Barriers to Effective Communication
Communication is said to be complete only when the recipient gets the message the way the sender intends it to be. When information is not received the way it was intended then it has been distorted. Distortion of a message is brought about by some communication barriers which may exists in the path of the message between the sender and the recipient. Some of these barriers are;
Service That Facilitate Communication
Services that facilitate communication include;
This refers to handling of letters and parcels. They are offered by organizations such as postal corporation of Kenya (P.C.K) Securicor courier and Document handling Limited (D.H.L)
Some of the services offered by the postal corporation include;
a) Ordinary Mail
These include surface mail and air mail.
An express mail is/must be presented at the post office counter by the sender and the envelope clearly addressed and a label with the word “express” affixed. Normal postage plus an extra fee (commission) is charged
The mail is delivered to the receivers nearest post office from where the post office makes arrangements to deliver the mail to the receiver within the shortest time possible.
NOTE: For speed post special arrangements to deliver the mail start at the sender’s post office whereas express mail, the arrangements start at the addressers post office.
c) Poste Restante;
This is a service offered by the post office to travelers who may wish to receive correspondence right away from their post office box. The addressee has to inform those who may wish to correspond with him/her of the nearest post office he is likely to use at a particular time
Under this arrangement when addressing the letter, the words poste Restante must be written on the envelope clearly. The addressee must identify himself/herself when collecting the correspondence from the post office.
There is no additional charge made apart from normal postage charges. This service can only be offered for three months in the same town.
a) Registered Mail;
This service is offered by the post office for sending articles of value for which security handling is required. A registration fee and a commission is paid. The commission depends on the weight of the article and the nature of registration. The sender is required to draw a horizontal and a vertical line across the faces of the envelope.
A certificate of registration is given to the sender. In case of loss, the sender may be paid compensation on production of the certificate of registration.
A green card is sent to the recipient. The card bears his name and the post office at which the mail was registered. The recipient will be required to identify himself before being allowed to possess the mail.
Items that may be registered include jewels, certificate, land title deeds etc.
b) Business Reply Service;
This is a service offered by the post office to business firms on request. The firm pays some amount to the post office and an account is then opened from which posted charges are deducted.
The service is useful/more common with firms which would like to encourage their customers to reply their letters. Customers are issued with reply card envelopes (or envelopes marked ‘postage paid’)
They can send letters to the business by using these envelopes/the card. The customers then place the card/envelope in the post box and the firm’s post office branch will deduct postage charges from the lump sum amount.
a) Courier Services
These are services where a service provider receives transports and delivers parcels or important documents to destinations specified by customers in return for payment of fees or charges.
Examples; Akamba bus service, Securicor courier services etc.
ii) Telephone services
Telkom Kenya, through the post office, provides telephone services which offer direct contact between people who are far apart. It makes conversation between people at any distance possible, as long as there are transmission facilities between them. Urgent matters can be discussed and consultations can take place so that instant decision or actions are taken. The telephone assists organizations to establish a fast and convenient machinery for its internal and external communication network.
ii) Cellular(mobile)phone services
These are hand held telephones with digital links that use radio waves. They are sometimes called cell-phones since they use power stored in a dry cell
In Kenya mobile phone services are provided by safaricom Ltd.(a subsidiary of Telkom Kenya)and Airtel communications Ltd(formally Kencel Communication Ltd)which is a joint venture between a French company and a Kenyan company, yu mobile services and Orange mobile services . This sector therefore greatly benefits from foreign investment to improve services.
The use of this service is popular. Apart from the provision of telecommunication service, cell phones have different attractive features or services such as short messages service (sms) whereby a caller can send a written message. Recent models of mobile phones enable the user to access the internet and send e-mail messages
Advantages of mobile phones
Disadvantages of cellular phones
iii) Broadcasting services
Communication commission of Kenya is a regulatory body that receives applications and issues licenses for radio and television broadcasting stations.
a) Radio stations
Radio broadcasting is a very important mode of giving news and information to people in the whole world.
The liberalization of the communications sector in Kenya in 1999, Kenya has witnessed a mushrooming of FM Stations which are owned by private sector operators e.g. Kiss Radio, Easy FM, Classic FM, Family FM, Kameme etc.
They have helped to spread news and information countrywide. Before liberalization, Kenya Broadcasting cooperation (KBC) radio was operating as a state owned monopoly.
b) Television Stations
Television broadcasting (telecasting) does not reach as wide an audience as radio broadcasting in Kenya. It however serves the same purpose of relaying news and information to Kenyans. Both radio and television stations are widely used for advertising purposes.
The T.V subsector has been liberalized since 1999 and a number of privately owned stations have emerged e.g. Kenya Television Network (KTN) Nation Television, Family T.V etc. Prior to that time KBC television was in operation as a state owned monopoly.
Other services that facilitate communication
Current trends and Emerging issues in communication
With the advancement of information technology (I.T) there has been a lot of revolution in communication.
The following are some of the current trends and emerging issues in communication;
Telephone Bureaux (Bureaus)
These are privately owned kiosks where telephone services are sold. The owner of the kiosk must get authority from the service provider in order to run the bureau. The individual wishing to use the services of the bureau makes payments to the owner of the service. Other services offered by the bureau include selling of scratch cards for mobile telephones and credit cards for landline telephone services.
i) Mobile phones (cell phones)
These are hand held telephones with digital links that use radio waves. They have become an important business and social tool. This is because most people and traders want some flexibility to be able to communicate whenever they are.
Other reasons that have led to the popularity of cell phones include:
This is a service provided through the internet for sending messages.
It is similar to sending a letter through the postal system only that it is done electronically.
Messages can be sent to anyone on the network, anywhere in the world. For this to take place, computers have to be connected to each other to form a network.
To communicate, one is required to have an email address e.g. raeform2@ yahoo.com. Messages arrive at the e – mail address immediately they are sent.
It is only the addressee of the message who can retrieve the message since a password is required to access the mailbox.
E – Mail can also be used to send documents and photographs like certificates by scanning and attaching.
More and more businesses are using e- Mail to communicate with other businesses, their customers and suppliers.
The internet links computers all over the world. Written and oral information is transmitted on the internet through the use of telephone wires, fibre- optic cables and wireless devices.
The internet has changed the way people communicate in the following ways;
The future office will rely largely on computers. Most of the communication will be done through computers. This may result in less use of paper, hence the use of the term “the paperless office”.
Vi) Decline in the use of postal services
Decline in the use of postal services is a result of the impact of the internet. E-mail has become a popular and preferred mode of communication since it is fast and cheap. However, ordinary mail/ use of postal services may not be completely phased out since the government, businesses and people do not regard an e-mail as a binding or formal communication.
Vii) Transformation of language
The language used to pass and receive messages has evolved through time. e.g. the youth have adopted the use of “sheng” in exchanging messages. Such language is largely understood by its youthful users. There is also the use of cell phones to send short text messages; which are highly abbreviated and may use slang whose meaning is only known to the users.
Communication Revision Questions
1. Define the term communication
Communication is the process by which information is passed from one person or place to another.
2. Outline the role played by communication in any given organization
(a) Vertical communication
Involves the flow of information either downwards or upwards, for example, from a senior employee to a junior employee
(b) Horizontal communication
Is also referred to as lateral communication which is passing of information between people of the same rank or status, for example from one departmental manager to another departmental manager
(c) Diagonal communication
This is communication of different people in different levels of management or departments for example a receptionist communicating to a production manager.
4. Distinguish between formal and informal communication
Formal communication is official and documented and follows certain rules for example a worker writing an official letter to an organization’s seniors. Informal communication does not conform to any time, for example communicating to friends and relatives.
5. State the essential elements in communication.
COMMUNICATION TOPIC OBJECTIVES.
By the end of the topic, the learner should be able to:
Meaning of communication
Effective communication is vital/important for business in that it serves the following purposes.
Importance of communication (purposes)
Communication is a process that involves interchange of information and ideas between two or more people. Communication therefore is a circular process i.e. communication may lead to some reaction which in turn may generate further communications or feedback. This flow can be illustrated as below;
Lines of communication
Communication can be classified according to either the levels of the communicating parties or according to the nature of the message.
A. According to levels
This can either be:
This is where messages are passed between a senior and her/his juniors in the same organizations
Vertical communication can be divided into two parts:-
This is a communication process which starts from the top manager to her/his juniors. This can be informed of:
This is a communication process that starts from the juniors to the seniors and maybe in the form of:
Horizontal communication (lateral communication)
This is communication between people of the same level (rank) in the same organization e.g. departmental heads in an organization may communicate to achieve the following:
This is communication between people of different levels in different departments or different organizations e.g. an accounts clerk may communicate with a sales manager of the same organization or of different organizations. Diagonal communication enhances team work.
b) According to nature of message
This can either be;
This is the passing of messages or information using the approved and recognized way in an organization such as official meetings, memos and letters. This means that messages are passed to the right people following the right channels and in the right form.
Formal communication is also known as official communication as it is the passing of information meant for office purposes.
Formal systems of communication are consciously and deliberately established.
This is communication without following either the right channels or in the right form i.e. takes place when information is passed unofficially. It is usually used when passing information between friends and relatives hence it lacks the formality.
Informal communication may also take the form of gossips and rumor-mongering.
Informal communication usually supplements formal communication as is based on social relations within the organization.
Note: Both formal and informal communication is necessary for effective communication in an organization.
Essentials of Effective communication
For communication to be effective it must be originated produced transmitted received understood and acted upon. The following are the main essentials to effective communications.
Forms and Means of Communication
Forms; these are channels or ways of passing on messages. The four main forms are;
This is where information is conveyed by talking (word of mouth)
It is also known as verbal communication
Means of communication
i) Face-to-face conversation
This involves two or more people talking to each other. The parties are usually near each other as much as possible to ensure effective communication.
It is suitable where subject matter of discussion require convincing persuasion and immediate feed-back.
It may be used during meetings, interviews, seminars, private discussions, classrooms e.t.c
It is the most common means of oral communication
Advantages of face-to-face communication
Disadvantages of face-to-face communication
This form of communication is commonly used in offices and homes. It is useful in sending messages quickly over short and long distances.
It is however not suitable for sending;
Installation is done on application by the subscriber (applicant).He/she pays the installation fee in addition; the subscriber is sent a monthly bill with the charges for all the calls made during the month.
The charges for calls depend on the time spent time of the day of the week and distance of the recipient from the caller e.g. it is cheaper to call at night than during the day. It is also cheap to make calls during public holidays and weekends than on weekdays.
There are also mobile phones which have no physical line connection to exchange and may be fixed to a vehicle or carried in pockets. In Kenya these services are provided by safaricom, Airtel, orange and Yu mobile communications.
Advantages of Telephones
Disadvantages of Telephone
Reasons why mobile phones have become popular
iii) Radio calls
This involves transmitting information by use of radio waves i.e. without connecting wires between the sender and the receiver
The device used is called a radio telephone. It is commonly used in remote areas where normal telephone services are lacking or where telephone services are available but cannot be conveniently used e.g. policemen on patrol in different parts of a town
Radio transmission is a one way communication system i.e. only one person can speak at a time. It is therefore necessary for the speaker to say ‘over’ to signal the recipient that the communication is through so that the recipient can start talking. To end the conversation, the speaker says ‘over and out’
The radio calls are commonly used by the police, game rangers, researchers, foresters, ship owners and hotels situated in remote areas. They are also used for sending urgent messages such as calling for an ambulance and fire brigade
Note; Radio calls are not confidential since they use sound frequencies that can be tapped by any radio equipment that is tuned to that frequency
Advantages of Radio calls
Disadvantages of Radio calls
This is a means of communication used to locate staff or employers who are scattered in an organization or who are outside and need to be located urgently
When within the organization portable receivers, lighted signals, bells, loudspeakers etc. are used
When outside the organization employees are contacted using portable receivers (pocket-size) used to send messages through sms (short message services)
The paying system can only be used within a certain radius. When using a portable receiver, the caller will contact the subscriber by calling the post office which will then activate the pager.
The subscriber is then informed to contact the originator of the message.
Paging is mostly used in emerging cases
Usually messages intended for a wide audience can be transmitted through a radio more quickly and economically than by using other forms of communication.
Radio is used for different reasons apart from advertising e.g. for formal notices, and venue for activities
Advantages of oral/verbal communication
Disadvantages of oral/verbal communication
vi) Written Communication
This involves transmission of messages through writing. It is the most formal way of communication because the information is in recorded form and can be used for reference
Means of written communication
Letters are the most commonly used means of communication.
There are two categories of letters;
Business letters are written to pass messages and information from businessmen to customers and vice versa e.g. letters of inquiry and acknowledgement notes.
It can also be used between employees and employers in an organization e.g. a complimentary note.
Official letters are letters between people in authority and others that touch on the activities of the organization e.g. an application letter for an advertised vacancy in an organization.
Formal letters have a salutation clause which usually starts with “Dear Madam “or “Dear Sir”. It also bears the addresses of both the sender and the recipient, a subject heading and a complimentary clause ending with “Yours faithfully”.
b) Informal Letters; these are letters between friends and relatives
They are also known as Personal letters
This is a means of communication provided by the post office. The sender obtains the telegram form from the post office and fills the message on it in capital letters and hand it over to the post office employees at the counter. Alternatively the sender may use a telephone to read the message to the post office. The post office then transmits the message to the recipient post office.
The charges of a telegram are based on the number of words used, the more the words used the higher the charges. However there is a standing charge.
Telegrams are used for sending urgent messages.
Note; Due to changing technology telegrams have lost popularity. Short messages can now be sent by cell phones (mobile phones) using the short messages services (sms)
This is a means of communication used to send short or detailed messages quickly by use of a teleprinter. The service is provided by the post office on application.
A message is sent by use of two teleprinters one on the senders end and another on the recipients end. When sending information through a teleprinter which is a form of electric typewriter producing different electric signals, its keys are pressed and automatically the message is printed at the recipient’s machine.
Telex saves time for both the sender and recipient as the messages are brief precise and received immediately. However it’s an expensive means of communication
iv) Facsimile (Fax)
This involves transmission of information through a fax machine. Both the sender and the receiver must have a fax machine. These machines are connected using telephone lines
Fax is used to transmit printed messages such as letters, maps, diagrams and photographs. To send the information, one dials a fax number of the required destination and then the document is fed into the sender’s machine. The receiving machine reproduces the document immediately. It is used for long distance photocopying service.
v) Memorandum (Memo)
This is printed information for internal messages within an organisation. It is normally used to pass information between departments or offices in an organization.
Memoranda have no salutation or complimentary clause. They are suitable for informing the officers within an organization of matters related to the firm.
A memo is pinned on the notice board of an organization if it is meant for everybody otherwise passed to the relevant staff.
This is a written communication used to inform a group or the public about past current or future events. It is usually brief and to the point. It can be placed on walls, in public places, on trees, in newspapers or on notice boards.
These are statements/within records of findings recommendations and conclusion of an investigation/research. A report is usually sent to someone who has asked for it for a specific purpose.
These are many copies of a single letter addressed to very many people when the message intended for each is the same.
This is an outline of the items to be discussed in a meeting. It is usually contained in a notice to a meeting sent in advance to all the participants of the meeting. The notice of the meeting contains;
These are records of the proceedings of a meeting. Keeping minutes of certain meetings is a legal requirements e.g. companies
Keeping minutes for other meetings are for management purposes to ensure that decisions made at the meetings are implemented
Advantages of written communication
Disadvantages of written communication
3) Visual Communication
This is the process of passing information by use of diagrams, drawings pictures, signs, and gestures etc.
A photograph is an image (visual representation of an object as it appeared at the time when the photograph was taken
Photographs are self-explanatory and may not be accompanied by any narration or explanation. The recipient is able to get the message at a glance.
Refer to marks, symbols, drawings or gestures whose purpose is to inform the public about such things as directions, distances, dangers and ideas.
Examples; road signs, traffic lights and danger signs on electricity poles
This means of communication can only be effective if the meaning of the sign used is understood.
Graphs; these are used to show and illustrate statistical information
Charts; these are diagrams which show or illustrate the flow of an idea e.g. an organization chart illustrates the whole organization structure indicating the chain of command
Advantages of visual communication
Disadvantages of visual communication
4) Audio-Visual communication
This is a form of communication in which messages are sent through sounds and signs.
This form of communication ensures that the receiver gets the message instantly.
It is suitable where both the sender and the receiver know the meaning of specific sounds and signs.
Means of Audio-visual communication
Advantages of Audio-visual communication
Disadvantages of Audio-visual communication
5) Audio Communication
This is when the message is transmitted through sounds. Examples include
Advantages of Audio communication
Disadvantages of Audio communication
communication questions and answers
1. 1996 P1
Outline four reasons why a business person may prefer written communication to verbal communication. (5 marks)
2. 1997 P1
State five services offered by the post office. (5 marks)
3. 1998 P1
State four advantages of verbal communication. (4 marks)
4. 1999 P1
Highlight four advantages of using telex as a means of communication. (4 marks)
5. 1999 P2
Discuss the factors that a firm may consider in choosing a method of communication within the firm
6. 2000 P1
State four features of effective communication. (4 marks)
7. 2001 P1
State four reasons why the post office is still popular as a means of sending letters. (4 marks)
8. 2001 P2
State reasons for use of letters in business communication.
9. 2002 P1
Give four reasons why a person would send a message by mail rather than by telephone. (4 marks)
10. 2003 P1
Highlight four factors that may limit the use of telephone as a means of communication in Kenya. (4 marks)
11. 2004 P1
State four problems that may interfere with the effectiveness of face to face communication. (4 marks)
12. 2006 Q15 P1
Give four reasons why one would prefer a letter to a telephone to send a message. (4 marks)
13. 2007 Q2 P1
The following terms relate to communication: vertical, horizontal, formal and informal. Write the appropriate term of communication associated with each of the following statements.
14. 2007 Q1b P2
b) Explain four advantages of transaction business through e-commerce. (8 marks)
15. 2008 Q5 P1
Outline four benefits that may accrue to a business person who uses e-mail to communicate. (4 marks)
16. 2009 Q12 P1
Outline four circumstances under which face to face communication may be ineffective.
17. 2012 Q5 P1
Outline one circumstance under which each of the following telecommunication services may be used:
(b) Explain five elements of effective communication. (10 marks)
By the end of the topic, the learner should be able to:
GUIDELINES ON TOPICS
MEANING OF TRANSPORT
Transport is the physical movement of people and goods from one place to another. It helps bridge the gap between producers and consumers hence creating place utility.
Importance of Transport to Business
ESSENTIAL ELEMENTS OF TRANSPORT
In order for a transport system to function efficiently it should have certain basic elements, these elements are:
A. Unit(S) of carriage
This refers to anything i.e. vessel that is used to transport goods and people from one place to another. Units of carriage include: ships, trains, airplanes, motor vehicles, bicycles and carts. Units of carriage are also referred to as means of transport.
b. Methods of propulsion
This is the driving force (source of power) that makes a unit of carriage to move. The power for most vessels may be petroleum products, electricity, human force or animal power.
It refers to either the route or path passes by the vessel. The route can be on land, on water or through air. Examples of ways are roads, railways, paths, canals, seaways and airways. The ways can be classified into either natural ways or man made ways.
d. Terminals (terminuses)
The vessel used to carry goods and people starts from one destination and ends up at another. At these destinations the loading and off-loading take place respectively. The loading and off-loading places are referred to as terminals or terminus. Examples of terminuses are bus stations, airports and seaports.
MODES OF TRANSPORT
Mode refers to the manner in which transport is carried out. There are three modes of transport namely:
This mode of transport involves movement of goods and people using units of carriage that move on dry land. The various means under this mode includes:
This involves human beings carrying goods on their heads, shoulders or backs. Human Porterage as a means of transport is the oldest kind of transport and is still very common in our society. The means is suitable for transporting light luggage over short distances. It is also appropriate where other means of transport are not available or convenient.
Advantages of Human Porterage
Disadvantages of human Porterage
Carts are open vessels usually on two or four wheels that are pushed or pulled by either human being or animals such as oxen and donkeys. The carts pushed or pulled by human beings are referred to as hand carts or mikokoteni. The ones pulled by animals, on the other hand, are called animal driven carts. Carts are used to carry relatively large quantities compared to human Porterage. Like human Porterage, they are not suitable for long distances. Types of goods that are transported using this means include, agricultural produce, water and animal feeds.
Advantages of carts
Disadvantages of carts
These are means (units of carriage) of transport that ferry goods and people on roads. Vehicles are the most commonly used means of transport.
Vehicles are either passenger or goods carriers. Passenger carriers may be buses, matatus, taxis and private cars while goods are transported using Lorries, pick-ups, tankers and trailers. Vehicles are expensive to acquire and maintain. The convenience of vehicles may depend on the nature of the road on which they travel.
Some roads are impassible especially when it rains while others are usable throughout the year (all weather roads).Of special concern in road transport is the matatus. These are privately owned passenger vehicles which were introduced to supplement the existing mainstream transport companies that were inadequate at independence. They got their name from the amount of fare they used to charge originally that is, mapeni matatu. The operators have to obtain the relevant documents such as insurance cover in order to be allowed to operate. Their owners may form associations which take care of their interests along given routes or in certain areas.
Advantages of matatus
Disadvantages of matatus
Advantages of vehicles
Disadvantages of vehicles
Trains are vessels that transport goods and people on rails hence the term railways.
The terminuses of trains are the railways stations. Therefore; the goods to be transported by trains have to be taken to the railway station. Railway transport is suitable for heavy and bulky goods as well as passengers. There are two types of trains: cargo and passenger train.
Advantages of Trains
Disadvantages of Trains
This is the movement of liquids and gases from one place to another through a pipe. Products transported through pipes include water, gases, petrol and diesel. Solids that cannot be dissolved or damaged by water may also be transported through pipes as suspension. Examples coffee berries from machines to drying places. The pipeline is both a vessel and a way.
Products flow by the force of gravity or pressure from an original station. If the original terminal is at a higher level than the receiving terminal, the force of gravity is adequate to move the product. But if the receiving terminal is at a higher level than the original than the originating terminal, then power is required to pump the product uphill. For example, petroleum from Mombasa which is at sea level needs pressure to pump it to all the receiving stations.
Advantages of pipeline Transport
Disadvantages of pipeline Transport
It is a mode of transport where the units of carriage transport goods and people on water. Water in this case includes; navigable rivers, lakes, seas and oceans. The means of transport which are the units of carriage or vessels using this mode include; ships, dhows, boats, steamers and ferries. Water transport can be divided into inland waterways and sea transport.
This is transport carried out on lakes, rivers and inland canals. The Lake Victoria facilitates transport among the three east African countries i.e. Kenya, Uganda and Tanzania. Ferries also connect the mainland to islands such as Rusinga Islands, found in Lake Victoria.
Water hyacinth has however been a threat to transport on the lake. Most rivers in Kenya are not navigable due to reasons such as:
This is where goods and people are transported in seas and oceans. All types of water vessels may be used in sea transport. Sea transport is important as it connects continents of the world thereby facilitating international trade. Kilindini in Mombasa provides a good natural harbor facilitating sea transport between Kenya and other countries of the world. Ferries also connect the island of Mombasa and the mainland.
Types of Water vessels
A ship is a large vessel that transports people or goods through water. Their sizes however vary depending on quantity of goods and passengers they carry. Ships help in connecting countries or places which borders the sea. They load and offload in terminals referred to as harbors found at sea ports. For example, the Kilindini harbor is found in the port of Mombasa.
Ships that transport people are referred to as passenger ship while those that transport goods are referred to as cargo ships. Cargo ships are c are convenient for carrying heavy and bulky goods.
Ships may also be classified as either liners or tramps.
These are ships that are owned and operated by shipping companies called conferences. Each conference is responsible for specifying the route on which each liner would operate the rates to be charged and setting the rules and regulations to be followed by the members.
Characteristics of liners
These are ships that do not follow a regular route or time table. Their routes therefore depend on demand. During times when demand is high, they charge higher rates and when demand is low they lower their rates. Tramps can therefore be likened to matatus. Tramps may be owned by either individuals or firms.
Characteristics of tramps
When a trader hires an entire ship to transport goods to a given destination, he/she and the ship owner signs a document called a charter party. This document shows the terms and conditions under which the goods would be transported.
Other information included in the agreement are destination, nature of the goods and freight charges. When the ship is hired to carry goods for a given journey the document signed is referred to as voyage charter. On the other hand, if the ship is hired to transport goods for a given period of time, the document signed is called time charter.
Ships may be specially built to carry special commodities. These may include tankers specially built to transport petroleum products and other liquids. Refrigerated ships may also be available to transport perishable commodities such as meat, fish and fruits.
Boats and Ferries
These are water vessels used in transporting goods and people over short distances. They are therefore found in both inland water transport and also the sea transport, e.g. the Likoni ferry in Mombasa carries people from and to the island of Mombasa and the main land.
Advantages of water transport
Disadvantages of water transport
This refers to the movement of goods, people and documents by aircrafts. Aircrafts/ aeroplanes are the units of carriage and air the way. The terminals include airports and airstrips.
Aeroplanes are fast compared to other means of transport i.e. they are the fastest means of transport. They are therefore suitable for transporting urgently required goods like drugs and perishable goods Such as flowers over long distances.
Aircrafts may be classified as either passenger planes or cargo planes. Passenger planes transport people from one place to another. On the other hand, cargo planes transport light cargo to the required destinations. Aeroplanes may be fitted with special facilities for handling special goods. Aeroplanes are expensive to acquire and to maintain. Their operations may also be affected by weather conditions.
Advantages of Air Transport
Disadvantages of Air Transport
This is a recent development in transport. It refers to the packaging of goods in standardized ‘box like’ containers designed for use in transporting cargo. The containers are mainly made of metal though a few are made of wood. They can either be hired or bought from firms that provide them. The hired containers are returnable to the owner after the goods have been transported.
Containers are designed in a way appropriate to transport goods by ships, train, lorry or by air. To safeguard the goods against risks such as theft and unfavorable weather conditions the containers are sealed immediately after goods have been packed. The sealed containers are then transported up to the final destination where they are off-loaded. The consignee can then break the seal.
Goods can be transported in containers as Full Container Load (F.C.L) or as Less Container Load (L.C.L).Full container load applies where the container is filled with goods belonging to one person. In FCL, goods are delivered to the consignee intact. On the other hand, less than container load applies where a container is filled with goods belonging to several consignors. This may be the case where a single consigner does not have enough goods to fill a container. When such a container reaches the destination, it is opened and the various consignees take their goods.
There are special handling facilities for loading and offloading containers onto and from the units of carriage.
Apart from the container depot at Mombasa, Kenya Ports Authority (K.P.A) has established inland container depots referred dry ports. An example of a dry port is found at Embakasi in Nairobi. The establishment of dry ports aims at relieving congestion at the sea port. It also aims at making handling of cargo easier and efficient for inland importers and exporters.
When containers are off loaded from ships at Mombasa, they are loaded into special container trains called railtainer which transports them by railway to the inland container depot at Embakasi. Containers can also be transported by specially designed trucks between the ports or from the port to consumer’s destination.
Advantages of containerization
Disadvantages of containerization
Factors that influence the choice of appropriate means of transport
TRENDS IN TRANSPORT
TRANSPORT kcse questions
1. 1995 P1
Give three disadvantages of railway transport in Kenya. (4 marks)
2. 1995 P1
Give three disadvantages of railway transport in Kenya (3 marks)
3. 1995 P2
Explain five reasons that may account for continued use of handcarts as a mode of transport in Kenya. (12 marks)
4. 1996 P1
State four circumstances under which a businessman would choose to transport goods by air? (4 marks)
5. 1996 P2
The oil pipeline has recently been extended from Nairobi to western Kenya. Explain five benefits that may be accounted to the country from the extension. (10 marks)
6. 1997 P1
Outline four reasons why a school in Kisumu may prefer to transport its sixty students to a music festival in Nairobi by train rather than by bus. (4 marks)
7. 1998 P1
List four disadvantages of using containers to transport goods. (4 marks)
8. 1998 P2
Discuss five factors that have hindered the expansion of railway transport in Kenya.
9. 1999 P1
Give five reasons why a manufacturing firm would be located in an area well served by good road network. (4 marks)
10. 1999 P1
Outline four limitations of containerization. (4 marks)
11. 1999 P2
Explain five features of an efficient transport system (8 marks)
12. 2000 P1
State four reasons why road transport is popular in Kenya. (4 marks)
13. 2000 P2
Explain the advantages of pipeline as a mode of transporting oil products. (12 marks)
14. 2001 P1
State four ways in which the nature of goods would influence the choice of transport. (4 marks)
15. 2002 P1
Outline four reasons why a transporter of goods from Mombasa to Nairobi may prefer rail transport to road transport. (4 marks)
16. 2002 P2
Outline five factors that should be considered when choosing a means of transport. (10 marks)
17. 2003 P1
State the unit of carriage for each of the following modes of transport. (5marks)
18. 2003 P2
Explain six advantages of containerization as a mode of transport. (10 marks)
19. 2004 P1
List four ways in which transport promotes growth of trade. (4 marks)
20. 2004 P2
Discuss six factors that may discourage the use of pipeline as a means of transporting petroleum products in a country. (12 marks)
21. 2005 P2
Discuss five circumstances under which a trader may choose to transport goods by rail. (10 marks)
22. 2006 Q5a P2
a) Outline five factors that may limit the use of containers as a method of transporting goods in a developing country. (10 marks)
23. 2007 Q11 P1
State four circumstances under which air transport may be used to ferry goods (4 marks)
24. 2008 Q14 P1
Outline four factors that a trader would consider in choosing a mode of transport. (4 marks)
25. 2009 Q11 P1
Outline four factors that should be considered in the choice of a means for transporting perishable goods (4 marks)
26. 2009 Q2a P2
(a)Explain five demerits that may be associated with water transport. (10 marks)
27. 2010 Q18 P1
State four reasons why flower exporters would transport their produce by air rather than by sea. (4 marks)
GOVERNMENT AND BUSINESS;
It can be cashed at any post office
Can only be cashed at a specific post office
Are in fixed denominations
Varies according to the needs of the remitter
Does not require any application form to make a remittance
Requires the filling of an application form in making remittance
Can be cashed by the bearer
Can only be cashed by the payee
Value can be increased by affixing revenue stamps
Value cannot be increased by affixing revenue stamps
Postage stamps may be used to pay small amounts of money. The person to whom the stamps are sent can then use them for sending mail and/or to pay someone else.
Premium bonds are issued by the post office in denominations of sh.10 and sh.20.They mature after a given period, after which one can cash them.
Bearers can also enter into draws so as to win money.
Premium bonds can be used to settle debts, but it is not a safe method because they can be cashed by anybody i.e. by the bearer.
Circumstances under which postage stamps and premium bonds are used
- Where the amounts involved are small
- Where they are the only means available.
a. Means and payments which arise from private arrangements between the sellers and the buyers
- I Owe you (IOU)
- Bill of exchange
- Promissory note.
This is unconditional order, in writing, addressed by one person to another, requiring the person to whom it is addressed by one person to another, requiring the person to whom it is addressed to pay on demand, or at a stated future date, the sum of money on the bill to the drawer, or a named person or to a bearer.
- Order-is a command not a request
- Unconditional-Without condition i.e. no use of such words as ‘if’ or ‘whom’
- The bill must be in writing
- Amount of money must be clearly stated
- Payee must be named. He/she can be the drawer or someone else or the bearer
- Date of payment must be stated or can be determined e.g. ‘Two months from the date of today’ or Three days after 31st January 2012’
If the buyer/debtor signs the bill “accepted” then he/she cannot deny responsibility for the debt since he/she has acknowledged responsibility for the date.
Procedure for preparing a bill of exchange
Step 1.The creditor prepares the draft and sends to the debtor.
Step 2.The draft and after accepting the conditions laid therein, he/she signs on it and write the words “accepted”. He/she then sends it back to the creditor. At this point the draft becomes a bill of exchange.
Step 3.The creditor receives the bill and may:
- Keep it until maturity when he would present it to the debtor (accepted) for payment
- Discount it with a bank. This is presenting to a bank or any financial institution and receiving cash against it before the maturity date. One is however charged(discounting charge) for the service
- Negotiate it -Using it to pay someone else apart from the payee.
Parties to a bill of Exchange
- Drawer-This is the person who gives the debtor the written order to pay the value of the bill of exchange(the creditor)
- Drawee-This is the person to whom the order to pay is given (Debtor).He or she accepts the bill.
- Payee-This is the person to whom the payment is to be made. The payee may be the drawer, or
Essentials of a bill of Exchange
- It must be signed by the drawer(creditor)
- It must be accepted by the drawee(debtor)
- It must be accepted unconditionally
- It must bear appropriate revenue stamps
Advantages of using Bill of exchange
- The holder may pass rights on the bill to another person
- Date of payment is determined
- Acceptance by the debtor makes it legally binding
- The payee may receive money before due dates by discounting
Disadvantages of using a bill of exchange
- It may be dishonoured on maturity
- Cash may not be readily available as banks may be reluctant to cash bills from debtors of doubtful financial backgrounds
- It is an expensive form of credit as the creditor may lose part of the face value of bill in form of discount
Circumstances under which a bill of exchange is appropriate.
- When the creditor wants to be assured that the payment would be done
- Where the creditor wants money while the debtor is not able to raise it before the end of the credit period
- Where the creditor wants to use the debt to pay another debt.
Features of a promissory note
- There are two parties i.e. the drawer (debtor) and the payee (creditor)
- There is a promise to pay
- It is written by the debtor to the creditor
- It does not require acceptance since it is signed by the person committing to pay the money
- The writer/maker is liable on the note as he/she is the debtor.
The seller/lender may keep it until maturity and then present it for payment or may discount it with the banks before maturity.
Similarities between a bill of exchange and a promissory note:
- Both act as evidence of the acknowledgement of a debt
- Both may be discounted or endorsed before maturity
- Both are negotiable i.e. can be transferred from one person to another
- Both are legally binding
- Both allow for adequate time within which to organize for the payment of the value of the bill or note.
Differences between a promissory note and a bill of exchange
Bill of Exchange
Drawn and signed by the debtor
Drawn and signed by the creditor
It does not need to be accepted
It must be accepted by the debtor for it to be valid
The drawer and drawee are one person
The drawer is the creditor and the drawee is the debtor
IOU is an abbreviation of ‘I owe you’
It is a written acknowledgement by a buyer of a debt arising from the purchase of goods and services on credit. It is written and signed by the buyer and sent to the seller
If the seller accepts it, then the buyer can receive goods and services on credit.
Though the IOU does not usually indicate the specific date of payment, the buyer acknowledges the debt and accepts responsibility to pay at a suitable future date
NOTE: The use of IOU is restricted to commercial transactions involving parties who have dealt with each other for a long time; hence they know each other well.
d. Other means of payment
- Credit cards
- Mobile money transfer services e.g. M-Pesa.
These are plastic cards that enable a person to purchase goods or services on credit from any business willing to accept the card
They are both a means of payment and a term of payment
This is a means of money transfer services provided by mobile phone service providers to their customers (subscribers)
It can only be used to transfer money between people subscribed to the same mobile phone network e.g. from one safaricom subscriber to another safaricom subscriber, Airtel to Airtel etc.
The sender must register for the money transfer service and is issued with a PIN (personal identification number)
When money is sent, both the sender and the receiver will receive a message confirming the transfer.
A person can send money anytime anywhere so long as he/she has value in his/her m-pesa, pesa pap account.
Each mobile service provider has a range of value that can be transferred using this method.
A small transaction fee is charges for the transfer i.e. for sending and withdrawing
- Confidentiality-The secret PIN protects the value in the customer’s account
- Ease of use-The service is easy to use as the agents assists to carry out transaction
- Speed-Money transfer is an instant service conveyed to the receiver via the short message service(SMS)
- Convenience-The service is convenient to both the sender and the receiver, as they only need to go to the nearest agent(money can be sent/deposited or received anywhere)
- Accessibility-The agents e.g. m-pesa agents are located in most parts of towns and also in rural areas. Money can hence be sent and received anywhere and anytime.
- Affordability-The service charges are very low for registered users and very affordable for non-registered users
- Security-Relatively secure when the sender uses the correct phone number of the receiver.
A business transaction is a deal between two or more people involving exchange of goods and services in terms of money.
Business transaction may take place on cash basis; in which case goods are paid for before or on delivery or a short while after delivery
Business transaction may also take place on credit basis; which means payment is made after a specified period from the date of delivery of the goods or the provision of the services
There are various business documents that are used in various stages of business transactions as discussed below;
a) Documents used at the inquiry stage
This is the first stage in transaction. An inquiry is a request by a prospective buyer for information on available goods and services. It is aimed at establishing the following;
- Whether the goods or services required are available for sale
- The quality or nature of the products available
- The prices at which the goods or services are being sold
- The terms of sale in respect to payment and delivery of goods or services
i) Letter of inquiry;
This is a letter written by a potential buyer to the seller to find out the goods and services offered by the seller.
A letter of inquiry can be general or specific. A specific letter of inquiry seeks for information about a particular product.
Reply to an inquiry
The seller may reply to the letter of inquiry by sending any of the following documents;
- Price list
- A catalogue
- A tender
This is a list of items sold by the trader together with their prices. The information contained in a price list is usually brief and not illustrated and may include;
- Name and address of the seller
- List of the goods and services
- The recommended unit prices of the products
- Any discounts offered
ii) A catalogue;
A catalogue is a basket which briefly describes the goods a seller stocks.It is normally sent by the seller to the buyer when the buyer sends a general letter of inquiry. It usually carries illustrations on the goods stocked, and could be in the form of attractive and colorful pictures
The content of a catalogue includes the following;
- Name and address of the seller
- Details of the products to be sold; inform of pictures and illustrations
- The prices of the products
- After-sales services offered by the seller
- Packaging and posting expenses to be incurred
- Delivery services to be used
- Terms of sale
c) Quotation; this is a document sent by a seller to a buyer in response to a specific letter of inquiry. It specifies the conditions and terms under which the seller is willing to supply the specified goods and services to the buyer.
The content of a quotation includes the following;
- Name and address of seller
- Name and address of the buyer
- Description of goods to be supplied
- Prices of the commodities
- Terms of sale i.e. discounts, time of supply, delivery
- Total of the goods to be supplied
d) A Tender
This is a document of offer to sell sent by a seller to a buyer in response to an advertised request
Tenders contain the following;
- Date when the tender advertisement was made
- Mode of payment
- Date of making document
- Discounts given
- Name and address of prospective seller called the tenderer
- The prices at which the goods can be provided
- Period of delivery
- Mode of delivery
The winning tender is usually awarded on the of the lowest quoted price although the buyer is not obliged to accept this especially if quality is likely to be low
Tenders are not binding unless accepted by the buyer.
After receiving replies to inquiry in form of price list, catalogue or Quotation, a prospective buyer will study the terms and conditions stated in them, and then may decide to buy products or not.
i) An Order
If a prospective buyer decides to purchase an item(s), he or she then places an order
An order is a document sent by a potential buyer to a seller requesting to be provided with specified products under specified terms and conditions
An order issued for goods is called a local purchase order (LPO)
An order issued for services is called a local service order (LSO)
Ways of making an order
- Filling an order form. This is a pre-printed document that is used for making orders
- Writing an order letter
- Sending an e-mail, faxing or sending a short text message
- Giving a verbal order. Verbal orders have the disadvantage in that they can be misunderstood and there would be no record of items ordered
A written order may contain the following;
- Name and address of the buyer
- Name and address of the seller
- The number of the order
- Quantities ordered and total amount to be paid
- Description of the goods ordered
- Price per item
- Special instructions on such matters as packaging and delivery
On receiving the order, the seller sends the buyer an acknowledgement note
An acknowledgement note is a document sent by the seller to the prospective buyer to inform him/her that the order has been received and it is being acted upon.
After sending the acknowledgement note, the seller has to decide whether to extend credit to the buyer or not. At this stage, the seller has the following options;
- If the seller is convinced that the buyer is credit worthy, arrangements are made to deliver the ordered goods or services to the buyer.
- If the seller is not sure of credit worthiness of the buyer, a credit status inquiry can be issued to the buyer’s bankers or to other suppliers who deal with the buyer to ascertain the credit worthiness.
- If the buyer is not creditworthy, then a polite note or a proforma invoice can be sent to him/her
A proforma invoice
Functions of a proforma invoice
- A polite way of asking for payment before the goods are delivered
- Sent when the seller does not want to give credit
- Used by importers to get customers clearance before goods are delivered
- Issued to an agent who sells goods on behalf of the seller
- Show what the buyer would have to pay if the order is approved
- Can be used to serve as a quotation
Circumstances under which a pro-forma invoice may be used
- If the seller does not want to give credit
- If the seller wants to sell goods through an agent
- If the seller wants to get clearance for imported goods
- If the seller wants it to function as a quotation
- If the seller wants to inform the buyer what he/she pay if the order is approved etc.
Documents used at the Delivery stage
- The seller can ask the buyer to collect the goods
- The seller can deliver the goods to the buyer using his/her own means of transport
- The goods can be delivered to the buyer through public transport
- The services(s) can be rendered to the buyer at the sellers or the buyer’s premises or at any convenient place.
i) Packing note; before delivery goods are packed for dispatch. This is a document prepared by the seller showing the goods contained/packed in every container, box or carton being delivered to the buyer. A copy of the packing note is packed with the goods to make/help the buyer have a spot check.
The contents of a packing note include;
- Description of goods packed
- Quantities of goods packed
- The means of delivery
ii) Advice note; this is a document sent by the seller to the buyer to inform the buyer that the ordered goods have been dispatched. It is usually sent through the fastest means possible.
- It contains the following;
- The means of delivery
- A description of the goods
- The quantity dispatched
- Name and address of buyer and seller.
Functions of an advice note
- Informing the buyer that the goods are on the way so that in case of any delay in delivery, the buyer can make inquiries.
- Alerting the buyer so that necessary arrangements can be made for payments when the goods arrive
- Can serve as an acknowledgement note, where one is not sent
When the goods reach the buyer, he/she confirms that the goods are the ones ordered for and that they are in the right condition by comparing the delivery note, the order and the goods. If the buyer is satisfied with the goods, he/she signs the two copies, retains the original and send the copy back to the seller. This serves as evidence that the goods have been received in the right condition and in the right quantities.
Some businesses keep delivery books in which the buyer signs to indicate that goods have been received in good condition. A delivery book is used by the seller if he/she delivers goods by himself/herself as an alternative to a delivery note
- Name and address of the seller
- Name and address of the buyer
- Date of delivery
- Delivery note number
- Description of the goods delivered
- Quantities of the goods delivered
- Space for the buyer to sign and comment on the condition of the goods received.
This is a document prepared by a transporter to show that he/she has been hired to deliver specified goods to a particular buyer. This document is used when goods are delivered to the buyer by public means of transport e.g. by trains.
The seller is the consignor, the buyer is the consignee and the goods the consignment
The transporting company prepares the consignment note and gives the seller to complete and sign. The seller then returns the note to the transporter (carrier) who takes it together with the goods to the buyer.
On receiving the goods, the buyer signs the consignment note as evidence that the goods were actually transported.
The content of a consignment note includes the following;
- Details of the goods to the transported
- Name address of seller (consignor)
- Name and address of buyer (consignee)
- Terms of carriage and conditions of transporting the goods
- The transportation cost
- Handling information
- Destination of goods
The contents of the goods received note include;
- Date of the document
- Name and address of the buyer
- Name and address of the seller
- Corresponding purchase order
- Details of goods received
- Date the goods were received.
- Wrong type of goods
- Excess goods
- Wrong quality goods
A goods returned note is a document sent by a buyer to a seller to inform him/her that certain goods are being returned to the seller.
Where the goods are returned because of damage, the note may be referred to as the damaged goods note.
The contents of the goods returned note include;
- Details of goods that have been returned to the seller
- Date goods are returned
- The number of (GRN)
- Order number
- Delivery number
- Name and address of both buyer and seller
This stage involves the seller requesting or demanding for payment from the buyer for the goods or services delivered.
Some of the documents used at this stage include;
This is a document sent to the buyer by the seller to demand for payment for goods delivered or services rendered.
There are two types of invoices namely;
- Cash invoice-This is sent when payment is expected immediately after delivery thus acting as a cash sale receipt
- A credit invoice-This is sent when a buyer is allowed to pay at a later date.
Functions of an invoice
- It shows the details of goods sold i.e. quantity delivered, unit price, total value of the goods and terms and conditions of sale.
- It is a request to the buyer to make payment
- It serves as an evidence that the buyer owes the seller a certain amount of money
- It is used as a source document in recording the transaction in the book of accounts.
- Invoice number
- Name and address of the seller
- Name and address of the buyer
- Date document is prepared
- Details of goods repaired
- Unit prices of goods delivered
- Total value of goods
- Discounts offered
- E and O.E printed at the bottom
On receiving the invoice, the buyer verifies the contents using the local purchase order and the delivery note. If the invoice is in order, the buyer makes arrangements to pay the amount stated.
Businesses which offer services issue a document called a bill, which serves the purpose of an invoice.
Differences Between the invoice and pro-forma invoice
The pro-forma invoice
It is issued after goods and services have been delivered
It is issued before goods and services have been delivered
It shows the total value of the goods or services on credit
Shows the total value of goods and services to be bought
It is used to demand payment for products sold on credit
It is used to demand for payment in advance for products to be bought
Used as a basis for making payment for products already bought
Used as a basis for preparing payment for products not yet bought
Serves as a notice of payment for products bought on credit
Serves as a Quotation for products to be bought.
This is a document sent by the seller to the buyer (credit buyer) to correct an overcharge. It is used to inform the buyer that the amount payable by him/her has been reduced
An overcharge is an excess amount charged beyond the right price.
Causes of overcharge may include;
- Arithmetical errors like wrong addition
- Price overcharges
- Inclusion of wrong or unordered items in the invoice
- Failure to deduct the allowable discounts
- Return of goods (damaged goods)
- Failure to note the return by the buyer of packing cases or containers used to deliver goods to him/her
- Use of wrong price list.
A credit note is usually printed in red to distinguish it from other documents.
Contents of a credit note include;
- Name and address of the seller and the buyer
- Credit note number
- Date document is prepared
- Description and value of goods returned by buyer (in case that was done)
- Total overcharge
Reasons why a seller would send a credit note to a buyer/circumstances under which a credit note is sent to a buyer.
- When there is an overcharge in an invoice
- When the original invoice had indicated items that were not supplied
- When the buyer returns empty cases/crates that had been charged in the invoice.
- When the buyer returns some goods to the seller
- If the buyer was entitled to a discount which was not given or taken care of in the invoice.
This is a document sent by the seller to the buyer to correct an undercharge on the original invoice. It is used to inform the buyer that the amount payable by him has been increased.
A debit note acts as an additional invoice.
An undercharge arises when amount charged on products is less than their right price.
Causes of undercharge include;
- Price undercharges on items
- Arithmetic errors/mistaken in calculation
- Omission of items in the invoice
- Retention of crates and containers that were not involved by the buyer
- Deductions of more discount than what was give/intended
Circumstances under which a debit note will be sent to the buyer
- When there is an undercharge in the invoice
- If the buyer had been given a discount that was not due to him
- If some items had been omitted in the original invoice
- If the buyer decides to retain some empty containers or crates
Differences Between a debit note and a credit note
Issued to correct an undercharge on the invoice.
Issued to correct an overcharge on the invoice.
Written on blue or black.
Usually written in red
Issued when containers have not been returned
Issued when containers have been returned.
Documents used at the payment stage
The documents used at the payment stage include:
This is a document issued to the buyer by the seller as proof that payment has been made.
Payment can be done in cash, cheque, other forms of money or in kind
The receipt also serves as a source document for making entries in books of accounts.
Contents of the receipt include;
- Date of payment
- Name of the person making payment
- Name of person/institution receiving payment
- Amount paid in words and figures
- Means of payment
- Receipt number
- Signature of person issuing the receipt.
A receipt serves the same purpose as the cash sale slip
This is a document prepared by the seller and sent to the buyer, giving a summary of all the dealings/transactions between them during a particular period of time, usually a month. It has the following details;
- Date when it was prepared
- Name and address of the seller
- Name and address of the buyer
- Account number
- Date column-where the date of each transaction is recorded
- Particulars (Details)column-where the explanation of each transaction is shown
- Money column
Credit column-Decrease in the amounts payable due to overcharges corrected or payments recorded.
Balance column-Amount owing after each transaction (Balance outstanding)
- Any discounts allowed to the buyer
- Date when the buyer is expected to clear the balance
- Terms of credit etc.
An IOU (I owe you) is a document written by the buyer and sent to the seller to acknowledge a debt.
- It does not specify date when settlement will be made.
- It acts as evidence that a debt exists.
Summary of documents used in home trade
Document sent by buyer
Document sent by seller
Letter of inquiry
Goods received note
Goods returned note
Pro forma invoice
Statement of account
There are wholesalers who carry out retailing but that do not make them retailers.
Classification of wholesalers/Types of wholesalers
- According to the range of goods they handle
- According to the geographical area in which they operate
- According to their method of operation.
Under this classification, wholesalers may be any of the following;
- General merchandise wholesalers
- General line wholesalers
- Specialized wholesalers
The word merchandise means goods.
The general merchandise wholesalers stock and sell a wide variety of goods e.g. hardware, clothes, cosmetics and foodstuffs. The retailers who buy from these wholesalers are thus able to get a wide variety of goods for resale.
They are also called general wholesalers or full-line wholesalers
b) General line wholesalers
These are wholesalers who deal in a wide variety of goods within the same line e.g. textbooks, duplicating papers and other types of stationary.
c) Specialized wholesalers
These are wholesalers who deal in a particular good from a given line e.g. in the line of grains, they may specialize in maize only.
Under this category wholesalers may be;
- Nationwide wholesalers
- Regional wholesalers.
These are wholesalers who supply goods to traders in all parts of the country.
They establish warehouses or depots in different areas from Kenya National Trading Corporation (KNTC)
b) Regional Wholesalers
These are wholesalers who supply goods to certain parts of the country only. They may cover a county, District, division etc.
Under this classification, wholesalers can be;
- Cash and carry wholesalers
- Mobile wholesalers
- Rack jobbers
b) Mobile wholesalers/Track distributors; these are wholesalers who use vehicles to move from place to place supplying goods to retailers e.g. soda distributors, bread distributors, beer distributors etc.
c) Rack jobbers
These wholesalers specialize in selling certain/particular products to other specialized wholesalers. They buy goods from producers or from other countries for reselling.
E.g. some wholesalers buy horticultural products from producers and sell to other wholesalers in urban areas
Rack jobbers usually stock their goods in shelves or racks from which customers select the goods to buy. Customers may be allowed to pay for the goods after they have sold them.
d) Drop shippers
These are wholesalers who make orders for goods from manufacturers/producers but do not take them from the producer’s premises. They then look for the buyers for the goods and supply the goods directly from the producers
Alternate classification of wholesalers
- Those who buy goods store them in warehouses and sell them to traders without having added anything to them.
- Wholesalers who act as wholesaler’s agents or brokers. These are middlemen who are paid a commission for their work e.g. commission agents
- Those who after buying the goods and storing them prepare them for sale. They break bulk, pack, brand, sort, grade and blend the goods
- Breaking bulk-Reducing a commodity into smaller quantities for the convenience of the buyer e.g. buying sugar from the producer in sacks and selling it in packets.
- Packing-Putting goods in packets and boxes ready for sale.
- Branding-Giving a product a name by which it will be sold
- Sorting-Selecting goods to desired sizes, weight, colour and qualities
- Grading-Putting goods in groups of similar qualities to make it easier to price them
- Blending-It involves mixing different grades of a product to achieve qualities like taste and colour.
Functions of a wholesaler
Services of wholesalers to the producers
- They relieve the producers the problem of distribution by buying goods from them and selling to retailers
- They relieve the producers of some risks they would experience e.g. damage, theft, fall in demand etc.
- Save the producers from the problem of storage by buying goods and keeping in their warehouses
- They prepare goods for sale on behalf of the producers
- They get feedback from consumers on behalf of producers
- They promote products through advertising, displays, trade fairs and exhibitions
- They finance producers by buying goods from them and paying in cash.
- They stock a wide variety of goods in large quantities relieving the retailer from buying from different producers
- They avail goods at places convenient to retailers
- They break bulk for the benefit of retailers
- They offer transport facilities to retailers
- They offer advisory services to retailers regarding market trends
- They offer credit facilities to retailers
- They engage in product promotion on behalf of retailers
- They sort, blend, pack and brand goods saving retailers from having to do it.
- They ensure a steady supply of goods to retailers hence consumers are not faced with shortages
- They ensure a stable supply of goods hence there will be stability in market prices
- They enable consumers to enjoy a wide variety of goods
- They break the bulk of goods thus enabling the consumer through the retailer to get the goods in convenient quantities
- They prepare goods for sale e.g. branding, blending and packaging
- Pass information to consumers through retailers about the goods e.g. new products, new prices and their use.
Classification of Retail Trader
- Small scale retailers
- Large scale retailers
1. Small-scale Retail businesses/small scale Retailers
Small scale businesses are easy to start and in most cases they are operated as one-man’s business.
A small scale trader serves the needs of people in the immediate neighborhood and deal mainly in fast moving goods such as foodstuffs, detergents, kerosene etc.
Categories and Types of small scale
a) Small scale Traders without shops
- Itinerant Traders (Hawkers and peddlers)
- Roadside sellers
- Open air market Traders
- Single shops
- Tied shops
- Mobile shops
- Market stalls
- Mail order stores
a) Small scale Retailers without shops
These are retailers who move from place to place selling their goods either on foot, by bicycles or motor cycles
They move from town to town, door to door and from village to village selling their goods. Their goods may include clothes, utensils and foodstuffs. Customers can buy goods without having to travel to look for them
Examples of itinerant traders are hawkers and peddlers (Hawkers move around on bicycles, handcarts or motorcycles while peddlers walk around)
The itinerant traders require a license from the local authorities in order to sell their goods.
Characteristics of itinerant Traders
- Are found mainly in densely populated areas
- Move from place to place in search of customers
- They are very persuasive
- Their prices are not controlled.
- They require little capital to start
- They are convenient because they bring goods closer to the people
- The business is flexible in that they can move from place to place. They can also change from line of business to another
- Few legal formalities are required
- They usually do not suffer bad debts because they sell in cash.
- The traders get tired because of moving from one place to another while carrying goods.
- The business is affected by bad weather conditions
- The traders sale a limited range of goods
- It is difficult to transport goods from one place to another.
- Do not offer guarantee, in case items are to be found defective
- They are constantly in conflict with the local government.
These are traders who sell their goods at places where other people pass by and at busy places such as along busy roads, bus stages, road junctions and entrances to public buildings.
They place their goods on trays, cardboards, empty sacks and mails
They sell items such as fruits, utensils, sweets, clothing and some hardware.
iii. Open-air market Traders.
Open air markets are places set aside by the government through the local authorities where people meet to buy and sell goods. Traders selling similar commodities are allocated a special area. Such markets are open on particular days of the week.
The variety of goods sold here is wide and include agricultural produce, clothing, household items, animals, foodstuffs and even furniture.
The traders move from one market to another depending on the various market days.
Advantages of small-scale retailers without shops
- They require a small amount of capital to start and operate their businesses.
- They are convenient since they take goods to the customers within their reach.
- They incur low costs of doing business
- Most of their goods are low-priced and hence more affordable to customers.
- The business is flexible. It is easy to change from one business to another
- They require few legal requirements
- The financial risks involved in these businesses are minimal
- They do not suffer bad debts since they sell on cash bases
- They interact at personal level with the customers and can convince them to buy their goods.
- It is tiring for traders to move from place to place especially if the goods are heavy and the distance covered are long
- The traders face stiff competition from other traders with more resources
- They offer a limited variety of goods
- They are affected by unfavorable weather condition
- Lack of permanent operating premises denies them a chance to develop permanent customers
- They face a lot of certainty, especially in terms of a steady flow of income
- They sometimes sell defective or low quality goods because customers expect to pay little money for them.
b) Small scale Retailers with shops
These are small shops or structures found mostly in residential areas, busy streets, highly populated areas or inside building where people pass by or work
They deal in fast-moving items and groceries such as; sodas, cakes, sweets, cigarettes, and newspapers etc. some kiosks also sell food.
ii. Market stalls
These are permanent stands found in market places, especially those operated by the various local authorities
They are of different designs depending on the goods they sell or services they offer.
They are rented or leased by individuals from local authorities
They deal in fast moving household goods though some may specialize in other products such as clothing and shoes.
Examples are stalls at Muthurwa markets, Kariokor, and most municipal markets
Advantages of kiosks and market stalls
- They are small, hence easy to start and operate
- They are conveniently located close to their customers
- They require little capital to start
- They tend to have a loyal group of customers since they have permanent premises
- They incur relatively low running costs
- They give personal attention to their customers
- They are flexible since the owner can change from one business to another easily.
Disadvantages of kiosks and market stalls
- They provide a limited range of products
- They usually do not have adequate higher capital for expansion
- They charge relatively higher prices than the retailers without shops
- They face stiff competition from more established retail businesses
- They sometimes suffer from bad debts
- Due to their size, they do not enjoy economies of scale
- For market stalls the hours for operation are controlled by the local authority concerned.
- Single shops are mostly located in the trading or market centres in rural areas or in the residential areas of high towns
- They are operated from fixed premises
- They are usually run by one person who may get assistance from him/her family or employ attendance
- Some deal in one line of commodity such as houses, clothing, groceries or electronics
Advantages of single shops
- Minimal capital is required
- Running costs are usually low as the owner may use the services of family members
- They may offer credit facilities to some customers
- They are easy to start because only a license is required
- They usually have a loyal group of customers
- Flexibility. The owner can change his or her line of business at will
- They are easy to start since the owner does not have to meet any manufactures requirements
- Products prices are fixed by the shop owners
- The owner has the freedom of creativity and independence
- They are convenient since they ensure goods are within easy reach of their customers.
Disadvantages of single shops
- Expansion is difficult due to limited funds
- They face stiff competition from large businesses
- The absence of the owner may result in closure and loss of business
- May suffer bad debts
- Provide limited variety of goods
- The operations of the business are affected by the owner’s commitment.
These are shops that mainly sell the products of one particular manufacture or are owned by a specific supplier of certain goods. The shops are owned or controlled by the manufacturer, and are thus tied to the manufacture.
The manufacture/supplier designs the organization of the shop and its appearance e.g. painting hence they look alike. The supply closely supervises the shops.
Examples of tide shops include; Bata shops which sell shoes made by Bata Company, petrol station like National, Kobil, and total etc.
Advantages of Tied shops
- Availability of goods is assured at all times
- The supplier carries out promotion for the goods
- The manufacturer/supplier can easily give credit to the shops
- Customers can return or change faulty goods at any of the shops
- The shops are easily identifiable due to their similarity
- Traders are financed by the manufacture
- They get loyal customers who keep buying their branded products
- Advertisement expenses are met by the manufacture
- They get technical advice from the manufacture
- Some operate from permanent premises owned by the manufacture.
Disadvantages of Tied shops
- Decision making is slow because the manufacturer must be consulted
- The variety of goods is limited
- The shops cannot sell goods from any other manufactures even if customers require them
- Prices are fixed by the manufacture and sometimes profit margins may be low
- They inhibit the retailers creativity and innovations
- There is a likelihood of disagreements between the manufacture and the tied shop owners.
Differences/Distinction between a tied shop and single shop.
Owner is free to stock whatever he/she wishes
Dealership can be withdrawn if operators stock competing products
Owned by individual or a group of people
The owner is normally the manufacturer
Sells products from different manufacturers
Sells products from a single manufacturer
Design of shop according to owners wish
Shops usually have the same design
Prices of goods determined by shop owner or different manufactures
Prices of goods set by the manufacturer
Operators not trained by manufacturers
Operators are usually trained by manufacturer
These are retail shops found in institutions such as schools, colleges, hospitals and army barracks.
- They stock a variety of consumable goods such as sodas, bread, tea, groceries and other things used by the people in that institution.
- They are run by the institutions management or by individuals on retail business
- Most of them operate without a license as they are considered to be part of the institution. Their hours of operation are sometimes regulated by the institution
Advantages of canteens
- Some do not pay any rent, thus they incur low overhead costs
- They often require low capital to start
- Some offer credit facilities to their customers
- They are situated at ideal location which is convenient for their customers
- They are assured of a market as they cater for people in particular institution.
- The market is limited to people in a particular institution
- They do not open throughout/they open for limited hours e.g. after classes in schools
- They close down when the targeted customers are not available e.g. during school holidays.
- They may suffer from bad debts
- They are difficult to expand due to insufficient funds
these are coin or card operated machines used to sell commodities like drinks, stamps, and snacks etc. Examples are coffee shops, ATM’s etc.
- They dispense goods or services once a coin or a card is inserted and instructions keyed in.
- They operate without an attendant
- They are usually placed at strategic places such as busy streets, office buildings, shopping centres and hospitals.
Advantages of vending machines
- Commodities can be bought anytime because no attendant is required
- They save the owner the cost of employing a shop attendant
- They can be put strategically to boost sales e.g at institutions
- They are fast and accurate
- They are not affected by weather changes
- They provide goods and services on cash basis protecting the owner from the burden of bad debts.
Disadvantages of vending machines
- They provide a limited range of products
- Break-downs or stock-outs may discourage customers
- Maintenance costs are high due to regular servicing, repairs and sometimes vandalism
- The owner may incur losses through fraud and use of inappropriate coins and cards by consumers.
- Customers are forced to carry coins and cards in order to obtain goods or services
- Their use is limited to customers who are familiar with how the machine works
- They are mainly found in urban areas, thereby locking out the people in rural areas.
- Mobile shops, like itinerant traders move from town to town or village to village selling their goods.
- They have vehicles that they have converted into a shop from which customers can buy their goods
- They visit different towns at regular intervals.
Advantages of small scale Retailers
- Easy to raise capital to start
- Retailers are in close contact with the consumers and may give credit to credit worthy customers.
- Are able to use free or cheap labour from family members
- The risks involved in their businesses are small
- The business is simple to start and manage
- Few legal formalities required to start and run the business
- The trader can easily change from one form of business to another i.e. the business is flexible
Disadvantages of small scale retailers
- Traders have limited access to loan facilities
- They may not afford to hire specialists or technical staff
- May suffer bad debts if they give credit to customers without proper assessment
- Do not enjoy economies of scale
- Have a low turnover because of the little capital invested
LARGE SCALE RETAILERS
- Require large amounts of capital to start and maintain
- They operate from larger fixed premises
- They operate mainly in urban areas
- They have a large labour force
- Buy goods in large quantities from wholesalers or directly from producers and are therefore allowed large trade and quantity discounts and other favourable credit facilities
- Require the services of specialists such as salespersons and accountants
- May occupy one large premise or several premises in the same town or in different towns
- They have large stocks and large sales volumes
TYPES OF LARGE SCALE RETAILERS
A supermarket is a large scale self-selection/self-service store that deals mainly with household goods such as utensils, foodstuffs and clothes. It has the following features;
Features of supermarkets
- Requires large capital to start
- They stock a wide variety of goods
- Offers self service facilities
- Goods have price tags or bar codes
- Prices of goods are fixed
- No credit facilities are offered
- Sell at comparatively low prices
- Goods are systematically arranged for easy selection
- Shoppers are provided with baskets or trolleys for convenience
- There is minimal interaction between buyer and seller
- There are employees who pack goods for customers at the pay points.
Advantages of supermarkets
- Prices may be relatively low because they buy their goods in bulk and are given discounts
- Saves time as customers are able to get most goods they require under one roof
- Self-service saves the customers time
- Few attendants are employed thereby reducing the monthly wage bill
- Impulse buying leads to more sales, hence high profits
- Bad debts are avoided because there are no credit sales.
- The price tags on goods help customers to monitor their spending.
Disadvantages of supermarkets
- Do not offer credit facilities to customers
- Do not deliver goods to the customer’s premises
- Are found mainly in urban areas
- May incur losses due to pilferage of goods
- Impulse buying may lead the customers to buying goods they may not need.
- They are expensive to start and operate due to the large amount of capital required
- Prices are fixed and bargaining is not accepted, which discourages some customers
- Minimal personal interaction limits chances for making more sales
A hypermarket is a large shopping complex/centre comprising a variety of businesses managed by different people all housed in one building
Examples; village market, sarit centre, Tuskeys-Kisumu, Nakumatt mega city-Kisumu e.t.c
Features/Characteristics of Hypermarkets
- Are served with good access roads
- They have ample parking space
- Many businesses in one building
- Located in the outskirts of town
- Offer a variety of goods and services
- Occupy a large space.
Advantages of Hypermarkets
- Offer ample and secure parking space to customers
- Customers can do all their shopping in one building
- They are usually open for long hours
- They may provide credit facilities by accepting credit cards
- There is less traffic congestion as hypermarkets are located away from urban centres
- Provide a wide variety of goods and services to customers under one roof.
- They have fair prices that are customer friendly.
Disadvantages of Hypermarkets
- Are only convenient to customers who have cars because they are situated away from city centres
- They serve limited number of people due to their location
- They require large amount of capital to establish
- They can easily exploit their customers since their prices are not controlled
- Require large amount of space which are not available in central business district (CBD)
- They spend a lot of security to safeguard properties
Are large scale businesses with separate branches which are managed and organized centrally. The branch managers are accountable to the head office. Examples; African Retail Traders (ART), White Rose dry cleaners, Nakumatt, Tuskys, Uchumi e.t.c
Characteristics/features of chain stores
- Are managed centrally from a head office
- Prices are standard for all their products in all their branches
- All branches deal in the same type of products
- Sales are decentralized i.e. the various shops situated in different places act as selling points or branches
- Purchases of stock are centralized i.e. buy stock buy stock in bulk centrally and distributed to the different branches
- Goods can be transferred from one shop to another where the need for them is higher
- The shops operate under one name and are similar in appearance and interior layout
Advantages of chain stores/multiple shops
- They enjoy large trade discounts since they buy their goods in bulk centrally and is passed to consumers in form of low prices
- Common costs such as those of advertising are shared
- Goods that do not have a high demand in one branch can be transferred to another where their demand is high
- They are easily identified by their colour and design
- They have low operational costs because of the centralized buying, storage, advertising and accounting
- They serve a large number of customers because they are spread in many towns and cities
- The similarity of the shops in appearance and services serves as an advertising tool
- Risks such as losses are spread among many shops
- It is possible to pay for goods in one branch and pick them up in another.
Disadvantages of chain stores/multiple shops
- Large amount of capital is required to start and maintain the business
- They cater mainly for the urban areas as they are situated in those places
- Organizational problems may occur due to their large size
- No credit facilities are offered except those operating exclusively on hire purchase schemes
- Response to market changes is slow due to the slow decision making
- Decision making is slow as the head office must be consulted
- Lack of personal touch with customers
- Absence of personal touch between employer and employee may reduce incentives for hard work among staff
- People tend to shy away from buying similar products such as clothes and this may reduce sales.
This is a group of single shops operating under one roof with a centralized management
Each shop/department specializes in a particular line of products and is headed by its own department manager.
Characteristics of departmental stores
- Each department has its own manager
- Each department sells only one line of products
- All departmental managers are answerable to a general manger
- They offer a wide variety of goods at relatively low prices
- They sell goods strictly on cash basis
- They are usually in town centres
- Goods are not transferable from one department to another as each has its own variety of goods.
Advantages of departmental stores
- Customers can buy/access a wide variety of goods at fair prices under one roof.
- They can afford to hire trained qualified experienced staff who provide quality services
- They buy goods in large trade discounts. This enables them to sell at low prices.
- Each department is able to make independent and quick decisions that affect its operations.
- The independence of departments ensures that the weakness of one department does not affect each other.
- Savings can be made on some activities such as product promotion by centralizing them.
Disadvantages of Departmental stores
- A large amount of capital is required to start and maintain the stores
- They require a large number of customers to operate profitably
- It is difficult to give personal attention to customers
- They cater mainly for the urban communities in which they are located
- They strictly sell their goods on cash basis
- Operational costs are high due to the wide variety of services offered
- Their large size could encourage theft and pilferage of goods
- The independence of departments can make central control difficult.
This is a type of retail business where business is carried out through the post office, telephone or email
- Ordering of the goods is done through the post office telephone or email and delivering of goods is done by post or courier
- There is no personal contact between the seller and the buyer and buyers get information from advertisements.
- Goods are dispatched on the basis of cash with order (CWD) or cash on delivery (COD).
- They sell the goods through the post office
- They operate on cash with order (CWO) or cash on delivery (COD) terms
- Heavy advertisement are involved
- Customers do not visit the selling premises.
- There is no personal contact between the buyer or the seller
- All transactions are done through the post office
- They deal with goods that are less bulky, have high value, and are durable and not too fragile
- May have large warehouses
Advantages of Mail order stores
- They reach customers who are far for away from the shopping centres
- Do not require the services of sales personnel or shop attendants for skilled labour since selling is routine
- Total control of distribution is possible
- Payments is made with order or delivery so there is little chance of bad debts
- Eliminates the loss associated with shop space, thus saving on rent
- Supply of goods is based on order thus a trader requires little working capital
- The method eliminates trips to congested stores and lengthy waits queues
- Do not require large storage space for goods.
Disadvantages of Mail order stores
- Advertising and postage costs may increases the price of goods
- There is lack of personal contact between the seller and the buyer
- There is limited variety of goods on offer
- Customers do not have the opportunity of inspecting goods before buying
- There are no credit facilities
- The method is only suitable for those who can read and write
- Should there be a problem with the post office. e.g. industrial action like strikes, the business may be affected
- Difficult to operate in places where post office services are poor or unavailable
- Chances of being defrauded are high.
FUNCTIONS OF RETAILERS
Services Rendered to consumers
- Offers credit facilities; Retailers are in close contact with the consumers and some may give them credit facilities
- After-sales services; Retailers who sell technical goods e.g. cars, electronics e.t.c may offer after sale services to consumers e.g. transport, installation repair e.t.c
- Provision of variety of goods; Retailers stock a wide variety of goods from different wholesalers and manufactures enabling the consumers to have a wide choice.
- Advising consumers; Retailers may offer advice to consumers on choice and use of products
- Availing needed goods; Retailers make goods available to consumers at the right time and place
- Breaking bulk; Retailers sell goods to consumers in convenient quantities
- Accumulating bulk
- Stabilizing prices, by ensuring that goods are continuously available to consumers.
- Retailers store goods and relieve the wholesalers the burden of storing goods and the storage costs
- They relieve the wholesalers the burden of transportation
- Retailers advice wholesalers on market trends(on consumers demand)and give valuable information
- They help in distribution of goods to the consumers
- They help in breaking bulk on behalf of the wholesaler
- They finance wholesalers to continue with their operations through paying for the goods
- They relieve the wholesaler of some risks that arise from the storage of goods such as theft, fire and accidents.
- Through wholesalers retailers provide very vital information to manufactures about market demand
- They advertise goods on behalf of producers
- They sell and market goods to consumers. This relieves the manufactures the task and risk of retailing
- They store goods on behalf of the producers
- They break bulk on behalf of producers to consumers
- They finance producers by buying and paying cash
Meaning of Trade
Importance of trade:
- Helps people to acquire what they cannot produce
- Avails a variety of goods and services thereby improving the peoples living standards
- Creates an outlet for goods thereby enabling the producers to dispose of their surplus produce
- Creates employment opportunities
- Encourages specialization and division of labour
- Promotes peace, social relations and understanding the parties involved since they depend on one another.
- Provides revenue to the business and the government in form of taxes and fees charged on the various trading activities
- Ensures steady supply of goods and services
- Exploitation of local resources as traders create goods and services using locally available resources
- Encourages economic growth and development.
Classification of Trade
1. Home trade
Also called internal, local or domestic trade. It refers to the buying and selling of goods and services within the boundaries of a given country.
It is further divided into retail trade and wholesale trade.
2. International trade (foreign trade)
This is trade that is carried out beyond the boundaries of a country
This is trade carried out between individuals or government of different countries e.g. trade between a citizen of Kenya and a citizen of Tanzania, or trade between the government of Kenya and the government of Southern Sudan
International trade carried out between two countries is referred to as bilateral trade and international trade carried out among many countries (more than two countries) is referred to as multilateral trade.
International trade is classified into the following;
- Export Trade-Which is the sale of goods and services by a country to another country or individuals in one country to another country or individuals in one country to individuals in another country.
- Import Trade-Which is the buying of goods and services by one country from another country or by individuals in one country from individuals in another country.
Forms of Home Trade
- Retail Trade
- Wholesale Trade
Functions of an office:
2. Distributing (disseminating) information â through the office, information is channeled to the relevant departments for action and implementation;
3. Mailing. Letters and parcels for and from various departments are dispatched and received in an office;
4. Communication. It serves as the communication centre to and from which the information flows.
5. Safeguarding and controlling of an organizationâs property. The office ensures safety of the organizationâs property through:
- - Taking insurance cove;
- - Ensuring the safety of people using the premises;
- - Enhancing security against theft using watchmen, security lights, alarms and fences;
- - Keeping records of movement and usage of each of the property;
- - Property repairs and maintenance;
- - Periodical physical stock-taking.
- - Simple to understand and operate;
- - Compact to save on space;
- - Suitability. It should be appropriate enough to suit the business needs;
- - Elasticity. It should be flexible enough to accommodate any future expansion needs;
- - Safety. The system should be able to secure the documents against loss, misplacement, damage, unauthorized hands, etc.
- - Accessible
- - Economical. It should be inexpensive to start and maintain.
- i) Protects documents from loss and unauthorized people;
- ii) Improves tidiness and efficiency in the office;
- iii) Acts as a future reference;
- iv) Enhances systematic storage and hence easier and quicker retrieval of documents;
- v) Keeps documents neat and dry.
a) Carbon copying:
This method uses carbon papers placed between papers stacked together with the carbonated side facing down and the original paper to be handwritten or typed on placed topmost.
- i. Convenient for reproducing few copies;
- ii. Cheap;
- iii. Requires no training.
- i. Not convenient for many copies;
- ii. Copies can be misaligned
- iii. Poor quality copies;
- iv. Difficult to produce different colours;
- v. Copies of photographs cannot be reproduced.
It involves use of a master copy like for instance a stencil to reproduce a copy or a succession of copies. The master copy can be prepared by hand writing, typing or scanning. There are different methods of duplicating namely:
I. Ink duplicating
It uses ink duplicator, duplicating stencil, stylus pen, typewriter, run-off paper and ink. The stencil is cut using a stylus pen or a typewriter and is then fed into the duplicator to produce the required copies. The duplicator can be manual or electric.
- i. Quite cheap for many copies;
- ii. Easy to correct errors on the stencil using correcting fluid;
- iii. Produces permanent copies with relatively good quality;
- iv. Stencils can be stored for later use;
- v. It is fast
- i. Expensive when producing few copies;
- ii. More time consuming than photocopying;
- iii. Uses coarse absorbent papers and is therefore unsuitable for quality work;
- iv. Requires separate runs for different colours.
This method uses a spirit duplicator which transfers carbon from the master copy to the other copies.
- i. Economical for few copies;
- ii. Can handle different colours in the copies.
- i. Unsuitable for many copies;
- ii. Copies fade out with time;
- iii. The master is expensive.
This method uses a photocopier which photographs the master copy and prints out the photography on blank pieces of paper to produce an exact copy of the master copy.
- i. Cheap for few copies;
- ii. Quicker than duplicating or printing;
- iii. Requires no special training to operate;
- iv. Produces high quality copies;
- v. Some machines can produce coloured copies;
- vi. Confirming the accuracy by comparing the copy with the original is not required unlike the case with duplicating and printing.
- vii. Environmentally friendly.
- i. Expensive to produce many copies;
- ii. Copies may fade out with time;
- iii. Only selected colours can be copied
- iv. Can be easily misused due to its convenience;
- v. Cannot be used where there is no electricity.
This process uses computerized or manual printing equipments to produce documents. Computer and printers can be networked to have the following advantages.
- i. Produces high quality copies;
- ii. Can produce different colours;
- iii. Convenient for many copies;
- iv. Environmentally friendly.
- i. Expensive
- ii. Requires specialized training;
- iii. Requires electricity.
This is a mechanical method that uses the concept of cutting out an outline of some letters on a template such as a piece of paper, placing the cut out template against the background of the surface to be printed and then spreading ink onto the template to produce the prints. It is mainly used on surfaces that cannot be fed into a printer.
- i. Cheap
- ii. Requires only little training
- iii. Adaptable
- iv. Can produce a variety of colours
In this method, the document to be printed is first printed onto a metallic plate which then affixed onto a printer for duplication.
- i. Produces high quality documents
- ii. Suited for mass production;
- iii. Can print different colours
- i. High initial and installation cost;
- ii. Pollutes environment;
- iii. Leads to deforestation due to high demand of logging to get trees;
- iv. Requires a lot of monitoring.
Types Office layouts
a) Open office layout
The staff members are housed in one large room and are usually grouped into departments. This is common in banks and some KPLC offices.
- Easy to supervise the staff;
- Low construction cost since they need few partitions;
- Easy to locate workers;
- Minimizing staff movement hence saving time when passing information;
- More efficient utilization of equipment since the staff is closely monitored;
- Promotes teamwork;
- Low maintenance cost;
- Saves floor space;
- Cheap to decorate;
- Discourages worker absenteeism.
- Disruption from colleagues;
- Senior workers are not secluded which may affect their status quo;
- Creates untidy un-business like appearance;
- Due to overcrowding, air conditioning, lighting and heating may not be conducive to all;
- Distraction by fellow workers and machines may lower productivity;
- Contagious disease may easily spread;
- Private discussions and consultations with management may be difficult.
Also known as cubicles. Usually occupied by one or two people with their names and/or their designations written on the door.
- Offers privacy
- Less noise and disruptions;
- Creates a conducive working environment;
- Confers status to senior workers;
- Air conditioning, lighting and heating may be controlled to comfortable levels;
- Provides security for valuable ad sensitive documents.
- Impedes closer supervision of the workers;
- Costly to construct and maintain;
- Encourages absenteeism;
- Time consuming by workers as they move from one office to another;
- Encourages laxity;
- Reduces interaction between management and other employees;
- Possible to misuse office facilities.
It is similar to the open layout but is more sophisticated with some glass semi-partition, sometimes with different floor levels so as to have senior employees on a slightly higher level for easier supervision and may have some decorations.
- Promotes teamwork among workers;
- Promotes sharing of office equipment hence less equipments are required;
- Easy supervision of the workers;
- Low maintenance cost;
- Easy location of workers;
- Discourages absenteeism;
- Decorations provides conducive and attractive working environment.
- Disruption by colleagues and machines;
- May be expensive to set up and maintain;
- No privacy for senior officers;
- Confidential work may not be conveniently done
- Set up may be more about aesthetics than functionality.
Roles of office equipment
- Make working more efficient;
- Enhances neatness and accuracy;
- Ensure security for documents;
- Provides comfortable working environment.
Types of office equipment
Trimming documents into required shapes and sizes;
Make holes in papers to facilitate filing
For pinning papers together
To remove pins from papers
Folding letters and sealing envelopes;
For printing postage impressions on envelopes;
For printing addresses on the mail
For sorting letters
For opening letters
To fold documents, place them in envelopes and seal the envelops
Used for typing documents manually
Dictating machines (Dictaphone)
For making shorthand dictations and recording information on tapes;
Cutting unwanted documents into tiny pieces to avoid the documents getting into wrong hands
For reproducing documents from a master copy. (stencil)
Telephone, radio calls, pagers
Used to send and receive messages;
Telex-printer, computer emails
For printing telexed messages
Facsimile , answering machines
For transmitting written messages like letters, maps, diagrams, photographs.
For producing documents
ACCOUNTS / FINANCE
Adding and subtracting figures
Preparing ash receipts
For all types of calculations
Accounting machine, Tax register
For posting information to ledgers and payroll preparation
For complex calculations
Money counting machine
For counting coins and notes
ââAdvantages of Office Machines
- Save on labour â use of machines substitutes large number of people hence saving on salaries;
- Speed. Machines are much faster than people;
- Accuracy â when used by an efficient operator, it can be very accurate;
- Presentable â their products are of high quality;
- Control â machines can prevent frauds by using some meters or detectors;
- Uniformity â machines produce homogenous outputs;
- Minimizes â they handle tedious and monotonous activities;
- Saving on cost â machines are more efficient than labour
âDisadvantages of office machines
- Cost â high initial, maintenance and operational costs;
- Stoppage of work â breakdown and downtime may disrupt operations;
- Unemployment â machines displace people from work;
- Obsolescence â advanced in technology may render a machine outdated;
- Require skills â machines require some training to operate;
- Special materials â some machinery may require special stationary;
- Losses â carelessness of the operator may lead to high losses.
âFactors considered when selecting office equipment
- Cost â initial, operational and maintenance costs;
- Adaptability â should be able to cope with future changes in technology;
- Durability â should have high working life;
- Effect on staff morale â it should boost the morale of the workers;
- Possibility of hiring rather than buying
- Availability of complementary resources â power to operate, the raw materials and spare parts should be considered as one acquires equipment;
- Availability of man power to operate the equipment;
- Availability of adequate space to keep it;
- Security of the equipment
- Managerial staff - They formulate policies, implement them and supervise other workers. They include managers, and company secretary.
- Junior staff â they include skilled and semi-skilled employees like account clerks, secretaries and sales persons.
- Subordinate staff â they are unskilled employees who provide non-specialized duties like cleaning and delivering messages.
Duties of various office staff
- (i) Controls all activities in the organization;
- (ii) Co-ordinates all departments to harmoniously work towards the main goals and objectives;
- (iii) Responsible for acquisition and management of staff;
- (iv) Provides resources for the organization;
- (v) Advising the owners on matters relating to the organization;
- (vi) Plans work and time schedule in the organization.
- (i) Handles all legal matters of the company;
- (ii) Taking down minutes during major meetings like AGM.
Include production manager, sales manager, technical manager, finance, human resources manager, etc. The finance manager:
- (i) Keeps books of account;
- (ii) Funds collection, banking and making payments on behalf of the firm;
- (iii) Making financial returns to the General Manager;
- (iv) Preparing financial reports;
- (v) Preparing payrolls and budgets.
A senior employee usually attached to a more senior officer.
- (i) Filing information for the boss;
- (ii) Attending meetings and recording minutes;
- (iii) Supervising junior secretarial staff;
- (iv) Receiving and making telephone calls for the boss;
- (v) Taking dictation from the boss;
- (vi) Making travel arrangements and booking hotels for the boss;
- (vii) Keeping petty cash
- (i) Typing information from original documents;
- (ii) Filing documents;
- (iii) Reproducing documents
- (i) Handling mail;
- (ii) Duplicating and operating various office machines;
- (iii) Indexing and filing;
- (iv) Helps in store keeping and record keeping;
- (v) Ordering, receiving, storing and issuing stationary.
- (i) Receives calls and directs them to the relevant offices at the switch board.
- (i) Collect and delivers mail
- (i) Supervises massagers and porters;
- (ii) Receives and directs visitors within the organization;
- (iii) Taking and passing messages;
- (iv) Making, renewing and cancelling appointments;
- (v) Keeping visitorsâ book
Essential qualities of office staff.
- (i) Physical appearance e.g. dressing and presentability;
- (ii) Hygiene â general body cleanliness;
- (iii) Posture â manner of walking, talking, sitting etc. should be dignified;
- (iv) Moral behavior
- (v) Good health and physical fitness.
- (i) Respect â showing regards to others in regard to age, rank and status.
- (ii) Punctuality â keeping time in duties and appointments.
- (iii) Courtesy â handling people politely, pleasantly and with consideration.
- (iv) Loyalty â commitment to the organization.
- (v) Honesty â telling the truth and sincerity.
- (vi) Co-operation â working harmoniously with colleagues.
- (vii) Diplomacy â ability to convince others tactfully.
- (viii) Judgment â making informed decisions.
- (ix) Accuracy e. typing a document quickly and with precision.
- (x) Initiation â ability to create and implement ideas.
- (i) Knowledge â relevant academic and professional qualifications;
- (ii) Skills â capability to work efficiently, accurately and easily that comes with training and experience.
Trends in Office Management
A. Computers â it is used for:
- i. Data storage and inventory control;
- ii. Processing amounting transactions
- iii. Storing information for the staff;
- iv. Communication e.g. email, intranet, websites etc
- i. Economize on space and amount of materials;
- ii. Fast
- iii. Presentable output;
- iv. Can have numerous storage capacity
- v. Facilitates communication
- vi. accurate
- i. leads to unemployment;
- ii. inhibits innovation;
- iii. using the same machine over and over is monotonous;
- iv. requires extra expense for back-ups, data links, UPS e.t.c
- v. requires skilled manpower;
- vi. may lead to leaking of confidential information;
- vii. expensive to install
- viii. Requires electricity;
- ix. Subject to virus attack
âUses for computers in communication
- Internet â connects very many computers all over the world hence proving lots of information;
- Intranet â connect the organization to selected persons like the suppliers, customers or employees;
- Website â a virtual location in the internet posted for other parties to access.
E-commerce â involves carrying out trading activities on the internet. It offers the following advantages:
- - Access to a large market;
- - Can connect small and large businesses without discrimination;
- - Very fast
- - Reduces paper work
- - Saves cost of sending and receiving messages;
- - Can enable one to access important business information enhancing decision making.
- Teleconferencing â one can hold meetings over the internet.
âAdvantages of internet, intranet, website, extranet, and e-commerce
- Low cost
- Convenient â you get information at the touch of a button;
- Can store information for future use
âDisadvantages of internet, intranet, website, extranet, and e-commerce
ii. High maintenance cost;
iii. Requires training for the users
iv. Suffers from occasional breakdown e.g. internet down-times, computer virus,
v. Prone to misuse
vi. Requires power to operate.
- Office arrangement â many organizations are nowadays adopting open or landscape office layouts to enable the manager have better control;
- Public relations department â the need for much better customer relations has necessitated establishment of customer relations department;
- Mobile phones â this enables the workers to carry out their responsibilities even while away;
- Office location- many organizations are tending to prefer locations outside the contestation of town to avoid traffic jams, lack of space and high running costs.
- Procedure and routines â technology has transformed some of the traditional procedures and routines like the use of computers instead of typewriters has enables management to take up responsibilities that would earlier be assigned to typists.
Meaning of entrepreneurship
An entrepreneur who identifies business opportunities and gets the necessary resources in order to start and run a business. The entrepreneur therefore creates new businesses or transform the existing ones in the face of risks and uncertainties in order to make profits.
An entrepreneur is therefore a business owner; he starts and organizes the business (the factors of production in appropriate combination)
Importance of entrepreneurship to an economy
- Creation of employment- Through entrepreneurship, jobs are created which help in absorbing people who would otherwise have been jobless e.g. people employed in the jua kali sector.
- Formation of capital- Profit earned by entrepreneurs may be used to expand the business or even to start other businesses. Wages and salaries paid to the employees is a source of capital to them.
- Raising standards of living- Entrepreneurs pay wages and salaries to their employees which enable them to acquire goods and services they need to live comfortable lives. Entrepreneurs also provide a wide variety of goods and services to consumers hence leading to improved living standards.
- Encourages the use of local resources- Entrepreneurship makes it possible to use/exploit local resources. Idle resources such as scrap metal may be used to make jikos.
- Improving infrastructure- The existence of businesses in the economy makes the government establish or improve infrastructure such as roads, communication facilities and water. At other times, entrepreneurs may combine forces to improve infrastructure in their area of operation.
- Savings on imports- Local entrepreneurs are able to produce goods and services that are a substitute to imports. This helps the country to reduce the amount of money required to pay for such imports.
- Reducing foreign dominance of the economy- Participation of local entrepreneurs in various business activities helps in reducing investments by foreigners in the particular area.
- Promotion of technology/promotion of innovation, research and development- Entrepreneurs are creative and they come up with new and better ways of accomplishing tasks. Most of the inventions and innovations in our society have been developed by entrepreneurs.
- Promotion of entrepreneurial culture/helps in the creation of role models- Successful entrepreneurs/entrepreneurial ventures encourage other members of society to initiate their own businesses and hence act as role models in the business world.
- It contributes to government revenue- Taxes and fees paid by entrepreneurial ventures constitute part of government revenue/income that helps it to facilitate its operations.
- It promotes economic growth- Entrepreneurs produce goods and services. This increases the volume of goods and services in the economy leading to expansion of the economy.
- It may promote self-actualization and esteem- By initiating businesses in which they are their own bosses, entrepreneurs pride is boosted and this may promote the overall productivity of the economy.
Characteristics of an entrepreneur
- Desire to achieve- An entrepreneur is a person who wishes to excel and has the drive to succeed while competing with others. He/she always tries to accomplish something new.
- Ability to solve problems- An entrepreneur is expected to struggle with determination to get solutions even under difficult situation so that the business can succeed.
- Risk taker- Entrepreneurs take viable business ventures even when they are not sure of the returns. They assess situations and take calculated risks.
- Initiative – An entrepreneur should be aggressive in implementing ideas well ahead of other businesses so that he/she can be ahead of them.
- Time consciousness- An entrepreneur should be able to use time wisely and avoid wasting it. A wise and quickly implemented decision may mean success in business whereas time lost may mean failure.
- Creativity and innovation- An entrepreneur should be able to generate new ideas as well as think of the best ways of putting them into practice.
- Independence and self-confidence- Entrepreneurs are their own bosses and should believe in their ability to do things and succeed.
- Persistence and patience- An entrepreneur should not give up when challenges arise. Sometimes, he/she takes time and make a repeated action or adopts a different course of action in order to overcome such challenges so as to reach the target
- Decisive- Entrepreneurs have strong problem, solving and decision making skills. The business environment is such that decision has to be made quickly to respond to any situation that may arise.
- Persuasive- Convincing people to believe in their ideas and buy their products keeps entrepreneurs in business
- Goal-oriented- Entrepreneurs are achievers who work towards set goals. They continually monitor progress to determine whether they are achieving the goals they have set and where improvements need to be made.
- Seek information- Entrepreneurs use various methods to get the relevant information that is necessary for the success of the business.
- Concern for high quality products- An entrepreneur should strive to cope or beat the existing standards of quality. This will enable him/her succeed in a competitive market.
- Commitment to work- An entrepreneur places priority on getting tasks accomplished. To achieve this he/she may make extra ordinary personal sacrifice e.g. working until very late.
- Concern for customer satisfaction- An entrepreneur should ensure that customers are satisfied so as to continue being/remain loyal to the business.
- Desire to feedback- An entrepreneur should be interested in knowing how the business is performing.
Generating Business Ideas
Business ideas are all about thoughts on possible businesses an entrepreneur can start or improve. It indicates among other things;
- The products to produce/sell
- Who the business will sell to (market)
- Where the business will be located
- How the business will be run (management)
- Why the business is needed (objectives)
Sources of Business Ideas
- Newspapers- Local newspapers like the Daily Nation, East African etc. especially in the business and advertising sections have a lot of information about commercial opportunities as well as personal services.
- Shows and exhibition- Visiting shows and exhibitions organized by manufactures and distributors and asking questions from the sales persons. Entrepreneurs can also get business ideas from products displayed in such shows.
- Magazines and journals- Reading magazines and journals with business information may equip an entrepreneur with new business ideas.
- Hobbies – These are activities pursued for pleasure but they can also serve as a source of business ideas e.g. photography.
- Vocational training and experience- A business idea may be developed from one’s own area of training or experience e.g. a teacher may use ideas from his/her training to start a private school.
- Surveys and market research- This involves conducting an investigation to gather information from consumers on what products they require.
- Recycling/using waste products- Some waste products could be converted into useful products e.g. scrap metal for making jikos, old tyres for making sandals etc.
- Listening to what people say- By listening keenly to what people say, one can identify unsatisfied needs e.g. complaints about goods and services in the market. These complaints may form a basis of a business idea for an entrepreneur.
- Identifying a market gap (niche) - An entrepreneur may try to identify/spot the needs of consumers which are not being met by the existing goods and services.
- Brain storming- An entrepreneur can engage other people in a discussion on how best to develop businesses.
- Listing attributes of a product- By listing the attributes of a product that is already existing in the market, one can find new use for the product.
- Copying/improving an existing business- This involves identifying the weaknesses of a business and trying to come up with solutions.
A business opportunity is a favourable chance that an entrepreneur accepts for investment. It exists where there is a gap to be filled in the needs of the market. Examples of such gaps include;
- In availability of products- This is where goods and services needed by the consumers are not available at all in the market.
- Poor quality products- A business opportunity exists if one offers better quality goods and services than those of the existing businesses.
- Insufficient quantities- This is where the goods supplied are not enough to meet the demand/need of the consumers.
- Unaffordable prices- A business opportunity exists where one would charge affordable prices.
- Poor services- A business opportunity exists where customers are not served well.
Evaluating a business opportunity
Evaluation should be done carefully, systematically and without emotions. Evaluation is necessary even where there is only one business idea. This will help in avoiding starting a business that cannot succeed.
Factors to consider when evaluating a business opportunity
a. Personal consideration
These are the abilities and expectations of an entrepreneur. They include the following;
- Objectives- The entrepreneur should evaluate the business idea to find out whether it is in line with his/her objectives.
- Skills- Where a business requires certain specialized skills and those skills are lacking the idea may be dropped.
- Commitments- Where the business is likely to interfere with the entrepreneurs other commitments it may fail.
- Interest- It is necessary to check whether the intended business will interest the entrepreneur or not. If the entrepreneur will not enjoy running the business, the idea should be dropped.
These are external factors that are likely to affect the operations of the business and they include;
- Availability of market for the product- An entrepreneur should assess the availability of customers before starting a business. Customers exist where there is a gap/niche in the market.
Technology- The business should be evaluated in terms of whether there is an appropriate technology that can be used in production. Factors to be looked into include;
- Appropriateness of the technology
- The cost of the technology
- The possibility of the business suffering in case the technology becomes outdated/obsolete.
- Availability of raw materials and other resources- The raw materials and resources required should be within the reach and affordable to the entrepreneur.
- Government policy- An entrepreneur should consider the requirements of the government before starting a business e.g. the government may require certain businesses to be located in certain areas only.
- Amount of capital required- The capital required to run and maintain the business should be considered i.e. the source of capital.
- Profitability of the business- Within a certain duration of time.
- The break-even period- How long the business can take to support itself.
- Possibility of expansion i.e. the potential for growth of the business.
- Impact of the business operations on the environments; some businesses lead to environmental degradation and should be located in appropriate places/effect on community and environmental health.
- Security- Availability of security should be considered.
- Level of competition- This will help determine whether the business will survive or not.
- The risks that the business will face.
Contents of a good business plan
- Name of the business
- The product to be sold or produced
- Personnel to manage the business
- Amount of finance and other resources required
- The market to be served (customers)
- Types of employees required
- Projection (level of achievement in future in terms of profit)
- Summary of the plan.
Need for the business plan
- Avoiding mistakes- in the process of drawing a plan; mistakes that would take place in the business are identified and corrected in the plan. This helps in avoiding the occurrence of such mistakes in the business.
- Identifying strength and weaknesses- A business plan helps in identifying strengths or weaknesses and where weaknesses are detected, remedial actions may be taken early enough.
- Requirement by financiers- Financial institutions such as banks may require a business plan before they can accept to finance the activities of the business.
- Allocation of resources- It helps to determine the resources required and plan on how and where to use them. This ensures that resources are neither underutilized nor used for the wrong purpose.
- Facilitates business evaluation- A business plan helps an entrepreneur to assess the progress of the business and any deviation (difference) from the intended plan can be corrected in good time.
- It helps an entrepreneur outline competition- It helps the entrepreneur to be fully aware of the market she or he plans to operate in, understand important trends and know who her/his competitors are and their strengths and weaknesses. This information aids the entrepreneur to develop products that are better than those of the competitors.
- A motivating factor- A business plan is communicated to all employees in the business. This makes them aware of the direction to be taken by the business. This motivates them to work towards that direction.
- Adaptability- Normally, not all events occur as predicted in the business plan. However, a well-drawn business plan should give room to accommodate any changes that might occur in the future.
- Tool for control- Planning involves setting of standards against which performances can be assessed. In case of deviation corrective measures can be taken.
Factors that influence entrepreneurship practices.
- Government policy- Some government policies are favourable to the operations of the business and thus encourage people to go into business while other policies may be unfavourable and will discourage people from going into business. E.g. higher taxes are unfavourable hence discouraging.
- Infrastructure- infrastructure includes transport and communication networks, water, security etc. Availability of good infrastructure in an area tends to encourage people to set up businesses while poor infrastructure tends to discourage them
- Levels of education and skills- Relevant and appropriate knowledge and skills are necessary if the business has to succeed. These are acquired through education, training or experience.
- Availability of markets- Adequate markets encourages existing entrepreneurs to continue producing and also encourage/attract new ones to venture into business.
- Availability of resources- Appropriate resources are necessary for starting and smooth running of a business. These resources include physical, human, capital and technology.
- Cultural and social beliefs and attitudes- These are norms, values and beliefs of a given community. Culture helps determine the kind of goods and services that people consume. This in turn, dictates the type of businesses to be established in such communities. E.g. Muslims do not take pork therefore businesses selling pork will not do well in such communities.
- Competition- Businesses will do well if they are able to complete favourably. Others will avoid competition by establishing businesses where there is no competition.
- Political stability- political stability gives conducive atmosphere for businesses to start and thrive on the other hands, where there is no political instability, businesses may not do well and entrepreneurs may close down businesses or new ones may not come up.
- Natural factors- natural factors such as rainfall, temperatures, earthquakes, pests, drought etc. may influence the type of businesses that are carried out in an area, especially agricultural businesses.
- Presence of role models in the society- The presence of successful entrepreneurs acts as an encouragement to aspiring entrepreneurs.
Causes of Business success
Some of the factors that lead to the success of business may include;
- Right choice of business- A good business opportunity needs to be evaluated on the basis of ability to capture many customers, make reasonable profit for the owner(s) and provide an opportunity for growth. Making the right choice of a business or product ultimately contributes to the success of a business.
Proper managerial skills- An entrepreneur should be able to carry out management roles effectively. A good manager will carry out roles such as;
- Hiring staff- The process of acquiring new employees to take up new positions or to replace employees who have left the business.
- Assigning duties- Allocating employees duties according to their qualifications.
- Supervising- Ensuring that employees carry out tasks that are assigned to them
- Training- Enabling employees to acquire knowledge and skills necessary to perform duties assigned to them.
- Motivating- giving employee’s inducement to perform their duties.
- Proper location/availability of customers- The business should be situated in a place convenient for its operations e.g. where customers are easily available.
- Adequate finance/capital- Money is needed to acquire other resources that are required by the business. A business that has adequate capital is likely to do well as it is able to finance all its operations.
- Lack of competition- Most businesses are put out of operation by stiff competition. Therefore, a business operating in an area where there is little or no competition is likely to succeed.
- Commitment to business
Proper financial management- Proper management of finances is necessary for the success of the business. It ensures that money is available and is used for the intended purpose. Management of finances includes;
- Acquisition of finances- This involves raising of the required amounts of money. This can be done through a variety of ways such as loans from financial institutions and owner’s contributions.
- Managing cash- This ensures that the available money is only used for the activities that are beneficial to the well-being of the business.
- Proper record keeping- This involves having a record of finances raised and how they are used.
- Proper debt management- Care should be taken to ensure that credit is only extended to creditworthy customers (credit worthy customers are those whose chances of paying are high).Debt collection should also be carefully planned to ensure that they are collected when due.
- Good public relations- This involves creating and improving a good relationship between the business and other people. Good relations are necessary for attracting and retention of customers.
- Being creative and innovative- This involves finding new uses of a product, new channels of communication and new ways of doing things. This enables the entrepreneur to be ahead of others.
- Proper market research- The business environment usually changes at a high rate. This makes it necessary for an entrepreneur to study his/her customer’s preferences, tastes, spending patterns, income levels, competitions, and behavior and substitute products.
- Good/proper time management- Time management is the ability to carry out planned activities within the allocated period.
- Proper skills and attitudes of employees- Employing qualified staff results in work being done in a professional manner. This enhances the performance of the business.
- Proper pricing of goods and services- Pricing should be done appropriately. If the prices for the products are too high, the business will lose customers. Very low prices may attract customers but kill the business. It is therefore important to create a balance between price to charge and the profit margin to realize.
ETHICAL ISSUES IN BUSINESS
- Ethics - refers to a set of values, principles and rules of acceptable behavior which influence how individuals, groups of people and the society in general behave.
- Business ethics- refers to acceptable behavior that should be displayed by business people. Business ethics helps businesses in deciding what actions are right or wrong depending on circumstances.
- Ethical issues- are the moral concerns that arise in the course of carrying out business.
Need for Ethical issues in Business
Ensures no discrimination in business- Business ethics ensures there is no discrimination in areas such as recruitment (hiring), promotion, training, remuneration and assignment of duties. These processes should be objective and based on merit, qualification, experience and ability.
- It ensures that everybody is given an equal opportunity (has equal chance) and is not discriminated against because of their sex, religion, ethnicity, social background etc.
Ensures protection of the environment- Helps in avoiding environmental pollution-Business ethics prohibits business units from carrying out activities that may cause pollution and degradation of the environment. Environmental degradation may be caused by human activities such as logging and unplanned cultivation. Pollution may be caused by activities such as:
- Damping effluents from production units into water masses thereby causing water pollution. Water pollution is disastrous to human health and also to aquatic animals.
- Emitting carbon dioxide and other gases into the atmosphere causing air pollution.
- Damping of waste material on the land surface causing solid waste pollution. This creates terrible sites to watch and also breeding places for dangerous insects such as flies.
Ensures fair play in competition- Ethics ensures that businesses do not engage in unfair practices while competing with others. These practices may include:
- Destroying a competitor’s product or promotional tools such as billboards
- Buying and destroying competitor’s products before they reach the market
- Giving false information about a competitor’s product.
Helps in avoiding environmental degradation- Ethics ensures that the physical environment is not degraded through business activities. Such activities may include:
- Deforestation through logging
- Unplanned cultivation.
- Helps in avoiding environmental pollution-Environmental pollution may be caused by activities such as:
- Releasing carbon dioxide and other gases into the atmosphere thereby causing air pollution
- Channeling effluents from factories to water masses thereby causing water pollution. Such pollution can be harmful to human health and aquatic animals.
- Disposing of waste material such as paper and scrap metal on the land surface thereby causing solid waste pollution.
- Producing too loud noise which might be harmful to human beings hearings
- Emitting too strong light that may be harmful to our eyesight.
- Ensures rights of employees are upheld- Ethics ensures that the employer does not violate the rights of employees especially as laid out in their terms and conditions of employment. Such rights include payment of dues in time.
- Eliminates use of unfair means of achieving business objectives- Ethics ensures that the business operations are carried out in a professional way e.g. it is unethical to give or receive a bribe in order to win a business contract. Similarly, it is not ethical to hoard goods awaiting their prices to go up.
Avoids consumer exploitation- Ethics ensures that consumers are not exploited by the business. Consumers may be exploited through practices such as:
- Overcharging them
- False advertisement
- Selling poor quality goods and services
- Selling wrong quantities
- Selling harmful commodities.
Types of Utility
- Form utility – involved the changing of raw materials into finished products.
- Time utility – it is created by storage of goods until an appropriate time, e.g. storing seeds until planting time;
- Place utility – this is the bridging the gap between the producer and the consumer of a commodity, for instance moving maize from the fields into the market.
- Possessive utility – it is created when ownership of goods change from one person to another.
Direct and Indirect Production
This is where goods and services are produced for own consumption rather than for commercial purposes. It is commonly referred to as subsistence and is much more common in rural areas. However, nowadays it is difficult to find someone living purely on this form of production.
Characteristics of Direct Production
- Goods and qualities are mainly of low quality and quantity;
- Encourages individualism
- Leads to low standards of living;
- Does not encourage consumption;
- Can be very tiring;
- Does not encourage invention and innovation;
- A lot of time is wasted as one moves from one job to another;
- No one has the ability to provide all that he/she requires.
It is the production of goods and services for selling the excess to the market in order to purchase what one needs but doesn’t produce. It thus leads to specialization.
Characteristics of Indirect Production
- Production with a view for exchange;
- The producer specializes in one or a few areas of production;
- It results in surplus of goods and services.
Level of Production and Related Occupations
This involves extracting the goods from their natural setting. The goods are either used as is or they are processed further to make them more useful. Primary level of production mainly involves mere ‘looking after’ e.g. growing crops where the farmer looks at the crops and nature grows them, or extracting the materials from nature. Examples of primary production include: farming, mining, fishing and lumbering.
ii. Secondary level
It involves processing raw materials into much more useful products like processing clothes, processing and food canning, manufacturing like furniture making and welding, and construction roads, houses and railways
iii. Tertiary level
This level deals with production of services. It may be divided into two categories:
- Communal services – it involves trade or aids to trade activities like banking, retailing, banking and insurance.
- Direct personal services – include services rendered by individuals directly to the consumers. E.g. teaching, nursing, pastoral work, legal practice, etc.
Factors of Production and Their Rewards
It refers to all natural e.g. soil, rivers, lakes and climate. Since it is natural, it cannot be increased in quantity, it can only be improved in quality. Land earns rewards to the owners or users in terms of royalty, rent and rates.
Characteristics of Land as a Factor of Production
- It is a basic factor of production since production cannot take place without it;
- It is fixed in quantity of supply;
- It is not homogenous in quality. Production in one piece of land is different from that of another.
- It is a natural resource;
- It lacks geographical mobility since it cannot be shifted from one place to another but it is occupationally mobile as it can be put to alternative uses;
- It is subject to the law of diminishing returns;
- Its productivity can be improved by increasing the quantity and quality of capital.
Also referred to as human resource, it requires either human physical effort or mental effort or both. It can be categorized as skilled where skills acquisition is required for one to be productive, semi-skilled where some simple training is needed or unskilled where no training is needed at all. Its reward is salaries and wages.
Characteristics of labour as a factor of production
- It is a basic factor of production;
- It cannot be separated from the laborer;
- It is human in nature, with capacity to think and limitations of moods;
- It cannot be stored;
- It is mobile both in terms of geographical and occupational mobility;
- The laborers sell their labour, not themselves.
This is also known as producer goods or capital goods and includes all man-made resources used in production of goods and services. It earns interest.
Characteristics of Capital as a factor of Production
- Its supply is under man’s control since it is manmade;
- Can be improved through technology;
- It is a basic factor of production;
- It is subject to depreciation.
An entrepreneur organizes all the other factors of production and pays rent for the land, interest for the capital and wages for the labour so as to use them. He/she is the organizer, the manager and the risk taker. His/her reward is the profit.
Functions of the entrepreneur:
- Controls the business;
- Starts the business;
- Makes decisions;
- Owns the whole project;
- Acquires and pays for all the other factors of production;
- Pays for such expenses as electricity, water, stationery and postage;
- Bears the risk and enjoys the profit.
Division of Labour and Specialization
Advantages of division of labour and specialization
- Output per worker is greatly increased;
- It encourages invention and innovation as one repeats the same process over and over, he can easily come up with more innovative and efficient tactics or solutions to a certain challenge.
- Enables greater use of machines in production making production fast and efficient;
- It saves time where the worker dos not have to move from one activity to another;
- It enables a worker to acquire skills in a particular field;
- It enables one to engage in a trade in which he/she is best suited or talented to do;
- Leads to production of production of quality goods and services;
- Routine jobs involved reduce mental and physical effort.
Disadvantages of division of labour and specialization
- Its monotonous nature leads to boredom;
- Specialization may make a country dependent on other countries;
- Specialization makes a worker dependent on one trade risking his employment in case his/her skills or product lose demand in the market;
- It hinders creativity since people work mechanically like machines;
- Interruption of the work of a few people derails the entire process;
- Specialization and division of labour brings people together bringing about congestion causing social crimes like prostitution and robbery.
- Lack of motivating pride in the final product by any of the individual worker.
Classification of Goods and Services produced in an economy
- Free goods and economic goods – free goods are mainly the free gifts of nature. They are abundant, have utility but no monetary value while economic goods have both monetary value and utility due to their scarcity nature.
- Producer goods and consumer goods – producer goods are also known as capital goods and are used to produce other goods. They include such equipments as machinery, tools, tractors, Lorries and grinding mills. Consumer goods are readily usable by their final consumer and include foods, television, cars, cosmetics, medicines etc. some goods can also be both producer and consumer depending on the intention of the buyer e.g. a building might be for renting or for occupation.
- Perishable goods and durable goods – perishable goods go bad easily for example the horticultural products while durable goods are usable for a longer period of time and are able to withstand spoilage. They include cars, furniture, buildings, metals etc.
- Public goods and private goods – public goods are owned by the government or are collectively owned, for instance infrastructure like roads, railways, ports, courts, churches, etc. while private goods are owned by individuals and the individuals have exclusive right to usage for example cars, private schools.
- Intermediate goods and finished goods – intermediate goods are not ready for use but require more production e.g. sisal, wood, cotton, skins and hides, minerals etc. while finished goods are final products ready for use like bread, furniture, shoes, ornaments et.
- Material goods and non-material goods – material goods are tangible while non-material goods are services.
SATISFACTION OF HUMAN WANTS
For us to lead our lives well, we require certain commodities and services. These goods and services satisfy our wants. Human wants can be referred to as the desires that human beings strive to satisfy by using goods and services. The satisfaction of these wants refers to the process of acquiring and using the required goods and services.
Characteristics of human wants
- Insatiable – human wants are endless (each cannot be satisfied once and for all) and they are also unlimited in number (satisfying one requires the other.)
- Competitive – the unlimited human wants are to be satisfied using limited human wants. This necessitates choice of the wants to satisfy and those to forego;
- They are recurrent – Satisfaction levels vary in time such that a need that has been fully satisfied in one point of time requires satisfaction in another point. Several hours after eating to the full, one feels hunger again.
- Varied intensity and urgency – the intensity of need is different for different people and also in different time, gender, age, season, location and culture.
- Require resources – it takes resources to satisfy human wants. Resources are always much less than the wants they need to satisfy;
- Complimentary – Satisfying some wants may create a need for another related want. For instance, acquiring a shoe may create a need for polish and socks, buying a car may require fuel.
- Universal – most human wants are common to all human wants, though in varying quantities and qualities;
- Habitual – Many consumers tend to develop a taste of commodities they use more frequently, especially certain brands and also certain addictive commodities.
Types of Human Wants
a. Basic wants
These are the essential needs in life such that one cannot do without them. They include food, shelter and clothing. They are satisfied before the secondary wants. They have the following characteristics;
- One cannot do without them;
- They’re felt needs;
- Cannot be postponed;
- They are satisfied before secondary wants.
Secondary wants are requirements for comfortable and luxuriant live. Comforts provide good life, beyond mere survival. It includes such needs like Medicare, education and security. Luxuries include even much more flamboyant needs like a sleek car, a mansion, study abroad and such kinds of needs. At times some secondary want may be meant to save lives, for instance Medicare. In such circumstances, the needs become a basic want.
Goods and Services
Characteristics of Goods
- Tangible – Can be touched and felt;
- Can be seen – Most of them, apart from gas, are visible;
- Can change possession – goods can change ownership from one person to another through a price or donation;
- Can be stored – all goods can be stored for future use. The length of storage depends on whether the goods are durable or perishable;
- Can change in quality over time – some goods depreciate while others such as land appreciate with time;
- Their quality can be standardized – through mechanization, production of goods can be automated and thereby their quality standardized. Standardization is enhanced by embarking on quality control procedures.
Characteristics of Services
- Intangible – services are immaterial, and hence cannot be touched or felt, bit their effects can be felt;
- Quality cannot be standardized – services vary from one provider to the other, from time to time and also from place to place. So standardization is very difficult;
- Cannot be seen – they are immaterial and are therefore not visible;
- Cannot be stored – services are extremely perishable. They are consumed as they are provided. Hence they cannot be stored;
- Inseparable from the provider – services can therefore not be transferred from one person to another.
Characteristics of economic resources
- Scarce in supply – the resources are limited while the wants to be satisfied by the resources are unlimited;
- Have money value – each commodity has a value that can be used to change ownership from one person to another.
- Unevenly distributed – they are more concentrated in some places than on others;
- Can change ownership – their money value enables people to change the ownership of the commodities from one person to another;
- They have utility – economic resources are useful in satisfying a want;
- Can be combined – they can be put together to produce some different commodities, e.g. building materials like natural stone, cement, nails, iron sheet, tiles, wood, concrete, steel and glass can be combined into a building.
- They have alternative uses – the owners have to choose the most appropriate use for a resource since it can be put into many different uses with different results;
- Can be complimentary – some goods have utility only when used together, for instance car and petrol.
Classification of Economic Resources
They are provided by nature and are therefore also known as gifts of nature. Man works on them to create goods and services. They include: minerals, forests, lakes, rivers, Climates Mountains, land and mountains.
For the natural resources to be beneficial, man must:
- Know that they exist;
- Use their knowledge to extract the resources from their natural setting;
- Use the extracted resources to produce goods and services that can satisfy their wants.
Goods produced from natural resources can be consumer goods like clothes, bread and ink or prouder goods like machinery, vehicles, trains, computers e.t.c.
b. Man – made resources
These are producer goods produced from natural resources. They include tools, machines and commercial vehicles.
c. Human resources
These are human beings involved in production activities through intelligence or physical effort. They include teachers, doctors, lawyers, engineers, manual laborers etc.
Renewable Resources and Non-renewable Resources
They include those resources whose production can be restored after use. Failure to restore can lead to depletion. They include wood, solar, fuel, H.E.P., wind power and soda ash.
2. Non-renewable Resources
Their supply cannot be replenished after use. They include such commodities like gold, building stone, gravel, iron, aluminum, gold, lead, natural gas, etc. These goods cannot be restored after they have been extracted and used.
Human wants are unlimited and varied in such measures as urgency, importance and intensity. They are satisfied through resources which are limited in nature. Therefore a choice has to be made based on the order of preference as to which wants to satisfy and which ones to forego. The second best alternative want foregone in order to satisfy the most preferred want is known as opportunity cost.
BUSINESS STUDIES FORM 3 NOTES
BUSINESS STUDIES NOTES
CHAIN OF DISTRIBUTION
DOCUMENTS USED IN HOME TRADE
ECONOMIC DEVELOPMENT AND PLANNING
FORM 3 BUSINESS STUDIES NOTES
FORMS OF BUSINESS UNITS
Introduction To Business Studies
Means Of Payments
MONEY & BANKING
SATISFACTION OF HUMAN WANTS
Terms Of Payments
THE LEDGER AND THE CASHBOOK
THEORY OF THE FIRM