises the bank to sell the goods in case the ( )
bill is dishonoured.
(e) Document received in exchange of Mate's Receipt at the shipping office.
( )
Note
19.7 PROCEDURE FOR IMPORT TRADE
The steps involved in importing goods are discussed below:

Fig. 19.2
1. Trade Enquiry: It is a written request by the importer to the exporters for
supply of relevant information regarding the price, quality, quantity and various
terms and conditions of export etc. In response to the trade inquiry of the importer,
the exporter prepares the quotation and sends it to the importer.
2. Obtaining Import Licence: An importer cannot import goods without having
avalid licence from the Import Licensing Authority. In India it is compulsory to
get the IEC number from the Directorate General of Foreign Trade (DGFT).
3. Obtaining Foreign Exchange: As foreign exchange transactions are controlled
by Reserve Bank of India, the importer has to submit an application along with
necessary documents to the Exchange Control department of RBI. After
scrutinising the application, the Reserve Bank of India will sanction the release
of foreign exchange.
4. Placing the Indent or Order: Indent is the purchase order to the exporter by
an importer for specified goods. The indent may be sent directly to the
manufacturer of goods or to the exporting agent.

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Trade 5. Sending Letter of Credit: Generally, the parties in external trade are not very
well known to each other. So the exporter wants to be sure of the credit-worthiness
of the importer. Usually, the exporter asks the importer to send a letter of credit.
An importer can get a letter of credit issued as per terms and conditions of his
banker and send it to the exporter. It ensures payment of bill of exchange drawn
by the exporter upto the amount specified in the letter of credit.
Note 6. Procuring the Shipping Documents: The importer will arrange to obtain
necessary documents such as bill of lading, shipping bill, etc., after receiving the
advice letter from the exporter. The documents are procured to take delivery of
the goods. He has to go to the exporter's bank to make payment in order to get
the necessary documents for taking delivery of the goods.

7. Appointment of Clearing Agent: The importer may take delivery on his own
or appoint an agent known as clearing agent, to take delivery of the goods. The
importer sends necessary documents to his agent to clear the goods. The clearing
agent charges commission for his services for clearing the goods.

8. Formalities to be Completed by the Clearing Agent :

(a) Endorsement for Delivery: When the ship arrives at the port, the clearing
agent approaches the concerned shipping company and gets the bill of
lading endorsed in his own name from the shipping company. If the freight
has not been paid by the exporter, it will have to be paid before
endorsement of the bill of lading.

(b) Bill of Entry: The agent has to fill in and submit three copies of the bill of
entry to the custom authority. The custom authority will calculate the duty
and receive the same from the clearing agent.

(c) Payment of Dock Charges: The agent has to complete and file two
copies of Port Trust receipt and three copies of Bill of entry to the landing
and shipping dues office. After receiving the dock charges, the dock
authority will return one copy of Port Trust receipt and two copies of the
Bill of entry to the agent. Then the agent has to submit this copy along with
two copies of Bill of entry to the custom office. If custom duty is to be
paid, he will make the payment and take delivery of the goods. Dock
charges are defined as charges which are being paid to concerned port by
a shipping company using for loading and unloading of goods.

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(d) Despatch of Goods by Rail/Road: The clearing agent has to arrange Trade
carriage of the goods to the railway station or the transport authority after
taking the delivery from the dock authority. He will despatch the goods by
rail/road to his principal and get the railway receipt/carrier receipt.

(e) Advice to the Importer: The clearing agent has to write a letter of advice
to the importer after despatch of goods. In this letter of advice, information
regarding arrival of goods and their despatch by rail/road is specified. He Note
has to enclose with it the railway receipt/carrier receipt and a statement of
his expenses and charges.

9. Delivery of Goods from Railway/Transport Authority: The importer can

take delivery of the goods from the railway or transport authority and carry
them to his godown.

INTEXT QUESTIONS 19.4

1. Mention any three roles played by clearing agent in external trade.
2. Answer the following questions:
(a) Name the specific department of RBI that controls the foreign exchange
transactions.
(b) In import trade, who sends the letter of credit to whom?
(c) Who appoints the clearing agent?
(d) To whom is letter of advice forwarded by the clearing agent.

19.8 DOCUMENTS USED IN EXTERNAL TRADE

The main documents which are used in external trade are discussed below:

1. Indent: It is an official order or requisition placed for import of goods. It

is sent to the exporter for supply of goods. It contains full information regarding
the goods to be imported i.e., quantity, quality, mode of packing and marking,
period of delivery, mode of payment instructions regarding shipment and
insurance, etc.

2. Letter of Credit: In external trade, the importer has to prove his credit-
worthiness to the exporter, who may demand a certain amount of deposit or
even full payment of due price before the shipment of goods. For this purpose,
the importer arranges with his bank for issuing a letter of credit in favour of the
exporter. Thus, a letter of credit is issued by a bank of the importer's

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Trade country in favour of the foreign dealer. It contains an undertaking by the

bank concerned that the bill of exchange drawn by the foreign dealer on
the importer will be honoured on presentation to the extent of amount
specified in it. Thus, it establishes the credit-worthiness of the importer and
guarantees payment of price to the exporter for the goods exported by him.

3. Bill of Lading: It is a document prepared by the ship owner or by the master

Note of the ship acknowledging the receipt of goods and undertaking to deliver
the goods at the port of destination. This, on one hand, acts as a proof of the
receipt of goods specified there in and on the other, is a document of title to the
goods. The document is sent by the exporter to the importer who can take
delivery of the goods at the port of destination on presentation of the bill of
lading and other shipping document

4. Advice Letter: It is a document, which is prepared by the forwarding agent

and sent to the exporter indicating that all the formalities for export of
goods have been completed and goods have been shipped. Along with this
letter, the forwarding agent sends a statement showing expenses incurred on the
goods exported and his remuneration. Similarly, a letter of advice is also prepared
by the clearing agent and sent to the importer stating that all the formalities for
clearing the imported goods have been completed. Along with this letter, the
clearing agent sends the railway receipt as a proof of goods sent to importer as
well as his statement of account for expenses incurred and commission charged.
Thus, it is a document used both in export and import trade.

5. Documentary Bill: When the documents of title to goods are sent along
with the bill of exchange drawn by the exporter on the importer, it is
called a documentary bill. It may be of two types (a) Documentary bill against
payment (b) Documentary bill against acceptance. In case of documentary bill
against payment, the documents of title to exported goods are delivered to the
importer only when the importer has paid the amount specified in the bill of
exchange. In case of documentary bill against acceptance, the documents of
title to the exported goods are delivered to the importer after he has accepted
the bill of exchange drawn by the exporter.

6. Insurance Policy: The insurance policy is issued by the insurance company

to cover the risks of loss or damage to goods due to specified causes. If
there is no insurance then the loss will have to be borne by the owner of the
goods, the exporter or importer. Under CIF (Cost Insurance Freight) contract,
insurance is generally done by the exporter while under FOB (Free on Board)

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contract, insurance is done by the importer. There are different types of insurance Trade
policies to cover different types of risks in external trade.

7. Shipping Order: In order to hire space in the ship, the exporter or his agent has
to enter into an agreement with the shipping company. The shipping company on
the conclusion of the agreement gives a shipping order, which contains
instruction to the captain of the ship to receive on board the specified
quantity of goods from the exporter. Note

8. Shipping Bill: The shipping bill is a document prepared by the exporter, or

the forwarding agent on the basis of which the custom authority calculates
the duty to be paid by the exporter.
9. Mate's Receipt: When goods are brought to the docks for shipment, the
document issued by the dock authority is known as a dock receipt. It is the duty
of the dock authority to load the goods in the ship. But if goods are directly
taken into the ship, the captain or his assistant (mate) gives a receipt as a proof
of goods loaded in the ship. This receipt is known as Mate's receipt. If the
mate is not satisfied regarding the packing of goods, he issues a foul Mate's
receipt, otherwise he issues a clean Mate's receipt.
10. Dock Challan, Dock Warrant and Dock Receipt: The exporter has to fill
up a form for the payment of dock charges. This form is known as 'Dock Challan'.
After paying the dock charges, a document is issued permitting the goods
to be brought to the docks for loading. This document is known as Dock
Warrant. After the goods are actually brought to the docks and handed over to
the dock authority for loading in the ship, the document issued as a proof of
delivery is known as Dock Receipt.
11. Consular Invoice: The exporter fills up a special invoice form mentioning all
the particulars about the goods shipped and certifying the accuracy of
the prices shown. This invoice is signed by the consul of the importer's country
stationed in the exporter's country. This special invoice is known as Consular
invoice. This document is obtained to avoid under and over invoicing as well as
for easy clearance of goods by the custom authority at the importer's country.
12. Certificate of Origin: It is a document issued as a proof of the fact that
the goods have been produced in the country mentioned on it, i.e., a
certificate about the genuine origin of the goods exported. This document is
issued on the basis of trade agreements between the countries in which they
agree to levy lower rates of import duties on the goods produced by them.
Some chambers of commerce are authorised to issue such certificates.

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Trade 13. Airway Bill: When goods, especially perishable ones, are sent to the importer
by air, then this document is needed. It is a receipt given by the airline
authority for the goods it is carrying. At the destination it has to be surrendered
by the importer for releasing goods. It contains such information as name and
address of exporter, name and address of importer or his agent, description of
goods, number of packages, weight and volume of goods, rate of freight and
Note total freight, airport of loading and destination, flight number and date, etc.

14. Export Invoice/Foreign Invoice: The foreign invoice is prepared by the

exporter and he/she sends it to the importer after the shipment of goods.
This invoice contains details such as the name of the ship, port of shipment, port
of destination, number of indent, details regarding packing and marking, price of
goods and other expenses including freight, dock dues and insurance charges.

15. Bill of Entry: Bill of entry is a form to be filled up by the importer at the
time of receiving the goods. It is a document based on which imported
goods are cleared from the port. These are two types of bill of entry.

(a) Bill of entry for Home Consumption: Where an importer wants to get
his goods cleared in one lot, he has to present the bill of entry for home
consumption.

(b) Bill of entry for Warehousing: Where an importer wants to shift the
goods to warehouse and thereafter get his goods cleared in small lots, he
has to present the bill of entry for warehousing. The reason could be he is
unable to pay duty on all goods in one instalment or because he has a
storage problem.

For imports through post, no bill of entry is used. Instead a way bill is
prepared by Foreign post office for ascertainment of duty.

INTEXT QUESTIONS 19.5

1. What is meant by Consular Invoice?

2. Arrange the following document in proper sequence.

(a) Dock Receipt

(b) Dock Challan

(c) Dock Warrant

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3. Answer the following in a word or phrase. Trade

(a) The document prepared by the master of the ship acknowledging the
receipt of goods.

(b) The document issued as a proof of the fact that goods have been produced
in the country mentioned on it.

(c) The document forwarded by the exporter to the importer after the shipment Note
of goods.

(d) The document issued by the dock authority after receiving the goods from
the exporters.

(e) The document needed in sending goods by air.

(f) Document which acts as a proof that goods of stated value and quantity
are being brought into the country from abroad.

19.9 WORLD TRADE ORGANISATION

The Eighth Uruguay Round was successful and led to the setting up of the World
Trade Organisation (WTO). The WTO was launched on January 1, 1995 replacing
the General Agreements on Trade and Tariffs (GATT). Naturally, the GATT members
became the members of WTO. It administers the agreements contained in the Final
Act of the Uruguay Round.

As on December 2017,WTO has 164 members. WTO is headquartered at Geneva,

Switzerland.

As the name suggests, GATT was meant to deal with tariffs and other trade restrictions
and prescribe rules for international trade. The removal of trade barriers was sought to
be achieved through negotiations among the GATT members. In all, GATT had seven
rounds of prolonged negotiations, the last one being the Uruguay Round, which was
launched in September 1986 and concluded in Decemebr 1993. These negotiations
covered not only the traditional subjects such as tariffs and non-tariff restrictions, but
also extended to cover seven broad areas, viz., (i) market access, (ii) agriculture, (iii)
textiles, (iv) trade related intellectual property rights (TRIPS), (v) trade related
investment measures and services (TRIMS), (vi) trade in services, and (vii) institutional
matters. While negotiations on the various aspects of trade related matters were
concluded quite successfully by the GATT, it was however realised that the GATT did
not have any mechanism for resolving trade disputes among the member nations.

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Trade Consequently, any powerful member could veto any decision arrived at by the
organisation and impose its will on the small member countries. Thus, an organisation
was required which could provide a level playing field to all the members and resolve
trade disputes with authority and equity. This led to the establishment of the World
Trade Organisation (WTO), which offers a far more powerful mechanism for resolving
disputes in international trade. India has been a member of WTO since January 1,
Note 1995 and member of GATT since 8th July 1948.

Before we proceed further, let's learn some key differences between GATT
and WTO which can be summarized as follows:

1. Conceptual Framework: GATT was basically a set of rules and regulations

for multilateral trade agreements with the objective of promoting international
trade while WTO is an institutional mechanism which attempts to regulate, monitor
and liberalize international trade.

2. Institutional Existence: GATT does not have any institutional existence while
WTO bears permanent institutional character with functioning secretariat.

3. Nature of Participation: In case of GATT participating nations were contracting

parties while WTO has membership for nations.

4. Scope of Application of Rules and Regulations: The rules and regulations

pertaining to GATT were applicable for goods only while in case of WTO it
extends to both goods and services.

Objectives of WTO

i. Raising standard of living

ii. Employment generation.

iii. Optimal use of world resources.

iv. Promoting sustainable development.

WTO has been playing an important role in facilitating and promoting international
trade. The following points sum up the "Role of WTO"

(i) WTO facilitates international business and promotes international peace.

(ii) It has reduced trade and non-trade barriers in the conduct of international trade.

(iii) WTO agreements have made international trade and relations very smooth and
predictable.

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(iv) Free trade improves the living standard of the people by increasing their income Trade
level.

(v) Free trade provides ample scope of getting varieties of qualitative products.

(vi) Economic growth has been speeded up because of free trade.

(vii) WTO helps fostering growth of developing countries by providing them with
special and preferential treatment in trade related matters. Note

TERMINAL EXERCISE
Very Short Answer Questions
1. What is meant by External Trade?
2. Name the different types of External trade.
3. What is meant by Entreport trade?
4. Give two reasons for the importance of External trade.
5. Name any two promotion measures for Export trade.
Short Answer Questions
1. Explain 'packing and marking' of the goods in external trade.
2. Explain the two alternative methods of payment to the exporter.
3. What is meant by 'Letter of Credit'?
4. What are (i) Bill of Lading, (ii) Shipping order and (iii) Mate's receipt.
Long Answer questions
1. Explain the various measures taken up by Government of India to facilitate
exports.
2. Discuss the various documents used in External Trade.
3. Advise Suresh, the procedure to import ball pens from Japan.
4. Satish wants to export leather goods to Singapore. You are required to explain
to him the procedure for the same.
5. Explain the need and importance of external trade to the Indian Economy.

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Trade Activity Name:......................

Complete the crossword puzzle below
1

2 3
4

5
Note

6
7
8

10

Horizontal Vertical
2. Receipt given by airline authority for the 1. Request by the importer to the exporter for details
goods it is carrying (alrwaybill) (price, quality, qty etc) regarding supply of goods
5. document filled by importer, based on which (tradeenquiry)
imported goods are cleared from the port 3. Document received in exchange of Mates receipt
(billofentry) at the shipping office (billofiading)
8. Firm imports goods in order to export to 4. Special invoice form filled by exporter certifyng
other country (entrepottrade) the accuracy of prices shown (consuiarinovice)
10. Document issued by the captain of the ship 6. Under this contract insurance is done by the
after the goods have been loaded importer (freeonboard)
(matesrecelpt) 7. launched on january 1995 replacing GATT (wto)
9. contains describtion of goods ordered, packing,
price, conditions of delivery etc (indent)

ANSWERS TO INTEXT QUESTIONS

19.1
2. (a) Import (b) Import (c) Entrepot
(d) Export (e) Export
19.2
3. (a) iii; (b) iv; (c) v; (d) i; (e) ii
19.3
1. (a) Shipping order (b) Mate's Receipt
(c) Letter of credit (d) Letter of Hypothecation
(e) Bill of Lading

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19.4 Trade
2. (a) Exchange control department
(b) Importer sends the letter of credit to the exporter
(c) Importer
(d) Importer
19.5
Note
2. (a) Dock challan (b) Dock warrant (c) Dock Receipt
3. (a) Bill of Lading (b) Certificate of origin
(c) Export Invoice/Foreign Invoice
(d) Dock Receipt (e) Airway Bill (f) Bill of Entry
Solution to crossword puzzle:
1t

r
2a i r w a y 3b i 1 1
4c d i
o e 1
3b i 1 1 o f e n t r y e 1
s n o
u q f
6f 1 u 1
r a 7w i a
8e n t r e p o t t r a d d
e i o y i
9i o n n
n n v g
d b o
e o i
n a c
10m a t e s r e c e i p t
d
Horizontal Vertical
2. Receipt given by airline authority for the 1. Request by the importer to the exporter for details
goods it is carrying (alrwaybill) (price, quality, qty etc) regarding supply of goods
5. document filled by importer, based on which (tradeenquiry)
imported goods are cleared from the port 3. Document received in exchange of Mates receipt
(billofentry) at the shipping office (billofiading)
8. Firm imports goods in order to export to 4. Special invoice form filled by exporter certifyng
other country (entrepottrade) the accuracy of prices shown (consuiarinovice)
10. Document issued by the captain of the ship 6. Under this contract insurance is done by the
after the goods have been loaded importer (freeonboard)
(matesrecelpt) 7. launched on january 1995 replacing GATT (wto)
9. contains describtion of goods ordered, packing,
price, conditions of delivery etc (indent)

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Trade
DO AND LEARN
1. You are required to survey the nearby area and record the observations on the
following:

(a) The goods and services that are not available and you think can be imported.

(b) Find out what are the speciality goods of your local area that can be
Note exported to boost the foreign exchange of our country.

(c) After identifying the goods as in part (a), that can be imported, determine
the country from where to import and enlist the various steps for import
procedure for the same.

ROLE PLAY
Gaurav was importing goods from USA and was a very accomplished and successful
businessman. One day he met his friend Sanjeev who was also into the same business
but not very successful. Read the conversation between them as given below.
Gaurav : Hello Sanjeev! How are you?
Sanjeev : Fine, but as usual very busy.
Gaurav : You seem to have no time for your family and friends.
Sanjeev : I am disturbed because I am not able to manage my firm well.
Gaurav : Why, what do you think is the reason?
Sanjeev : I do the running around all by myself. Sometimes I go for obtaining
foreign exchange, sending letter of credit, I run for shipping documents.
I find it impossible to meet all ends.
Gaurav : Remember when you try to do everything by yourself you end up
doing nothing. What I feel is you must appoint an expert for carrying
out certain functions. Half of your job will be done by him. Then you
can relax and concentrate on other needs of your business.
Sanjeev : You said experts, handling functions? Could you elaborate that?
Gaurav : Now you see, if you appoint a Clearing Agent by paying him
commission for his services he will complete the formalities like
Endorsement for delivery, payment of dock charges etc.
Now continue the conversation as Gaurav explains the role of clearing agent to Sanjeev

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WHAT HAVE YOU LEARNT
SELF-EMPLOYMENT Module - 6
Awareness in Business
and Employment

20

SELF-EMPLOYMENT Note

Having learnt about the nature and scope of business, business support services,
business environment, forms of business organisations, you may now be thinking
about ways to earn your livelihood. At this stage you have to decide whether to take
up a job in an organisation or to start your own business venture. When you accept an
employment in any organisation, you have to perform various jobs as per the
requirements of your employer and you may get a fixed amount of income as salary.
But, instead of seeking a job, you can also opt to do work on your own to earn your
livelihood. You may run a small retail shop, tailoring shop, restaurant, bakery and
confectionery shop, beauty salon, etc. in your locality. In other words, you may get
engaged in manufacturing, trading, marketing or selling of products or services on a
small scale to earn your livelihood. Such economic activities are known as self-
employment. An individual can make a very good living out of the income generated
from a self employment venture. However, there is a need to plan and select a lucrative
venture suitable to the local needs. In this lesson, we will learn more about the career
opportunities of self-employment in business.

LEARNING OUTCOMES
 explores the possibility of self-employment and the avenues of self-employment;
and

 describes the advantage of government support for small business:

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Awareness in Business
and Employment 20.1 MEANING OF SELF-EMPLOYMENT
You know that earning is necessary for a living. Your father, mother, brothers, sisters
and others may be engaged in different economic activities through which they earn
their livelihood. Have you ever observed their activities? What exactly do they do?
Possibly some of them may be working for others in factories, shops, agricultural field
etc. and get a fixed amount from their employers for the service rendered by them.
Note
These persons are engaged in an economic activity which is termed as wage employment
or paid employment. But there are many persons who engage themselves in one
occupation or some business which they start and manage on their own instead of
working for a wage or salary in an organisation run by others.They put in their best
effort and take all types of risks to pursue their careers successfully. The entire earning
of their work goes to them. All of us have seen small grocery shops, tailoring shops,
medical stores etc. in our locality. These are owned and managed by a person, with or
without the help of some assistants. Their economic activities are termed as self-
employment. So when an individual engages in any economic activity and manages it
on his own, it is known as self-employment.

Thus, self-employment may be defined as, an economic activity which one may perform
on his own as a gainful occupation. Self-employment may consist of producing and
selling goods, buying and selling goods, or rendering services for a price by taking the
risk to mobilize inputs and other resources.

From the above discussion we can analyse the characteristics of self-employment.

20.2 CHARACTERISTICS OF SELF-EMPLOYMENT

Following are the characteristics of self-employment:
1. Self-employment involves doing something on one's own to earn one's livelihood.
2. It involves ownership and management of activities by a person although he/she
may take the help of one or two persons to assist him/her. Thus, self-employment
may provide employment to other persons as well.
3. The earning from self-employment is not fixed. It depends on the income one
can earn by producing or buying and selling goods or providing services to
others at a price.
4. In self-employment, the owner alone has to take the profit and bear the risk of
loss. So, we find a direct link between the effort and reward in self-employment.
5. It requires some amount of capital investment, although it may be small.

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6. In self-employment, a person is free to take decisions in respect of running his Awareness in Business
and Employment
business profitably and avail of any opportunity that may come up for expansion
of his business.

7. It gives complete freedom to work as per one's own will and within the parameters
of the prevailing legal regulations.

20.3 IMPORTANCE OF SELF-EMPLOYMENT Note

Career is a way of making one's livelihood. Self-employment is also a career because

one may employ oneself in business or in service activities and earn one's livelihood.
With growing unemployment and lack of adequate job opportunities, self-employment
has become very significant.

The share of the self-employed in the workforce according to the Periodic

Labour Force Survey (PLFS) of 2017-18, remained stagnant between 2011-
12 and 2017-18 at 52.2%, The share of the self-employed in the workforce
was high among some of India's poorest states: Chhattisgarh (66%), Rajasthan
(65%), Uttar Pradesh (64%), and Jharkhand (61%)

Its importance can be enumerated as follows.

1. Advantages of Small Business: Small-scale business has several advantages

over large-scale business. It can be easily started, and requires small amount of
capital investment. The self-employment involving activities on a small-scale is a
good alternative to large scale business which has brought various evils like
environmental pollution, development of slums, exploitation of workers, and so
on.

2. Preference over Wage Employment: In self-employment there is no limit of

earnings as is the case with wage employment. In self-employment one can use
one's talent for own benefit. The decisions can be taken quickly and conveniently.
All these factors act as strong motivators for self-employment to be preferred
over wage employment.

3. Developing the Spirit of Entrepreneurship: Entrepreneurship involves taking

risks because the entrepreneur tries to innovate new products, new methods of
production and marketing. Self-employment, on the other hand, involves either
no risk or very little risk. But, as soon as the self-employed person starts becoming
innovative and takes steps to expand his business, he becomes an entrepreneur.
Therefore, self-employment becomes a launching pad for entrepreneurship.

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Awareness in Business 4. Promotion of Individualised Services: Self-employment may also take the
and Employment
form of providing individualised services like tailoring, repair work, dispensing
of medicines etc. Such services are helpful in providing better consumer
satisfaction. These can be easily started and run by individuals.

5. Scope for Creativity: It provides opportunity for development of creativity

and skills in art and crafts, leading to preservation of the cultural heritage of
Note India. For example, we can see creative ideas reflected in handicrafts, handloom
products, etc.

6. Reducing the Problem of Unemployment: Self-employment provides

opportunities of gainful occupation to those who otherwise remain unemployed
and helps to empower them financially. Thus it reduces the problem of
unemployment.

7. A boon to Under-privileged in Respect of Higher Education: Everyone

may not be able to pursue higher education after Secondary or Senior Secondary
examination due to one or the other reason. Such persons can start their career
as self-employed in occupations that do not require higher education.

Self-employment is large in India also because government policies and programmes

encourage owner-managed small and medium enterprises.A number of schemes have
been initiated all over the country to encourage entrepreneurship and self-employment.

INTEXT QUESTIONS 20.1

1. Define the term 'Self-employment' in your own words.

2. Which of the following examples indicate self-employment? Put a tick mark in

the box if your answer is 'Yes'.

(a) A worker working in a factory.

(b) A person running his stationery shop.

(c) A person working as manager in a bank.

(d) A person running a chemist shop.

20.4 AVENUES OF SELF-EMPLOYMENT

The Indian Government through its constant efforts towards development of agricultural
and industrial economy has been able to generate numerous self-employment

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opportunities for the people. However, before choosing a suitable career in self- Awareness in Business
and Employment
employment you must have some idea about the avenues in which self-employment
opportunities are available.

Let us categorise the avenues of self-employment into the following broad areas.

1. Trading;

2. Manufacturing; Note

3. Professionals; and

4. Individualised services.

Let us discuss further about all these areas:

1. Trading: You know that trade involves buying and selling of goods and services.
With small amount of investment one can start and run a small trading unit. You
can think of starting a small grocery or stationery shop in your locality. If you are
able to invest more capital and ready to take risk, then wholesale business is a
good option for you. One can also take up some agency business or become a
stockist. The real estate business which is booming now-a-days can also be a
lucrative alternative.

2. Manufacturing: One can start a small industry of manufacturing bricks, or

producing bakery items or confectionery. All these businesses require small
amount of capital and simple equipment. Farming is another such area in which
a person can work all alone or take the help of one or two persons. This is an
age-old area of self-employment. Orchards, dairy, poultry, sericulture, fisheries,
horticulture, etc. are good examples of avenues of self-employment.

3. Professionals: Occupations that require special knowledge and training in a

particular field also provide opportunities of self-employment. Lawyers, doctors,
chartered accountants, architects and journalists fall in this category. However
one has to follow certain code of conduct framed by their association and get
specialised knowledge and training.

4. Individualised Services:Tailoring, motor repairing, hair cutting, fashion

designing, interior decoration etc. are some of the business activities which provide
individualised services to the consumers. These can be easily started and run by
individuals. These activities are based on the personal skills of those who perform
them such as the blacksmiths, carpenters, goldsmiths, fashion designers, hair
stylist, cartoonist etc. There is freedom to work as and when one wants or
needs.
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Awareness in Business You choose the area of your interest to pursue the career in self-employment. If you
and Employment
decide to start a small business of your own, you must have complete knowledge
about the product or service line you choose and the scope and importance of small
business in our country.Additionally, complete information and your understanding
about the government policy and institutional support for its promotion is very essential
for attaining success in your business.
Note According to the Periodic Labour Force Survey (PLFS) of 2017-18 majority
of the self-employed (60%) were engaged in agriculture .and most of those
engaged in non-agricultural activities were in trade, manufacturing, transport
and storage.

20.5 MEANING OF SMALL BUSINESS

When somebody questions you, 'what is a small business?', you would probably
answer that a business which is:

 small in size,

 requires low capital investment,

 employs small number of workers,

 volume or value of output is low, may be termed as small business.

Yes! You are absolutely right. The size, capital investment, number of employees,
volume of output as well as value of output are the most common parameters of
measuring a business enterprise.

We may define a small business as a business which is actively managed by its owners,
operating within the local area and relatively small in size. However, the Government
of India has considered the fixed capital investment in plant and machinery as
the only criteria to define a small industrial unit in our country. Up to the year
1958, an industrial unit in which fixed capital investment was less than Rs. 5 lakh and
employing up to 50 workers if using power, and up to 100 workers if not using power
was considered as a small business. This limit has been changed by the government
from time to time.

Under the MSMED Act 2006 on the basis of capital investment made in plant and
machinery, excluding investments in land and building -

1. Manufacturing units having investment between Rs 25 lakhs and Rs 5 crores

(Rs 50 million) are termed as small enterprises and;

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2. For service units, having investment between Rs 10 lakhs to Rs 2 crores (Rs 20 Awareness in Business
and Employment
million) are small enterprises.

From the above discussion now we can identify the main characteristics of small
business as:

(i) A small business is usually owned and managed by one or a few persons.

(ii) The owners take active participation in day-to-day activities of business. Note

(iii) The participation of owners in the management helps in taking quick

decisions.

(iv) The area of operation of a small business is limited. It generally caters to

the need of the local people.

(v) The small business units are generally labour intensive and thus require
less capital investment.

(vi) It generally uses local resources for its operation. The small-scale
manufacturing units are usually located near the source of raw material,
labour etc.

(vii) Gestation period (the period that a business waits to get return on its
investment) is short.

(viii) The operation of a small business is flexible. It can easily change its nature,
area of operation, process of production etc. as per the change in social,
political and economic conditions.

INTEXT QUESTIONS 20.2

1. State the meaning of small business in your own words.

2. Identify the category (avenue) of self-employment from the following:

(a) Ravi is a farmer having four acres of land. He has employed three people
to look after his fields and orchards.

(b) Ram runs a small departmental store in the central market of Kolkata.

(c) Geeta is a doctor who runs her own clinic.

(d) Karan's father takes orders and makes carpets.

(e) Hari repairs gold chains and other ornaments.

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Awareness in Business
and Employment 20.6 TYPES OF SMALL BUSINESS
In India we find different types of small business. They may be categorised on the
basis of investment in fixed capital in plant and machinery or on the basis of nature or
place of operation. Following are some of the main types of small business.

(a) Small-scale enterprises (b) Micro enterprises

Note (c) Ancillary industrial undertakings (d) Village industries

(e) Cottage industries (f) trading unit

Let us have a brief idea of the types of small business.

(a) Small-scale Enterprises: According to the MSMED Act 2006Small-scale

enterprises are classified into two major categories viz., manufacturing and
services.

 Small manufacturing enterprises have investment in plant and machinery

of more than twenty five lakh rupees but not exceeding five crore rupees.

 However, investment in equipment is more than ten lakh rupees but does
not exceed two crore rupees in small service enterprises.There are about
twenty-one major industry groups in the small scale sector.

(b) Micro Enterprises: Under the MSMED Act 2006 on the basis of capital
investment made in plant and machinery excluding investments in land and building:

 manufacturing units having investment below Rs 25 lakh (Rs 2.5 million)

were termed Micro Manufacturing industries and

 service units, having investment upto Rs 10 lakh (Rs 1 million) were called
Micro Service industries

(c) Ancillary Industrial Undertakings: When a small-scale industry supplies not

less than 50% of its production to another industry, it is called as ancillary industrial
undertaking. The fixed capital investment limit of Rs. One crore also applies to
it. If an ancillary unit is owned by some other business unit, it losses it status of
small business.

(d) Village Industries: A unit that is located in rural area and which produces
goods or renders service with or without the use of power and in which the fixed
capital investment per head or artisan or worker is specified by the central
government from time to time.

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(e) Cottage Industries: These are small manufacturing units producing simple Awareness in Business
and Employment
products involving some specific art or skill like handicrafts, filigree etc. They
use simple equipments with indigenous technology for production. Cottage
industries are carried on wholly or primarily with the help of members of the
family either on a whole or part-time basis. These units are not defined on the
basis of capital of investment.

(f) Trading Units: These are usually in the form of small retailers found in the Note
market places.

20.7 IMPORTANCE OF SMALL BUSINESS IN INDIA

Having discussed the meaning, characteristics and different types of small business let
us now look at its importance. Small business enterprises are found everywhere. They
play a major role in the socio-economic development of any country. In view of India's
scarce capital resource and abundant labour and natural resources, small-scale
enterprises have been given an important place in the economic planning of the country.
In India, small industries account for 95 per cent of the industrial units in the country. In
India small-scale enterprises account for 35% of the gross value of the output in the
manufacturing sector, 80% of the total industrial employment and about 45% of the
total exports. Besides these contributions, the importance of small-scale business is
increasing day by day due to the following factors.
1. The small business enterprises are capable of generating immediate and large-
scale employment opportunities in our country.
2. They require less capital investment as compared to large scale business
enterprise.
3. The cost of production is less due to use of local resources and fewer
establishments and less running cost.
4. The small industries help in effective mobilisation of the untapped resources of
the country. With the help of local resources and indigenous technology, world-
class products can be produced by village and cottage industries.
5. Small industries promote balanced regional development of the country. These
can be easily set up near the source of resources that leads to overall economic
development of that place.

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Awareness in Business 6. The small industries help in improving the national image by exporting quality
and Employment
products to foreign countries. The Indian handicrafts, handloom products, filigree,
appliqué works have a high demand in international market.
7. Small enterprises help in raising the standard of living of the people. The people
get employment or can start their own enterprises easily. They get a variety of
quality products for their daily consumption and use at reasonable prices.
Note
20.8 SCOPE FOR SMALL BUSINESS
The scope for small business is vast covering a wide variety of activities starting from
retailing to manufacturing. There are some specific areas of economic activity which
can be effectively and successfully managed by forming small business enterprises. Let
us now discuss the scope for small business.

1. Trading which involves buying and selling of goods and services requires less
capital and time to start. This area of economic activity is dominated by small-
scale entrepreneurs.

2. The activities which require personalised service like motor repairing, tailoring,
carpentry, beauty parlour etc. are undertaken by persons who establish small
business enterprises.

3. For those who do not like to work as an employee the best option is to become
self-employed. These people can work independently by running a small
enterprise of their own.

4. For products and services, which have low demand or their demand is limited to
any specific area, small-scale business is the most suitable.

5. A large industrial unit cannot run smoothly without the support of small units.
These industrial units often depend upon the small units (ancillary industrial
undertakings) for supplies of some parts or spares, which cannot be profitably
produced by them.

6. In the context of business process outsourcing (BPO), many new areas have
emerged to offer new opportunities for small business enterprises.

7. The business enterprises, which require constant interaction of the owners with
customers as well as the employees, can only be successfully operated in the
form of small enterprises.

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INTEXT QUESTIONS 20.3 and Employment

1. Identify any two specific areas of economic activity, which can be effectively
managed by small business enterprises.
2. Name the type of small scale industry on the basis of fixed capital investment in
plant and machinery.
a. Total amount of fixed capital investment in plant and machinery does not exceed Note
Rs. 25 lakhs.
b. The total amount of fixed capital investment in plant and machinery does not
exceed Rs. 10 lakhs.
c. The total amount of fixed capital investment in plant and machinery is upto 2
Crores.
d. The total amount of fixed capital investment in plant and machinery does not
exceed Rs. 5 crores.

20.9 GOVERNMENT POLICY TOWARDS SMALL

BUSINESS
The Government of India has given special importance to small business enterprises
due to their vast potentiality for development of social and economic conditions of the
country. Several kinds of assistance and support are announced from time to time
keeping in view of the changing economic conditions. The following are some of such
steps taken by the Government for development of small business in India.

1. It provides liberalised credit policy like, fewer formalities to process the loans
and advances, loans at concessional rate, etc. for small scale industries.

2. To keep away from the competition with large scale industries, the Government
of India has reserved about 800 items for exclusive production by small scale
industries.

3. The limit for exemption from payment of goods and services (GST) has been
raised to 40 lakh turnover for small scale industries from April 1,2019 Under
the GST Composition Scheme, small traders and and businesses can pay 1 per
cent tax based on turnover of 1.5 crore from April 1 ,2019 against earlier
turnover of 1 crore.

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Awareness in Business 4. The Government also gives preference to the products of small enterprises while
and Employment
purchasing stationery and other items for government departments and institutions.

5. For promotion, financing and development of small-scale industrial enterprises

several institutes like Small Industrial Development Bank of India (SIDBI),
National bank for Agriculture and Rural Development (NABARD), District
Industries Centres (DICs) etc. have been set up by the Government.
Note
6. The Government of India has set up separate Ministry of Micro, Small and
Medium Enterprises (http://msme.gov.in) for effective planning and monitoring
of the development of small business enterprises in the country.

7. To provide benefits of its plans and policies to a large number of Small industries,
it has lowered the investment limit from Rs. 3 crore to Rs. 1 crore.

8. The Government provides capital subsidy of 12 % for investment in technology

in select sectors of small-scale business.

9. To encourage total quality management (TQM) the Government provides grant

of Rs. 75,000 to each unit that obtains ISO 9000 certification.

10. To provide finance, design and marketing support to handloom sector it has
launched the Deendayal Hathkargha ProtsahanYojana.

11. The Government of India has permitted upto 24 % of total shareholding of

small-scale units by other industrial units.

12. The Government provides land, power and water etc. at concessional rates to
small business enterprises.

13. Special incentives are also provided for setting up of small enterprises in rural
and backward areas.

14. The Government encourages establishment of small-scale industries by providing

developed land and industrial estates.

15. Through the MUDRA scheme of providing capital to the Medium and Small
Business Enterprises sector, the government has sought to provide capital to
people who wish to start their own enterprises.

16. Some government policies focus on skill building activities under the framework
of Skill India Mission that allows self-employed individuals to start more
productive jobs.

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17. Ministry of Women and Child Development, Government of India launched Awareness in Business
and Employment
Support to Training and Employment Programme for Women (STEP ) to train
women in sectors such as agriculture, horticulture, food processing, handlooms,
traditional crafts like embroidery, travel and tourism, hospitality, computer and
IT services who had no access to formal skill training facilities, especially in
rural India.

18. Another government initiative 'Stand-up India' launched in 2015 seeks to provide Note
institutional credit to women entrepreneurs, individuals from Scheduled Castes
and Scheduled Tribes to set up Greenfield enterprises in manufacturing, services
or the trading sector. The Stand-Up India portal also acts as a digital platform
for small entrepreneurs and helps to provide information on financing and credit
guarantee to them.

20.10 INSTITUTIONAL SUPPORT TO SMALL BUSINESS

To start and run a business enterprise one requires various resources and facilities.
These may be in the form of technical, financial, marketing or training support. Such
support is provided by the Government by establishing different institutions or
organisations from time to time. Let us now learn about some of such institutions and
their role in providing support.

1. National Small Industries Corporation Ltd.: The National Small Industries

Corporation Ltd. (NSIC) was set up in the year 1955 to promote, aid and
foster the growth of small industries in India. It provides wide range of promotional
services to small-scale industries. It provides machinery to small-scale industries
under hire purchase schemes and also on lease basis. It helps in export marketing
of the products of small-scale industries. It also helps in development and
upgradation of technology and implementation of modernisation programme of
small-scale industries.

2. State Small Industries Development Corporations: The State Small

Industries Development Corporations (SSIDCs) are set up in various states of
our country to cater to the developmental needs of small, tiny and village
industries. Their main functions include procurement and distribution of scarce
raw materials, supply of machinery on hire purchase basis, and providing
marketing facilities for the products of small-scale industries.

3. National Bank for Agriculture and Rural Development: The National Bank
for Agriculture and Rural Development (NABARD) was set up in 1982 as an

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Awareness in Business apex institution for financing agricultural and rural sectors. It provides financial
and Employment
assistance through Regional Rural banks and cooperative banks to agriculture,
small-scale, cottage and village industries, handicrafts and other allied activities
in rural areas.

4. Small Industries Development Bank of India: The Small Industries

Development Bank of India (SIDBI) was set up in 1990 as a principal financial
Note institution for promotion, financing and development of small-scale industrial
enterprises. It acts as an apex institution for all banks providing credit facility to
small-scale industries across the country.

5. Small Industries Service Institutions: The Small Industries Service Institutions

(SISIs) are set up to provide consultancy and training to small enterprises. These
institutions render technical support service and conduct entrepreneurship
development programmes. They also provide trade and market information to
small-scale industries.

6. District Industries Centres: For promotion of small industries across the

country, District Industries Centres (DICs) are set up at district level. They
conduct industrial potential survey keeping in view the availability of resources.
Their main function includes implementation of various schemes of central and
state governments. They appraise the worthiness of various proposals of the
entrepreneurs to establish new units, guide them in choosing suitable machinery,
equipment and raw materials.

INTEXT QUESTIONS 20.4

1. Mention any five supports provided by SISIs to small-scale industries.

2. Mention the full form of the following .

(a) DIC ( )

(b) SIDBI ( )

(c) NABARD ( )

(d) NSIC ( )

(e) SSIDC ( )

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TERMINAL EXERCISE and Employment

Very Short Answer Questions

1. What is meant bythe term 'Self-employment'?

2. State any two characteristics of small business.

3. What is micro enterprise? Note

4. Enumerate the types of small-scale industries found in India.

Short Answer Questions

5. Mention any four characteristics of self-employment.

6. Explain any two avenues of self-employment.

7. State any four characteristics of small business.

8. Describe the role of SIDBI and SISI in providing support to small business in
India.

5. What are the areas in which small-scale business enterprises can be successfully
established?

Long Answer Questions

10. Explain any four points of significance of self-employment.

11. State and explain any four types of small industries.

12. Describe the various institutional support provided to the small business in India.

13. State any six types of assistance and support provided by the Government of
India for development of small-scale business.

14. Describe the importance of small business in India.

15. After passing Class 12, Radha wants to start her own boutique. Her father has
promised her to meet her initial financial requirement. She has been advised by
her teacher that there are a number of government agencies providing help in
various fields and she can approach them. Name such agencies and state the
nature of assistance these can provide in starting small businesses.

16. Anil has been observing since his childhood that his father, who is working in a
reputed company on a high position, comes from office quite late and exhausted.

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Awareness in Business Most of the times he is tense because of the pressure of office work so he
and Employment
decides never to go for wage employment. Anil wants to start his own business.
Explain to him the various avenues of self employment so that he may understand
the advantages and disadvantages of each one of them.

ANSWERS TO INTEXT QUESTIONS

Note 20.1

2. Yes - 'b' and 'd'

20.2

2. (a) Manufacturing,

(b) Trading,

(c) Professional Occupation

(d) Individualised Service,

(e) Individualised Service

8.3

1. (a) Trading,

(b) Personalised services (or any other)

2. (a) Micro manufacturing Enterprise

(b) Micro service Enterprises,

(c) Small-scale manufacturing enterprise

(d) Small Service Enterprise .

8.4

1. (a) Consultancy,

(b) Training

(c) Technical support service

(d) Entrepreneurship development programmes

(e) Provides trade and market information

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2. (a) District Industries Centre Awareness in Business
and Employment
(b) Small Industries Development Bank of India

(c) National Bank for Agriculture and Rural Development

(d) National Small Industries Corporation

(e) State Small Industries Development Corporations

Note

DO AND LEARN
Survey about 5 to 6 small business units in the nearby area and study in detail the
following:

a) Avenue of Self-employment

b) Capital investment

c) Type of Small business

d) Govt. support to these small businesses

e) Problems faced by these units (if any)

ROLE PLAY
Ramesh was a brilliant student but his friend Suresh was not upto the mark. But both
of them were very good friends. After completing Secondary course Ramesh went to
the nearby city for higher studies. During the vacation when Ramesh came to his
village he found Suresh moving here and there and that he has discontinued his studies.
He was also looking very tense.

Here is the abstract of their conversation.

Ramesh : What happened to you? You look upset.

Suresh : I have discontinued my studies and now I don't want to be a burden

on my parents. I want to earn my livelihood. I have to choose a suitable
career.

Ramesh : Why don't you start a small business?

Suresh : Small business! I do not have any idea about it.

Ramesh : Okay. Come with me. I shall tell you about it in detail.

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Awareness in Business Ramesh explained to Suresh about the meaning, characteristics and scope of small
and Employment
business. He also explained to him about the Government as well as various other
institutional support provided for development of small business.

Choose a role for yourself and one for your friend and continue the conversation.

Note

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WHAT HAVE YOU LEARNT
JOB EMPLOYMENT Module - 6
Awareness in Business and
Employment

21

JOB EMPLOYMENT Note

Once you decide to earn your livelihood by pursuing wage employment, you should
be ready to work as an employee; work under certain terms and conditions of
employment; and get a fixed amount of salary or wages as remuneration. But how will
you search for a job and enter into the world of employment? In the current employment
situation in our country, it is not an easy task to get into any job. It requires serious
preparation in addition to having required qualification and experience for any job
You need to find out the vacant position for the jobs in different organisations, prepare
and post your resume for the same and be ready to face the employment test and
interview. In this lesson you will learn in detail about all these processes.

LEARNING OUTCOMES
 explores various sources of information about job vacancies - print and electronic
media, job portals and referencing, Placement agencies-meaning, concept, jobs
offered; and

 prepases for Employment- preparing bio-data, preparing for employment test,

preparing for interview.

21.1 SOURCES OF INFORMATION ABOUT JOB

VACANCIES

You must know some people who are employed in different factories, other business
units, and offices. If you ask them as to how did they get the information about those
job vacancies in those offices, you will learn that they got the necessary information
from various sources.

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Awareness in Business and

Employment
Employment
exchanges
Placement Employment
Agencies News

Newspaper
and Internet
Note
Magazines
sources of
information
Friends and leaflets
Relatives

Mobile Notice
Phones Boards
Television
and Radio

Fig. 21.1 Sources of information

Let us have a brief idea of all these sources.

1. Employment Exchanges: In our country employment exchanges have been

setup by the government for bringing together job seekers and job-providers.
The employment exchange maintains the list of job seekers and registers their
names for different categories of jobs according to their qualifications. When the
employers approach the employment exchange for recruitment, it identifies the
candidates from its list and informs them about these vacancies so that they can
approach the concerned employers.

2. Placement Agencies: These are privately operated organisations whose

mainfunction is to introduce the job seekers to their prospective employers.
Their role is similar to the government owned employment exchanges

3. Newspaper and Magazines: The use of newspapers and magazines both at

regional and national level, are the most commonly used mode of information for
the candidates about the job vacancies. The employers usually advertise the job
vacancies and invite the prospective candidates to offer their candidature by
applying for the advertised job position.

4. Employment News: The Employment News/Rozgar Samachar is published

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by Ministry of Information and Broadcasting, Government of India every week. Awareness in Business and
Employment
It contains advertisements of vacant position of jobs in different government
organisations. This is simultaneously published in English, Hindi and Urdu
languages for wider circulation.

5. Internet: Internet is the most convenient source of getting information about the
availability of vacancies. A number of organisations, now-a-days invite applications
through their websites to fill up the vacancies in their offices. By using internet Note
one can search for various job vacancies as per his/her qualifications and
experience.

6. Leaflets: In cities and towns advertisement for recruitment are sometimes given
in leaflets which are distributed by the newspaper vendors along with the daily
newspaper. This is particularly suitable where the employer wants to engage the
local people for specific jobs only.

7. Notice Boards of Offices and Factories: Information about various job

vacancies are also displayed on the notice boards of government and private
offices and often notices displayed at the factory gates.

8. Television and Radio: Sometimes information about job vacancies are also
telecasted through television such as for recruitment to defence forces. It may
appear in special programmes or in the form of written message being scrolled
during news and other programmes. The cable television operators also give
advertisement in the local areas. The advertisements for job vacancies are also
broadcasted through radio, which is regaining its popularity now-a-days.

9. Mobile Phone: Information about job vacancies are sometimes received through
mobile phone in the form of SMS. On receiving the message one may apply and
offer his/her candidature for the job.Further information can also be obtained by
following the instructions given in the SMS.

10. Friends and Relatives: Many times we also get information from our friends
and relatives about the job vacancies in government, private and business
enterprises. The existing staff of the offices may also inform others about the
existing vacancies.

21.2 ROLE OF EMPLOYMENT EXCHANGES

The primary objective of Employment Exchanges is settlement of job seekers either
through regular jobs or through self-employment. To achieve this objective the
employment exchanges in India perform the following functions:

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Awareness in Business and (a) Registration and placement of job seekers so as to ensure a proper balance
Employment
between demand and supply of labour;

(b) Collection of comprehensive employment market information on a quarterly

basis for creation of data base for use in effective management of the demand
and supply of labour,

(c) Undertake career counselling and vocational guidance with a view to effectively
Note
guide the job seekers.

(d) Conduct area specific specialised study or surveys to have an assessment of

skills available and the marketable skills required for encouraging the job seekers
for self-employment, particularly, in rural informal sector.

(e) Arrange for disbursement of unemployment allowance to certain specific

categories of job seekers through the employment exchanges as decided by
some of the State Governments.

There are more than 940 Employment Exchanges run by the State Governments to
provide support to the job seekers. These include State Employment Exchange (SEE)
District Employment Exchange (DEE), Rural Employment Bureau (REB), University
Employment Information and Guidance Bureau (UEI and GB) etc. The Employment
exchanges are controlled by Directorate General of Employment and Training (DGE
&T).

21.2.1 PROCEDURE OF REGISTRATION

The procedure of getting a person's name registered with the employment exchange is
as given below: -

1. A candidate can visit any Employment Exchange during specified hours on any
working day. He can get from the employment exchange a blank form/ card for
registration to be filled up. This card includes entries for the name, father's name,
residential address, qualifications, whether general or SC/ST category, N.C.O.
Code No., job desired, location where the candidate wishes to serve, salary
expected, work experience and other related information.

2. Certain documents have to be enclosed with the card, such as proof of age,
photocopies of educational qualifications, experience, as well as a photocopy of
Proof of residence like driving license, Voter's identity Card, PAN card number,
passport or ration card. The candidates are required to bring all certificates/
documents in original and a set of photocopies of all the above documents. The
photocopies are retained by the Employment Exchange.

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3. Having filled the required information on the card, and with the enclosures Awareness in Business and
Employment
(documents) ready, you are to see the Employment Officer with your original
certificates and photocopies. He will verify and attest the photocopies, and your
signature on the Card and return the original certificates.

4. The card as attested above will be kept in the Employment Exchange for record
and making future calls for employment, and a registration card, bearing code
no. of the job (NCO), date of registration, and your specimen signature will be Note
handed over to you. This registration card is to be renewed after every three
years. In case of any correspondence with the employment exchange you need
to mention your registration number.

It may be mentioned here that in the present employment scenario, the role of
Employment Exchanges is not significant. A large number of recruiting agencies
like Staff Selection Commission, Railway Recruitment Boards and Banking Service
Recruitment Boards etc. have come up and they have restricted the area of operations
of the Employment Exchanges. In fact today almost all the major establishments both
in Government and outside have their own recruitment agencies. The judgments of the
Supreme Court have made it obligatory on the part of the employers to advertise the
vacancies in other media and consider applications submitted not only by the
employment exchanges but also those responding to the open advertisements for
selection of candidates. Therefore, Employment Exchanges are left with limited
categories that too for the lower level job appointments.

21.2.2 KINDS OF JOBS AVAILABLE THROUGH EMPLOYMENT

EXCHANGES

The Employment Exchanges sponsor the names of registered applicants for different
types of jobs. The list of some of such jobs/posts for which the Employment Exchanges
generally sponsors the names is as follows:

Aya Meter Reader

Barber Motor Mechanic
Booking Clerk Nurses
Caretaker Office Assistant
Carpenter Operation Theatre Technician
Data Entry operator Peon
Doctor Pharmacist
Electrician Physiotherapist

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Awareness in Business and Instructor (Steno / Steno typist) Plumber

Employment
Journalist Programmer (Computer Software)
Laboratory Assistant Receptionist
Laboratory Attendant Safai Karamchari
Laboratory Technician Sales representative

Note Librarian Sanitary Inspector

Library Attendant/Assistant Security Guards
Lift operator Stenographer
Mali Teacher (Aided and Primary schools)
Messenger Telephone Operator
Typist Travel Agent
X-Ray Technician Translator

INTEXT QUESTIONS 21.1

1. Which source of information about job vacancy do you find convenient and why?
2. Enumerate any three functions of Employment Exchanges.

21.3 ROLE OF PLACEMENT AGENCIES

The Placement Agencies could be Private Employment Agencies or Management
Consultants. Private Employment Agencies bring together the employers and suitable
candidates available for a job. Private agencies advertise the vacancies in the
newspapers, periodicals and on the internet. They prepare the data bank of all the
prospective employers and job seekers. This data bank helps them to find out the
suitable employer for a job seeker and vice versa. They keep on informing the job
seekers periodically about the employers and the availability of jobs according to
their qualifications, skills and experience. Some placement agencies also help the
candidates in preparing their bio-data and other supporting documents.

The placement agencies also screen the applicants against the requirements specified
by the employer. They supply a list of shortlisted candidates, and the organisation only
conducts the final round of interview. These agencies function primarily in the
Metropolitan cities and they charge a fee from the employer as well as the employee
for their services. Fake placement agencies are also found in different parts of the
country. These fake agencies collect money from the jobseekers and arrange fake
interviews. Job seekers, therefore must, be careful in utilizing their services.

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Management Consultants specialize in the placement of executives at middle and top Awareness in Business and
Employment
level of management. These are basically executive searching agencies. These agencies
work at a nationwide level and they charge a substantial amount of fee from employer
as well as the employee. They work for large, medium, small-scale companies They
have a huge database of job vacancies Some of the well known Management
Consultants in India are ABC Consultants, Ferguson Associates, The Search House
and Analytic Consultancy Bureau. Note
The placement agencies basically help in informing about the availability of jobs in
private sectors. Most of the small and medium size business enterprises rely upon the
placement agencies for all types of manpower requirements. The big enterprises often
advertise the vacancies directly through newspapers and internet. The job seekers can
register their name with placement agencies for the post of office assistant, typist,
salesperson, marketing executives, accounts assistant, computer operators etc.

21.4 ROLE OF ADVERTISING MEDIA

You have learnt about the role of Employment Exchanges and Placement Agencies in
helping the job seekers to get the job of their liking. The advertising media also play an
important role in informing the job seekers about the job vacancies and procedure to
be followed in applying for these jobs. Advertisements for the job vacancies can be
given in print media and electronic media. Print media includes daily newspapers,
Employment News, journals and magazines etc. Similarly, electronic media mainly
includes Internet, Television and Radio.

21.4.1 PRINT MEDIA

Newspapers are the most common print medium for advertisements of job vacancies.
All small and big companies advertise their job vacancies in most widely read
newspapers both at regional level and national level. The Employment News is a
weekly publication that only publishes advertisements for job vacancies. Some of the
popular newspapers carry their employment news editions on a weekly basis.The
advertisement for job vacancies in print form receives tremendous response from the
job seekers because it contains details about the eligibility criteria, proforma of
application form, necessary instructions to fill and submit the application form etc.

21.4.2 ELECTRONIC MEDIA

With the advancement of Information and Communication Technology, electronic

media has become the most common and convenient source of recruitment. There are
so many websites that provide information about employment opportunities. Some of

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Awareness in Business and the popular job websites are www.naukri.com, www.monsterindia.com,
Employment
www.careerindia.com, www. placementindia.com. They provide the facility of searching
various jobs as per:

 the category (like computer, academic, engineering, sales and marketing, finance
etc.)

 the required post ( fitter, electrician, office assistant, teacher etc.)

Note
 the place of job (i.e. the city or state within which the job seeker wants to search
for a job)

 the experience (number of years of experience)

 expected compensation (annual package from 2 to 3 lakhs, 3 to 5 lakhs, 5 to

10 lakhs etc.)

The job seekers can find out the information about various types of job on the basis of
the above criteria just by visiting the websites of different placement agencies. The job
seekers can also post their resume at these placement agencies to find out a suitable
job for them. They get information about the availability of jobs as per their qualification
and experience through email and accordingly take the action to contact the employers
for interview. The employers can also use those resumes and directly contact the job
seekers as per their requirement.

INTEXT QUESTIONS 21.2

1. List any three functions of placement agencies.

2. List the criteria on the basis of which one can search for job vacancies through
internet.

21.5 APPLYING FOR A JOB

In the earlier sections of this lesson you have learnt about the various sources from
where you could get the information about the availability of job vacancies, qualifications
and experience required and also, details about the employer. Now suppose for a
particular post you would like to offer your candidature. What would you do?
Obviously, you have to prepare an application containing your qualifications, work
experience and other details to justify yourself as the most suitable candidate for that
post. This brief account of one's professional or work experience and qualifications is
termed as the Biodata (Biographic Data) or Resume or Curriculum Vitae (CV).

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21.5.1 PREPARATION OF A BIO-DATA Awareness in Business and
Employment
Let us learn how to prepare a Biodata. In most of the cases the employers want to
receive the application in their prescribed proforma that makes their job easier in
screening the applications. In that case you need not worry about preparing your own
biodata in a different style to attract the attention of the employer. But in other cases,
mostly for jobs in private sector you should pay special attention to the style, language,
presentation as well as contents of your biodata. Your biodata should contain factual Note
details. You must avoid preparing a lengthy biodata. You must briefly describe your
qualifications, responsibilities handled, work experience, achievements etc.
Your bio-data should have four basic sections.
1. your name and contact details,
2. your educational qualifications (academics and technical),
3. your work history (responsibilities, experience and achievements etc.)
4. details regarding references.
The list of enclosures may be mentioned at the end of your bio-data.
In brief, your bio data should have the following points: -
1. Full Name (in Block Letters):
2. Father's/Husband's Name:
3. Date of Birth:
4. Residential Address:
5. Details of Educational Qualifications:
6. Details of Technical or Professional Qualifications, if any:
7. Work Experience:
8. Name & Contact No. of References:
9. List of Enclosures:
10. Signature of the Candidate
The above points may be presented in different format and style. Now-a-days the
employer wants to scan a bio-data quickly rather than read page after page about
your qualifications and achievements. Therefore, be brief and clear with just sufficient
details to convey the requisite information. A brief guide to help you to arrange the
above-mentioned details in a proper sequence is as follows:

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Awareness in Business and

Employment
Name, address, email

Objective (type of Job Position)

Educational details
in tabular form
Details of technical
qualification and skills
Note
Work Experience

Personal Details

Fig. 21.2 Components of Biodata

Components of a Resume

1. Begin your resume with your name, address, phone number, and email address,
generally at the centre of the page.

2. Describe the type of job position you are seeking in a sentence or two under a
heading labelled 'Objective'.

3. Now, give your educational details - the name of the school, college, institute,
board, percentage of marks secured, year of passing the examinations etc. in a
tabular form.

4. Details of any technical education or skills you have acquired may be mentioned.
It may include information about any such skills or experience like computer
skills, additional training, foreign language or any other professional skill.

5. Work experience with job description and responsibilities handled should be

described.

6. Personal details like marital status, date of birth, Father's/Husband's name or

family details, hobbies and interests can be given under a separate heading as
'Personal Details'.

21.5.2 COVERING LETTER

When applying for a job, the bio-data should be accompanied with an appropriate
covering letter. In this section let us learn what to include and how to write the
different sections of a covering letter.

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(a) The Opening: This is where you tell the employers 'who you are', 'why are Awareness in Business and
Employment
you writing' and 'how you came to know about the vacancy'! The 'who are
you' part is a brief introduction of yourself. Just mention the basic facts about
yourself. In the 'why you are writing' part you mention which position you are
applying for. Then be sure to mention how you heard about the organisation or
the job. You might write "This is with reference to your advertisement in Hindustan
Times dated 29 January 2014 regarding the vacancy of a trainee in your Note
organisation's sales department".

(b) Suitability of Your Candidature: The objective of this part of the letter is to
mention the reason why the employer should see you as a prospective
candidate. It is best to start with a statement that provides an overview of your
qualifications and emphasizing that these match with the job position requirements
A typical sentence may be "As a trained graduate in management I possess the
following skills and accomplishments".

(c) About the Organisation: In this section of the letter you may tell something
positive about the organisation and mention why you would like to work
there. You might mention the reputation of the organisation, past record, sales
records, size, corporate culture, management or anything else that is remarkable
and distinct about it.

Prospective employers like to know that you have chosen them for a specific
reason and they are not just one of the hundreds of the companies in which you
are applying for a job.

(d) Request for further action: This is the closing paragraph of the letter. The
closing paragraph is about thanking the employer for spending time to
read your letter or for considering you as a candidate for the job. It is an
important thing to end the letter in a courteous way by taking the initiative to
follow up.

Finally, check your letter for typographic errors, misspellings and grammatical errors.
Now, you are ready for the 'complimentary close'. Do not forget to put your signature
at the end of your letter.

21.5.3 SOME DO'S AND DON'TS TO BE CONSIDERED WHEN

APPLYING FOR A JOB

So you have just seen that applying for a job means preparing your bio data and
covering letter as the best marketing documents for yourself. The following list of do's
and don'ts will help you in preparing your application in a better way.

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Awareness in Business and (a) Follow all the instructions strictly as given in the advertisement. If it says send
Employment
three photographs or three copies of resume, do send as directed. The employer
may have his own reasons to ask you to do that.

(b) Make sure your application is sent and received on time. Many companies do
not even acknowledge late applications as they reflect on the poor time
management skills of the applicants.
Note
(c) Do enclose all documents in one application. Make sure all your documents are
in order and tied up properly with the covering letter on top.

(d) Don't use the same covering letter every time you apply for a job. Write a fresh
covering letter every time you apply by making changes appropriate for the job
position you are applying for. Do not customise it.

(e) Don't assume that your application has been received. Confirm from the employer
or the placement agency if they have received your application. There is a
possibility that applications might get misplaced in post. It is even good to
confirm whether the e-mail has been received.

(f) Don't include references in your application. Include them only if asked for by
the employer.

(g) Try to gather all the facts before applying for a job and tailor your application
accordingly.

(h) If your application is not considered then do find out the reason. Learn from it.
Knowing your weaknesses will help you to improve while applying the second
time.

INTEXT QUESTIONS 21.3

1. What information should one give in the opening part of the covering letter?
2. Name the different broad sections found in a bio-data.

21.6 EMPLOYMENT TESTS

The selection test for employment is usually held in the form of a written test, physical
fitness and interview. Let us learn about these tests in brief.

21.6.1 WRITTEN TEST

Most of the organisations particularly in government sector conduct written test for the
selection of candidates. This test may be conducted to test the subject knowledge or

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general aptitude of the candidates. Descriptive or multiple-choice questions are framed Awareness in Business and
Employment
for the written test. To test the general aptitude, questions are asked on current affairs,
general science, reasoning, arithmetic, languages etc. The job seeker must prepare
and practice thoroughly for the written test.

21.6.2 PHYSICAL FITNESS TEST

In certain categories of jobs like Defence, Police and Forest Service physical fitness
Note
of the candidate is essential. So, they conduct physical fitness test for selection of right
candidate. In almost all cases medical test is also conducted before giving offer of
appointment. This test is arranged to know whether the candidate is suffering from any
serious disease that might affect his/her normal functioning at work.

21.6.3 INTERVIEW

To judge the communication skills, presentation skills, command of the subject,

leadership qualities, personality etc. the employers usually arrange for an interview.
This may be done in the form of a group discussion and personal interview. For group
discussion, small groups are formed to discuss any specific topic. During the discussion
the employer judges the communication skills and leadership qualities of the candidate.
The employer can observe the candidate's performance sitting in the discussion room
or through a close circuit television. This process can also be carried out in
teleconferencing mode in which the employer can observe the process sitting at a
distant place, located even abroad.

In personal interview, the prospective employer and employee interact with each other
by using different modes. Here the prospective employer tries to evaluate the candidate's
personality, communication skill, command of the subject, judgement, honesty, integrity,
tolerance, patience, politeness, promptness etc. The personal interview can be held in
the form of -

(a) Telephonic Interview

(b) Interview through Teleconference

(c) Chatting through Internet

(d) Face-to face-interaction

Face-to face-interview is the most common form of personal interview in which the
candidate is asked to interact with the interview board. The interview board is headed
by a chairperson and comprises of senior officers from the same organisation and
outside experts. The other forms of personal interview like telephonic interview,

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Awareness in Business and interview through teleconferencing and chatting through internet are common in the
Employment
corporate sector.

21.7 PERSONAL INTERVIEW

The main purpose of holding personal interview is to assess the suitability of the
candidate for a particular post. So it is very important for you to prepare for the
Note interview physically, mentally and psychologically. In this section, you shall learn about
different aspects of personal interview that would help you to face the interview board
comfortably and confidently. Let us discuss these points by classifying the entire
procedure into three different stages -

(i) Preparing for the interview;

(ii) On the day of the interview; and

(iii) During the Interview.

Let us discuss these in detail.

(i) Preparing for the Interview

At this stage you are advised to do the following:

1. Keep yourself well informed about current affairs, important current national
and international problems and issues and topics of general interest through
regular reading of newspapers and listening to the radio and watching the
discussions on television.

2. Gather information about the organisation, its main activity, background, expansion
/ takeover plans etc. All this information can be obtained from the Annual Report
of the organisation or from its website.

3. Know the job profile of the post applied for.

4. Refresh your area of specialisation. A revision of your own subject of studies is

desirable.

5. List out your strengths and weaknesses.

6. Visit the site of interview, if possible. Prior visit will help to ensure punctuality on
the day of interview and also will reduce nervousness.

Put all your documents and certificates including the call letter for the interview
in a folder.

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(ii) On the Day of the Interview Awareness in Business and
Employment
1. Have a good sleep in the previous night and wake up early in the morning.

2. Do your daily chores.

3. Ensure that your appearance is neat and tidy. Wear well ironed clothes, well-
polished footwear.
Note
4. Carry your document folder and reach the interview site on time.

5. After reaching the site go to the washroom, comb your hair and watch your
appearance.

6. Then wait at the interview place for your turn.

7. During the waiting time you can even ask for the brochure of the company and
read it.

(iii) During the Interview

Take care of the following points inside the interview chamber.

1. Entry to the interview room is most important. Knock, greet, and close the door
as gently as possible while facing the interview panel.. Walk in confidently. Do
not sit until you are asked to. If the interviewer gives a hand, give him a warm,
confident and firm handshake. Remember first impression is very important. In
your entry you are being observed for your gait, confidence and manners.

2. The body language of the candidate is observed carefully. Sit properly and bend
forward slightly to show an attitude of interest and attention. Do not fiddle with
anything, like pen, paper, spectacles, other items on table like paperweight etc.
Fidgeting, twitching, scratching etc. show lack of confidence and concentration.

3. While answering questions the following points need to be observed:

o Listen, think and then talk.

o Do not be in a hurry to answer. Take your own time.

o If you have not heard or understood the question, politely ask for a repeat.
Do not assume things and make a wrong statement.

o If you do not know the answer, tell frankly that you do not know.

o If you make a mistake, admit it gracefully.

o Be brief and clear in your reply. No one likes a talkative person.

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Awareness in Business and o Do not tell a lie. Be honest in your response.

Employment
o Do not get angry and lose your control even if the questions are insulting
or irrelevant. Remember it may have been asked to check your patience
or attitude.

4. Do not interrupt. Maintain eye contact.

Note 5. Avoid words like 'I mean', 'Okay' etc.

6. Display enthusiasm, courage and energy while answering the questions. This
shows that you are genuinely interested in the job.

7. Ask questions if you are told to ask.

8. Be well mannered during the whole interview. Words like 'Thank you' 'I beg
your pardon', ' yes please' at appropriate places reflect your manners.

9. Be natural. Don't try to copy anyone.

10. At the end of the interview, thank the interviewer politely with a smile.

11. You're picking up things from the table, getting up and leaving the room is also
observed. Do these movements confidently.

12. Walk confidently. Open the door while facing the interviewer and close the door
after you leave.

13. Do not forget to wish the receptionist or secretary before you leave the premises.

Analyze the interview to know what went wrong if you fail, accept it and get ready for
the next interview.

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Awareness in Business and
Some typical questions What do interviewers Some common reasons Employment
asked at an interview look for in a candidate? for rejection at an
Interview

 Why do you  Personality  Poor Physical

consider yourself Appearance
 Knowledge of the
suitable for this job? Note
subject/intelligence  Lack of courtesy/
 Tell me something manners
 Education and
about yourself or your
experience  Lack of sincerity
family background.
 Communication Skills  Dishonesty
 What are yo ur
strengt hs and  Past achievements  Poor communication
weaknesses? skills
 Personal qualities like
 Why do you want to honesty, integrity,  Disorganised and
join this company? tolerance, patience, vague answers
politeness, promptness
 Why have you chosen  Telling lies
etc.
this line/field?  Non-punctuality
 What are your goals in  Lack of knowledge/
life? intelligence
 What are yo ur  Loud voice
hobbies ? and how do
you spend your free  Under/over
time? confident

 What are your salary  Poor grooming

expectations?

INTEXT QUESTIONS 21.4

1. Name two terms/phrases a candidate should avoid using during an interview.

2. Name three term/phrases one may use during an interview to show his/her good
manners.

3. Name the different forms of personal interview.

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Awareness in Business and

Employment TERMINAL EXERCISE
Very Short Answer Questions

1. Enumerate any four sources of information of vacancies for jobs.

2. State the role of management consultants in the process of recruitment.

Note 3. What is meant by the term 'resume'?

4. Name any four personal qualities of a job seeker.

5. What are the qualities an interviewer can judge from 'Group discussion'?

Short Answer Questions

1. Employment Exchanges are not playing a significant role in the process of

recruitment. Do you agree with this statement? Give reasons.

2. Explain any two sources that provide information about job vacancies.

3. State the functions performed by placement agencies in the process of recruitment.

4. State any four points one should mention in his/her bio-data.

5. Describe the role of print media in providing information about the vacancies
advertised.

Long Answer Questions

1. Briefly describe the procedure for getting your name registered in employment
exchanges.

2. Explain the role of employment exchanges in India.

3. Describe the role of electronic media in helping the job seekers to get the jobs of
their liking.

4. What are the points one should consider while preparing a covering letter for
sending bio-data to a company?

5. Describe in brief the interview form of selection test.

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Awareness in Business and
ANSWERS TO INTEXT QUESTIONS Employment

21.1
2. a) Registration and placement of job seekers
(b) Career counselling and vocational guidance
(c) Collection of information about employment market
Note
21.2
1. (a) Prepare the data bank of employers and job seekers
(b) Advertise the vacancies
(c) Help the job seekers in preparing their bio-data
2. (a) Category of jobs
(b) Post
(c) Place of job
(d) Expected salary
21.3
1. (a) Brief introduction of the applicant
(b) Purpose of writing the application
(c) Sources of information about the vacancy
2. (a) Name and contact details
(b) Educational qualifications
(c) Work history
(d) Details regarding references
21.4
1. (a) I mean
(b) Okay
2. (a) Thank you
(b) I beg your pardon(c) Yes please
3. (a) Telephonic Interview
(b) Interview through Teleconference
(c) Chatting through Internet
(d) Face-to face-interaction

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Awareness in Business and

Employment DO AND LEARN
(1) Visit the nearest Employment Exchange and watch the process of registration.

(2) Familiarize yourself with the important documents be filled up to get vocational
guidance in Employment Exchange.

(3) Take out one week's newspapers and identify the job vacancies for which you
Note qualify after passing 10+2 examination.

ROLE PLAY
Anamika and Radhika are two friends. After completing the studies, Radhika joined in
a nationalised bank as an officer and Anamika joined as a teacher. Both the friends
met each other after a gap of two years in a coffee shop. In the midst of the conversation
Radhika shared her problem, the conversation flowed in the manner given below:

Anamika : Hi! Radhika. What are you doing now?

Radhika : Nothing. I am trying to get a better job. But I am not successful till
now.
Anamika : What is the problem?
Radhika : I don't know. I sometimes feel that though my interview goes well but,
my credentials are not very impressive
Anamika : Okay, my friend. Don't worry, just show me your resume.
Radhika : I don't have any.
Anamika : No issues. Let us get together to make an impressive resume for you.

Both the friends started discussing the various points to be considered while preparing
a resume.

Assume the role of Anamika and ask your friend to play as Radhika and continue the
conversation.

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SKILL DEVELOPMENT Module - 6
Awareness in Business and
Employment

22

SKILL DEVELOPMENT Note

Skill development is an initiative by the Central Government to accomplish the vision

of Skill India.It is aimed at developing the skills of youth who could be employed in
industrial organisations.The Government launched Skill India Programme in 19 centres
on 15th July 2015.These centres include. Agartala, Ahmedabad, Aizawl, Baddi,
Chennai, Daman, Dehradun, Gangtok, Hyderabad, Itanagar, Jaipur, Lakshadweep,
Mumbai, Patna, Port Blair, Puducherry, Silvassa, Shillong, Udhampur.

Skill India is a focused approach to develop the skills required by the industry. The
Central Government has also created a dedicated Ministry of Skill Development and
Entrepreneurship to give a fillip to skills.

LEARNING OUTCOMES
 explains the concept of Skill Development;
 identifies the objectives and features of Skill India;
 highlights the need and importance of Skill Development; and
 describes use of the Government initiatives, NSDC and other bodies

22.1 CONCEPT OF SKILL DEVELOPMENT

Skill India or National Skills Development Mission of India is a campaign
launched by Prime Minister Narendra Modi on 15th July 2015 which aims to train
over 40 crore people in India in different industry-related skills. Because of its
importance, 15th July of each year is celebrated as World Youth Skills Day. This
policy replaced the National Policy on Skill Development 2009.

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Awareness in Business and The vision of Skill India is to create an empowered workforce by 2022 with the help
Employment
of various schemes and training courses. It includes various initiatives of the government,
like:
 National Skill Development Mission
 National Policy for Skill Development and Entrepreneurship, 2015
 Pradhan Mantri Kaushal VikasYojana (PMKVY)
Note  Skill Loan scheme
 Rural India Skill

Skill Development is an initiative by the Central Government to accomplish the vision

of Skill India. It is aimed at developing the skills of youth who could be employed in
industrial organisations. To accomplish this goal, the Central Government has also
created a dedicated Ministry of Skill Development and Entrepreneurship to
give a fillip to the objectives of Skill India as discussed in the next section of this
chapter.

Skill Development is the process of:

 identification of skill gaps, and

 developing the existing skills to enable an individual to achieve his / her goals.

22.2 OBJECTIVES AND FEATURES OF SKILL INDIA

Skill India has defined the following objectives toward which it strives:

 To create opportunities, space and scope for the development of the talents of
the Indian youth.

 To develop more of those sectors which have already been put under skill
development for the past so many years.

 To identify new sectors for skill development.

 The new programme aims at providing training and skill development to 500
million youth of our country by 2020, covering each and every village.

These objectives are in line with the government's push for adequate availability of
skilled manpower for micro enterprises, small scale, medium and large scale industries
including Special Economic Zone (SEZ) and industrial parks as a whole. The
government also aims to bring about convergence in various employment schemes
along with effective training and placement mechanisms.

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Skill India is unique in comparison to previous initiatives taken by central and state Awareness in Business and
Employment
governments. The features that make it unique are:

 The emphasis is to skill the youth in such a way so that they get employment and
also improve entrepreneurship.

 Provide training, support and guidance for all occupations that were of traditional
nature like carpenters, cobblers, welders, blacksmiths, masons, nurses, tailors,
Note
weavers, etc.

 More emphasis has been given on new areas like real estate, construction,
transportation, textile, gem industry, jewellery designing, banking, tourism and
various other sectors, where skill development is inadequate or nil.

 The training programmes are on the lines of international level so that the youths
of our country can not only meet the domestic demands but also of other countries
like the US, Japan, China, Germany, Russia and those in the West Asia.

 Another remarkable feature of the 'Skill India' programme would be to create a

hallmark called 'Rural India Skill', so as to standardise and certify the training
process.

 Tailor-made, need-based programmes have been initiated for specificage groups

which can be like language and communication skills, life and positive thinking
skills, personality development skills, management skills,behavioural skills,
including job and employability skills.

 The course methodology of 'Skill India' is innovative, which includes games,

group discussions, brainstorming sessions, practical experiences, case studies etc.

22.3NEED AND IMPORTANCE OF SKILL DEVELOPMENT

1. A Massive Young Population

India is the second most populated country in the world with nearly a fifth of the
world's population. According to the 2019 revision of the 'World Population
Prospects', population stood at 135 crores. India has more than 50% of its
population below the age of 25 and more than 65% below the age of 35. It is
expected that, in 2020, the average age of an Indian will be 29 years, compared
to 37 for China and 48 for Japan. Such a large young population mandates that
the government must work out ways of ensuring that they are gainfully employed
to help realise the dream of India becoming a world superpower and a developed
country. Skill India is a pivotal initiative in this direction.

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Awareness in Business and 2. Support for Industrial and Agricultural growth

Employment
Investment in human resource development through skilling provides an adequately
skilled population that directly and favorably impacts the industrial and agricultural
growth of India.

3. Promotion of Entrepreneurship & Small & Medium Enterprises

Entrepreneurship is the key to India's development as an economic superpower.
Note
Skill India is therefore a cornerstone for supporting skilled entrepreneurs who
can in turn be job creators in their own right.

4. Bridging the Gap that Education Sector is not able to Fulfill

Indian education system lags in certain aspects of preparing students for
employment in the industry. Therefore, Skill India was needed to bridge the gap
between unskilled and educated manpower and make industry-ready manpower
available to all types and scales of industry.

22.4 SKILL DEVELOPMENT INITIATIVES

22.4.1 PRADHAN MANTRI KAUSHAL VIKAS YOJANA - PMKVY

Pradhan Mantri Kaushal VikasYojana (PMKVY) is a unique initiative by the

Government of India that aims to train about 24 lakh Indian youth to be industry
relevant, skill based and to be ready for the global market. Under this scheme, the
trainees will also be given financial support and a certificate on successful completion
of training and assessment, which will help them in securing a job for a better future.
This scheme mainly focuses on the upbringing of youth and to prepare them to face the
challenges of the industrial world.

Keeping in mind the very less emphasis laid on skill development in schools and colleges,
the government has decided to set up training centers. Interested candidates need to
undergo certain basic steps to take part in the course. Candidates are firstly expected
to find a training center, get enrolled, learn the required skill, be a part of an assessment
and a certification programme and gain a reward at the end. The PMKVY scheme is
being implemented successfully with many skill sectors all over the country. PMKVY
2.0 is expected to be completed by 2020. This is concurrent with the proposed launch
of PMKVY 3.0.

22.4.2 NATIONAL SKILL DEVELOPMENT MISSION

National Skill Development Mission (NSDM) was launched by the Hon'ble Prime
Minister on 15th July, 2015 on the occasion of World Youth Skills Day to provide a

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strong institutional framework to implement and scale up skill development efforts Awareness in Business and
Employment
across the country and to train a minimum of 300 million people by the year 2022.
Under the Mission, 20 Central Ministries / Departments including Ministry of Skill
Development and Entrepreneurship are involved in the implementation of more than
40 schemes/programmes on Skill Development. The implementation of skilling activities
under the Mission will be as per the budget provisions of various schemes under their
respective heads. Note
Further, the National Skill Development Fund has been set up by the Government of
India with an initial corpus of Rs. 995.10 crore for skill development in the country.

22.4.3 NATIONAL POLICY FOR SKILL DEVELOPMENT AND

ENTREPRENEURSHIP, 2015

The core objective of the Policy is to empower the individual, by enabling her/him to
realize her/his full potential through a process of life long learning where competencies
are accumulated via instruments such as credible certifications, credit accumulation
and transfer, etc. As individuals grow, the society and nation also benefit from their
enhanced skills. The national policy will:
I. Make quality vocational training aspirational for both youth and employers.
II. Ensure both vertical and horizontal pathways to skilled workforce for further
growth by providing seamless integration of skill training with formal education.
III. Focus on an outcome-based approach towards quality skilling that on one hand
results in increased employability and better livelihoods for individuals, and, on
the other hand, translates into improved productivity across primary, secondary
and tertiary sectors.
IV. Increase the capacity and quality of training infrastructure and trainers to ensure
equitable and easy access to every citizen.
V. Address human resources needs by aligning supply of skilled workers with
sectoral requirements of industry and the country's strategic priorities including
flagship programmes like "Make in India".
VI. Establish an IT-based information system for aggregating demand and supply of
skilled workforce which can help in matching and connecting supply with demand.
VII. Promote national standards in the scaling space through active involvement of
employers in setting occupational standards.
VIII. Recognise the value of on-the-job training, by making apprenticeship in actual
work an integral part of all skill development efforts.

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Awareness in Business and IX. Ensure that the skilling needs of the socially and geographically disadvantaged
Employment
and marginalised groups (like SCs, STs, OBCs, minorities, differently-abled
persons, etc.) are appropriately taken care of.

X. Promote increased participation of women in the workforce through appropriate

skilling and gender mainstreaming of training.

22.4.4 SKILL LOAN SCHEME

Note
A skill loan initiative is launched in which loans from Rs.5000 - 1.5 lakhs will be
available to those who seek to attend skill development programmes, over the next
five years. The idea is to remove financial hindrances in accessing skill training programs.

22.4.5 NATIONAL RURAL LIVELIHOOD MISSION - AJEEVIKA SKILLS

Aajeevika - National Rural Livelihood Mission (NRLM) is an initiative launched by

the Ministry of Rural Development (MoRD), Government of India. The Aajeevika
Skill Development Programme (ASDP) operates under NRLM. Its aim is to understand
the professional aspirations and interests of youth and to also increase their daily
income. This mission provides young people from poor communities an opportunity to
upgrade their skills and join the skilled workforce of the country. Some key features of
the scheme include, post placement support, food and transport during training and
assured placement.

NRLM wishes to bring a change by supporting entrepreneurial skills of the poor by

creating appropriate platforms through dedicated and sensitive support structures.
NRLM has a demand driven strategy and also encourages states to have their own
perspective of implementing this scheme. Through this scheme, the private sector is
also being encouraged to set up self-employment generation training institutes.

22.4.6 DEEN DAYAL UPADHYAY GRAM KAUSHALYOJANA - DDU-GKY

The Deen Dayal Upadhyay Gram Kaushal Yojana (DDU-GKY) is a placement linked
skill development programme for the rural youth. To date there have been 66 special
projects that were taken up under the DDU-GKY scheme. 15 states have a minimum
of five approved projects and many in the pipeline.

DDU-GKY funds a variety of skill training programmes all over the country that include
over 250 trades such as Retail, Hospitality, Health, Construction, Automotive, Leather,
Electrical, Plumbing, Gems and Jewellery, to name a few. DDU-GKY is being adopted
throughout India as the scheme is being implemented on a large scale in almost all the
states and union territories.

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22.4.7 DEENDAYALANTYODAYAYOJANA - NATIONAL URBAN Awareness in Business and
Employment
LIVELIHOODS MISSION - DAY-NULM
The main aim of DAY-NULM mission is to curb poverty of the urban poor households
by providing them access to their skill related employment opportunities in an organised
manner. As a part of this scheme, regional workshops have also been conducted to
support urban homeless, urban street vendors etc. A major objective of the scheme is
to help people earn a sustainable livelihood through skilling and upskilling. Note
Another objective is to increase the income of urban poor by encouraging them to be
a part of courses that can provide salaried employment and or self-employment
opportunities which will eventually lead to better living standards. Through this scheme,
the government of India also hopes to eradicate the threats that a regular worker faces
in the unorganized sectors of work. The belief that poor also have entrepreneurial
capability and have an intent desire to come out of poverty is what drives this mission.

22.4.8 MAHATMA GANDHI NATIONAL RURAL EMPLOYMENT

GUARANTEE ACT - NREGA
NREGA guarantees the right to work in rural areas by providing wage employment to
unskilled manual workers. People are ensured of at least 100 days of employment in
every household to a member who is willing to do unskilled work. Employment under
NREGA has a legal clause and the employment schemes are directly implemented by
the gram panchayats.

Apart from providing economic security and creating rural assets, NREGA also aims
at protecting the environment, empowering rural women, reducing rural-urban migration
and fostering social equity, among others.

22.4.9 DIRECTOR GENERAL OF TRAINING - MODULAR

EMPLOYABLE SKILLS - DGT MES

The Government of India and the Ministry of Labour together has launched 'Modular
Employable Skills' (MES) under 'Skill Development Initiative' (SDI). Under this scheme,
school dropouts and existing workers, specially, in the unorganized sector are to be
trained for employable skills. The scheme has been in operation since 2007 and statistics
show that a large number of school dropouts do not have access to skill development
for improving their employability through various vocational training and apprenticeship
programmes.

The basic objective of the scheme is to provide vocational training to school dropouts,
ITI graduates, rural and unemployed youth to improve their employability. Also, priority

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Awareness in Business and is given to those above the age of 14 years who have suffered in the form of child
Employment
labour to enable them to learn employable skills in order to get gainful employment.

INTEXT QUESTIONS 22.1

1. Which of the following is NOT a reason that a strong need was felt for launching
the Skill India initiative?
Note
a. An aging population in India

b. Support for Industrial and Agricultural growth

c. Promotion of Entrepreneurship and Small & Medium Enterprises

d. Bridging the gap that education sector not able to fulfil

2. Which of the following is NOT a feature that makes Skill India initiative unique?

a. The emphasis is to skill the youth in such a way so that they get employment
and also improve entrepreneurship.

b. Provide training, support and guidance for ALL occupations that were of
traditional type like carpenters, cobblers, welders, blacksmiths, masons,
nurses, tailors, weavers, etc.

c. No emphasis has been given on new areas (like real estate, construction,
transportation, textile, gem industry, jewellery designing, etc.) where skill
development is inadequate or nil.

d. The training programmes are on the lines of international level

3. What are the four initiatives launched as part of Skill India Vision on 15th July
2015?

4. On 15th July 2015 Prime Minister Narendra Modi unveiled National Policy for
Skill Development and Entrepreneurship 2015, is intended to replace the
___________.

a. National Policy on Skill Development 2009

b. International Policy on Skill Development 2009

c. National Policy on Skill Development 2004

d. National Policy on Skill Development 2000

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5. Skill India Campaign was launched on __________. Awareness in Business and
Employment
a. 13th July 2015

b. 14th July 2015

c. 15th July 2015

d. 16th July 2015

Note

22.5 ROLE OF NSDC AND OTHER BODIES

22.5.1 NATIONAL SKILL DEVELOPMENT CORPORATION

The National Skill Development Corporation India (NSDC) was set up as a Public-
Private Partnership (PPP) Company with the primary mandate of developing and
enabling the skills landscape in India. NSDC's underlying philosophy is based on the
following pillars:

1. Create: Proactively catalyse creation of large, quality vocational training

institutions.
2. Fund: Reduce risk by providing long-term capital, including grants and equity.
3. Enable: The creation and sustainability of support systems required for skill
development. This includes the Industry-led Sector Skill Councils.
The main objectives of the NSDC are to:
 Upgrade skills to international standards through significant industry involvement
and develop necessary frameworks for standards, curriculum and quality
assurance.
 Enhance, support and coordinate private sector initiatives for skill development
through appropriate PPP models and to strive for significant operational and
financial involvement from the private sector.
 Play the role of a "market-maker" by bringing financing, particularly in sectors
where market mechanisms are ineffective or missing.
 Prioritize initiatives that can have a multiplier or catalytic effect as opposed to
one-off impact.
Partnerships: NSDC operates through partnerships with multiple stakeholders in
catalysing and evolving the skilling ecosystem.
 Partnerships with Private Sector- Areas of partnerships include awareness
building, capacity creation, loan financing, creation and operations of Sector

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Awareness in Business and Skill Councils, assessment leading to certification, employment generation,
Employment
Corporate Social Responsibility, World Skills competitions and participation in
Special Initiatives like Udaan focused on J&K.
 International Engagements- Investments, technical assistance, transnational
standards, overseas jobs and other areas.
 Partnerships with Central Ministries - Participation in flagship programmes
Note
like Make in India, Swachh Bharat, Pradhan Mantri Jan DhanYojana, Smart
City, Digital India, Namami Ganga, etc.
 Partnerships with State Governments - Development of programmes and
schemes, alignment to NSQF and capacity building, operationalization of program,
capacity building efforts, among others.
 Partnerships with University & Schools - Vocationalisation of education
through specific training programmes, evolution of credit framework,
entrepreneur development, etc.
 Partnerships with Non-profit Organizations - Capacity building of
marginalized and special groups, development of livelihood, self-employment
and entrepreneurship programmes.
 Partnerships for Innovation - Support early-stage social entrepreneurs
working on innovative business models to address gaps in the skilling ecosystem,
including programs for persons with disability.
Since its inception, NSDC has several achievements to its credit. These are:
 Over 52 lakh students trained
 235 private sector partnerships (each to train at least 50,000 persons over a
10-year period) for training and capacity building.
 38 Sector Skill Councils (SSC) approved in services, manufacturing, agriculture
& allied services, and informal sectors. Sectors include 19 of 20 high priority
sectors identified by the Government and 25 of the sectors under Make in India
initiative. (refer to the Table 22.1 below)
 1386 Qualification Packs with 6,744 unique National Occupational Standards
(NOS) which have been validated by over 1000 companies.

 Vocational training introduced in 10 States, covering 2400+ schools, 2 Boards,

benefitting over 2.5 lakh students. Curriculum based on NOS and SSC
certification. NSDC is working with 21 universities, Community Colleges under

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UGC/AICTE for alignment of education and training to National Skills Awareness in Business and
Employment
Qualification Framework (NSQF).

 Designated implementation agency for the largest voucher-based skill

development program, PMKVY.

 Skill Development Management System (SDMS) with 1400 training partners,

28,179 training centres, 16,479 trainers, 20 Job portals, 77 assessment agencies
Note
and 4983 empanelled assessors.

22.5.2 NATIONAL SKILL DEVELOPMENT AGENCY

The National Skill Development Agency (NSDA), an autonomous body, (registered

as a Society under the Societies Registration Act 1860) was created with the mandate
to coordinate and harmonise the skill development activities in the country, is part of
the Ministry of Skill Development & Entrepreneurship (MSDE).

Functions of NSDA are:

 Take all possible steps to meet skilling targets as envisaged in the 12th Five Year
Plan and beyond.

 Coordinate and harmonize the approach to skill development among various

Central Ministries/Department, State Governments, the NSDC and the Private
sector.

 Anchor and operationalize the NSQF to ensure that quality and standards meet
sector specific requirements

 Be the nodal agency for State Skill Development Missions

 Raise extra-budgetary resources for skill development from various sources

such as international agencies, including multilateral agencies, and the private
sector.

 Evaluate existing skill development schemes with a view to assessing their efficacy
and suggest corrective action to make them more effective.
 Create and maintain a national database related to skill development including
development of a dynamic Labour Market Information System (LMIS).
 Take affirmative action for advocacy.
 Ensure that the skilling needs of the disadvantaged and the marginalized groups
like SCs, STs, OBCs, minorities, women and differently abled persons are taken
care of.

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Awareness in Business and  Discharge any other function as may be assigned to it by the Government of
Employment
India.
Activities undertaken by the NSDA
Besides anchoring and implementation, the National Skills Qualifications Framework
(NSQF), some of the other actions taken by the NSDA are as under:
1. Rationalization of the Skill Development Schemes of the Government
Note of India
NSDA has worked with the various ministries and stakeholders to achieve
convergence of norms across the various central schemes for skill development,
while at the same time recognizing the special needs of the North-Eastern States,
the hill States, and other geographies that pose challenging situations for skill
development.
2. Creation of an integrated Labour Market Information System (LMIS)
A national database on all major aspects of skill development is being created in
partnership with all other Ministries of the Government of India and the State
Governments. This would be a one-shop stop where all the relevant information
is freely available to citizens. The LMIS would bring in operational efficiencies,
would be transparent and available to all, and would help reduce considerably
the situation of one individual being benefited under different schemes.
3. Engagement with States
The NSDA is now actively engaged with the various State governments to plan
out their skill development action plan, help them develop their skill development
policies, and set up suitable administrative mechanisms. Through Technical
Assistance programmes with the Asian Development bank (ADB), European
Union (EU) and DFID (Department for International Development of the
Government of UK), NSDA is helping the State Skill Development Missions of
11 states build their respective capacities.
4. Skills Innovation Initiative
A committee has been set up under the Skills Innovation Initiative housed under
the NSDA. The NSDA invites innovative ideas, concepts and practices on skill
development. The Committee reviews all proposals of innovations to facilitate
their application on a wider scale.
22.5.3 SECTOR SKILL COUNCILS

Since its inception, one of the major pillars of NSDC's strength are Sector Skill
Councils (SSCs), which play a vital role in bridging the gap between what the industry

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demands and what the skilling requirements should be. Till date, NSDC has approved Awareness in Business and
Employment
38 Skill Councils across different sectors.

The National Occupational Standard is one of the most significant contributions of

NSDC to India's skilling ecosystem-something that was made possible by the SSCs,
which are national partnership organisations that bring together all the stakeholders --
industry, labour and academia.
Note
Each SSC operates as an autonomous body and could be registered as a Section 8
Company, or a Society. NSDC is mandated to initiate and incubate SSCs with initial
seed funding to facilitate their growth and enable them to achieve self-sustainability in
a time bound manner.

The list of SSCs and their founding years is given below:

Role of each SSC

The SSCs have been mandated with the following functions:

 Identification of skill development needs including preparing a catalogue of types

of skills, range and depth of skills to facilitate individuals to choose from them.

 Development of a sector skill development plan and maintaining skill inventory.

 Determining skills/competency standards and qualifications and getting them

notified as per National Skills Qualification Framework (NSQF).

2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

- Auto - Media & - Logistics - Life Sciences - Hydrocarbons - Management
Priority - Retail Entertainment - Construction - Hospitality - Chemical & - Strategic
Sectors - IT/ITeS - Gems & - Food - Textiles & Petrochemicals Manufacturing
Jewelry Processing Handlooms - Furniture &
- Leather -Apparels Furnishings
- Electronics - Handicrafts - PwD
- BFSI - Power - Green Jobs
- Iron & Steel
Large - Rubber - Telecom -Aerospace & - Sports - Instrumenta-
Workforce - Capital Goods Aviation - Paints & tion
- Agriculture - Mining Coatings
- Earthmoving &
Infra Building
Informal - Plumbing - Beauty & - Domestic
Sectors Wellness Workers

Table 22.1 - Sector Skill Councils and their founding year

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Awareness in Business and  Standardization of affiliation, accreditation, examination and certification process
Employment
in accordance with NSQF as determined by the National Skills Qualifications
Committee (NSQC).
 May also conduct skill-based assessment and certification for Qualifications
Pack /National Occupational standards (QP /NOS) aligned training programmes.
 Participation in the setting up of affiliation, accreditation, examination and
Note certification norms for their respective sectors.
 Plan and facilitate the execution of Training of Trainers along with NSDC and
states.
 Promotion of academies of excellence.
 Paying particular attention to the skilling needs of ST/SC, differently-abled and
minority groups.
 Ensuring that the persons trained and skilled in accordance with the norms laid
down are assured of employment at decent wages.
 Job Placements
 The most critical outcome of skill training is employment, whether self or wage
employment.
To facilitate employment, SSCs have been encouraged to develop their own placement
portal and mobile apps.
22.5.4 MINISTRY OF SKILL DEVELOPMENT AND
ENTREPRENEURSHIP - MSDE

The Ministry of Skill Development and Entrepreneurship (MSDE) is responsible for

the co-ordination of overall skill development efforts across the country, building the
vocational and technical training framework, skill up-gradation, building of new skills,
and innovative thinking not only for existing jobs but also jobs that are to be created.

The ministry has aided and supported several other missions that also focus on skill
development like the -

1. National Skill Development Agency (NSDA),

2. National Skill Development Corporation (NSDC),
3. National Skill Development Fund (NSDF) and
4. 38 Sector Skill Councils (SSCs) as well as
5. 187 training partners registered with NSDC.

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The Ministry also wishes to work with the existing chain of skill development training Awareness in Business and
Employment
centers, universities and other institutes in the field.

22.5.5 MINISTRY OF LABOUR AND EMPLOYMENT - MOLE

The Ministry of Labour and Employment (MoLE) is one of the oldest and important
Ministries of the Government of India.

1. The main responsibility of this Ministry is to protect the interests of workers in Note
general and also the rural and urban poor and deprived section of the society.

2. The Government's attention is also on the promotion of welfare and providing

social security to the labor forces both in organised and unorganised sectors.

3. The ministry majorly focuses on women and child welfare and has also started
schemes to support various initiatives.

4. The National Career Services is another scheme under the ministry of Labor
and Employment which deals with providing job matching services to youth in
an easy manner. This project also readily provides information on education,
career opportunities, jobs etc.

22.5.6 ROLE OF INDUSTRY IN SKILL DEVELOPMENT

The skill development in India is an imperative as the government cannot accomplish

this task alone. The industry is gradually witnessing increased participation from
corporate and PSUs who are coming forward and investing in youth by supporting
skill development through their CSR initiatives. They are getting involved in a range of
activities such as financing, providing infrastructure, recognition of prior learning, adoption
of national qualification framework and occupational standards, etc. Organisations
like Power Grid, Coal India, NTPC, Ambuja Cements, Essar and Coca Cola are
some of the leading examples.

INTEXT QUESTIONS 22.2

1. Name the campaign that has been launched by India on the occasion of
the first ever World Youth Skills Day?

a. Namami Gange Campaign

b. Skill India Campaign

c. Yuva Kalyan Kosh

d. Sab Haath Rozgaar Campaign

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Awareness in Business and 2. How many Sector Skill Councils have been approved by NSDC?
Employment
a. 36

b. 37

c. 38

d. 39
Note
3. Which of the following is NOT a function mandated to the SSCs?

a. Identification of skill development needs

b. Development of a sector skill development plan and maintaining skill

inventory

c. Determining skills/competency standards and qualifications

d. Approving other Sector Skill Councils

S.No Abbreviation Expanded Form

1 ASDP Aajeevika Skill Development Programme

2 PMKVY Pradhan Mantri Kaushal VikasYojana

3 DAY-NULM Deendayal AntyodayaYojana - National Urban

Livelihoods Mission

4 DDU-GKY Deen Dayal Upadhyay Gram Kaushal Yojana

5 MES Modular Employable Skills

6 NRLM National Rural Livelihood Mission

7 NREGA National Rural Employment Guarantee Act

8 NSDM National Skill Development Mission

9 NSDF National Skill Development Fund

10 SEZ Special Economic Zones

11 SDI Skill Development Initiative

12 NSDA National Skill Development Agency

13 MoRD Ministry of Rural Development

14 DGT-MES Director General of Training - Modular Employable Skills

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Awareness in Business and
15 ITI Industrial Training Institute Employment
16 NSDC National Skill Development Corporation

17 PPP Public-Private Partnership

18 SSC Sector Skill Councils

19 NOS National Occupational standards Note

20 SDMS Skill Development Management System

21 MSDE Ministry of Skill Development and Entrepreneurship

22 LMIS Labour Market Information System

23 ADB Asian Development Bank

24 DFID Department for International Development

25 EU European Union

26 NSQC National Skills Qualification Committee

27 QP/NOS Qualifications Pack /National Occupational standards

28 MoLE Ministry of Labour and Employment

29 CSR Corporate Social Responsibility

30 NSQF National Skills Qualifications Framework

TERMINAL EXERCISE

Very Short Answer Questions

1. Briefly complete the following sentence:

Skill Development is the process of ______.

2. Explain briefly any two features that make Skill India unique in comparison to
any previous initiatives taken by the central and state governments.

3. Why is a massive young population in India a big reason for the government's
push towards Skill India?

4. Is our existing education system adequate to address the skill needs of the
country? Discuss briefly.

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Awareness in Business and 5. Is Mahatma Gandhi NREGA scheme enough to fulfil the aspirations of rural
Employment
development in India? What role are DDU-GKY and DAY-NULM expected
to play in rural development?

6. What are the key areas of partnerships that NSDC enters into with the private
sector?

7. What is the importance of creating the SSCs as autonomous bodies?

Note
8. Briefly discuss the implementation of the National Career Services scheme under
the Ministry of Labour and Employment (MoLE).

Short Answer- Questions

1. Write short notes on–

(a) National Skill Development Corporation

(b) National Skill Development Agency

2. Write brief notes on the following Skill Development Initiatives–

(a) National Skill Development Mission

(b) National Policy for Skill Development and Entrepreneurship, 2015

(c) Pradhan Mantri Kaushal VikasYojana (PMKVY)

(d) Skill Loan scheme

(e) Rural India Skill

3. Write briefly the key objectives of Skill India

4. Explain briefly the importance of the Aajeevika Skill Development Programme

(ASDP) that operates under NRLM.

5. Which two ministries play a key role in skill development in India. Write brief
notes on each.

Long Answer- Questions

1. Explain the objectives of the Skill Development Initiative of the Central

Government. What measures have been initiated for the development and
upgradation of the skills among the youth ?

2. NSDC operates through partnerships with multiple stakeholders in evolving the

skilling ecosystem. List all these partners and write briefly about the role of each
of them.

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3. Explain the reasons why the government considered Skill Development a very Awareness in Business and
Employment
important pillar in the development of India.

4. How does the National Policy for Skill Development and Entrepreneurship,
2015 propose to support the government's agenda of all-round development of
India?

5. Rural development 'especially through skills ' is a key government objective.

Note
List the key schemes that the government is running to pursue rural development
through skill enhancement.

ANSWERS TO INTEXT QUESTIONS

22.1

1. (a)

2. (c)

3. (b) National Policy for Skill Development and Entrepreneurship 2015, National
Skill Development Mission (NSDM), Pradhan Mantri Kaushal VikasYojana
(PMKVY) and Skill Loan scheme

Explanation: The four initiatives are aimed at making India as a hub of world's
human resource capital.

4. (a) National Policy on Skill Development 2009

Explanation: It is the first such policy on entrepreneurship since independence in

India. The policy was unveiled in a programme held on the occasion of first-ever
World Youth Skills Day.

5. (c) 15th July 2015

Explanation: Prime Minister Narendra Modi had launched 'Skill India campaign'
at VigyanBhavan in New Delhi. On this occasion, Meghalaya Skill Development
Society organised the programme under the theme, "Why Skill Development is
necessary for the youth of Meghalaya?" in conformity with the launch of the
Pradhan Mantri Kaushal VikasYojana by Prime Minister Narendra Modi in
New Delhi.

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Awareness in Business and 22.2

Employment
1. (b)

2. (c)

3. (d)

Note ROLE PLAY

Reena is a leader in her village leading a group of women manufacturing and marketing
of handicraft items. She wants to be an entrepreneur by extending her business to
other regions also. She has no idea regarding government initiatives to impart the
required skills and to handhold her in the expansion of her business.
Assume the role of a government employee for yourself and dramatise the situation by
developing an exchange of dialogues between you and Reena, imparting her necessary
guidance for the same.

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WHAT HAVE YOU LEARNT
MODERN MODES OF BUSINESS Module - 6
Awareness in Business
and Employment

23

MODERN MODES OF BUSINESS Note

You know that normally, to buy goods and services we visit the nearby market; to
book the train tickets we go to the rail reservation counters, to make deposits and
withdrawals of money we visit banks personally, and so on. But, now-a-days all these
facilities are available at our doorstep. The Information and Communication Technology
(ICT) has made it a reality. It has brought about a formidable change in the mode of
transacting the business activities. There is no need to stand in long queues in the
banks and at rail reservation counters. All these transactions are now being done with
the help of Internet. We can visit the world market at any time just sitting at our home.
We can avail of many facilities without visiting the shops or the market physically. All
these developments are the result of the changes in the economic policies established
by the government. One of the major advantages that India gained due to globalisation
has been our introduction to the world of technology. The Multinational Corporations
(MNCs) got an opportunity to explode the Indian market with its modern science and
technology. However, India took no time to adapt the changing technology and emerged
as a successful player in the world market. In addition to the technological revolution,
another concept successfully introduced in the Indian market has been the 'Outsourcing
of Services' or 'Business Process Outsourcing' (BPO). It has helped the business
firms to concentrate on their core competencies. In this lesson we shall learn in detail
about all these modern modes of business.

LEARNING OUTCOMES
 explains why e-banking/online business is important for business;
 explores the possibility of using online transactions for business; and
 takes- precautionary measures for safe online transactions.
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Awareness in Business
and Employment 23.1 E-BUSINESS AND E-COMMERCE
Gone are the days when we have to stand in queues to get our ticket booked in
railways or airlines or buy our grocery or clothes from local markets. Now everything
is just a click away. Now, the virtual market has gained momentum.. Big bazaar is
replaced by bigbasket.com and readymade garment shop is replaced by Myntra.com.
As stated earlier, to buy goods and services we usually go to a nearby market personally
Note
where buyers and sellers get together for transactions. The buyers check the quality
and negotiate the price. The sellers, on the other hand, try to persuade the prospective
buyers and finalise the transaction. Sometimes, we contact the sellers over telephone
or through correspondence to buy the specific goods. These are the common modes
of business transactions. However, of late, the virtual market mode is gaining
momentum. Through this mode, people get their desired goods and services sitting at
their own place without actually visiting the market place. This has been made possible
through introduction of information technology. The activities of production, marketing,
selling, banking, insurance etc. are all carried out at a faster speed through the use of
computers and Internet. When all these activities are carried on electronically, it is
commonly referred to as 'Electronic Business' or 'e-Business'. Since Internet plays an
important role in all e-Business activities, let us first acquaint ourselves with Internet
before we learn as to how it is helpful in carrying out business transactions.

The Internet, sometimes called simply the 'net', is a worldwide system of computers
network through which the users at any computer can access the information from
other computers. By internet we can connect any computer to any other computer
anywhere in the world via dedicated routers and servers. When two computers are
connected over the internet, they can send and receive any kind of information such as
text, graphics, voice, videos etc. It provides information regarding science and
technology, history, politics, sports, business, current events, music, entertainment,
news and many more topics. It helps the users in the following ways:

(a) Browse the information on any topic through the World Wide Web (www).

(b) Read news available from leading newspapers and television channels.

(c) Exchange messages using e-mail.

(d) Search databases of government, individuals and private organisations.

(e) Transfer files, pictures, animations etc.

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(f) Communicate with others by chatting or talking to them personally when both of Awareness in Business
and Employment
them are connected to the Internet.

(g) Browse and search the catalogues of goods and services and purchase items
on-line.

(h) Set up a website with information about products and services of your organisation.
The Internet was conceived by the Advanced Research Projects Agency Note
(ARPA) of U.S. Government in 1969 as a military project and was known as
ARPANET. It developed as an academic and research network. Later on, it
was opened for use by members of public and commercial use. In the year
1979, it was called Internet. It has now evolved into a global network.

23.2 ELECTRONIC COMMERCE

You know that commerce involves buying and selling and supports services like
transport, insurance, banking, communication etc. When all these activities are
undertaken using information and communication technologies, it is termed as Electronic
Commerce or e-Commerce. In other words, e-Commerce refers to the process of
conducting business with the help of electronic devices using the computer and
interconnected telecommunication network. Here, offer for sale and its acceptance
are made electronically through Internet. It does not require physical interaction between
the parties concerned. It is also known as 'on-line trading', 'on-line shopping' and 'e-
shopping'.

23.3 HISTORY OF E-COMMERCE

The beginning of e-Commerce can be traced to the 1960, when businesses started
using Electronic Data Interchange (EDI) to share business documents with other
companies. In 1979, American National Standard Institute developed ASC X 12 as a
universal standard for businesses to share documents through electronic networks.
The use grew in 1980s, and the rise of eBay and Amazon in 1990s revolutionized the
e-Commerce industry.

E-Commerce takes place between companies i.e., business to business (B2B), between
companies and their customers (B2C), customer to customer (C2C) and consumer to
business (C2B).

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Awareness in Business
and Employment

Note

Fig. 23.1 E-Commerce

1. B2B: This refers to interactions between a manufacturer and a supplier of

materials and services, or between a manufacturer and a wholesaler, or between
a wholesaler and a retailer. A network of computers is used for making enquiries
seeking or placing orders, communicating supply of goods, making payments,
and so on.

2. B2C: As the name implies, there are business firms (manufacturer or retailers)
at one end and its consumers on the other. It enables a business firm to be in
touch with its customers round the clock . It involves a wide range of marketing
activities including promotion, seeking orders, intimating supply and so on.

3. C2C: It usually involves consumers at both ends dealing in goods for which
there is no established market mechanism as is the case with used books and
household equipments.

4. C2B: It is a type of e-Commerce in which consumer make their products and

services available online for companies to bid and buy. This is an opposite of
traditional commerce model of B2C.

INTEXT QUESTIONS 23.1

1. Define the term Internet.

2. State the full form of the following–

(a) WWW (b) B2B (c) B2C (d) C2C

23.4 INTRA- B COMMERCE

Normally, one may use the terms 'e-Commerce' and 'e-Business' interchangeably.
But, in practice, the term e-Business is used in a broader sense. The e-Business covers

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not only the interaction with its customers and suppliers but also interactions and dealings Awareness in Business
and Employment
among various departments and persons within the firm. Thus, e-Business is a wider
term which includes e-commerce and other electronically conducted business functions
like production, accounting, finance, personnel, administration etc. In other words, e-
Business includes not only B2B, B2C, and C2C but also Intra-B Commerce i.e.,
interaction and dealings among various departments and persons within the firm. For
example, the marketing department may interact regularly with the production Note
department and get the products made as per the requirements of the customers.
Similarly, regular interaction among other departments helps in attaining efficient inventory
handling, better cash management, proper utilisation of manufacturing capacity, timely
and sufficient provision of customer services, and so on. Thus, e-Business implies use
of Internet technologies to perform the key business processes.

Fig. 23.2 E-Business

23.5 BENEFITS OF E-COMMERCE/E-BUSINESS

The merits of e-Commerce/e-Business can be summarised as follows:

(a) Wider Accessibility: With the help of a well-developed computerised networking

system, the business units can operate at the national as well as the global level.
The buyers and sellers from any part of the world can interact with each other.
This helps in gaining exposure to new markets.

(b) Improved Customers Service: E-Commerce enables a company to be open

for business whenever a customer needs it. Up-to-date information about
products can be offered on the web, making it easier and convenient for
customers to select the best product. It also enables suppliers of goods and
services to offer a wide range of services to the customers, before as well as
after sale, and respond to customers' queries without any delay.

(c) Shortened Transaction Time: An e-business transaction takes much less time
as compared to the normal process of buying and selling because the producers
are able to cut short the distribution channels and establish direct contact with
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Awareness in Business the consumers. It also enables a company to introduce a new product into the
and Employment
market, gain customers' reaction quickly, implement the necessary changes
without incurring heavy cost and loss of time.

(d) Cost Saving and Low Prices: There is a substantial cost saving in business
transactions through e-Commerce as there is hardly any display of goods involved
and need for large stocks in godowns (warehouse). The number of employees
Note required is also limited. For example, as the orders are directly put into the
system there is no need for any sales persons or order entry clerk. This helps in
substantial savings in operational costs and offering products at lower prices to
customers.

(e) Enlarge Business and Profits: With e-Commerce, the companies are able to
approach a larger number and variety of customers and gain exposure to new
markets. This enables them to enlarge their business volume and earn more
profits.

(f) Convenience to Customers: The customers also stand to gain by e-Commerce

in various ways. They have access to a large number of suppliers, enjoy a wider
choice, and acquire quality products and services at competitive prices. They
also receive prompt and efficient service and gain information about new products
easily.

(g) Personalization and Product Recommendation: E-Commerce site can track

visitors, browse search and purchase history. They also add other customer's
recommendations and reviews which helps us to make a wise decision while
buying online.

23.6 LIMITATIONS OF E-COMMERCE/E-BUSINESS

A few limitations of e-Business/e-Commerce are:

(a) It lacks personal touch with customers, which makes it unsuitable for items such
as clothes, jewellery, etc.

(b) The web can provide a good picture, a detailed description of the product, but
the customer cannot actually see, feel or try on the goods he/she is buying.

(c) The transaction can be finalised quickly, but physical delivery of goods often
takes long time and be delayed. This leads to a lot of inconvenience for the
customers.

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(d) Return of faulty goods bought on-line may often be more problematic and a time Awareness in Business
and Employment
consuming exercise.

(e) Shopping through Internet is not the same experience as a shopping expedition
with family or friends. It is not suitable for non-routine buying where one is
usually guided by advice of friends and family members.

(f) Online transactions are prone to a number of risks that can result into financial,
Note
reputational or psychological losses to the parties involved in a transaction.

The risks relate to:

1. the transaction (default in order taking, default in delivery, default in

payment);

2. data storage and transmission; and

3. privacy.

(g) Moreover the privacy of personal details and security of financial transactions
are a concern for many users.

It may be noted that most of the above limitations are applicable to B2C
commerce. As for the business buying i.e., B2B e-Commerce, these limitations
have little relevance as both the parties are sufficiently knowledgeable, resourceful
and well informed, and transact regularly with each other. No supplier therefore,
can afford mishandling of any transaction with its business customers. However,
there are some challenges, which will have to be overcome. These are:

A. lack of adequate Internet infrastructure;

B. delivery and payment related issues; and

C. absence of cyber laws.

INTEXT QUESTIONS 23.2

1. India-B Commerce means____________________

2. Identify the merits and limitations of e-business from the following statements–

(a) It lacks personal touch in business transactions.

(b) It takes less time to give order for desired goods and services.

(c) The customers have access to a large number of suppliers and they enjoy
a wider choice.

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Awareness in Business (d) It helps the business houses to expand the business and earn more profit.
and Employment
(e) The privacy of personal details and security of financial transactions are a
concern for many users.

23.7 STAGES IN ONLINE TRANSACTIONS

As with any trading processes, the on-line transactions involve the following stages:
Note

Fig. 23.3 Stages in online transactions

(a) Search: For making a purchase, the prospective customer has to find an
appropriate vendor by using various websites, either directly or through a search
engine.
(b) Order: Once the vendor has been found and goods are identified, the customer
makes contact and negotiates the terms. When satisfied, the customer proceeds
to the checkout that involves filling up a registration form to have an account
with a password. Thereafter, he can place the order for the items put by him in
his virtual shopping cart, an on-line record of what has been picked up while
browsing the on-line store.
(c) Payment: The normal way for paying on-line purchases is by the credit card.
The customer enters the credit card number, expiry date and billing address on
the order form, and the vendor can verify the details. Debit cards, or store's
value cards can also be used for the purpose. Alternatively, payments can be
made by cheques sent by post.
(d) Delivery: Once the payment is made or is assured, the vendor arranges for the
delivery of goods as per instructions of the buyer.
(e) After-Sales Service: In any transaction, there can be problems like damaged
or faulty goods. For items such as machinery or consumer durables, there can

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be a provision of warranty or maintenance. The e-Vendors have to make the Awareness in Business
and Employment
necessary arrangements for attending to such complaints and services.

23.8 PRECAUTIONS FOR SECURITY

There are numerous threats to the security of e-Commerce from the customer's side
as well as the vendor's side. The following steps are usually taken to ensure security in
on-line transactions. Note

(a) Passwords: In on-line shopping, one has to register with the on-line vendor to
have an account with him. This provides for a password to avoid login by an
unauthorised person.

(b) Authentication: Sender of the message must be identified precisely using the
off-line validation, if necessary. This avoids any possibility of fraud or misuse of
the password.

(c) Encryption: It refers to the conversion of data into a code so that it cannot be
read by other users. The data is converted into the code by the sender and then
decoded by the receiver. For this purpose, they use an encryption algorithm and
binary numbers. The other alternative is the private (secret) key system.

(d) Digital Signatures: A digital signature may be used to authenticate the sender
of the message and check the integrity of the message so that no alteration takes
place in transit. In terms of transmission, authentication and integrity, the digital
signature is considered very secure provided it is created in a manner or by
using a means under the exclusive control of the person using it.

(e) Trusted Third Parties: Another way to ensure security is to transmit a copy of
the transaction to a third party trusted by both sides and where the record of the
transaction could be used to settle any dispute.

However, the provision of encryption, digital signatures and trusted third parties cannot
provide full proof security against the use of stolen credit cards or the setting up of
fraudulent website by a bogus trader. Hence, the parties have to be highly vigilant and
take all possible precautions to ensure security in e-Commerce dealings, whatever
may be the cost.

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Awareness in Business
and Employment INTEXT QUESTIONS 23.3
1. Mention the various ways of making payment in on-line transactions.
2. Arrange the following stages of on-line transactions in proper sequence.
(a) Order (b) Delivery (c) Payment

Note (d) Search (e) After sales services

23.9 APPLICATIONS OF E-COMMERCE

The impact of e-Commerce has already begun to appear in all areas of business
ranging from customer service to new product design. It has facilitated new types of
information based interaction with customers, Internet bookshops, on-line super market,
electronic newspapers, on-line trading on stock exchanges (e-Trading), on-line
advertising (e-Advertising), on-line taxation (e-Taxation), online ticketing (e-ticketing),
online banking (e-Banking), computerisation in postal communication (e-Post) and so
on. We shall take up some of these e-Commerce services to have an idea of how it
has transformed the functioning in these sectors.

23.9 APPLICATIONS OF E-COMMERCE

The impact of e-Commerce has already begun to appear in all areas of business
ranging from customer service to new product design. It has facilitated new types of
information based interaction with customers, Internet bookshops, on-line super market,
electronic newspapers, on-line trading on stock exchanges (e-Trading), on-line
advertising (e-Advertising), on-line taxation (e-Taxation), online ticketing (e-ticketing),
online banking (e-Banking), computerisation in postal communication (e-Post) and so
on. We shall take up some of these e-Commerce services to have an idea of how it
has transformed the functioning in these sectors.

23.10.1 e-Banking

Internet Banking ATM Credit/Debit Card

Fig. 23.4 e-Banking

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Imagine the days when one had to go to the bank during a particular time of the day Awareness in Business
and Employment
and on particular days of a week to deposit or withdraw money or to get a demand
draft made. Long queues and waiting were the normal phenomena. But, the scenario
in banks now-a-days is very different. One can withdraw and deposit money at his/
her own convenience. Having account in one place in India, one can transact in any
part of the country. Some of the new trends in banking sector are as follows:

(a) Telebanking: A customer is given a password number (known as T-PIN i.e., Note
Telephonic personal identification number) through which he/she can have access
to his/her account over telephone and give instruction regarding withdrawal,
issue of demand draft etc. The customer can also access his account and give
instructions by using the mobile phone. Similarly, the bank can also keep on
informing the customer regarding the various schemes, opportunities, last dates,
etc. and attend to balance enquiries by the customers.

(b) Internet Banking: This is another way a customer can have access to his
account and give instructions. It makes the task of the customer easy as he can
access his account anywhere, any time and any number of times. The customer
simply uses a password number and gets the details of transactions sitting at
home.

(c) ATM : ATM, the acronym for Automated Teller Machine, is increasingly
becoming popular in banking industry. ATM is a computerised machine used for
most of the routine jobs of a bank. It is operated by a magnetic plastic card
popularly known as ATM card. By inserting the ATM card in the machine and
entering the PIN (Personal Identification Number) the customer can use it for
withdrawals and deposits of money. The customer can also get the information
about the balance available in his/her account, get the mini-statement of last 5/
10 transactions from the ATM.

Earlier the customers only had the option to access the ATM of the bank in
which they had an account. But now-a-days some banks have tied-up with
other banks for use of their ATM by the customers. So customers can use the
ATM facility even of a bank they do not have an account in, but with whom their
bank has a tie-up.

(d) Debit Card: A debit card is an electronic card that can be used conveniently
while making payments. This card is issued to the customers of the bank having
current or savings account. The holder of this card can use this card at several
outlets for purchase of goods and services. This card allows the holder to spend

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Awareness in Business up to the balance available in his/her bank account. It can also be used at ATMs
and Employment
just like ATM cards.

(e) Credit Card: Some banks issue credit cards to individuals who may or may not
have an account with them. The cards are issued to individuals after verifying
their creditworthiness. The individual can use those cards at various outlets to
make payments. The issuing bank fixes a credit limit up to which the cardholder
Note can purchase goods and services. The bank issues a statement of transactions
periodically and the individuals have to pay back the amount to the bank by a
due date. Thus, the customers get a credit period ranging from 10 to 55 days
which varies from bank to bank and the nature of transactions made. No interest
is charged if the payment is made within the due date. If the customers fails to
pay back by due date, the bank charges interest at a high rate on the amount
due. Most banks give bonus points for transactions and insurance coverage for
the products purchased through credit card as well as to the cardholders. The
cardholder can also use his/her card to withdraw cash from ATMs.

(f) Education: In educational training also e-Commerce has a major role in

interactive education video conference, online classes and in connecting different
educational training centers. Now, we also have many online courses and classes.
For example, in India we can be part of e-classes conducted by Harward School
of Business.

INTEXT QUESTIONS 23.4

1. Mention one benefit of ATM for the customers of the bank.

2. Identify the following in e-banking transactions–

(a) A card that allows the holder to spend money without having any balance
in his/her deposit account.

(b) A machine using which we can withdraw money from our deposit accounts
at our convenience.

(c) A system that allows the account holder to avail the banking facility over
telephone.

(d) A convenient way of accessing the account anytime, anywhere and any
number of times.

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23.10.2 E-TICKETING Awareness in Business
and Employment
Purchasing tickets has become so easy now that you can make railway reservations
while sitting at home or even while you are on the move. If you have access to Internet
you can have all the details of railway information and accordingly you can book a
ticket. You have to make payment through
credit cards/debit cards for on-line booking
of tickets. You can also buy air tickets through Note
similar methods. Recently, with private sector
entry in aviation sector, the competition has
increased and bidding of air tickets through
Internet has started. The highest bidder avails
the opportunity of travelling at a rate much
lower than the original price. The e-Ticketing
service is also available through mobile
phones. Fig. 23.5 E - Ticketing

23.10.3 E-ADVERTISING

Internet advertising has revolutionised marketing strategies. Unlike the print and television
media where all advertisements are stacked together, the viewer has the choice either
to view it or ignore them. Where as in the net-world the surfer will only click on the
advertisement of his/her choice. He may select advertisements of his own interest. E-
Advertising is still in its infancy stage and covers only a small portion of the advertising
market.

23.10.4 E-TRADING AT STOCK

EXCHANGES

Online trading started with the establishment

of Over The Counter Exchange of India
(OTCEI). Now the National Stock
Exchange (NSE) and Bombay Stock
Exchange (BSE) have also completely
switched over to on-line trading to which
most stock-brokers have access through
internet. It is also taking off among small
investors and traders in stocks and shares.
Internet makes available to them up-to-the-
minute information which, until recently, had
Fig. 23.6 e - Trading

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 Module - 6 MODERN MODES OF BUSINESS

Awareness in Business only been available to financial institutions. The use of on-line brokerage services
and Employment
automates the process of buying and selling. This allows reduction in brokerage charges,
makes trading transparent as they can access the information on market prices on-
line, and the investor is able to deal at a price viewed immediately. The transfer of
ownership of stocks and shares can also be recorded electronically in investor's account
thereby avoiding the need for physical delivery. This has also made it possible to have
Note rolling settlement and reduce the settlement period to just 2 days.

23.10.5 COMPUTERISATION OF MAIL TRANSMISSION AND

PROCESSING

As a part of modernisation programme, computerisation of the registration and sorting

work has been done in a large number of post offices in India. To cut down the
transmission time for sending money order across the country, money orders are now
transmitted through VSAT satellite networks which have resulted in faster delivery of
money order to the customers. New policy for Voice mail/Audio fax services was
announced in July 2001 by incorporating a new service known as Unified Message
Service (UMS), a system by which voice message, mails, fax and e-mail can be received
from one mail box using telephone instrument, fax machines, mobile phones, internet
browsers, etc.

23.10.6 E-POST

You know about e-mail which is the fastest means of communication. To send and
receive any information through e-mail, we need to have a computer with Internet
connectivity and the e-mail account of the sender and receiver. However, this technology
has not yet reached the rural and other remote areas of our country. To bridge this gap
and extend the benefit of the e-mail facility to the people of rural India, the Department
of Post has introduced e-Post facility. It enables people to send and receive e-mail at
the post offices.

e-Post is a service under which printed or even handwritten messages are transmitted
as email on internet. At the destination post offices, these messages are printed,
enveloped and delivered through the postman like other letters. For this purpose, e-
Post centres have been set up in the post offices in all districts and major towns. The
post offices where this facility is not available can receive the e-Post message from the
customers and forward the same to the nearest e-Post centre for despatch. Similarly
e-Post messages received for areas beyond the delivery jurisdiction are printed and
sent to concerned post office for delivery. Besides availing e-Post services through
post office it can also be accessed from a customer's house or office or from any other

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place if he has Internet access. The customer can make payment through a prepaid Awareness in Business
and Employment
card that is available in the head post office and other outlets. The customer has to
register as a user and access the service at the e-Post portal http://indiapost.nic.in. The
present tariff for sending the message in A4 size page is Rs.10 per addressee.

23.10.7 RESOURCES REQUIRED FOR SUCCESSFUL E-BUSINESS

IMPLEMENTATION
Note
Following resources are required for successful e-business implementation:

1. A Website: A business must develop a website to effectively communicate with

its customers. Detailed information of the enterprise should be provided on the
website. Necessary pictures should also be posted on the website.

2. Technically Qualified Workforce: E-business can be successful only with a

well trained workforce. The workers should be capable of easily handling the
new trends in computers. Sales Department staff should be trained to handle
sales inquiries, processing orders and ensuring prompt delivery.

3. Adequate Computers: The business enterprise must own computers with

adequate speed and memory to handle the expected volume of business. Business
concerns must have the necessary Internet Service Provider (ISP) and Application
Service Provider (ASP), Server and Portals, and e-mail facilities.

4. Effective Telecommunication System: Good telephone lines with high quality

voice calls must be there to make e-business effective. Business firms will be
badly affected if the telephone lines get disconnected frequently.

5. Payment Mechanism: Adequate information must be provided on the website

so that customers will have an idea of the exact amount to be paid. If extra
amount is received, inbuilt systems should be created to refund the extra money
received. Business concerns must make arrangements with banks and credit
card agencies to enable electronic receipts and payments of money.

23.10.8 PAYMENT MECHANISM OF ONLINE TRANSACTIONS

1. Finding the Seller: A buyer will go through the website of the seller. The online
buyer has to register with online seller by filling up a registration form. Registration
means the buyer will create an 'account' with online seller by providing a
'password'.

2. Selection of Products: The buyer selects the products after comparing prices
and quality offered by other sellers.

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Awareness in Business 3. Placing an Order: While browsing the website, the buyer drop the items
and Employment
selected in his shopping cart. Shopping cart is an online record of the items
picked up by the buyer while browsing the website.

4. Payment Mechanism: Payment for the purchases through online shopping

maybe done in any of the following ways :

a) Cash on Delivery (COD): The payment for goods ordered online may
Note
be made in cash at the time of physical delivery of goods.

b) Cheque: The buyer may send a cheque to the online vendor. The delivery
of goods are made upon the realisation of cheque.

c) Net-banking transfer: The buyer may transfer the amount for the agreed
price of the transaction to the account of the online vendor.

d) Credit/Debit Card: In case of Credit Card, the buyer can make

purchases on credit. Issuing bank transfers the amount involved in the
transaction to the credit of the seller and debit the buyer's account.

The debit card allows purchases up to the specified amount that is lying in
his account. (available balance)

e) Digital Cash: This is a form of electronic currency that exists in

cyberspace. In favour of the customer the bank issues digital cash for the
amount he paid. Bank will supply a special software that will allow the
customer to draw digital cash from his account. Digital cash is used for
purchases over the web.

5. Delivery: The product is given to the buyer after receiving the payment.

23.10.9 SECURITY AND SAFETY OF E-TRANSACTION: E-BUSINESS

RISKS

Risks are involved in online transactions. There can be financial, reputational or

physiological losses to the parties in online transactions. Various types of e-business
risks are:

1. Transaction Risks: Transaction risks can be of the following types :

a) Default on order giving/taking: Seller denies that the order was placed or
customer denies that he ever placed the order.

b) Default on delivery: The intended delivery does not take place; goods are
delivered at wrong address or goods other than ordered may be delivered.

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 MODERN MODES OF BUSINESS Module - 6
c) Default on payment: The customer claims that the payment was made and Awareness in Business
and Employment
the seller does not receive the payment of the goods supplied.

To avoid the above defaults, following measures can be used:

i. The identity and location of the customer may be verified at the time of registration.

ii. Seller can verify the 'cookies' to confirm whether the customer has correctly
entered his details in the registration form. Cookies are like caller ID in Telephones Note
that provide important information about customers to the telemarketers.

iii. Customers must shop from well established shopping sites.

2. Data Storage and Transmission Risk: People may steal/distort the data for
selfish motives/for fun. VIRUS (Vital Information Under Siege) and Hacking
are the methods used for distorting data. Antivirus programmes should be installed
from time to time. Cryptography is used to prevent interception of data in the
course of transmission. Cryptography is the act of protecting information by
transforming into an unreadable format called 'hyper text'. Only those who
possess a secret key can decipher the message into 'plain text'.

3. Risks to Intellectual Property and Privacy: Anyone can copy the data
available in the internet and supply it to others. Junk materials formed as a result
of dumping advertisement materials can be a great problem.

INTEXT QUESTIONS 23.5

1. What is meant by e-Post?

2. Identify the linkage of the following terms in different e-Commerce applications.

(a) Demat Account

(b) Unified Message Service

(c) Getting e-mail facility without direct access to Internet.

(d) On-line booking of air ticket.

23.11 OUTSOURCING OF SERVICES

Another important trend in business, of late, has been 'outsourcing' of some of its
activities i.e., use of outside sources to perform activities traditionally handled by internal
staff and resources. For example, most companies have so far had their own staff for
cleaning and security activities in their organisations. But, of late many companies have

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Awareness in Business started entrusting these tasks to outside agencies on contractual basis. In fact, outsourcing
and Employment
is a management strategy by which an organisation contracts out its major non-core
functions to specialised service providers with a view to benefit from their expertise,
efficiency and cost effectiveness, and allow managers to concentrate on their core
activities. The Information Technology (IT) is one area in which this approach is growing
fast, and in recent years, outsourcing the operation of IT systems has been supplemented
Note by a move to outsourcing the whole business processes such as payroll processing,
cheque processing, etc. This is known as BPO (Business Process Outsourcing). It
may be noted that Indian IT-BPO sector, both in domestic business and exports, has
registered a growth of 28% in 2006-07 and revenues have exceeded $ 48 billion,
nearly 10 fold increase over the aggregate revenue in 1998.

Need for BPO

1. Improvement in productivity.

2. Reduction in cost.

3. Opportunity to focus on core business.

4. Updation of technology.

5. Stimulates entrepreneurship, employment and export.

23.11.1 FEATURES OF OUTSOURCING OF SERVICES

The basic features of outsourcing of services are:

(a) It involves contracting out an activity to an outside specialised agency which

takes complete responsibility to handle it effectively using its own manpower.

(b) Normally outsourcing is done in case of non-core activities such as housekeeping,

security, etc. But, of late, it has been extended even to some of the core activities.
For example, a school may engage a Computer Training Institute to handle
computer education to its students or a bank may outsource its cheque processing.

(c) There are two main forms of outsourcing the business processes;

(i) outsourcing to a third party, and

(ii) outsourcing to its own subsidiary company specially formed to handle a

specific activity.

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23.11.2 MERITS OF OUTSOURCING OF SERVICES Awareness in Business
and Employment
(a) It provides an opportunity to the organisation to concentrate on areas in which it
has core competency or strength. It keeps the organisation free from repetitive
and mundane functions.

(b) It helps better utilisation of its resources as the management can focus its attention
on selected activities and attain higher efficiency.
Note
(c) It helps the organisation to get an expert and specialised service at competitive
prices leading to provision of improved service and reduction in costs. The
BPO organisations have considerable strength and adapt best practices to provide
the service more efficiently.

(d) It enables expansion of business as resources saved from outsourcing can be

used for expanding the production capacity and the product line and seek new
markets.

(e) Apart from financial returns, it facilitates inter-organisational knowledge sharing

and collaborative learning.

23.11.3 LIMITATIONS OF OUTSOURCING OF SERVICES

(a) It may be opposed by labour unions who feel threatened by possible reduction
in their strength and prospects.

(b) It reduces confidentiality as outsourcing involves sharing a lot of information

with others. This implies a possibility of its communication to the competitors by
such persons.

(c) Globalised outsourcing at times causes resentment in the manpower of the home
countries who feel threatened by increased competition.

(d) The organisation hiring others may face the problem of loss of managerial control
because it is more difficult to manage outside service providers than managing
one's own employees. Not only that, it may also lead to decrease or total loss of
in-house expertise and the organisation becomes partially or totally dependent
on the service provider.

In view of the above limitations of outsourcing, it becomes necessary for the

outsourcing company to take the necessary preventive steps, remain in constant
touch with the service provider, and maintain control of the outsourced operations.

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Awareness in Business 23.11.4 KNOWLEDGE PROCESS OUTSOURCING (KPO)

and Employment
KPO means outsourcing services that require expertise of a higher order. i.e. high end
Knowledge Work is done by an outside organisation. KPO is mainly done to improve
the efficiency and quality and to reduce costs of doing business. KPO requires
professionals with right skills, attitude and experience.

Distinction between BPO and KPO

Note
BPO KPO

1. Repeatable processes 1. Non repeatable process.

2. Quick learning is needed 2. Need regular learning process.

3. Large number of workers. 3. Smaller work force.

4. Comparatively less experts 4. Specialists/experts

5. Predetermined way to solve problem 5. No pre-determined way to solve

problems.

INTEXT QUESTIONS 23.6

1. Identify the merits and limitations of Outsourcing of Services.

(a) It facilitates inter-organisational knowledge sharing and collaborative

learning.

(b) It reduces confidentiality of information.

(c) It helps in concentrating on the core competency of the organisation.

(d) The management finds it difficult to handle the outside staff.

(e) It provides expert and specialised service at competitive prices.

2. Tick the right choice:

i. Name the act of protecting information by transforming into an unreadable

format.

a) VIRUS b) Hacking c) Cryptography d) None of the above

ii. In online buying the buyer drops the items selected in a __________.

a) Shopping cart b) Shopping box c) Net card d) None of the above

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MODERN MODES OF BUSINESS Module - 6
iii. Plastic Card is the popular name for Awareness in Business
and Employment
a) Debit/Credit card b) Cheque c) Digital Cash d) None of the above

TERMINAL EXERCISE
Very Short Answer Questions

1. Define the term 'e-commerce'. Note

2. State any two precautions one should take while making online transactions.

3. Mention any two advantages of outsourcing of services.

4. What is meant by 'Internet banking'?

5. Give the meaning of 'B2C e-commerce'.

6. Name the electronic currency that exists in cyberspace.

Short Answer Questions

1. State any four uses of Internet in our daily life.

2. Distinguish between 'e-Business' and 'e-Commerce'.

3. Mention any four limitations of 'e-Commerce'.

4. Distinguish between 'Debit Card' and 'Credit Card'.

5. Explain the usefulness of 'e-Post' facility for the general public.

6. State any two requirements for successful implementation of e-business.

7. What is meant by Knowledge Process Outsourcing?

Long Answer Questions

1. Explain the merits of 'e-Commerce'.

2. Describe the transaction process of 'e-Commerce'.

3. Explain any four new trends of banking services under the e-Banking mode.

4. What is meant by outsourcing of services? Explain its features.

5. State the meaning of 'e-Banking'. Explain any two modes of e-Banking.

6. Distinguish between BPO and KPO.

7. How can security of e-business transactions be ensured?

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Awareness in Business 8. Explain the steps involved in the payment mechanism of online transactions?
and Employment
9. You are interested in giving a new mobile phone to your mother as a gift on
mother's day. One of your friends told you that you can get it quite cheaper
through online shopping, for which you have no experience. But you decide to
try at least once. Explain the steps you will follow to get the mobile phone for
your mother through online shopping.
Note
10. Your father is a businessman having a business of digital watches. He heard a lot
about e-business from his friends, newspapers and magazines. Now he is equally
interested in entering in the field of e-business as he wants to enter into new
markets which were far from his reach. As you are a student of senior secondary,
he discussed the matter with you. Explain to him the various resources required
for successful implementation of e-business.

ANSWERS TO INTEXT QUESTIONS

23.1

1. Internet is a worldwide system of computer network through which the users at

any computer can access the information from other computers.

2. www: World Wide Web B2B: Business to Business

B2C: Business to Customer C2C: Consumer to Consumer

23.2

1. Intra-B Commerce refers to interaction and dealings among various departments

and persons within the firm with the help of computer and interconnected
telecommunication network.

2. Merits: (b), (c), (d) Limitations: (a), (e)

23.3

1. (a) Credit card (b) Debit card (c) Store's value card (d) Cheque

2. (d), (a), (c), (b), (e)

23.4

1. Withdrawals and deposits of money

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2. (a) Credit card (b) ATM (c) Telebanking (d) Internet banking Awareness in Business
and Employment
23.5

1. e-post is a service offered by post office through which printed or hand written
messages are transmitted as e-mail on internet.

2. (a) e-Trading at stock exchanges

Note
(b) Computerisation of mail transmission and Processing

(c) e-Post(d) e-Ticketing

23.6

1. Merits: (a), (c), (e) Limitations: (b), (d)

2. (i) c (ii) a (iii) a

DO AND LEARN
1. You are required to visit the nearby post offices and banks and find out the
various services that are being rendered electronically or through the use of
computers. Make a list of those services and their features.

1. Sonam a girl of 15 years of age. Once she got an opportunity to visit the branch
of a Bank along with her mother. Due to failure of the server, her mother could
not perform the transactions she wanted to perform. Now Sonam is curious to
know the role of server in banking activities. Her mother took her to the Bank
Manager.

Sonam : Good morning Sir, today I came to Bank with my mother for
some work, but we came to know that server is down.

Manager : Good morning, Yes, today the server is not working for which
I am extremely sorry; sorry for the inconvenience caused to
you.

Sonam : No need to feel sorry sir, I just want to be know something

more about the role of internet in Banking services.

Manager : Sure.

Please continue the discussion of Sonam & Bank Manager about the e-banking and
various services provided by bank to general public through internet.

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 Module - 6 MODERN MODES OF BUSINESS

Awareness in Business
and Employment ROLE PLAY
1. Shivani was to attend her cousin's marriage. She ordered a saree for the occasion
through an online shopping website. To her surprise when she received the order
it was different from what she had ordered. She immediately called the customer
care of the website but there was no response. Shivani then talked to her friend
about the incident. Her friend explained about the online transaction risks and
Note
precautions to be taken while purchasing online.

Dramatise the situation by assuming a role for yourself and your friend.

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MODERN MODES OF BUSINESS Module - 6
Awareness in Business
BLUE PRINT and Employment

Subject: Business Studies Class: XII

Maximum Marks: 100 Time: 3 hours

Sl. Objective Form Knowledge Understanding Application Total

No. of Questions Note
Content Unit

LA VSA SA MCQ LA VSA SA MCQ LA VSA SA MCQ

1. Module 1 6 3 1 4 15
Introduction to (1) (1) (2) (1)
Business
2. Module 2 Business 4 6 3 1 20
Management and (1) (1) (3) (1)
its Functions
3. Module 3 Business 3 6 4 1 20
Finance (1) (1) (2) (3)
4. Module 4 4 1 3 6 20
Marketing (1) (1) (3) (1)
5. Module 5 Trade 3 4 10
(2) (1)
6 Module 6 Avenues 1 4 6 15
in Business and (1) (2) (1)
Employment

Total 30 50 20 100
Note:
 Figures within brackets indicate the number of question and figures outside the
brackets indicate marks.
 Denotes that marks have been combined to form one question.

SUMMARY
LA –Long Answer No 05 × 6 Marks: 30
SA-Short Answer No 08 × 4 Marks: 32
VSA-Very Short Answer No 10 × 3 Marks: 30
MCQ No 08 × 1 Marks: 08

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Awareness in Business
and Employment Suggestive Marking Scheme
Ques Details Notes Marks
No.

1 D — 1

Note 2 A — 1

3 C — 1

4 B — 1

5 D — 1

6 A — 1

7 C — 1

8 A — 1

9  Meaning: The human activities that — 1+2

are undertaken with an objective to
earn money or livelihood are called
economic activities.·

 Any two relevant example

10  Meaning: Control consists in Any 2 1+2

verifying whether everything occurs characteristics
in conformity with the plan adopted,
the instructions issued and principles
established.·

 Characteristics:

o Planning is the Basis of Control

o Control is a Continuous Process

o Control is All Pervasive

o Action is the Essence of Control

o Control is Forward Looking

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11  Meaning: process of systematically — 1+1+1 Awareness in Business
and Employment
collecting information relating to all
the aspects of a job. It is a task that
compiles and analyze is data relating
to skills, abilities, knowledge, duties,
responsibilities, relationships of a
specific job. Note
 Difference: Job description- statement
of duties and responsibilities and tasks
involved for each job.Job specification-
statement of the qualifications, skills and
abilities required for performing the job.

12  The planning process: Explanation 3

not needed

o Establishment of Objectives

o Making Assumptions (establishing

Planning premises) about the
External and Internal Conditions

o Development of Alternative
Courses of Action

o Evaluation of Alternatives

o Selecting the Appropriate Course

of Action

o Arranging for Implementation

o Review and Follow up

13  No· — 1+1+1

 Limitations

o It is vague

o It ignores the timing of returns.

o It ignores risk.

 Wealth maximization
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Awareness in Business 14  Levels of Packaging Explanation 1+1+1

and Employment
needed with
suitable example

o Primary Package

o Secondary Package

Note o Transportation Packaging

or Final Packaging

15  Societal Marketing Concept: Overall 3

o Emphasizes the importance of

the well-being of customers

o consumer welfare or societal

welfare

o Marketers to build social and

ethical considerations into their
marketing practices.

o Public health, education,

environmental protection etc.
are some of the social goals.

16  Meaning: It refers to all those activities —— 1+0.

undertaken by a company to promote 5+0.
the buying or selling of a product or 5+0.
service.· 5+0.5

 Four P’s of Marketing

o Product

o Price

o Place

o Promotion

17  Specialty Store: These stores deal —— 1.5+1.5

with products of a specific brand
or company. All varieties of any

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particular brand or manufacturer Awareness in Business
and Employment
are made available in these stores.

 Single Line Store: These stores deal

with a specific line of goods. They
sell goods of different size, brands,
designs, styles and quality of the
same product line. Note

18  Meaning: It is a form of retailing Any 2 1+2

wherein two parties enter into an features
agreement in which one party
authorizes others to sell or produce
and sell specified goods and services.·

 Features:

o It is based on an agreement
between the franchiser and the
franchisee, wherein they enter
into a commercial relationship,
generally for an agreed period
of time.

o The franchisee gets the right to

use a particular brand name,
process or product owned by
the franchiser, for the purpose
of retailing, in return for a fee.

o Any other feature

19  Based on the extent of participation: — 2+2

o Active Partners

o Sleeping Partners·

 Based on sharing of profits:

o Nominal Partners

o Partners in Profits

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Awareness in Business 20  Planning fixes the goals/standards Overall 4

and Employment
to be achieved. Controlling checks
the actual performance with the
standards fixed.

 Planning sets the course of actions.

Control compares the actual course
Note and the planned course.

 Planning is both backward looking

and forward looking.

 Like planning, controlling is also both

backward looking and forward looking.

21  Meaning: It refers to a device through Explanation 1+1+1

which you can lift more weight with needed +1
minimum efforts.

 Types of Leverage:

o Financial leverage

o Operating Leverage

o Combined leverage

22 BASIS SHARES DEBENTURES Any 4 1+1+1+1

1. Status Shareholders are Debenture

the owners of the holders are the
company. They creditors of the
provide ownership company. They
capital which is provide loans
not refundable generally for a
unless the fixed period,
company is which are to be
liquidated. paid back.

2. Nature of Shareholders get Interest is paid on

return on dividends. Its debentures at a
investment amount is not fixed rate. Interest

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MODERN MODES OF BUSINESS Module - 6
fixed as it depends is payable even if Awareness in Business
and Employment
on the profit of the the company is
company. running at a loss.

3. Rights Shareholders are Debentureholders

the real owners of do not have the
the company. right to attend
Note
They have the meetings of the
right to vote and company. So they
determine the have no say in the
policies of the management of
company. the company.

4. Security No security is Generally

required to issue debentures are
shares. secured. So,
sufficient fixed
assets are
required when
debentures are to
be issued.

5. Order of Share capital is Debentureholders

repayment paid back only have the priority
after paying the of repayment over
debentureholders shareholders.
and creditors.

6. Risk Risk is high due to Little risk due to

uncertainty of certainty of return.
returns.
23  Factors: Any 4 points 1+1
explanation +1+1
needed

o Cost

o Demand

o Competition

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 Module - 6 MODERN MODES OF BUSINESS

Awareness in Business o Marketing Objectives

and Employment
o Government Regulation

24  Meaning: When buying and selling Any 3 1+3

of goods and services takes place difference
within the geographical boundaries
of a country·
Note
 Difference

Basis Wholesale Retail

trade trade

1. Number Deals in a few Deals in a

of items items. variety of items.

2. Quantity Large Small

of goods
bought
and sold

3. Source Manufacturers Wholesalers/

of purchase producers

4. Main Sells goods to Sells goods for

activity the retailers. consumption
or final use.

25  Avenues of self-employment —— 1+1+

1+1

o Trading

o Manufacturing

o Professionals

o Individualized services.

26  Trading — 2+2

 Personalized service·

 Or Any other suitable point

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27  Process of formation of a company: Detailed 6 Awareness in Business
and Employment
explanation
expected

o Promotion stage

o Registration/Incorporation stage

o Capital Subscription stage Note

o Commencement of Business stage

28  External Sources of recruitment: Any 6 1+1+1

points with +1+1
brief explanation +1

o Media Advertisements

o Employment Exchanges

o Educational Institutions

o Unsolicited Application

o Recruitment at the Factory gate

o Referrals

o Placement Agencies

29  Meaning: stock exchange is the term Any 5 1+1+1

commonly used for a secondary functions +1+1
market, which provides a place where with brief +1
different types of existing securities explanation
such as shares, debentures and bonds,
government securities can be bought
and sold on a regular basis.

 Functions:

o Provides a ready market for

securities

o Provides information about prices

and sales of securities

Business studies (319) Senior Secondary 247

 Module - 6 MODERN MODES OF BUSINESS

Awareness in Business o Provides safety to securities dealings

and Employment
and investment

o Facilitates mobilisation of savings

and capital formation

o Barometer of economic and business

conditions
Note
o Efficient Allocation of funds:

30  Qualities: — 1+1+1
+1+1
+1

o Good Personality

o Mental Qualities

o Good Behaviour

o Knowledge

o Ability to communicate and

persuade

o Persistence

31  Institutional support to small business — 1+1+1

+1+1
+1

o National Small Industries

Corporation Ltd.

o State Small Industries

Development Corporations

o National Bank for Agriculture

and Rural Development

o Small Industries Development

Bank of India

o Small Industries Service Institutions

o District Industries Centers

248 Business studies (319) Senior Secondary
MODERN MODES OF BUSINESS Module - 6
Awareness in Business
Sample Question Paper and Employment

Business Studies
(319)

Senior Secondary Course

Time: 3 Hours Maximum Marks: 100 Note

Answer all the questions

Select the correct option out of the given options 1×8=08 Marks
for questions 1 to 8.

1. Which of the following is not required for the commencement of a business?

a) Memorandum of Association

b) Article of Association

c) Certificate of Incorporation

d) Commencement of Business Certificate

2. Identify the appropriate cause from the following if a company suffered a loss
due to tsunami:

a) Natural Cause b) Human Cause

c) Economic Cause d) Political Cause

3. Identify the plan which is numerical and can be expressed is monetary terms.

a) Objective b) Strategy

c) Budget d) Policy

4. If the operating leverage is 3 and financial leverage is 2, the combined leverage

is?

a) 2 b) 2.5

c) 7 d) 1.5

5. Which of the following is a foreign source of long-term financing?

a) ADRs b) GDRs

c) SFIs loans d) All of these

Business studies (319) Senior Secondary 249

 Module - 6 MODERN MODES OF BUSINESS

Awareness in Business 6. NSDL stands for

and Employment
a) National Securities Depository Ltd.

b) National Securities Deposits Ltd

c) National Savings Depository Ltd

d) National Services Depository Ltd

Note
7. What does NABARD stand for?

a) National Agriculture Bank and Rural Development

b) National Bank for Agriculture and Regional Development

c) National Bank for Agriculture and Rural Development

d) National Bank for Agricultural and Rural-Urban Development

8. As per the Selling concept, it is believed that customers primarily buy products
that are

a) Sold Aggressively b) Sold Defensively

c) Widely available d) Good quality

Answer the questions 9 to 18 in about 80-100 words. 3x10=30

9. Define economic activities and give two examples of economic activities.

10. What is control? Explain any two characteristics of control.

11. What do understand by Job Analysis? Explain the difference between job
description and job specification.

12. Enumerate the steps involved in the planning process. (Explanation not needed).

13. “Profit maximization is regarded as the prime objective of any business” Do you
agree with the given statement?

14. “Packaging is the act of designing and producing appropriate container or cover
for the product”. In context of the given statement explain the various levels of
packaging.

15. “The social and ethical considerations have become integral parts of any marketing
strategy these days”. In the light of this statement explain the societal marketing
concept.

16. What is marketing? Explain the 4Ps of marketing in brief.

250 Business studies (319) Senior Secondary

MODERN MODES OF BUSINESS Module - 6
17. Explain the terms “Specialty store” and “Single Line store”. Awareness in Business
and Employment
18. What is franchising? Explain any two features of a franchise agreement.

Answer the questions 19 to 26 in about 100-120 words. 4x8=32

19. Explain the types of partners on the basis of “Extent of participation” and “Sharing
of profits”
Note
20. ‘There is a close and reciprocal relationship between planning and controlling’.
Comment. What do you understand by venture capital? Enumerate distinguishing
features of venture capitalist.

21. What do you understood by leverage, explain the different types of leverage?

22. Explain the difference between shares and debentures.

23. What are the factors to be considered while deciding price of a product?

24. What is Internal Trade? Distinguish between wholesale trade and retail trade.

25. What are the different avenues of self-employment?

26. Identify any two specific areas of economic activity, which can be effectively
managed by small business enterprises.

Answer the questions 27 to 31 in about 120-150 words. 6x5=30

27. Mrs. Chandni wants to start a new business in the form of a company. She,
however, doesn’t know how to register a company and the steps involved in
starting of a company. You are an expert in the area of company registration and
therefore she seeks your help for the said promotion of the company. Explain to
her in detail the steps involved in formation of a company.

28. Mr. Atif is the HR manager of a large Multi-National Corporation. His company
wants to hire new employees and want to utilize internal sources of recruitment
but Mr. Atif as a diligent HR manager suggests otherwise. if you were in the
place of Mr. Atif what sources of recruitment would you have suggested.

29. What do you understand by stock exchange? Explain its main functions.

30. One reputed company wants to recruit salesmen for retail stores. Can you identify
the qualities they should look for in the prospective candidates?

31. State any six types of assistance and support provided by the Government of
India for development of small-scale business.

Business studies (319) Senior Secondary 251

 Module - 6 MODERN MODES OF BUSINESS

Awareness in Business
and Employment
SAMPLE QUESTION PAPER
Subject: Business Studies Class: XII

Maximum Marks: 100 Time: 3 hrs.

1. Weightage by Objectives

Note Objectives Marks % of total marks

Knowledge 30 30

Understanding 50 50

Application 20 20

100 100

2. Weightage by types of Questions

Types of No. of Marks per Total Estimated time a candidate

Question Questions Questions marks is expected to take

MCQ 08 1 08 08

VSA 10 3 30 50

SA 08 4 32 52

LA 05 6 30 60

31 100 170+10=180

3. Weightage by Contents

Modules Marks

1. Module 1 Introduction to Business 15

2. Module 2 Business Management and its functions 20

3. Module 3 Business Finance 20

4. Module 4 Marketing 20

5. Module 5 Trade 10

6. Module 6 Avenues in Business and Employment 15

252 Business studies (319) Senior Secondary

WHAT HAVE YOU LEARNT