Mastering Commerce

Frontmatter

Chapter 1. The Divisions of Production

Abstract

This chapter explains the scope of the book and provides a framework for later studies.

R. R. Pitfield

Chapter 2. Sole Traders and Partnerships

Abstract

This and the next two chapters are about the forms in which private business is carried on. (Private businesses are those which are not publicly owned by central or local government.)

R. R. Pitfield

Chapter 3. Limited Companies

Abstract

A very high proportion of private businesses trade in the form of limited companies. This is because to do so provides considerable advantages over being in business as a sole trader or in a partnership. The advantages of running a very small business as a limited company are in many respects the same as apply to companies with capital amounting to millions of pounds. In fact, most companies are not large.

R. R. Pitfield

Chapter 4. Private Business Units Generally

Abstract

We have studied the main forms of private business and you may now find it useful to revise by referring to the features which are summarised in Figure 4.1. We have seen how the forms tend to alter with the growth of a business. (However, although we have traced the development of Zebedee’s business from sole trader to a large company, it must be remembered that a business can start in any form the owners wish it to have.) In this chapter we consider the reasons why businesses grow, the methods of doing so and the problems which growth often brings. We also look at two other types of business which differ widely from those we have studied so far.

R. R. Pitfield

Chapter 5. The Retail Trade

Abstract

Retailing is carried on by those businesses which sell goods to the final consumer. The obvious example is provided by the shops we all know and deal with. The retailing stage, therefore, is the one where goods reach the end of their journey from the manufacturer. At the close of the previous chapter we saw that some goods are sold to the consumer by the manufacturers or the wholesalers. This does not mean that in those instances there is no retailing. The manufacturer or wholesaler who sells direct to the consumer is acting as a retailer; he adds retailing to his other activities. Whatever channel of distribution is used, the retailing function always exists.

R. R. Pitfield

Chapter 6. The Wholesale Trade

Abstract

Traditionally, the wholesaler buys in large quantities from manufacturers and sells in smaller quantities to retailers. We have seen that the function of the wholesaler is often undertaken by manufacturers who sell direct to consumers and by retailers who buy directs from manufacturers. These practices are increasing so that wholesaling as a separate activity is declining. Nevertheless, the work of storing large amounts of goods, breaking them into smaller amounts and distributing them still has to be done, even though it may not be a wholesaler as such who does it. In this chapter, however, we are mainly concerned with individual wholesalers and the service they provide.

R. R. Pitfield

Chapter 7. Middlemen and Markets

Abstract

The word ‘middlemen’ is a general one, referring to all those people who come between manufacturers and consumers. Middlemen therefore include retailers and wholesaler. We have studied both of these in previous chapter and we now have to consider other middlemen.

R. R. Pitfield

Chapter 8. Insurance

Abstract

No matter how accurately a businessman plans for the future there is always the possibility that some unexpected event will upset those plans. By means of insurance it is possible to obtain protection against the consequences of some of those events. No one would venture into business unless he knew that he would receive some help if an accident occurred which caused him financial loss. Industry would be brought to a standstill unless it had this confidence.

R. R. Pitfield

Chapter 9. Transport

Abstract

Transport is an essential part of commerce, and as economic activity becomes more complex so the importance of transport increase. Increasing specialisation in industry means that production becomes more centralised. The result is that goods have to be sent longer distances from a few areas to consumers who are scattered. Specialisation also means that components are made in a few areas and therefore have to be moved to central areas for assembling. Transport plays an even larger part today because of the increase in trading between countries.

R. R. Pitfield

Chapter 10. Foreign Trade

Abstract

During our studies we have encountered various forms of specialisation. We have seen that even in a primitive society there is specialisation of labour; that firms specialise in sections of an industry; that different parts of the country specialise in what they produce. This principle of specialisation extends to international trade, in that each country dose those things it is best suited to do. Like the small community on its island, this results in a country producing more than it requires of those things it specialises in. This surplus is sold to other countries in exchange for the surplus production of those countries. Consequently, each country gets the goods it wants from the most economical source; that is, from its own production or from another country, as the case may be.

R. R. Pitfield

Chapter 11. Public Enterprises

Abstract

Throughout the book our concern has been with private enterprise: that is, commercial activities carried on by firms ranging from one-man businesses to multinational companies. In addition, central and local government play a major part in providing goods and services, i.e. via public enterprises.

R. R. Pitfield

Chapter 12. Commerce and the Government

Abstract

In the previous chapter we looked at the ways in which the government takes part in commercial activities. We now need to consider the actions of the government which have an effect on those engaged in commerce. As we shall see, the government has responsibilities to the commercial world and the business community has obligations to the government.

R. R. Pitfield

Chapter 13. Buying and Selling

Abstract

All businesses are engaged in buying and selling. Although they include those which ‘sell’ services, in this chapter we will be concerned only with trading in goods.

R. R. Pitfield

Chapter 14. Advertising

Abstract

Both consumers and sellers are affected by advertising. Sellers must first make their products known as they may then have to persuade consumer to buy their products in preference to those of other sellers. Consumers, at whom advertising is aimed, require information, but there is the possibility of deception in the ways they are persuaded. There are therefore moral as well as practical considerations in the practice of advertising.

R. R. Pitfield

Chapter 15. Communications

Abstract

In the commercial sense communications are the methods used to obtain information from outside a business, to negotiate with other businesses and to pass information outward. Numerous forms of communication methods are available and a businessman should choose that method which is most effective in a particular situation. To be effective a communication method must be one which is economical and accurate, and as rapid as is necessary.

R. R. Pitfield

Chapter 16. Banking Services

Abstract

In the English system banks can be broadly divided into three groups:

(a)

The Bank of England is owned by the state. As it is the centre of the financial world it is discussed in Chapter 18. Some reference will also be made to it in this chapter.

 

(b)

Joint-stock or commercial banks are the ‘High Street banks’ we all know. They are also knows as clearing banks. In this chapter we will look at the services provided by these banks for business people and private individuals. (The ways in which banks provide credit are discussed in the next chapter.)

 

(c)

Merchant banks are financial institutions offering specialist services and these are dealt with in Chapter 18.

 

R. R. Pitfield

Chapter 17. Bank Credit

Abstract

Although banks charge fees for most of the services they provide, the major part of a bank’s profits comes from lending money. There are various ways in which a bank can provide credit for its customers. First, it can provide a lump sum of money in the form of a loan. Second, it can allow a customer to draw cheques when he has insufficient money in his account to meet them. This is done by allowing him an overdraft. Finally, it can make it possible for a customer to buy things without paying cash for them. This is done by the use of credit cards.

R. R. Pitfield

Chapter 18. The Money Market

Abstract

The ‘money market’ is a term which is somewhat loosely applied to a number of financial institutions within the total banking system. As we saw in the two previous chapters, ordinary traders and private individuals do a lot of business through their banks, but the banking system extends beyond the High Street banks. In this chapter we will study institutions which gives specialist services concerned with circulating money and providing credit.

R. R. Pitfield

Chapter 19. The Capital Market

Abstract

Every business needs capital. Before setting up a business there must be a pool of money to buy the physical things which will be required and to pay the bills until the business is earning income. If a business wishes to expand at a later date, it will require more money. It may be able to provide that money itself by not paying out some of its profits, but in most cases it must go outside to get the money. The capital market provides the channels by which money is collected and made available to those who want it for use in business. In this chapter we will also see the part played by the Stock Exchange.

R. R. Pitfield

Chapter 20. Business Finance

Abstract

This chapter is about using capital in a business. If capital is borrowed, it must be put to work so as to produce sufficient income to pay the interest on the loan and leave enough over to provide a profit. If capital is in the form of shares, enough profit must be made to give the shareholders a satisfactory dividend. The major aim of any business, therefore, is to employ its capital in such a way as to provide the most profit. However, this must not be achieved at the expense of safety. In its efforts to make profits a company can ‘over-reach’ itself so that everything ends in disaster.

R. R. Pitfield

Chapter 21. Personal Finance

Abstract

In many respects every person is in business. We all have to relate what we spend to what we earn, so that, consciously or not, we ‘budget’. As private individuals we are also like businessmen in that we have to choose carefully our methods of saving. Similarly, we have to take steps to insure ourselves against various forms of risk.

R. R. Pitfield

Chapter 22. Personal Aspects of Buying

Abstract

Everyone is a buyer. We all buy goods, such as food, domestic articles, newspapers and books, etc. In most cases one has a choice in buying goods. It is therefore possible to compare prices between, for example, different brands of tea, different makes of shoes, and so on. Often, however, when comparing prices one is not comparing ‘like with like’. Thus one brand of tea may be cheaper than another merely because it is of an inferior quality. To make a true comparison, therefore, one must allow for differences in the products.

R. R. Pitfield

Chapter 23. Buying on Credit

Abstract

To obtain goods on credit means to ‘buy now, pay later’. The system is also known as ‘deferred payment’.

R. R. Pitfield

Backmatter