KCSE BUSINESS STUDIES NOTES

PRODUCT PROMOTION - KCSE BUSINESS STUDIES NOTES, SCHEMES OF WORK, OBJECTIVES, QUESTIONS AND ANSWERS

5/12/2017

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PRODUCT PROMOTION (12 LESSONS)
TOPIC/ SUB-TOPIC OUTLINES

Meaning of a product
Meaning and importance of product promotion
Methods of product promotion
Advantages and disadvantages of each method of product promotion
Choice of promotion method
Ethical issues in product promotion
Trends in product promotion

SPECIFIC OBJECTIVES

By the end of the topic, the learner should be able to:

explain the meaning of a product
explain the meaning and importance of product promotion
explain the various methods of product promotion
explain the advantages and disadvantages of each method of product promotion
discuss factors which influence choice of promotion method
recognize the need for ethical practices in product promotion
discuss trends in product promotion.

introduction to Product Promotion.

Product is an item or service offered to the consumers at a price. Therefore, product promotion is the communication or any activity undertaken to inform the consumers, persuade and remind them to buy the product from the market.

The purpose/Importance of product promotion

It informs the customer of the availability, price, and where to obtain the product to satisfy their wants
It persuade the buyer to buy their products a head of their competitors’ products in the market
It reminds the customers of the continued existence of a given product in the market
It educate the consumers of the usage of the product to satisfy their needs fully
It informs them on any improvement that has been made on the product
It stimulates the demand of the product being promoted in the market
It brings out the positive features of the product
It opens new market for the product in the environment

Methods of product promotion

Product promotion may be carried out in the following ways:

Personal selling
Advertising
Sales promotion
Publicity

1. Personal selling

This is a method of promotion where there is an oral presentation in the conversation with the prospective customer. It is done by with the use of salesmen who informs the prospective buyer of all the aspects of the product

Methods of personal selling

Personal selling can be carried out in the following ways;
Through sales person approaching the customers
A case where the sales person approaches the prospective customers after drawing their attention, explaining details of the product and even demonstrating how the product works in order to persuade the customer to buy.

Steps involved in personal selling through sales person

Identify prospective customers who could possibly require the product
Preparing the presentation by gathering all the possible information about the product , as well as designing an appropriate methods that he will be used to present to the customer
Establishing the customers contact, as well as choosing an appropriate time to meet the customer to be. That is the time when the customer may receive him
Arousing the consumers interest in the product by attracting his/her attention through approach and languages, as well as making the prospective customer develop interest in the product
Dealing with the objections on the product which may have been brought about by the customer to be
Closing the sale by inquiring whether the prospective customer will be interested in the product or not. This should be done in a polite manner
Offering after sale service to the customer on the product that has been sold

Shows, trade fairs and exhibitions

This is where the manufacturer of a given product gets a chance to display publicly to the prospective customer to inform them about the product. The prospective customers’ attention is then drawn to the product and more information is given to him about the product at the point where it is displayed.

Advantages of shows, trade fair and exhibitions

It gives the customer an opportunity to compare various products before making a decision on what to buy
It gives the sales person an opportunity to explain in fine details the features of the product to the prospective customers
The manufacturers of the product gets a chance to receive immediate feedback from their customers through interactions during the shows
The number of people visiting their stall to assess their products will help them determine their potential market size for the product

Disadvantages of shows, trade fairs and exhibitions

It is expensive to hire a stall for the exhibition of the product
The sales person may have to explain over and over again for the prospective customers as they may not enter into the stall at the same time
The trade fairs are not frequently organized, therefore an organization rely on it as the only means of product promotion may not succeed

Showrooms

These are large rooms where goods are displayed, especially bulky and durable goods like cars, furniture’s, etc. for the customer to see and be informed about them to stimulate their interest in them
The room allows the customer to get more information about the product from the sales person in the showroom

Advantages of showrooms

They enables the seller to get immediate feedback on the product
They enable the customers to get clarification on the product they need to purchase
It is a cheap method of production
It provides an opportunity for the usage of goods to be demonstrated
The information the prospective customer get from the show room is more reliable

Disadvantages of showrooms

They are usually located away from the town centers, making them not be accessible by many
It is expensive to hire showrooms
They require security to protect the goods inside them which may be very expensive
Some prospective customers may tamper with goods in the room while trying to operate them

Free Gifts

A gift is an item given to the customer free of charge after buying a product which it is pegged on or buying products of a given value. The gift may not necessarily be the same as the product bought, but they are meant to encourage the customer to buy more or give the customer opportunity to explore the product given as a gift.

Advantages of free gifts

It enable the customer to enjoy the product given as a gift without paying for it
It persuades the customer to buy more of the product in order to get the gift
It is an additional product, and therefore increases the customers satisfaction
It may help in creating loyalty in the product being promoted

Disadvantages of free gifts

It makes the customer buy including products they didn’t require in order to the said gift
The cost of the product may be very expensive for he customer
Some middlemen may remove the gift and keep or even sell to the customer to maximize profit

Free Sample

This is a product on trial given to the customers freely to influence their demand towards the product. It mainly used when the product is new and the customer may have not known about the existence of the product

Advantages of free sample

It enables the customer try the product before making a decision to buy it
The customer is able to enjoy the product that otherwise he may have not enjoyed
The organization is able to get immediate feedback from the customer about their new product
It enables the organization to acquire more customers for their product

Disadvantages of free sample

Some of those receiving the sample may not come back to buy
It may be an expensive method of promotion especially where many samples are to be given
Goods given for free may reduce the value of goods that may have been sold to earn profit
It is not suitable for expensive products

Circumstances under which personal selling is appropriate

When launching a new product in the market which requires a lot of awareness to the prospective customers to enable them make a choice
When a product is tailored to meet the customer’s needs, as different consumers have different needs, taste and preferences to be addressed.
When demonstration is required on how the product works, especially the technical products
When the organization has the capacity to finance the sales force carrying out the personal selling.
Where the market is concentrated within a given region that can easily be accessible by the task force.

Advantages of personal selling

It is more flexible than any other method for the marketer is able to meet the needs of different people
It enable the prospective customer to know more details about the product before making a decision
The sales person is able to demonstrate the use of the product
The seller is able to get immediate feedback on the product
The seller is able to obtain the personal contact of the prospective buyer
It gives the buyer an opportunity to negotiate the terms of purchase
It takes care of both literate and illiterate prospective customer
The seller is able to persuade the prospective buyer to buy the product

Disadvantages of personal selling

It is labour intensive and therefore very expensive when the area to be covered is wide method
It is time consuming as it involves explanation and demonstration
It may only target a particular group of people
The seller has to meet the travelling and other expenses involved which may be very expensive
Salespersons may misuse the resources allocated for them, making the target not to be achieved
The process may inconvenience the prospective buyer’s program
It may only cover a given region which may not be wide enough

1. Advertising

This is the presentation of information about a product through public media such as newspapers, radios, billboards, etc.

Types of Advertising

Product advertising: - this is a form of advertisement meant to promote a given product or a particular brand of product
Institutional advertising: - this is a form of advertisement meant to improve the image of the institution or organization and not a particular product. It is meant to create confidence in the customers about the institution
Primary demand advertising: - a form of advertisement meant to a new product that has been introduced in the market for the first time. It is mainly to create awareness of the existence of that particular product
Celebrity advertising: - a form of advertisement where a famous/popular person is used to promote a particular product. It is meant to convince those who identify themselves with that personality to buy the product
Informative advertising: - a form of advertisement meant to give the customer more information about the product to enable them make an informed decision
Competitive/persuasive advertising: - a form of advertisement carried out with organizations producing similar product to persuade the customers to buy their products ahead of their competitors
Corrective advertising: - a form of advertising meant to correct a misleading information that may have been given out about the product
Reminder advertising: - a form of advertising meant to remind the customers that the product still exists in the market and is still capable of satisfying their needs.

Advantages/Importance of advertising to the business

It maintain the sales of an already existing product
It create awareness in the customers about a new product in the market
It informs the customers about the changes that may have been made in the product
It helps in building image or reputation of the selling organization
It may increase the volume of the existing sales of a product
It reaches peoples who may have not been reached by the sales person
It complements the effort of the sales person to enable them achieve their sales objectives
It clears the customers misconception and prejudice about the product
It opens up new markets for the products.

Disadvantages of advertising to the business

It may be costly to the business in terms of money and other resources
It leads to increase in cost of production if at all it has to be done frequently
The cost of the advertisement will always reduce the profit margin of the business
Poorly planned advertisement may negatively affect the business
Misleading advertisement may reduce the level of business operation

Advantages of advertising to the customer

They educate them on the usage of the product
They inform them on the products availability
They guide them on where to get the product
The outlines all the features about the product including prices to the customer
Competitive advertisement may lead to improved quality of goods to benefit the customer
Information on different prices through competitive advertisement makes the customer to benefit from the reduced prices

Disadvantages of advertising to the consumer

The advertisement may not disclose the side effect of the product
The advertising cost may be passed to the consumers through increased price
Some advertisement may persuade customers to buy what they do not require leading to impulse buying
Some customers may buy substandard goods due to misleading advertisement

Advertising media

These are channels or agents through which an advertisement message is conveyed to the target group. They includes both the print and electronic media which includes; newspapers, journals, magazines, posters, billboards, brochures’, radio, television, neon signs, etc.

Newspaper

These are daily or regularly publications which contains advertisement. They includes, Daily nation, Standard, Taifa Leo, citizen, star, etc.

Advantages of newspaper

The can reach areas that other means may not reach
Many people can afford them as they are relatively cheap
They cover a wider geographical area, leading to a wider market
The message on the newspaper can last for a longer period of time, making it to reach more customers
The advertisement appearing in the newspaper is readily acceptable by the reader
Colored print makes the advertisement to be more attractive to the reader who in turn gets the information

Disadvantages of the newspaper

Many of them are written in English or Kiswahili, making them to only target those who can read and understand the language
It discriminate against the illiterate group who cannot read the information
They have short lifespan as they may be read only on the day it is circulated
It cannot be used to focus on a specific target as they are read by almost everybody
Some of the prospective customers are always in a hurry to read the newspaper and may not pay attention to the advertisement

Magazines and Journals

These are periodic publications meant to target a particular class or group of people. They may be published monthly, quarterly, annually, etc. The information reaches the targeted group as they read them

Advantages of magazines and Journals

The specific information for the targeted people can be published
They can be read and re-read before the next publication may the information to last longer and plead with the prospective customer
Their publication is of high quality and colourful, making them to draw the attention of their targeted group easier and passing the information to them
The quality material they are made of makes them to last longer and can be accessed even by those who may have not been around during their publication

Disadvantages of magazines and journals

If the time gap between the publication time and circulation time is wide, the advertisement may fail
They are a bit expensive which makes some of the potential customers not to afford them
The cost of advertising on them may be expensive for the organization
Their circulations may be limited to a small geographical region
The publications may not be available in the vernacular language to reach those who are not able to read either English or Kiswahili

Posters and Billboards

A form of advertising that may contain the information about the product either in words, pictures or both for the customer to see and read.

Advantages of posters and billboards

They are able to convey the information to the large audience, as they are placed in strategic position
Posters are cheap and easy to prepare
The use of different colors makes them to be more attractive and appealing to more audience
It can be used by both literate and illiterate group
The message may last for a longer period of time
Billboards are conspicuous and hence attractive to the audience

Disadvantages of posters and billboards

May be affected by adverse weather condition, especially rain
If not placed strategically, it may not reach the targeted group
Incase destroyed by the passersby, the information may not meet the targeted group
Bill boards are expensive to make and maintain

Transit/transport advertising

A form of advertisement whereby vehicles such as trailers, matatus, buses, etc are used to carry and convey the advertisement message.

Advantages of transit advertisement

The message reaches most of the people in the environment
They message last long as the paints always last on the vehicle
Transit vehicles may carry the message a long way to their final destination
It is captivating to the members of the public especially the promotion convoy, hence can easily reach the target

Disadvantages of transit advertisement

During the rush hour, the crowd may hinder some from getting the information
It mainly relay the information to those served by the vehicles
The noise produced by the promotion convoy may be a nuisance to some members of the public

Brochures

These are small pamphlets carrying message and pictures about product being advertised.

Advantages of Brochures

They are easy to carry around as they are small in size
They are effective in meeting the targeted group
Their cost of production is not very high
They can be distributed at different places to meet the targeted group
Can be made attractive by the use of different colours
They have a long life and therefore can be used repeatedly
They can be used to direct others on where to get the product

Disadvantages of Brochures

The information may not reach the illiterate group
They may be ignored by the intended users
They may require frequent updating if many changes are made on the product making it expensive

Radio

This is a channel that allows for the advertised messages to be conveyed through sound to the listeners, with some background music accompanying the message

Advantages of Radio

Different languages may be used to reach different people
It is accessible even to the remote areas that is not covered by other media
One can choose the time to advertise to reach the targeted group
Able to serve many people at the same time
It can be used for both literate and illiterate members of the group
The advertisement can be repeated over and over again according to the advertisers needs
The music accompaniment may attract many people to listen to the information
Can reach even the blind as they are able to hear
The message can be conveyed in different languages

Disadvantages of Radio

Their advertisement does not have any reference
It may be more expensive than the print media
Poor timing may make the message no to reach the targeted group
It may interrupt some programmes to the annoyance of the listener
It short and brief advertisement may be missed by the listeners
It is difficult for the listener to visualize the product

Television (T.V) and Cinema

Television is a form of media advertisement where the written words are combined with motion pictures and sound to pass the information
Cinema is where the advertised messaged is conveyed during film shows in the cinema halls. It may be before or after the movie.

Advantages of Television (T.V) and Cinema

It appeals to most people as it is entertaining
It makes it possible for the demonstration of the use of the product
It is able to reach both the literate and illiterate viewers
The advertisement can be aired over and over again to meet the targeted group
The advertisement may be modified when need arise
It has wide appeal to many people
The message can be conveyed in different languages

Disadvantages of Television (T.V) and Cinema

The cost of advertising through this media is high
The television sets are expensive to acquire, hence many people may not have them
Their uses are limited to places with electricity
The advertisement may not last longer
The time for airing the information may not suit the targeted audience

Neon Signs

This is a form of advertisement where the message is passed to the public through the use of electrical signals transmitted through neon lights. They are usually common in the banks, airlines, jewel shops, etc.

Advantages of Neon Signs

The use of different colours makes them very attractive and catch attention of different people
They can be put strategically making them to be visible to many people
Can be used both at night and day
They direct the customer on where the goods are to be found

Disadvantages of Neon Signs

Can only be used where there is electricity
They are expensive to buy and maintain
The message may not easily reach the illiterate

Advertising Agencies

These are businesses that specialize in advertising work and are hired to carry out the functions for other businesses. They are paid a commission for this

Functions of Advertising Agencies

They help the organizations in designing their trademarks, logos and advertising materials
They book space and airtime for their clients in various media
They offer advisory services to their client on selling techniques
They advertise on behalf of their clients
They choose on behalf of their clients the appropriate media to be used

3. Publicity

This is the mentioning of the product or the organization in the mass media to make it be known to many people. There two types of publicity, that is free publicity (where the payment is not required) and Special featured publicity (where there is payment, for example sponsoring an event in the public)

Advantages of Publicity

It saves the organization money in case of free publicity
It is likely to cover a wider region as the publicity is in the media
The organization may earn credibility due to positive publicity
The information may be received positively by the customers as the message is likely to be more objective
It may improve the competitiveness of the firm

Disadvantages of Publicity

Unfavourable information about the organization may reach the public especially in free publicity
It is irregular and short lived
Might require special occasion or event in order to attract the mass media
The firm does not have control on how the information will appear in the media and the extend of the coverage

4. Public relations

A process of passing information with an intention of creating, promoting, or maintaining good will and a favourable image of the organization in the public. It involves informing the public about the firm’s achievement and how it is contributing to the community welfare and development, to get more approval of the public

Next Page ...

product promotion topical questions

1. 1995 P1
The following are types of advertising

Product advertising
Competitive advertising
Information advertising
Institutional advertising

In the table below, match each type with its appropriate description. (4 marks)
Description Type
a) Create awareness about a product
b) Promotes the name of the manufacturer
c) Persuades a particular brand of a product
d) Promotes a particular brand of a product
2. 1995 P2
Abdullah, a manufacturer, exhibited his goods in a local trade shows. However his sales did not increase significantly thereafter. Outline five reasons that may have led to lack of significant sales increase. (10 marks)
3. 1996 P1
State four ways in which consumers benefit from advertising by business people. (4 marks)
4. 1996 P2
Describe the procedures involved in personal selling methods of sales promotion. (10 marks)
5. 1997 P1
Give three reasons why manufacturer may offer after sales services to his customers (3 marks)
6. 1997 P2
Outline five ways of attracting customers that traders may put into use. (10 marks)
7. 1998 P1
Outline four steps involved in personal selling process. (4 marks)
8. 1998 P2
Explain five benefits that a trader would get by advertising his goods through the radio. (10 marks)
9. 1999 P1
State four circumstances under which a trader would advertise his products over the radio instead of the television. (4 marks)
10. 1999 P2
Explain the reasons why the firms with popular products find it necessary to continually advertise the same products. (10 marks)
11. 2000 P1
Identify four disadvantages of advertising through television in Kenya. (4 marks)
12. 2000 P1
List four disadvantages of advertising through television in Kenya. (4 marks)
13. 2000 P2
A multinational company is planning to launch its products in the local Kenyan market. Highlight the factors that should be considered by the company when choosing the appropriate media through which to advertise the products. (10 marks)
14. 2001 P1
Highlight four limitations of after sales services as a method of promoting products.
15. 2001 P2
Explain the role of a sales department in a business firm (10 marks)
16. 2001 P2
What are the benefits accruing to a seller who uses personal selling methods to promote her products. (10 marks)
17. 2002 P1
Outline the advantages of after sales services as a method of sales promotion to a customer. (4 marks)
18. 2003 P1
Highlight three reasons why traders may engage in sales promotion. (3 marks)
19. 2004 P1
State four advantages of personal selling method of promoting sales. (4 marks)
20. 2004 P2
Advertising in the newspaper is one way of promoting sales of goods. Highlight five limitations of advertising goods in newspapers. (10 marks)
21. 2006 Q6 P1
What are the advantages of personal selling as a method of sales promotion? (4 marks)
22. 2007 Q4 P1
A firm wishes to introduce a new product into the market. Outline four factors that should be considered in choosing an appropriate medium for promotion.
23. 2008 Q15 P1
State four reasons why ethical practice is necessary in Product promotion (4 marks)
24. 2009 Q3 P1
Amboseli Enterprises has been spending heavily on promotion of its products though its sales have consistently declined. Outline four measurers that the company may take to reverse the trend. (4 marks)
25. 2012 Q22 P1
Highlight four advantages of promoting sales through the internet. (4 marks)

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INSURANCE - KCSE BUSINESS STUDIES NOTES, SCHEMES OF WORK, QUESTIONS, ANSWERS AND OBJECTIVES

4/12/2017

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OBJECTIVES
NOTES
QUESTIONS
PRINTABLES

INSURANCE (12 LESSONS)
TOPICS / SUB-TOPICS OUTLINES

Meaning and concept of insurance
Importance of insurance
Terms used in insurance
Principles of insurance
Classes of insurance
Re-insurance and co-insurance
Obtaining an insurance policy
Making an insurance claim

SPECIFIC OBJECTIVES

By the end of the topic, the learner should be able to:

explain meaning and concept of insurance
discuss the meaning and importance of insurance
explain terms used in insurance
explain the principles of insurance
distinguish between the classes of insurance
explain the meaning of reinsurance and coinsurance
describe procedures of obtaining an insurance policy
describe the procedure of making an insurance claim.

Definition of Insurance

Insurance is an undertaking or contract between an individual or business and an insurance on occurrence of risk(s) (i.e. against events whose occurrences are unforeseen but causes financial losses or suffering to the affected parties.
Risks are also referred to as contingencies, hazards or perils and include:

Fire outbreak
Accidents
Thefts
Deaths
Disabilities

Risks are real and unforeseen. Methods to eliminate such risks has achieved very little and thus has necessitated the need for insurance.

Importance of insurance

1. Continuity of business
Every business enterprise is exposed to a variety of risks e.g. fire, theft etc. The occurrence of such risks often result in financial losses to the business. Insurance provides adequate protection against such risks in that, if a trader suffers losses as a result of insured risk, she/he is compensated, thus he/she is able to continue with business operations.
2. Investment projects
Insurance enables investors to invest in profitable yet risky business projects that would otherwise avoided.
Not all the money received as premiums (by the insurance companies) is used up for compensation to those who have been exposed to risk and suffered losses. The rest of the money is invested in other businesses to earn profits.
3. Creation of employment
Insurance does provide employment opportunities to members of the public.
4. Government policy
The profits earned are a source of revenue for the government i.e. insurance companies are profit-making organizations which generate revenue to the government through payments of taxes
5. Credit facilities
The insurance industry have also established credit or lending facilities which the business community uses by borrowing. Loans are made available to the public for different investment projects in different sectors of the economy and also for personal requirements.
6. Development of infrastructures
The insurance industry plays a crucial role in the development of urban facilities in major towns. Both residential and office buildings have been developed by insurance firms. The firms also participate in development projects in the areas where they operate. They contribute to development of a region by constructing and infrastructural facilities

Life policies can be used as security for loans from either the insurance company or other financial institutions.
Provision of life and general insurance policies encourages Kenyans to plan ahead for their dependents thereby reducing the number of needy future students.
Loss prevention-The insurance companies encourage the insured not to cause accidents thus channeling the unclaimed resources into the economy.

The Theory of Insurance

The insurance business relies on the law of large numbers in its operations. According to this law, there should be a large group of people faced with similar risks and these risks spread over a certain given geographical area.
Every person in the group contributes at regular intervals, small amounts of money called premium into a “common pool”. The pool is administered and controlled by the insurance company.

The fact that risks are geographically spread ensures that insurance does not have a concentration of risks in one particular area.
The law of large numbers enables the insurance to accurately estimate the future probably losses and the number of people who are likely to apply for insurance. This is done in order to determine the appropriate premiums to be paid by the person taking out insurance.

Pooling of risks

The insurance operation is based on the theory that just a few people out of a given lot may suffer a loss. There is therefore a “pooling of risks” i.e. the loss of the unfortunate few is spread over all the contributors of the group, each bearing a small portion of the total loss. This is why the burden of loss is not felt by the individuals because it is “shared” by a large group.

Benefits of the “pooling of Risks” to insurance company

Pooling of risks enables an insurance company to create a common pool of funds from the regular premiums from different risks.
It enables the insurance company to compensate those who suffer loss when the risks occur
The insurance company is able to spread risks over a large number of insured people
Surplus funds can be invested in for example, giving out loans or buying shares in real estates
It enables the insurance company to meet its operating costs by using the pool funds
It enables the insurance company to calculate to be paid by each client
It enables the company to re-insure itself with another insurance company.

Terms used in Insurance

Insurance
This is a written contract that transfers to an insurer the financial responsibility for losses arising from insured risk.
Premium
This is the specified amount of money paid at regular intervals by the insured to the insurer for coverage against losses arising from a particular risk.
Risk
These are perils or events against which an insurance cover is taken. It is the calamity or problem a person or business faces and results into losses.
Note: The calculation of premiums depends upon the type of risk insured against. The higher the probability of the risk occurring, the higher the premium. The more the risks the business or person is exposed to the more the premiums payable.
Pure risk
This is a risk which results in a loss if it occurs and results in no gains if it does not occur. For example, if a car is involved in an accident, there will be a loss and if the accident does not occur there will be no gain or loss
Speculative risk
This is a risk which when it occurs, may result in a loss or a profit. For example, a person may buy shares at ksh.50 each, one year later the shares may be valued at ksh40 each meaning a loss of ksh.10
Alternatively, their value might not have changed or might have increased to ksh.45 each. Speculative risk lures people to venture into business in the first place.
Insured
This is the individual or the business that takes out the insurance cover and therefore becomes the policy holder
The insured pays premiums to the insurance company to be compensated should the risk insured against occur or cause loss.
Insurer
This is the business company that undertakes to provide cover or protection to the people who suffer loss as a result of occurrence of risks
Actuaries
These are people employed by an insurance company to complete expected losses and calculate the value of premiums.
Claim
This is a demand by the insured for payment from the insurer due to some loss arising from an insured risk.
Policy
This is a document that contains the terms and conditions of the contract between the insurer and the insured. It’s issued upon payment of the first premium.
Information contained in a policy includes;

Name, address and occupation
Policy number of the insured
Details of risks insured
Value of property insured
Premiums payable
Other special conditions of the insurance, for example nominees

Actual value
This is the true value of the property insured
Sum insured
This is the value for which property is insured, as stated by the insured at the time of taking the policy.
Surrender value
This is the amount of money that is refunded to the insured by the insurer in case the former (i.e. the insured) terminates payment of the premiums before the insurance contract matures. The policy holder is paid an amount less than the total amount of the premium paid.
Grace period
This is term allowed between the date of signing the contract and the date of payment of the first premium. During this period the insurance contract remains valid. This period is usually a maximum of thirty (30) days.
Proposer
This is a person wishing to take out an insurance cover (prospective insured)
Cover note (Binder)
This is a document given by the insurance company to an insured on payment of the first premium while awaiting for the policy to be processed. It is proof of evidence that the insurer has accepted to cover a proposed risk.
Annuity
This is a fixed amount of money that an insurer agrees to pay the insured annually until the latter’s death. It occurs when a person saves a lump sum amount of money with an insurer in return for a guaranteed payment which will continue until he/she dies.
Consequential loss
This is loss incurred by a business as a result of disruption of business in the event of the insured risk occurring.
Assignment
This is the transfer of an insurance policy by an insured to another person. Any claims arising from the transferred policy passes to the new policy holder called an assignee
Beneficiaries
These are people named in a life assurance policy who are to be paid by the insurer in the event of the insured
Nomination
This is the act of designing one or more people who would be the beneficiaries in the event of death of the insured. These people are called nominees

Average clause
This clause is usually included in policies to discourage under-insurance. The clause provides that the insured can only recover such proportions of the loss as the value of the policy bears on the property insured. It is usually included in marine or fire insurance policies.
The amounts recoverable are arrived at using the following formulae:

Example:
If a house worth kshs.800,000 and insured against fire for kshs.600,000 was damaged by fire to the tune of kshs.400,000,the insured would be compensated;

Double insurance
This is taking of insurance policies with more than one company in respect to the same subject matter and the risk. It is significant because if one of the insurers is insolvent at the time the claim arises the insured can enforce his/her claim against the solvent insurer or if both insurers are solvent then they share compensation.
(Insolvency is a state where a business is not able to pay all its liabilities from its existing assets)
Co-insurance
This is an undertaking by more than one insurance company to provide insurance cover for the same risk for an insured. This will usually occur for properties that have great value and face great risk exposures that an insurer cannot successfully make compensation for e.g. value of aeroplanes, ships etc.
Co-insurance help spread risks to several insurers, each insurer covering only a certain proportion of the total value. The insurance company with the largest share is called the “leader” and acts on behalf of all the participating insurance companies’ e.g. in collecting premiums from the insured and carrying out documentation work, making claim after collecting each insurers premium contribution etc.
Note: Co-insurance is different from double-insurance in that in co-insurance company approaches another insurance company to help in covering the insured property while in double-insurance; it’s the insured who decides to approach different insurance companies to insure the same property against the same risk.
Re-insurance
‘Re-insurance’ means insuring again. This is a situation where an insurance company insures itself with a bigger insurance company called re-insurer for all or part of the risks insured with it by members of the public
Re-insurance indirectly insure an individual’s risks. Re-insurance helps to reduce the burden on an insurance company when the loss is too high for a single insurer. When such losses occurs, the claim is met by both the insurer and re-insurer(s) proportionately (according to agreed percentages)
Note: Re-insurance deal with the protection of insurance companies only, while insurance companies protect individuals and business organizations.

Factors that may make it necessary for an insurance company to Re-insure

Value of property - When the value of property is great, such as ship, the risk is too high to be borne by a single insurer
High risk of loss - When chances of loss through the insured risks are high, it becomes necessary to re-insure.
Number of risks covered - When the insurance company has insured many different risks, it would be too costly to compensate many claims at once, hence the need for re-insurance
Need to spread the risk - When the insurance company wishes to share liability in the event of a major loss occurring
Government policy - The government may make a legal requirement for an insurance company to re-insure

Under-insurance
This occurs when the sum insured as contained in the policy is less than the actual value of the property e.g. a property of shs.500, 000 can be offered for insurance as having a value of shs.400, 000
Over-insurance
This is a situation where the sum insured is more than the correct value of property e.g. a person insures property of shs.300,000 for shs.600,000.If total loss occurs, he is compensated the correct value of the property i.e. that which he has lost
Agents
These are people who sell insurance policies on behalf of the insurance company. They are paid on commission that is dependent upon the total value of policies sold
Insurance Brokers
These are professional middlemen in the insurance process. They connect the people wishing to take insurance with the insurers. They act on behalf of many different insurance firms, unlike agents.
Their activities include:

Examination of insurance market trends
Correspondence between the insured and his clients
Advising the insured and would be policy holders on the best policies for their property etc.

He receives a commission (reward) known as brokerage.

Principles of Insurance

Principles of insurance provide guidance to the insurance firms at the time they are entering into a contract with the person taking the cover. These insurance principles include:

Help to determine whether a valid insurance contract exists between the two parties at the time claims are made.
Provide checks and controls to ensure successful operations of insurance for the benefit of both the parties

It is therefore important that a prospective insured (person wishing to take insurance policy) has basic knowledge of these principles as stated in the insurance law.
The insurance principles include;
1. Insurable Interest
This principle states that an insurance claim cannot be valid unless the insured person can prove that he has directly suffered a financial loss and not just because the insured risk has occurred.
Going by this principle one cannot insure his parents or friends or other people’s property since he/she has no insurable interest in them. If such properties are damaged or completely destroyed, he/she will not suffer any financial loss.
For example, Mr. X has no insurable interest in the property of his neighbours. He does not suffer any financial loss should they be destroyed. This principle ensures that people are not deliberately destroying other people’s properties/life in order for them to receive compensation.
In life insurance (life assurance) it is assumed that a person has unlimited interest in his/her own life. Similarly it is assumed that one has insurable in the life of spouse and children e.g. a wife may insure the life of her husband, a father the life of his child because there is sufficient insurable interest.
2. Indemnity
The essence of this principle is that the insurer will only pay the “replacement value” of the property when the insured suffers loss as a result of an insured risk.
This principle thus puts the insured back to the financial position he enjoyed immediately before the loss occurred.
It is therefore not possible, then, for anybody to gain from a misfortune by getting compensation exceeding the actual financial loss suffered as this will make him gain from a misfortune.
This principle does not apply in life assurance since it is not possible to value one’s life or a part of the body in terms of money. Instead, the insurance policy states the amount of money the insured can claim in the event of death.
3. Utmost good faith (uberrima fides)
In this principle the person taking out a policy is supposed to disclose the required relevant material facts concerning the property or life to be insured with all honesty. Failure to comply with this may render the contract null and void hence no compensation.
e.g.

A person suffering from a terminal illness should reveal this information to the insurer.
One should not under-insure or over-insure his/her property.

4. Subrogation
This principle compliments the principle of indemnity. It does so by ensuring that a person does not benefit from the occurrence of loss.
According to this principle, whatever remains of the property insured after the insured has been compensated according to the terms of the policy, becomes the property of the insure.
Example:
Assuming that Daisy’s car is completely damaged in an accident and the insurance compensates for the full value of the loss, whatever remains of the old car (now scrap), belongs to the insurance company
Scrap metal can be sold for some values and should Daisy take the amount she would end up getting more amount than the value of the car which will be against the principle of indemnity.
Note: This principle cannot be applicable to life assurance since there is nothing to subrogate.
5. Proximate cause
This principle states that for the insured to be compensated there must be a very close relationship between the loss suffered and risk insured i.e. the loss must arise directly from the risk insured or be connected to the risk insured.
Example

If a property is insured against fire then fire occurs and looters take advantage of the situation and steal some of the property, the insured will suffer loss from ‘theft’ which is a different risk from the one insured against, so he/she will not be compensated.
However if the property burns down as a result of sparks from the fire-place, the proximate cause of the loss is sparks which are directly related to fire. So the insured is entitled for compensation.

Classes of Insurance

Insurance covers are mainly classified into two,

Property (non-life) general insurance
Life assurance

1. Life Assurance
The term assurance is used in respect of life contracts. It is used to mean that life contracts are not contracts of indemnity as life cannot be indemnified i.e. put back to the same financial position he was in before the occurrence of loss.(life has no money value, no amount of money can give back a lost or injured life)
Life insurance (assurance) is entered by the two parties in utmost good faith and the premiums payable in such life contracts depend on:

Age; The higher the age the higher the premiums as the age factor increase the chances of occurrence of death.
Health condition; A person with poor health i.e. sickly person pays higher premiums as opposed to one in good health.
Exposure to health risks; the nature of a person’s occupation can make him susceptible to health problems and death.

Types of policies

Whole life assurance - In whole life assurance, the assured pays regular premiums until he/she dies. The sum assured is payable to the beneficiaries upon the death of the assured. Whole life assurance covers disabilities due to illness or accidents i.e. if the insured is disabled during the life of the policy due to illness or accidents, the insurer will pay him/her for the income lost.
Endowment policy/insurance - This is whereby the insured pays regular premiums over a specified period of time. The sum assured is payable either at the expiry of the period (maturity of policy) or on death of the insured, whichever comes first.
The insured, at expiry of policy is given the total sum assured to use for activities of his own choice. (Ordinary endowment policy)
Where the insured dies before maturity of contract, the beneficiaries are given these amounts.

Note; the assured person may be paid a certain percentage of the sum assured at intervals until the expiry of the policy according to the terms of contract. Such an arrangement is known as Anticipated
Endowment policy.
Advantages of Endowment policies

They are a form of saving by the insured, for future investments
Premiums are payable over a specified period of time which can be determined to suit his/her needs e.g. retirement time
Where the assured lives and time policy matures, he receives the value of sum assured.
Policy can be used as security for loans from financial institutions.

Differences Between a whole life policy and an Endownment policy

Whole life	Endownment
Compensation is paid after the death of the assured	Compensation is paid after the expiry of an agreed period
Premiums are paid throughout the life of the assured	Premiums are paid only during an agreed period
Benefits go to the dependents rather than the assured	The assured benefits unless death proceeds the expiry of the agreed period
Aims at financial security of dependants	Aims at financial security of the assured and dependants

Term insurance- The insured here covers his life against death for a given time period e.g. 1yr, 5yrs etc. If the policyholder dies within this period, his/her dependants are compensated. If the insured does not die within this specified period, there is no compensation. However, a renewal can be taken.
Education plan/policies - This policy is normally taken by parents for their children’s future educational needs.
The policy gives details of when the payments are due.
Statutory schemes - The Government offers some types of insurance schemes which are aimed at improving/providing welfare to the members of the scheme such as medical services and retirement benefits.
A member and the employer contribute, at regular intervals, certain amounts of money towards the scheme.

Examples

N.S.S.F
N.H.I.F
Widows and children pension scheme (W.C.P.S)

1. Annuity

Characteristics of life Assurance

It is a cover for life until death or for a specified period of time
It may be a saving plan
It is normally a long term contract and does not require an annual renewal
It has a surrender value
It has a maturity date when the assured is paid the sum assured bonuses and interests.
A life assurance policy can be assigned to beneficiaries
The policy can be any amount depending on the assureds’ financial ability to pay premiums
The policy can be used as security for a loan

1. General insurance (property insurance)

This type of insurance covers any form of property against the risks of loss or damage. A person can insure any property he has an insurable interest in
General insurance is usually divided into;

Fire insurance/department
Accident insurance/department
Marine insurance/department

Accident insurance

This department covers all sorts of risks which occur by accident and includes the following;
Motor policies

These provide compensation for partial or total loss to a vehicle if the loss results from an accident.
The policy could either be third party or comprehensive.
Third party policies cover all damages caused by the vehicle to people and property other than the owner and his/her vehicle. This includes pedestrians, fare-paying passengers, cows, fences and other vehicles

In Kenya, a motor-vehicle owner is required by law to have this policy before the vehicle is allowed on the roads. One can also take a third party, fire and theft policy.
Comprehensive policy covers damages caused not only to the third party but also to the vehicle itself and injuries suffered by the owner. Comprehensive policies include full third party, fire, theft and malicious damage to the vehicle.

Personal accident policy

These policies are issued by insurance companies to protect the insured against personal accidents causing;

Injury to the person
Partial or total physical disability as a result of the injury
Loss of income as a result of death

If death occurs due to an accident, the insured’s beneficiaries are paid the total sum assured.
In case of a partial or total disability as a result of accident, the insured can be paid on regular periods, e.g. monthly as stipulated in the policy.
Compensation for injuries where one loses a part of his/her body can be done on a lump sum basis.
The insured is also paid the value of hospital expenses incurred if hospitalized as a result of an accident.

Cash and / or Goods in Transit policies

These are policies that specifically provide cover for loss of cash and goods in transit between any two locations.
E.g. Goods and cash moved from business to the markets, from suppliers to business etc.

Burglary and Theft policies

These policies cover losses caused by robbers and thieves
Burglary policies are enforceable only if the insured has met the specified safety and precautionary measures for protection of the insured items.
E.g.

How much money should be maintained in different kinds of safety boxes?
Positioning of each of the cash boxes is also an important precautionary measure.

NB: The control measures are aimed at reducing both the extent and probability of loss occurring

Fidelity Guarantee policies

These policies cover the employers against loss of money and/or goods caused by their employees in the cause of duty.

The losses may be as a result of embezzlement, fraud, arithmetical errors e.t.c
The policies may cover specified employees or all the employees

Workmen’s compensation (Employer’s Accident liability)

These policies provide compensation for employees who suffer injuries in the course of carrying out their duties.
The employer insures his employee against industrial injuries i.e the employer is only liable for the compensation of workers who suffer injuries at work.
Public liability
This insurance covers injury, damages or losses which the business or its employees cause to the public through accidents.
The insurer pays all claims from the public up to an agreed maximum
Bad debts
This policy covers firms against losses that might result from debtor’s failure to pay their debts.
Marine Insurance
This type of insurance covers ships and cargo against the risk of damage or destruction at the sea. The main risks sea vessels are exposed to include; fire, theft, collision with others, stormy weather, sinking etc.

Types of Marine Insurance policies

The marine insurance covers are classified as Hull, cargo, freight and ship owners’ liability.
Marine Hull
This policy covers the body of the ship against loss or damage that might be caused by sea perils.
Included here are any equipment, furniture or machinery on the ship.
A special type of marine hull is the part policy, which is for a specified period when the ship is loading, unloading or at service.
Marine Cargo
This type of policy covers the cargo or goods carried by the ship
The policy is taken by the owners of the sea vessels to cover the cargo being transported. It has the following sub-divisions.

Voyage policy - Here cargo and ship are insured for a specific voyage/journey. The policy terminates automatically once the ship reaches the destination.
Time policy - Here insurance is taken to cover losses that may occur within a specified period of time, irrespective of the voyage taken
Fleet policy - This covers a fleet of ships, i.e. several ships belonging to one person, under one policy.
Floating policy - This policy covers losses that may occur on a particular route, covering all the ships insured along that route for a specified period
Mixed policy - This policy provides insurance for the ship and cargo on specified voyages and for a particular period of time. No compensation can be made if the ship was on a voyage different from the ones specified even if time has not expired
Composite policy - This is where several insurance companies have insured one policy of a particular ship especially when the sum insured is too large to be adequately covered by one insurer.
Construction policy/builders policy - This covers risks that a ship is exposed to while it is either being constructed, tested or being delivered.
Freight policy - This is an insurance cover taken by the owner of the ship for compensation against failure to pay hiring charges by a hirer of the ship.
Third parties liability - This is an insurance policy taken by the owner of the ship to cover claims that might arise from damage caused to other people’s property.

Description of marine losses

The following are some of the losses encountered in marine insurance.
Total loss,
This occurs where there is complete loss or damage to the ship and cargo insured. Total loss can be constructive or actual.
In Actual total loss, the claims are as a result of the ships and/or cargos complete destruction. It could also occur;
When a ship and its cargo are so damaged that what is salvaged is of no market value to both the insurer and the insured.
When a ship is missing for a considerable period of time enough to assume that it has sunk.
Constructive total loss occurs when the ship and/or cargo are totally damaged but retrieved. It may also occur;
Where a ship and its cargo are damaged but of market value. This could be as a result of decision to abandon the ship and cargo as the probability of total loss appears imminent.
If the cost of preventing total loss may be higher than that of the ship and its cargo when retrieved e.g. many lives may be lost in the process of trying to prevent total loss.

General average - This is a loss that occurs as a result of some of the cargo being thrown into the sea deliberately to save the ship and the rest of the cargo from sinking. The losses made are shared by the ship owners and the cargo owners proportionately as the effort was in the interest of both.
Particular average - This occurs where there is a partial but accidental loss to either the ship or the cargo. When this happens each of the affected party is solidly responsible for the loss that has occurred to his property. A claim can, however be made if the loss incurred amounts to more than 3% of the value insured.

Fire insurance

This type of insurance covers property damage or loss caused by accidental fire. Cover is offered to domestic commercial and industrial premises, plant and machinery, equipment, furniture fittings stock etc.
In order to claim for compensation as a result of loss by fire, the following conditions must be fulfilled;

Fire must be accidental
Fire must be immediate cause of loss
There must be actual fire.

There are several types of types of fire insurance policies. These include;

Consequential loss policy; (profit interruption policy)

This covers or compensates the insured for the loss of profit suffered when business operations have
It is offered to protect future earnings of an enterprise after fire damage.

Sprinkler leakage policy - This provides cover against loss or damage caused to goods or premises by accidental leakages from firefighting sprinklers
Fire and Related perils policy - This covers buildings which include factories, warehouses, shops, offices and their contents. The policy does not cover loss of profit arising from fire damage.

Characteristics of General Insurance

It’s a contract of indemnity
It cannot be assigned even to ones relatives
The insured must have an insurable interest in the property to be insured
Premiums charged depends on the degree of risk, the higher the premium charged.
Compensation for loss can only be up to a maximum of the value of the insured property or the sum insured in case of under insurance.
It has no surrender value
It’s normally a short term contract which can be renewed periodically, usually after one year.

Factors to be considered when Determining Premiums to be charged

Health of the person
Frequency of occurrence of previous losses
Extent of the previous losses
Value of the property insured
Occupation of the insured
Age of the person or of the property in question
Location of the insured(address and geographical location)
Period to be covered by the policy
Residence of the insured.

Procedure for taking a policy

Filling a proposal form
Calculation of the premium to be paid
Issuing of cover note (Binder)
Issuing of the policy

Procedure of claiming compensation

Notification to the insurer - The insurer has to be notified about the occurrence of any incident immediately.
Filling a claim form - The insurer provides the insured with a claim form which he fills to give details of the risk that has occurred
Investigation of the claim - The insurer arranges to investigate the cause of the incident and to assess the extent of the loss incurred. The insurer is then able to establish whether the insured is to be compensated and if so, for how much.
Payment of claim - On receipt of the report of the assessor, the insurer pays the due compensation to the insured. (Payment of the compensation shows that both the insurer and the insured have agreed on the extent of the loss and the payment is the settlement of the claim)

Insurance and Gambling

In most cases, insurance is erroneously taken to be the same as gambling in that small amounts are contributed by many people into a common fund which later benefits just a few people. They are however different and their differences include;

Insurance

The insured must have insurable interest
Reinstates the insured back to the financial position just before loss
The insured is expected to pay regular premiums for the insurance cover to remain in force
Insurance involves pure risks
The event of loss might never occur

Gambling

A gambler has no insurable interest
Aims at improving the winners financial position
Gambling money is paid only once
Gambling involves speculative risks
The event of bet must happen to determine the winner and the loser.

insurance questions on topic

1. 1995 P2
Describe the procedures that should be followed when taking an insurance policy. (10 marks)
2. 1996 P2
Explain four ways in which the insurance industry promotes the growth of business enterprises. (5 marks)
3. 1997 P2
Explain four ways in which the insurance industry contributes to the development of Kenya’s economy. (10 marks)
4. 1998 P2
Discuss various insurance policies under which an insurance company would not compensate the insured in the event of the loss. (10 marks)
5. 1999 P2
Discuss various insurance policies that the owner of a supermarket may find it useful for the business. (12 marks)
6. 2000 P2
Explain four benefits of the ‘pooling of risks’ to an insurance company. (8 marks)
7. 2001 P2
Explain the factors that may make it necessary for an insurance company re-ensure.
8. 2002 P2
Explain the meaning of the following terms as used in insurance (10 marks)
i) Uberrimae fidei
ii) Indemnity
iii) Third party motor vehicle insurance
iv) Contribution.
v) Subrogation
9. 2003 P2
Discuss four circumstances under which an insurance contract may be terminated. (8 marks)
10. 2004 P2
Explain five benefits that could be enjoyed by a person who decided to take out an endowment policy. (10 marks)
11. 2006 Q2 P1
Outline four risks against which a shopkeeper may insure. (4 marks)
12. 2007 Q3 P1
Outline three features of a Re – insurance company
13. 2008 Q22 P1
Elephant Enterprises acquired a building valued at sh 1 000 000 on 1 January 2007. The building was insured with two insurance Companies. Zebra and Simba for sh. 600 000 and Sh.400 000 respectively. In May 2007, fire damaged the building, causing Elephant Enterprises to suffer a loss of 20% of the building value. Determine contribution made by Simba and Zebra to cover the loss. (4 marks)
14. 2009 Q25 P1
KAMAT owned a motor vehicle, valued at sh 1,000,000. He comprehensively insured the car at Sh 800,000. The motor vehicle was involved in an accident and declared a write off. Calculate the amount KAMAT should get from the insurer. (4 marks)
15. 2010 Q11 P1
Outline four differences between insurance and assurance. (4 marks)
16. 2012 Q4a P2
(a) Explain five characteristics of property insurance. (10 marks)

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warehousing - kcse business studies notes, objectives, syllabus, schemes of work, questions, answers and more

1/12/2017

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OBJECTIVES
NOTES
Q & A
APA REF.
OTHERS

WAREHOUSING (6 LESSONS)

SPECIFIC OBJECTIVES
By the end of the topic, the learner should be able to:

explain the meaning and importance of ware housing to business
discuss the essentials of a warehouse
identify the various types of warehouse
explain the advantages and disadvantages of each type of warehouse.

TOPICS / SUB-TOPIC BREAKDOWN

Meaning and importance of warehousing
Essentials of a warehouse
Types of warehouses
Advantages and disadvantages of each type of warehouse

Introduction

Definition
A warehouse is a building for storing goods and services until the need for them arises. A warehouse is also usually referred to as a go down, silo or depot.
Warehousing is the process and the systems for relieving goods, protecting them against all types of hazards and ensuring their availability to those who need them. Therefore, it involves three main processes:

Receiving goods into a warehouse;
Storing them
Releasing them to the users.

Thus, warehousing helps to create time utility and is therefore classified as an ‘aid to trade’.

warehouse/godown

Importance of Warehousing to Business

It enables a steady flow of goods into the market as the producers store their commodities and regulating their supply as needs arise;
It stabilizes the prices by reducing the supply of goods when the market is faced with surplus and increasing the supply whenever there is shortage;
It protects the goods from adverse weather conditions thereby upholding their quality until they are sold;
It facilitates the bridging of time between when the goods are manufactured and when they are demanded. This is especially so for goods with seasonal demands;
It acts as a reserve that can meet a sudden unexpected demand, for instance cereals can be stored in a warehouse just in case a draught strikes;
It enables ample time and opportunity for such practices like blending, branding, packaging, grading and sorting out of goods before they are sold.
Warehousing ensures that goods are protected from loss through theft or pilferage;
It enables buyers to inspect the goods before they buy them;
Warehousing allows time for some goods to ripen or mature before they are sold, for instance ripe bananas or tobacco leaves;
It encourages specialization in production and distribution. Producers concentrate on producing while distributors store the goods for sale to the consumers;
By allowing manufacturers to buy raw materials in bulk as they await their needs to arise, warehousing ensures a continuous production schedule;
It allows importance ample time to look for a market.

Essentials of a warehouse

In order to be as effective as possible, warehouses require some features and resources. These include:

Proper buildings suitable to house various types of goods;
They should be conveniently located to enhance accessibility by the users;
Proximity to a good transport network system to ensure smooth movement of goods in and out;
The warehouse should be equipped with appropriate protection equipment to keep the goods safe from water, sunshine, human animals, excess heat and such factors;
It should be spacious enough to enable both storage of goods and movement of goods and personnel;
It should be equipped with proper facilities for handling goods like forklifts and an necessary working materials and tools to facilitate operation;
It should be equipped with adequate facilities to care for goods for instance coldroom facilitates for perishable goods;
It should be manned by well trained staff for efficient delivery of services;
The warehouse should be equipped with an efficient communication network.
A warehouse should conform to the law of the land.
It should have proper recording system to monitor movement of goods.

Types of Warehouses

Warehouses are usually categorized on the basis of ownership or types of goods stored.

I. Warehouse Types Based on Ownership

Private Warehouses
These warehouses are owned by individuals for storing goods. They include:

Wholesalers warehouse – they enable the wholesalers to buy goods from the producers in bulk and prepare them so that they will be ready whenever the retailers need them;
Producer’s warehouses – they store producer’s goods before the goods are released to the market. They are most conveniently located near the producers or their clients.
Retailers – they are commonly owned by some large scale retailers like the chain store and supermarkets to suit the purchase of goods in large quantities and sell them gradually.

Advantages of private warehouses

They enable the manufacturers more control over the manufacturing operations. They enable for instance coordination between the manufacturing process and delivery to the market
They are usually flexible enough to adapt to the different requirements for different goods by offering special facilities not accessible in public warehouses;
The owner can custom make the warehouse to suite any need;
The owner does not incur the cost of hiring space unlike in public warehouse;
Decision making is independent and therefore quick since the owner does not have to consult;
The owner is not ted down by procedures of receiving and issuing the goods unlike in public warehouses;

Disadvantages of public warehouses

When there is low volumes the resources may become underutilized;
High initial cost of production;
The owners may suffer some problems associated worth small scale firms like lack of enough funds to employ adequately qualified personnel.

Public warehouses
The term public implies that these warehouses can be used any member of the public to store his/her goods whereby the owners of the premises lend parts or the entire warehouse to any individual. To enhance versatility and suitability, the owners site the warehouses strategically near ports. This is because they are most commonly used by importers or exporters.
Many public warehouses offer some additional services like packaging, clerical services, market reports, preparing export samples and insuring the goods. Ownership of the goods in the warehouse is usually proved and transferred from one owner to another through a document known as a warehouse warrant. This enables the owner of the goods to sell goods in the warehouse without having to physically transfer them from one place to another.

Advantages of Public Warehouse

Public warehouses enable various small scale owners of goods to come together and sell their commodities together thus enjoying the economies of scale;
The owner does not have to construct his/her own warehouse;
Very convenient to traders since the goods can be sold while still in the warehouse;
Goods are insured against some risk like damage by fire and theft;
Traders can rent space to store their goods;
The warehouse can offer additional services;
The trader can access short term loans with the goods in the warehouse as collateral.
The goods in the warehouse can be used as a collateral for a loan;

Disadvantages of Public warehouse

Hiring space can eventually be more costly than constructing premises in the long run;
Space allocation is not a guarantee, it depends on availability;
The hirer may lose customer contact since they purchase directly from the premises;
The presence of other suppliers in the warehouse brings in some competition;
The presence of several hirers may lead to a complication and prolonged documentation and receipting process;
Inconveniences emanate from the distant location of the warehouse from the hirer’s presence;

ii. Warehouse Types Based on Goods Stored

These types of warehouses are categorized on whether they house goods awaiting tax or tax free goods.
Bonded Warehouses
They store imported goods prior to payment of the duties. The warehouse owner’s offers cash guarantee to assure that the goods will not be released before clearing the duties. Goods under transit to another country may not attract duties, including those that are packaged outside the warehouse. The goods may be sold inside the warehouse and the new owner undertakes the payment of the taxes. Once cleared, the owner is issued with a warrant of release.

Features of Bonded Warehouses

Goods can be sold while inside the warehouse;
Goods are released only upon production of the warrant of release;
Storage charges are made on all the goods under storage;
Goods can be bonded till custom duty is paid;
Goods can be inspected or prepared for sale while still in the warehouse;
Goods can be re-exported while in the warehouse.

Advantages of using Bonded Warehouses to the importer

Relieves the importer the burden of securing the goods;
Some goods lose weight while in the warehouse an advantage to those whose amount of tax depends on the weight;
It offers an opportunity to prepare the goods for sale;
Some goods improve in quality while in the warehouse due to maturation duration;
The importer transfers the burden of paying the duty onto a buyer who buys the goods while still in the warehouse;
The importer can look for the market of the goods even before paying the tax.

Disadvantages of using Bonded Warehouses

The importer pays rent for the space of goods;
In case the importer fails to pay the duty, the custom authorities may be auction the goods;
Withdrawing goods from the warehouse in bits ends up with a higher total tax than a one off fee.

Free Warehouses
Goods in these types of warehouses are not under the control of the custom authorities. The goods do not have any pending tax. These include locally manufactured goods or imported goods whose duty has been cleared.

Advantages of Free Warehouse

Cheaper than bonded warehouse since no duties charges;
Goods do not risk auctioning since there are no taxes charged;
The warehouses are usually conveniently located for the goods’ owners;
Release of goods cannot be not delayed by complicated protocols of having to produce signed release warrants

Disadvantages of Free Warehouse

Inspection of goods is relaxed and therefore it is susceptible to habour illegal goods;
The storing activity does not earn the government any revenue since no tax is paid;
Hoarding of goods can occur in these uninspected warehouses.

Current Trends and Emerging Issues in Warehouses

Driven by technological inventions, warehouses are undergoing revolutions such as:

Computerised monitoring systems are tracking the goods inside and outside the warehouses;
Conveyor belts and other mechanisms are replacing manual movement of goods in the warehouses;
Newer designs with improved storage capacities are coming up;
Better storage facilities like the use of racks is being employed in the warehouses;

warehousing kcse questions and answers

1.         1995 P1
Outline four features of a bonded warehouse (4 marks)
2.          1995 P2
Explain five ways in which warehousing facilitates trade.
3.         1996 P1
Highlight four ways in which a warehouse is useful to a trader. (4 marks)
4.         1997 P1
List three advantages of warehousing to a manufacturer. (3 marks)
5.          1997 P2
Lobo Traders intends to consult a warehouse. Explain five measures that
Lobo would take to ensure smooth functioning of the warehouse
6.         1998 P1
Outline four benefits that consumers get from a warehousing (4 marks)
7.         1999 P1
Outline four factors that a trader would consider in locating a warehouse. (4 marks)
8.         2000 P1
State four benefits that a government gets from a bonded warehouse. (4 marks)
9.          2000 P2
In what ways does warehousing facilitate trade in a country?
10.       2001 P1
State four features of a bonded warehouse (5 marks)
11.       2002 P1
State four advantages of public warehouse to retailers. (4 marks)
12.       2003 P1
The table below contains descriptions relating to some types of warehouse. In the space provided, write the type of warehouse to which each description refers.

13.       2004
In which four ways are consumers likely to suffer in a situation where there is no warehousing?
14.          2007 Q13 P1
Outline four benefits to a business that uses its own warehouse. (4 marks)
15.          2007 Q6a P2
a) Explain five features that you would consider in establishing a warehouse for   imported goods. (10 marks)
16.          2008 Q3 P1
State four ways in which a warehouse is of importance to a manufacturer. (4 marks)
17.   2010 Q3 P1
Name the types of warehouses associated with each of the statements given below: (4 marks)

18. 2012 Q21
Outline four conditions under conditions under which a warehouse may be considered to operating efficiently. (4 marks)

PRODUCT PROMOTION - KCSE BUSINESS STUDIES NOTES, SCHEMES OF WORK, OBJECTIVES, QUESTIONS AND ANSWERS

​PRODUCT PROMOTION (12 LESSONS)TOPIC/ SUB-TOPIC OUTLINES

​SPECIFIC OBJECTIVES

introduction to Product Promotion.

The purpose/Importance of product promotion

Methods of product promotion

1. Personal selling

​Methods of personal selling

​Steps involved in personal selling through sales person

​Shows, trade fairs and exhibitions

​Advantages of shows, trade fair and exhibitions

​Disadvantages of shows, trade fairs and exhibitions

​Showrooms

​Advantages of showrooms

​Disadvantages of showrooms

​Free Gifts

​Advantages of free gifts

​Disadvantages of free gifts

​Free Sample

​Advantages of free sample

​Disadvantages of free sample

​Circumstances under which personal selling is appropriate

​Advantages of personal selling

​Disadvantages of personal selling

1. Advertising

​Types of Advertising

​Advantages/Importance of advertising to the business

​Disadvantages of advertising to the business

​Advantages of advertising to the customer

​Disadvantages of advertising to the consumer

​Advertising media

​Newspaper

​Advantages of newspaper

​Disadvantages of the newspaper

​Magazines and Journals

​Advantages of magazines and Journals

​Disadvantages of magazines and journals

​Posters and Billboards

​Advantages of posters and billboards

​Disadvantages of posters and billboards

​Transit/transport advertising

​Advantages of transit advertisement

​Disadvantages of transit advertisement

​Brochures

​Advantages of Brochures

​Disadvantages of Brochures

​Radio

​Advantages of Radio

​Disadvantages of Radio

​Television (T.V) and Cinema

​Advantages of Television (T.V) and Cinema

​Disadvantages of Television (T.V) and Cinema

​Neon Signs

​Advantages of Neon Signs

​Disadvantages of Neon Signs

​Advertising Agencies

​Functions of Advertising Agencies

3. Publicity

Advantages of Publicity

​Disadvantages of Publicity

4. Public relations

product promotion topical questions

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INSURANCE - KCSE BUSINESS STUDIES NOTES, SCHEMES OF WORK, QUESTIONS, ANSWERS AND OBJECTIVES

INSURANCE (12 LESSONS)TOPICS / SUB-TOPICS OUTLINES

​SPECIFIC OBJECTIVES

Definition of Insurance

Importance of insurance

The Theory of Insurance

Pooling of risks

Benefits of the “pooling of Risks” to insurance company

Terms used in Insurance

Factors that may make it necessary for an insurance company to Re-insure

Principles of Insurance

Classes of Insurance

​Differences Between a whole life policy and an Endownment policy

​Characteristics of life Assurance

1. General insurance (property insurance)

​Accident insurance

​Personal accident policy

PRODUCT PROMOTION (12 LESSONS)
TOPIC/ SUB-TOPIC OUTLINES

SPECIFIC OBJECTIVES

Methods of personal selling

Steps involved in personal selling through sales person

Shows, trade fairs and exhibitions

Advantages of shows, trade fair and exhibitions

Disadvantages of shows, trade fairs and exhibitions

Showrooms

Advantages of showrooms

Disadvantages of showrooms

Free Gifts

Advantages of free gifts

Disadvantages of free gifts

Free Sample

Advantages of free sample

Disadvantages of free sample

Circumstances under which personal selling is appropriate

Advantages of personal selling

Disadvantages of personal selling

Types of Advertising

Advantages/Importance of advertising to the business

Disadvantages of advertising to the business

Advantages of advertising to the customer

Disadvantages of advertising to the consumer

Advertising media

Newspaper

Advantages of newspaper

Disadvantages of the newspaper

Magazines and Journals

Advantages of magazines and Journals

Disadvantages of magazines and journals

Posters and Billboards

Advantages of posters and billboards

Disadvantages of posters and billboards

Transit/transport advertising

Advantages of transit advertisement

Disadvantages of transit advertisement

Brochures

Advantages of Brochures

Disadvantages of Brochures

Radio

Advantages of Radio

Disadvantages of Radio

Television (T.V) and Cinema

Advantages of Television (T.V) and Cinema

Disadvantages of Television (T.V) and Cinema

Neon Signs

Advantages of Neon Signs

Disadvantages of Neon Signs

Advertising Agencies

Functions of Advertising Agencies

Disadvantages of Publicity

INSURANCE (12 LESSONS)
TOPICS / SUB-TOPICS OUTLINES

SPECIFIC OBJECTIVES

Differences Between a whole life policy and an Endownment policy

Characteristics of life Assurance

Accident insurance

Personal accident policy

Cash and / or Goods in Transit policies

Burglary and Theft policies

Fidelity Guarantee policies

Workmen’s compensation (Employer’s Accident liability)

Consequential loss policy; (profit interruption policy)

Characteristics of General Insurance

Procedure for taking a policy

Procedure of claiming compensation

Insurance

WAREHOUSING (6 LESSONS)

TOPICS / SUB-TOPIC BREAKDOWN

Advantages of private warehouses

Disadvantages of public warehouses

Advantages of Public Warehouse

Disadvantages of Public warehouse

Features of Bonded Warehouses

Advantages of using Bonded Warehouses to the importer

Advantages of Free Warehouse

Disadvantages of Free Warehouse