DEMO

COMMERCE AND PRODUCTION

Introduction

  • Commerce is the production and distribution of goods and services in order to satisfy needs and wants of consumers.
  • Commerce involves the buying and selling of goods and services
  • Production is the process of manufacturing goods using raw materials and other inputs.
  • When people make use of goods and services to satisfy their needs and wants, they are called consumers.

Fig 1 Commerce and production.jpg (125 KB)

E-Commerce

  • This is the buying and selling of goods and services and the transfer of money, or information sharing through the internet.
  • The internet is an inter- connection of computers through networks.
  • It involves the use of cell phones and computers on the internet.
fig.2 Drivers of e-commerce1.jpg (212 KB)

Types of e-commerce

-There are several forms of e-commerce these include:
  • Business to Business (B2B)
  • Business to Consumers (B2C)
  • Consumer to Business (C2B)
  • Consumer to Consumer (C2C)
  • Business to Administration (B2A)
  • Consumer to Administration (C2A)

Benefits Of E-Commerce

  • Overcoming the distance which means that one does not travel to get what he/she wants to buy.
  • The world is one global village meaning that there are no physical barriers such as border controls.
  • Lower costs mean that goods are cheaper because of reduced costs of advertising and selling.
  • Time is not wasted since producers and sellers are found over the internet
  • Business can be conducted on a 24/7 basis which means business can be done anytime of the day without interruptions.

Difference between Needs and Wants

Needs

  • Needs are the goods and services that consumers need in order to survive.
  • Consumers cannot do without them as they are basic.
  • They are consumed on a day to day basis.
  • For example, food clothes and shelter.
Fig.4 Examples of needs_water.jpg (92 KB)
Fig.4 Examples of needs_food.jpg (83 KB)
Fig.4 Examples of needs_clothing.jpg (117 KB)

Wants

Wants are goods and services that are meant for leisure and luxury.
-These goods and services are meant to improve peoples' lives. -
  • Consumers can survive without these.
  • For example Sofas, cell phones and radios.
Fig.5 Examples of wants_pet.jpg (95 KB)
Fig.5 Examples of wants_car.jpg (88 KB)
Fig.5 Examples of wants_toy.jpg (97 KB)

Goods and Services

  • Goods are tangible things that can be touched by hand. For example bread, soap, and a pen.

Goods

  • For example healthcare, accommodation, catering, and entertainment.
Fig.6 The definition of a good_car.jpg (85 KB)
Fig.6 The definition of a good_books.jpg (71 KB)
Fig.6 The definition of a good_bike.jpg (93 KB)

Services

  • Services are things that we cannot see or touch. Aservice is something done for someone else. Sometimes people are paid for their service, sometimes they are not.
Fig.7 Definition of a service_cutting hair.jpg (87 KB)
Fig.7 Definition of a service._cooking.jpg (104 KB)
Fig.7 Definition of a service_fire fighting.jpg (92 KB)

Types of goods

Fig.8 Durable and non-durable goods._cars.jpg (72 KB)
Fig.8 Durable and non-durable goods-food.jpg (83 KB)

1. Durable goods

Such goods can be used for a very long time before they are exchanged or replaced, for example car tyres, furniture, equipment.

2. Non-durable goods

These goods can only be used for a short time before being replaced, for example food, clothes and batteries.

3. Consumer goods

Goods that are bought for final consumption by the consumer, for example bread, washing powder and clothes.
Fig.9 Consumer goods..jpg (202 KB)

4. Capital goods

Goods which are bought to be used as inputs in the production of other goods, For example flour, computers and ice-cream machine.
Fig.10 Capital goods..jpg (136 KB)

Types of Production

  • There are two methods of production that a producer can choose to use.

A) Direct production

  • This is where someone produces all goods and services in order to satisfy his/her own needs and wants, for example a peasant farmer.

b) Indirect production

  • This occurs when someone produces goods and services for exchange that is for resell, and for their own consumption, for example a commercial farmer.

Stages of production

-There are 3 stages of production which are:

1. Primary/ extractive production

  • This is the extraction of raw materials from the land or natural resources.
  • The raw materials can be consumed but need further processing.
  • Activities include farming, mining, forestry and fisheries.

2. Secondary production/ manufacturing/

  • This involves the processing of raw materials from the primary stage into finished goods.
  • Processing takes place in factories and industries.
Fig.11 an activity of manufacturing..jpg (118 KB)

3. Tertiary production

  • This stage refers to activities of commerce as well as other direct services.
  • This involves all channels of distribution to the consumer such as transport.
  • It also involves trade, advertising, warehousing and marketing.
  • Direct services include professions such as lawyers, teachers, police, and musician.

Divisions of production

  • It is the assignment of different parts of a manufacturing process or task to different people in order to improve efficiency.
-The production process requires inputs in order to come up with finished products.
-Basically there are four factors of production


1. Land/Natural resources
  • This refers to all the natural resources found on earth, beneath and above.
  • For example land is necessary for construction of factories and offices.
  • Fish require seas, rivers and oceans to breed in.
  • The reward for land is rent.
Fig.12 Examples of natural resources..jpg (239 KB)
2. Labor
  • This refers to all human, physical and or mental effort used in the production process.
  • The rewards for labor are salaries or wages.
3. Capital
  • This refers to the money; machinery and equipment are used in a business to produce goods/ services.
  • It is the money used to start a business.
  • The reward for capital is interest.
4. Entrepreneurship/ Organization
  • This refers to all the ideas and skills that a person possesses to gather, organize, direct and control resources used in the production process.
  • An entrepreneur is a risk taker who mobilizes resources to run a business.
  • The reward for entrepreneurship is profit

Commerce and Trade

-Commerce is a branch of business. It is concerned with the exchange of goods and services.
  • It includes all those activities, which directly or indirectly facilitate that exchange.
- Trade is the exchange or buying and selling of goods and services.
- Trade is generally in two forms:

1. Home Trade

This kind of trade takes place between residents of the same country.

2. International / Foreign Trade

This is trade that takes place between residents of different countries.

Aids to Trade

Aids to Trade
ict
transport
warehouse
advertising
insurance
banking
1. Transport;
  • This refers to the movement of resources such as raw materials, other inputs and equipment to manufacturers.
  • Finished goods are transported by manufacturers to consumers.
  • There are channels of distribution that are used for movement of goods and services.
  • It helps in the creation of employment as people are employed as drivers, conductors, and pilots.
  • Employees are carried to and from work.
  • Examples of the modes of transport used in trade include air, road, rail, pipeline and sea transport.
2. Insurance
  • It is important to cover risks and give compensation to anyone who has experienced a loss.
  • In trade insurance is important as it covers consumers and businesses against losses as a result of theft, accidents, fire and many other risks that may occur.
  • At the work place employees can be covered against injuries and accidents.
3. Banking
  • This is the keeping of money and other valuables safely in a bank.
  • Banks provide many functions to business and consumers.
  • Money kept in a bank can earn interest.
  • Banks can offer loans to businesses and individuals, who must pay with interests.
  • Banks can also facilitate financial transactions through internet banking, transfers and cheques payments.
  • Banks also provide foreign currency and facilitate international trade.
4. Warehousing
  • This is the storing of materials such as raw materials, finished goods, spares and unused stock safely.
  • The storage place must be safe and secure to prevent loss or damage of materials due to bad weather like rain, heat and the cold.
  • Warehouses are useful for manufacturers to store finished goods to enable them to meet demand for their goods.
  • Seasonal goods that are bought in some seasons can be kept safely until there is demand for them. For example jackets and jerseys for the winter season.
  • There are various types of warehouses such as Bonded warehouses, manufacturer’s warehouses. (See the topic on Wholesale and international Trade).
5. Communication and Technology
  • This is the process of getting in touch with customers, suppliers, other traders and stakeholders for business purposes.
  • Business communication is now done using various ways such as email, Fax, SMS, letters, and other social media such as WhatsApp, Facebook and Twitter.
  • Customers can place orders, For example using the Internet to buy a car in Japan.
6. Advertising
-Businesses can use the internet to advertise cars, clothes, cell phones and so on.
  • Advertising is about communicating with consumers and creating an awareness of your goods and services.
  • This also enhances a brand.
  • A brand is a name or symbol of a specific type of goods or services. For example Nike, Adidas, Coca Cola and Mercedes Benz.
  • Advertising helps to increase sales in a business.
  • It also encourages consumers to buy products of a business.
  • Advertising is done through different media such as electronic (Television and Radio), Print (Newspapers, Magazines) and Internet (Computers, Cell phones). See topic on Advertising.
7. Technology
  • Improvements in technology have led to changes in the way trade is conducted.
  • E-commerce has developed as a result.
  • Business has been simplified or made easy.
  • Trade can be conducted in the comfort of the home or on the go that is when someone is moving about using a cell phone or laptop.
  • The world is one global village that is one market without borders.
  • Transactions can be done faster and distance has been reduced as a person can quickly transfer money or identify goods in America for example.

Specialisation

-This is when workers become experts in doing one area of work in which they become skilled. For example an electrician, a web designer and software engineer.

Types of Specialisation

- Specialisation can be classified as:
1. Professionals
This refers to a job that requires special education, training, or skill.
  • Examples include Lawyers who can specialize in criminal law, international law, or constitutional law. Teachers can specialize in different subjects such as English, History and commerce.
Fig.14 People can specialise in different jobs..jpg (197 KB)
2. The line of production
-In the production process work is divided into smaller parts or stages which are called the division of lab our.
  • The work place is divided into departments which cooperate to produce the final products.
  • Workers become highly skilled in their work as they repeat the same activities every day.
  • For example in car manufacture someone works on the engine, someone else does the painting; another will work on the wheels.
Fig.15 The production line..jpg (88 KB)
3. Firms
-A firm is a business that produces one type or range of products that are related to those produced by other firms.
  • The firm will use a certain type of machinery and tools to produce its goods.
  • Different firms will produce related goods.
  • For example in the car manufacturing industry One firm produces engines, another produces brakes, another tyres and so on.
4. Regions
  • Within a country there are divisions known as regions.
  • In Zimbabwe there are ten provinces, for example Matebeleland which specializes in cattle and goat rearing.
  • Mashonaland central specializes in maize production and the Lowveld in sugar production.
5. Countries
  • Countries belong to particular groupings regionally and internationally, for example Zimbabwe is a member of SADC and the United Nations.
  • Member countries in groupings have different areas of specialization and resources.
  • Zimbabwe used to be known as the bread basket of SADC because of crop production.
Advantages of Specialisation
  • Goods are produced much faster because workers do not waste time moving from one place to another.
  • There is increased production because workers are good at doing their jobs.
  • Workers are more skilled as they always repeat the same type of work.
  • As workers are skilled they are able to produce quality products.
  • Consumers benefit from quality products which improves their lives.
  • Better technology has been developed as a result of specialisation with new machinery, and equipment being created.
  • As a result of specialisation there are fewer tools and equipment required as workers share these.
Disadvantages of Specialisation
  • Specialisation results in repetition of processes which can cause boredom for the workers.
  • Repetition of tasks can also result in loss of satisfaction as workers seek newer challengers elsewhere that they cannot get at work.
  • Some workers can become dependent on the group they work with and cannot work on their own.
  • If one person makes a mistake in the production line then it affects the work of other workers.
  • Specialisation leads to similar products being produced leaving consumers with limited choices to select.

Summary

  • Commerce is the production and distribution of goods and services in order to satisfy needs and wants of consumers.
  • Commerce involves the buying and selling of goods and services as well as all the activities that aid trade.
  • Production is the process of manufacturing goods using raw materials and other inputs.
  • E- commerce: This is the buying and selling of goods and services and the transfer of money, or information sharing through the internet.
Types of e-commerce
  • Business to Business (B2B)
  • Business to Consumers (B2C)
  • Consumer to Business (C2B)
  • Consumer to Consumer (C2C)
  • Business to Administration (B2A)
  • Consumer to Administration (C2A
  • Types of goods
  • Durable goods
  • Non-Durable goods
  • Consumer goods
  • Capital goods
Stages of Production
  • Primary
  • Secondary
  • Tertiary
Factors of Production Reward
  • Land - rent
  • Labour - salaries and wages
  • Capital - interest
  • Entrepreneurship - profit