CAMBRIDGE O LEVEL COMMERCE (7100)

COMPLETE DEFINITIONS NOTES — PART 1

INTRODUCTION TO COMMERCE

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Commerce

• The process of buying and selling goods and services along with all activities that help trade take place.

Key Points:

• Links producers and consumers.

• Includes trade and aids to trade.

• Essential for economic activity.

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Trade

• The buying and selling of goods and services.

Types of Trade:

• Home Trade

• Foreign Trade

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Home Trade

• Trade conducted within the boundaries of one country.

Includes:

• Wholesale Trade

• Retail Trade

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Wholesale Trade

• Buying goods in large quantities from producers and selling them to retailers.

Functions of Wholesalers:

• Bulk breaking

• Warehousing

• Transport

• Risk bearing

• Financing retailers

• Providing market information

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Retail Trade

• Selling goods directly to final consumers in small quantities.

Functions of Retailers:

• Breaking bulk

• Providing variety

• Customer advice

• Advertising products

• After-sales services

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Import Trade

• Buying goods from another country.

Example:

• Pakistan importing machinery from China.

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Export Trade

• Selling goods to another country.

Example:

• Pakistan exporting rice to Saudi Arabia.

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Entrepot Trade

• Importing goods into a country and then re-exporting them without processing.

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Aids to Trade

• Services that support and facilitate trade.

Examples:

• Banking

• Insurance

• Transport

• Warehousing

• Advertising

• Communication

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Production

• The creation of goods and services to satisfy human wants.

Types:

• Direct Production

• Indirect Production

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Direct Production

• Production for personal use.

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Indirect Production

• Production for exchange or sale.

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Consumer

• A person who uses goods or services.

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Producer

• A person or business that makes goods or provides services.

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Goods

• Tangible products that satisfy wants.

Examples:

• Food

• Cars

• Furniture

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Services

• Intangible activities provided to satisfy wants.

Examples:

• Banking

• Teaching

• Insurance

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Economic Resources

• Resources used to produce goods and services.

Four Factors of Production:

• Land

• Labour

• Capital

• Enterprise

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Land

• Natural resources used in production.

Examples:

• Water

• Minerals

• Forests

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Labour

• Human effort used in production.

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Capital

• Man-made resources used for production.

Examples:

• Machinery

• Buildings

• Tools

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Enterprise

• The ability to organise factors of production and take risks.

Functions of an Entrepreneur:

• Organising resources

• Decision making

• Risk taking

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Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

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Division of Labour

• Breaking production into smaller specialised tasks.

Advantages:

• Faster production

• Increased efficiency

• Greater expertise

Disadvantages:

• Worker boredom

• Repetitive tasks

• Less flexibility

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Specialisation

• Concentrating on one specific task or activity.

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Chain of Production

• The stages through which goods pass from raw materials to finished products.

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Industry

• Activities involved in extracting or manufacturing goods.

Types of Industry:

• Primary Industry

• Secondary Industry

• Tertiary Industry

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Primary Industry

• Industry involved in extracting natural resources.

Examples:

• Farming

• Fishing

• Mining

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Secondary Industry

• Industry converting raw materials into finished goods.

Examples:

• Manufacturing

• Construction

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Tertiary Industry

• Industry providing services.

Examples:

• Banking

• Insurance

• Transport

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COMMUNICATION

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Communication

• The transfer of information from one person to another.

Importance:

• Improves coordination

• Assists decision making

• Reduces misunderstandings

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Internal Communication

• Communication within an organisation.

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External Communication

• Communication between a business and outside parties.

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Oral Communication

• Communication through spoken words.

Examples:

• Meetings

• Telephone calls

• Interviews

Advantages:

• Fast

• Immediate feedback

Disadvantages:

• No permanent record

• Can be misunderstood

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Written Communication

• Communication using written words.

Examples:

• Letters

• Emails

• Reports

Advantages:

• Permanent record

• More formal

Disadvantages:

• Slower

• Sometimes expensive

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Visual Communication

• Communication through images, charts or symbols.

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Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

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Electronic Communication

• Communication using electronic devices.

Examples:

• Email

• Messaging apps

• Video conferencing

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Memo

• A written internal message used within an organisation.

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Agenda

• A list of topics to be discussed during a meeting.

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Minutes

• Official written record of a meeting.

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Report

• A formal document presenting information or findings.

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Feedback

• Response given by the receiver to the sender.

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Encoding

• Converting information into a communicable form.

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Decoding

• Interpreting received information.

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Barriers to Communication

• Factors preventing effective communication.

Examples:

• Noise

• Language problems

• Poor internet connection

• Misunderstandings

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Internet

• A worldwide network connecting computers.

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Email

• Electronic mail sent through the internet.

Advantages:

• Fast

• Cheap

• Global communication

Disadvantages:

• Spam

• Viruses

• Requires internet access

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Video Conferencing

• Conducting meetings using video and audio technology.

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Fax

• Sending documents electronically through telephone lines.

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Postal Services

• Services responsible for delivering letters and parcels.

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Courier Service

• Fast and secure parcel delivery service.

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Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

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Website

• A collection of web pages available on the internet.

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Intranet

• A private network within an organisation.

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Extranet

• A private network shared with external organisations.

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Telecommunication

• Communication over long distances electronically.

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Data Transmission

• Sending information electronically from one place to another.

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Presentation

• Formal delivery of information to an audience.

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Notice

• Written information displayed publicly.

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Public Relations

• Activities aimed at maintaining a good image of a business.

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Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.