FORM FIVE COMMERCE – TRADE IN GENERAL

                                 COMPARISON OF MAIN METHODS OF DISTRIBUTION AVAILABLE TO PRODUCER:

1. Indirect method  ( Manufacture –wholesaler-retailer)

 

edu.uptymez.com

                                Advantages:

a)      Fewer orders dealt with resulting lower delivery and packing costs.

b)      Fewer representatives needed.

c)      Fewer accounts required hence reduction in bad debts.

                               Disadvantages

a)      Lower profit margin on goods sold.

b)      Producer must rely on wholesaler loyalty to promote goods. i.e no guarantee that wholesaler will promote his goods.

1.            Direct method (Producer – Consumer). Can be through mail, order business or manufacturers, own retail shops or canvassing (using own sales people), sale at manufacture’s plant.

 

edu.uptymez.com

                                Advantages

a)      Direct control over selling method by using own sales people.

b)      Saving in sales peoples salaries when using mail order.

c)      Greater convenience to customer especially if customer are away from shops by using mail order business.

d)     Good control over sales methods and increase in sales volume through manufacturers own shop.

e)      Allows sale of technological products which need demonstration and after sales services.

                               Disadvantages

a)      No personal contact by salesman in mail order.

b)      Higher costs of transport and delivery.

c)      High cost of printing catalogue for mail order business. Packing and advertising.

d)     High cost of renting or purchase of sites for shops.

                            MIDDLEMEN OR INTERMEDIARIES IN THE DISTRIBUTION OPERATIONS

They are traders who operate between producers and final consumers as they are involved in the whole nglish-swahili/distribution” target=”_blank”>distribution process.

Are persons or firms who put producers in touch with consumer.

                          TYPES OF MIDDLEMEN

Middleman are classified into merchant middlemen and mercantile agents.

1.  Merchant middlemen: These are middlemen who buy and sell goods in their own name (their own properties) they include wholesalers and retailers.
2.  Mercantile agents: These are middlemen who hold and sell the goods on behalf of other people called principals. They sell goods which are not theirs they belong to principals, so they act on principal’s name.

 

edu.uptymez.com

Is appointed by the principal to act on his behalf in the ordinary courses of business including buying and selling on behalf of principal.

NOTE

Mercantile agent can be general or special agent

•  General mercantile agents: Have full authority in performing any lawful transactions on behalf of principal.
•  Special or particular mercantile agents: Perform special or particular transaction eg: Buying particular kind of goods; after completion the agent ceases his agency.

 

edu.uptymez.com

The agent is required to fulfill the following conditions;

1.  Must act within his ability and he must be personally liable for his actions beyond his authority
2.  Must act on behalf of and in the name of his principal and any act done in his own name he will be liable to third parties.
3.  Must act under the instructions of the principal as may be stipulated in the contract of business operations.

 

edu.uptymez.com

                          DIFFERENCES BETWEEN MERCHANT MIDDLEMEN AND MERCANTILE MIDDLEMEN

    

Common features of mercantile agents

1.  They do not take title to the goods.
2.  They are paid commission based on sales or purchases
3.  They are used as marketing force by principles
4.  They serve the interest of both buyers and sellers.

 

edu.uptymez.com

                                      Arguments in favour of middlemen.

Middleman are very important in the nglish-swahili/distribution” target=”_blank”>distribution process because.

1.  They facilitate smooth flow of goods from the manufacture to final user.
2.  They offer specialized or expert in marketing hence relieves manufactures of tasks outside their scope and concentrate in producing task.
3.  They are near customer so they know their demand and satisfied them.
4.  Many manufacturers wants to avoid risks which would face them if they had to sell directly to consumers e.g. Theft, damage etc.
5.  It is impossible for manufacturer to have stores all over the country. Therefore middleman are important because they are scattered all over the country and they can offer storage facilities in all regions.
6.  Many manufactures do not have financial resources to sell directly to consumers eg. Transport cost.

 

edu.uptymez.com

                                    Arguments against middlemen (Assignment 2)

1.  Rise in price
2.  Producers profit reduced

 

edu.uptymez.com

                                   Types of Mercantile agents

                     A Broker is an agent who represent a buyer or a seller in negotiating a purchase or a sale without physical handling of the goods.

                                   Characteristics:

1. They do not possess the goods.
2. They have limited power price and terms of sale.
3. They do not have authority to receive payment
4. They do not have power to deliver the goods sold.
5. They act in the name of their customer (buyer/seller) and not their own name.
6. They are independent agents who engage in bargaining or agreement between two or more parties for brokerage.

 

edu.uptymez.com

                                 Types of brokers

      a) Produce brokers: They negotiate the purchase and sell produce e.g. Maize

      b) Stock and share brokers: They negotiate purchase, sell stocks and shares in stock exchange.

      c) Insurance brokers: They specialize in negotiating various types of insurance policies to various prospective customer on behalf of insurance coys.

      d) Ship brokers: They specialize in negotiating transport by ship like procuring cargo, and charter of ships etc.

     e)  Court brokers: They negotiate the sale and buy of property of person seized according to the order given by the court.

                                Role of brokers

1.  They provide professional advice to buyers and sellers which help sellers and buyers to benefits from each transactions.
2. They are able to secure better terms of sale purchase on behalf of their clients.
3.  They enable the relationship between buyers and sellers.
4.  They are able to render services at cheap rates because they may execute various deals at pear.

 

edu.uptymez.com

                              B: Factors: is an agent employed to sell goods consigned or delivered to him by his principal for compensation.

                              Characteristics

1.  They take physical possession of the goods.
2.  They may give credit to a reasonable extent as allowed by the principal.
3.  They have great saying in price.
4.  They are general agents who sell goods for other on commission basis.
5.  They finance the principal by making immediate payment and assume responsibility of collecting payment from the customers.

 

edu.uptymez.com

                             DISTINCTION BETWEEN BROKERS AND FACTORS.

1.  Broker does not possess the goods while the factor does.
2.  Broker cannot receive payment while the factor does.
3.  Broker has no insurable interest in the goods transacted while the factor has the insurable interest.
4. Broker has no right of lien on the goods but the factor has a right on goods in his possession for the unpaid charges.
5.  Broker is a special mercantile agent while factor is a general mercantile agent.

 

edu.uptymez.com

                            C: Commission agents. Are  middlemen who buy and sell goods for his principal in return for commission.

                            Characteristics of commission agents:

1.  They get fixed commission.
2.  They do not bear risks. The risks are borne by principals.
3.  They are experts in the goods dealt in.
4. They buy and sell in their own names.
5. They are liable for the contracts as they act in their own names.

 

edu.uptymez.com

                           D: Delcredere agents. Are agents employed by the principal to sell and guarantee payment for all goods they sell irrespective of the payment received or not received by him for an extra additional commission called delcredere commission. They  are personally liable for default of customers. Introduced by him for extra commission paid for that guarantee.

E: Auctioneers: Agent employed to sell goods at the public auction.

                          Features:
      1.  They are specific agents until the goods have sold
2.  They take possession of goods
      3.  They sell on cash, if they sell on credit they are personally liable for bad debts
      4.  They  have authority to receive money from sale

                          Roles

1.  They undertake promotion to the public
2. They are responsible to try to find and sell to the highest bidder deduct the expenses and remit the balance to the seller
3.  They collect debts (if goods) sold on credit

 

edu.uptymez.com

F: Warehouse keeper: is an agent who receives goods and store them on behalf of owners in return for warehousing charges

                         Features

1.  Responsible for storage and take care of goods preserved by them.
2. They can retain the goods until they receive payment.

 

edu.uptymez.com

                        G. Underwriters agents: Persons or firms who guarantee the subscription (sale to the public) of whole or portion of the shares of a company in turn they are paid commission.

                        Features:

1.  They are specific agents.
2.  They are dealing in guaranteeing shares or debentures.
3.  They receive commission as a percentage of the face value of subscribed shares or debentures guaranteed by them.
4. They pay or take unsubscribed shares or debentures.

 

edu.uptymez.com

H: Clearing and forwarding agents. Are persons or firms employed by importers and exporters to collect deliver and forward goods on behalf of them in return they are paid commission.