Production and Marketing Book by Coleen Hayles-Smith

Production and Marketing

ABOUT

The Authors Coleen Hayles-Smith,

born 5th of July 1983in St. Catherine, attended the Old Harbour High School where she sat five subjects at the CSEC level; then matriculated to the St Anna’s Business College to achieve additional subjects. During her tenor at the Business College, she recognized her full potential as a business student and decided to pursue a Bachelor Degree in Business Education. Currently, she is employed to the KSA Health Department in the position of a Records Officer and a fourth year student at The Mico University College, pursuing a Bachelor Degree in Business Education.Her philosophy is “I can do all things through Christ who strengthens me and the sky is the limit for my destiny”. This philosophy allowed her to realize who she was and who she is today. The aim for this book is to positively assist in transforming, motivating and empowering the growth and development of students in the topics production and marketing.

Gregory Samuels

was born in Linstead, St. Catherine to Trevor and Pamella Samuels, who are both deceased. He lived in St. Catherine for most of his life where he attended his early childhood school years. He attended Independence City All Age School in the late 1980's after which he earned a space at the St. Georges' College via the common entrance exams. At St. Georges' College he was an active member of the track team; he represented the school at various levels. Further to that,he also attended the University of the West Indies Continuing Studies where he pursed a certificate in supervisory management. He also attended Infoserv Institute of Technology where he acquired a Certificate in Computer Technology. He worked in the Book Industry over 10 years in various capacities such as a Senior Customer Service Representative, Accounting Technician, Marketing Representative and a Warehouse Supervisor. He also worked in the Used Car Industry as a Sales Representative for a few years. Being exposed in the various industries

Production and Marketing has helped him to develop a love for business and an eagerness to learn more about business and being an entrepreneur. Currently, he is a student at The Mico University College, where he is studying to pursue a Bachelor Degree in Business Education. It was never his intention to attend The Mico University College due to the fact that most of his relatives attended that institution and he wanted to set his own trail because he is a firm believer in setting his own trail and be who he is.

Omar Williams, one of the authors of this Business CSEC study guide, was born at the Kingston Public Hospital on 6th of July 1993, to parents Mrs. Annette Blake-Williams and Curtis Williams. He is twenty-two years old. He is the first son for his Father and the second son for his Mother. He is a very optimistic individual, selfmotivated, confident and spiritual. His extracurricula activities comprises of reading novels, the gleaner and any other information that attracts positivity. He is a former graduate of the Dunoon Technical High School, were he was a member of the schools prefect body. He has been in a number of clubs and societies during his tenure at the institution such as Key Club and the Duke of Edinburgh Programme where he was a silver awardees. He later sat six CSEC Examinations and City and Guilds. He later employed to the Ministry of Education were his dream to become a business educator comes into effect from motivation from family, friends and co-workers. Currently, he is employed to the Office of the Prime Minister in the capacity of a Records Officer and a second year student at The Mico University College, where he is pursuing his Bachelor of Education in Business Studies. His beliefs and inspiration comes from his daily bible quote which reads â&#x20AC;&#x153;I will lift up my eyes unto the hill from whence cometh my help my help cometh from the Lord the maker of heaven and earthâ&#x20AC;?. This bible verse as propel him in becoming the person he is today, he live by it and it has become apart of his daily routine.

Production and Marketing

Jerron Latham

is currently the Administrator of the Online Learning Management System at The Mico University College. He received his CSEC and Cape subjects at the Mannings High School in the Area of business and is currently pursuing a Bachelorâ&#x20AC;&#x2122;s Degree in Business Education at The Mico University. He has received training from the University of Technology in Business Administration and has worked in many areas outside of business making him an all-round individual who is able to apply information from various aspects.Jerron Latham is also adept in information Technology which he has utilized and linked to his love for business and also his new found love for teaching where online learning is concerned.

Production and Marketing

Contents

Production

Production Productivity Levels of Production Types of Production Factors of production Roles of the Entrepreneur Chapter 1 Activity

Marketing

Difference between Marketing and Marketing Marketing Activities Marketing Mix Marketing Research Reasons for Conducting a Market Research Marketing Research Process Types of Market Research Types of Market Structures Factors that Influence Consumer Behaviour Packaging and Presentation of Goods Branding Copyright, Patent and Trademark Methods of Promoting Sales Techniques of Selling Terms of Sales Consumer Organization Links in the Distribution Chain Methods of Retailing Forms of Transportation Problems of Distribution Measures to Mitigate Problems of Distribution Chapter 2 Activity Answer to Activities References

3 - 14 3 3-4 5-6 7 8 - 10 11 12-14

16 - 37 16 16 - 17 17 - 19 19 20 20 20 - 21 21 - 22 23 – 24 24 25 25 26 27 28 29 - 31 31 - 32 33 - 34 34 - 36 36 – 37 37 38 – 39 40 – 41 42

Production and Marketing

This Production and Marketing book has been organized to follow closely to the new CXC Principles of Business Syllabus. The book is divided into two sections, the first section focused on the topic production and the second focused on Marketing. The authors tried to use the most important information under each topic so as to make the book reader friendly and easy to use. As the quote above says everything is always changing and so it is never an easy task to capture all the information available in the business world due to rapid changes especially in the way we produce and market products. We hope this book serves as an introduction and stimuli to students and teachers being eager to explore the world of business.

Production and Marketing

Chapter 1: Production Learning Objectives: On completion of this chapter, students will be able to: 

identify at least two factors in the production of goods and services;



differentiate between production and productivity;



discuss at least two production levels of a business;



describe the resources used for production of goods and services;



explain at least three factors of production;



draw a table in their notebook and compare at least two types of production.

Requirements: Teachers: Computer, tablet or laptop, projector, whiteboard, makers, whiteboard eraser, calculator Students: To go on field trips when deemed necessary, calculator, notebook

Production and Marketing

PRODUCTION

Production and Productivity When we say that something is produced, we usually mean that there has been a transformation or that changes have been made to the format. In the world of business, a profit is made because consumers are willing to pay for these changes. Businesses use all the different resources in our world, in countless different ways. Let us begin our study of production by examining a few key terms.

Production Production is the act of creating or manufacturing something. This product usually has an exchange value. For example, a manufacturing business such as a packaging firm produces boxes and other packages.

Productivity Productivity deals with how well a business is using all its resources. In other words, productivity is the relationship between the amount of human and other resources used, and the amount of output that is produced. If a large quantity of human and other resources is used and only a small quantity of output is produced, it means that productivity is very low.

Production and Marketing

Productivity levels must be high if the business is to be profitable, and therefore productivity is very important. When productivity is low, the business will make little or no profit. Business managers should measure the productivity of the different resources. This can be done by using a simple formula: Productivity = Output (goods or services produced) Input (workers, money, machines, raw materials) Say a business wanted to measure labour productivity, the managers would first gather information on the output and the number of employees. For example, if a business produced 100 chairs in a particular week and there were 10 employees, the labour productivity would be calculated in the following manner: Output = 100 chairs Labour = 10 employees Labor productivity = Output________ Number of employees =

100 chairs_____ 10 employees

= 10 chairs per employee This means that each employee produced 10 chairs in the particular week. If we were told that each employee produced 8 chairs in the previous week, then we could now say that productivity has increased from 8 chairs per employee to 10 chairs per employee.

Production and Marketing

Production Levels The level of production of a business is largely dependent on the factors listed below. a. The availability of resources, including the availability of land, machinery and buildings; b. The level of technology, that is, manual labour, mechanization, automation or computerization; c. The cultural patterns of the country, for example, whether women are allowed to work or not; d. The political and economic policies of the country, that is, whether the country has a stable political climate and progressive economic policies relating to trade, taxation and monetary policies. There are three levels of production namely subsistence, domestic and surplus level of production. Subsistence Subsistence level of production is geared towards satisfying basic needs. What is produced is usually just enough for a person and his or her family. At this level, most persons are engaged in agricultural activities. Also, production is not very efficient and it may require many hours of hard work. Examples of subsistence level of production The kitchen garden planted at the back of a house to supply a family with vegetables. The rearing of poultry to feed the family. 5

Production and Marketing

Domestic At this level, surplus goods and services are used within the domestic or national community. The total quantity produced by the whole nation is gross domestic production. The domestic level of production does not involve any imports or exports. Resources are used to satisfy domestic needs. Examples of domestic level of production The use of local forest resources to obtain lumber to produce furniture for the domestic or local market. The use of daily catchments of fish to prepare local dishes to be consumed by the citizens. The surplus level of production is also called the export

Surplus

level. Surplus production is found mostly in countries that have large supplies of raw materials and advanced (modern) technology to exploit them. These countries are able to produce for the domestic community and still have excess or surplus production to export. The export level should be the aim of all producers or manufacturers because at this level foreign earnings will be obtained. Examples of surplus level of production Trinidad and Tobago produces crude oil for export. Jamaica and Guyana produce bauxite for export.

Production and Marketing

Types of Production Types of production refer to the different forms of productive or economic activities associated with producing goods and services. Examine the table below that differentiates between the different types of economic activities and classifies them as primary, secondary and tertiary activities. Primary production Examples - fishing, quarrying, mining and forestry. Secondary production Examples - canning, baking, the refining of oil and the construction of buildings, roads and bridges. Tertiary production Examples - direct services (serving fish, hairdressing, babysitting and secretarial work) or commercial services (transporting fish, banking, insurance and advertising).

Primary production is an activity that involves extracting from our natural resources. It is the first stage of production. Fishing is regarded as a primary activity since it involves extracting from seas, rivers and lakes. Secondary production is the second stage of production. The activity involves converting raw materials into finished goods. The canning of fish is regarded as a secondary economic activity since it involves using raw material All the services are classified as tertiary production. These can be grouped into direct services, which are personalized services, and commercial services involving trade and other activities related to trade. Serving fish in a store or restaurant and transporting the fish are examples of tertiary production.

Production and Marketing

Factors of Production According to the Principles of Business book for CSEC (2011), factors of production are grouped into four main categories (p. 141). They are:    

land - also called natural resources; labour - also called human resources; capital - also called man-made resources; enterprise or entrepreneurship.

N.B.You can use the word CELL to remember the factors of production. That is C – Capital; E – Enterprise or entrepreneurship; L – Land and L – Labour.

Land Land consists of all the natural resources on the earth, including those of the sea. Land is a gift from God or a gift of nature. These include soil, water, forest, sunshine, rainfall, gold, diamond, bauxite, oil etc

Image showing examples of the Factor of Production – Land natural resources

Labour Labour is all the physical (working with the body) and mental (brain work) activity used in the production of goods and services. Labour

Production and Marketing

referred to the human resources aspect of factors of production. All production requires some labour.

Labour is often divided as: Clarke (2012) stated that “labour sometimes consists of three grouping namely skilled; semi-skilled and unskilled” (p.57). However, throughout in this chapter we will classify labour into four groups. They are skilled; professional/managerial; semi-skilled and unskilled 1. Skilled – these are persons who are competent at doing a specific job. Their jobs mostly entail working with their hands and are most time technical such as mechanic; electrician; plumber; computer technician; architect and engineer. 2. Professional or managerial - these are highly trained workers who specialize in doing a specific job. These persons are trained for a long period of time such as trained nurse; doctor; lawyer and trained teacher. 3. Semi-skilled – these are workers who have limited amount of skills and need further training. Examples are: driver; domestic servant; hair dresser; practical nurse and pre-trained teacher.

Production and Marketing

4. Unskilled – these workers have no form of skills to perform tasks. For example, vendor; labourer or men who carry cement bucket on a construction site. Capital Capital refers to manmade resources that are used in the production process. Capital is used to start a business or to carry on the business. Examples of capital included but not limited to: building, machinery; equipment, stocks, money, vehicle or any other tools used in the production of goods and services.

Examples of Factor of Production – Capital

Enterprise or Entrepreneurship “Entrepreneurship or Entrepreneurial ability refers to the people who must organize the other three factors of production. In the work force the people who organize the factors of production are called entrepreneurs” (Principles of Business for CSEC. (2011). p. 151).

Production and Marketing

Roles of the Entrepreneur The roles of the entrepreneur included but not limited to: 1. To raise capital from saving or by borrowing for investment in the business. 2. To organize the various levels of labour required. 3. To define and clarify business policy decisions so that all levels of personnel can understand what the firm is trying to achieve. 4. To make any change necessary in the interest of the growth and development of the business. 5. To take risks for the growth and development of the business. 6. To ensure that the factors of production are efficiently used.

Production and Marketing

CHAPTER 1: ACTIVITY Question 1 -5 consists of four options from which to choose from. Circle the letter that responds to the correct response preceding the option you select as your answer. 1. All of the following are factors of production EXCEPT: (A). Land (B). Labour (C). Loan (D). Capital 2. The act of creating and manufacturing goods and services is known as: (A). Productivity (B). Marketing (C). Advertising (D). Production 3. Production levels are dependent on all the following EXCEPT: (A) . Availability of land and machinery (B) . Level of technology (C) . Religious reasons (D) . Political and economic policies 12

Production and Marketing

4. The family garden planted at the rear of the house is an example of: (A). Subsistence level of production (B). Domestic level of production (C). Surplus level of production (D). None of the above 5. Serving fish in a restaurant is classified as: (A). Secondary production (B). Primary production (C). Tertiary production (D). Both (A) and (C) 6. The crossword puzzle below will help you to identify the various levels of production. Use the statements below to assist you in completing the puzzle. ACROSS 4. Subsistence level is producing just _____ 5. Increased _____ exchange is a benefit of surplus production. 6. Production for export is called ______ production. DOWN 1. Level of production depend on availability of _______ 2. Producing for yourself and members of the community is the ______ level of production. 3. Subsistence level of production adds to the familyâ&#x20AC;&#x2122;s ______ 13

Production and Marketing

7. What is the difference between the terms 'production' and 'productivity'? _______________________________________________________ _______________________________________________________ 8. Two businesses that produce tables use similar machines and tools. They are the same size and each employs 20 workers. The first business produces 600 tables per week, while the second business produces 400 tables per week. Calculate and compare the labour productivity of the two businesses. End of Activity 14

Production and Marketing

CHAPTER 2: MARKETING

Learning Objectives: On completion of this chapter, students will be able to: identify marketing activities; identify the main type of market structures; list at least two measures to mitigate problems of distribution list at least three terms of sales; state at least two purposes of advertising; state at least two forms of transportation; outline at least two reasons for conducting market research; distinguish between the terms market and marketing; describe the marketing mix; explain the concept of market research; clearly explain at least twomethods of retailing.

Production and Marketing

CHAPTER 2: MARKETING Difference between Market and Marketing Market is any environment which operation takes place between buyers and sellers in order to exchange goods or services. Examples of market are produce market, shops and international trade. Before we get into the details of marketing you must understand the process of marketing and why business engage in it. This diagram below explains the marketing process in a nutshell, creating value for customers and in return capture value from satisfied customers

Marketing Activities

Production and Marketing

There are many different marketing activities. Seven marketing activities include: a. Market research – the process of gathering information about potential customers’ needs and/or preference. b. Packaging – presenting a product in the most advantageous way suitable for usage and advertising. c. Branding - differentiating the product of a company from other brands. d. Pricing - identifying the right price that will encourage sales. e. Advertising – a form of marketing communication used to promote and sell a product or services. f. Sales promotion – short-term methods used to encourage consumers to buy during a specified period. g. Distribution - is the process of making a product or service available for consumption by a consumer, using direct means or using indirect means with intermediaries.

Marketing Mix The marketing mix is about putting the right product or a combination thereof in the place, at the right time, and at the right price. The marketing mix predominantly associated with 4P’s (product, promotion, pricing and place) but in recent time 3P’swere added (people, process and physical evidence). 17

Production and Marketing

Product– this identifies the good(s) or service(s) that should be produced, for example, sports cars, biscuits, track shoes or flowers. It also considers the quantity that should be made, for whom the goods or services should be made, and the design and specification of the products. Product research can be done to assist in the product development. Pricing– the monetary value of the good or service. It is usually calculated based on what the customer is welling and capable of paying for the product and the firm’s willingness to sell in order to make a reasonable profit on the investment. Arriving at the exact value can be challenging, but there are various methods that can be used to set the price as outlined in diagram below. Promotion–these are the methods the firm would use to make consumers become aware of the product. This may be done through the methods outlined in diagram below. Place – this is the pattern of distribution that the firm uses to get its product to the consumer. Diagram belowhighlighted some methods of pricing.

Production and Marketing

Diagram Showing the Marketing Mix and each Method

Market Research Market research is the gathering, recording and analyzing of data to address the marketing issues of a business. Market research must be detailed to the issues of a business. The marketing issues must therefore be clearly identified so that the appropriate market research may be done.

Production and Marketing

Reasons for Conducting a Market Research Market research provides managers with existing, pertinent, accurate and consistent information regarding competitors, advertising, distribution and potential and loyal customers. This information helps managers in making decisions about packaging, product design, pricing, distribution and advertising. The Marketing Research Process This consists of five steps: i.

Defining the objectives;

ii.

Developing information sources;

iii.

Collecting data;

iv.

Analyzing the data;

Presenting the findings.

Types of Market Research i.

Consumer Research – garners information on consumers’ responses and reactions towards a company’s good or service.

ii.

Product Research –helps to identify key issues and avoid expensive mistakes. It can be used to evaluate new ideas.

iii.

Distribution Research –this refers to the collection and analysis of information related to the sales of a product or brand and 20

Production and Marketing

through various retail channels so as to enable the management to make better decisions. iv.

Advertising Research- Identifies the most suitable and reliant mediumto captures and broadcast the advertising message.

Types of Market Structures The term market structure refers to the level of competition experienced by businesses in an industry. This factor determines the nature of the product sold, how easy it is for new businesses to enter the business industry and the amount of information accessible concerning that industry. The types of marketing structures are: monopoly, duopoly, oligopoly, perfect competition and monopolistic competition. The table below explains each type of market structure. A monopoly exists when only one supplier has control over an entire market for a particular good or service.The monopolist sells a product for Examples â&#x20AC;&#x201C; single electricity company which there are no close substitutes. The monopolist controls the market because it is and water supplier. These may be owned difficult for other firms to enter such industries. The monopolist has great market power and can by the government therefore set the price of products sold in the or a private market. company. Monopoly

Duopoly

The challenges include high start-up costs and difficulty in obtaining strategic raw materials or information regarding business operation. This exists when there are only two sellers of a good or service in a market.

Production and Marketing

This exists where there are few producers of the good in the market. They offer the same product for sale and compete aggressively for market dominance. Examples telecommunications Entry into this industry is also difficult as start-up costs are very high, there is control of strategic raw and petroleum material and information is not easily available. companies. Oligopoly

Perfect Competition

This market structure is characterized by many buyers and many sellers of a product. The product is not unique as it is available from many sellers. Firms in this market structure are price takers as they cannot sell above the price of their competitors. Firms must accept the marketâ&#x20AC;&#x2122;s price as there are several competitors. There is perfect knowledge about the business and there are no barriers of high start-up cost and control of strategic raw materials.

Monopolistic Competition

This is a market that has very strong competition. There are many firms producing goods or services that are similar, but have a few features that are different. This difference might simply be a brand name, or a difference in the design or packaging. Businesses use some of their resources for heavy advertising and sales promotion in order to influence consumers and build loyalty for their products. Each seller can create their unique brand. As the sole supplier of that brand, they will face competition from the other firms that produce similar products, but they enjoy a partial monopoly for their unique brand. 22

Production and Marketing

Factors that Influence Consumer Behaviour The following factors will cause consumers to either increase or decrease their demand for a product.  The price of a commodity - consumers will be able to afford to purchase more of a good when its price falls rather than when its price increases.  The price of substitutes and complements - substitute products are those that can be used alternatively as they satisfy the same need for a consumer. For example, a weekly shopper may decide to purchase pork instead of mutton because the price of pork has fallen significantly less than the price of mutton. Therefore either pork or mutton will be adequate for dinner. If by the other week the price of pork increases and becomes more expensive than mutton then the consumer will go formutton. Complements products are goods that are used together e.g. bread and butter. If the price of butter increases then its demand will fall and so will the demand for bread? Conversely if the price of butter decreases, its demand will rise and so too will the demand for bread.  Income of consumers - as income level increase consumers will demand more goods and services whereas as income level decrease consumers will demand less goods and services.  Taste and preferences - a change in consumers taste for goods and services will impact their demand. For example, changes in fashion will result in a drastic decline in demand for an old fashion and a rise in demand for what is current. 23

Production and Marketing

 Expectations of a future rise in price - if consumers expect the price of a commodity to increase in the near future, they will try to purchase adequate amount before the price increases.  Brand loyalty - will ensure a continuous demand for a product regardless of changes in prices of other goods and services.  Spending patterns - consumer spending surveys compile information on consumer spending patterns based on income levels. This informs businesses of what goods and services are in demand.  Changes in the size of the population - a population decline will cause demand to fall in a particular region. Reasons for a population decline are migration, death and crime and violence.

Packaging and Presentation of Goods Packaging refers to designing and presenting the container that contains the product. A good package must identify, protect and advertise the product. It must also make the product convenient to use. Therefore, products such as toothpaste are best packaged in a tube as it has to be squeezed out; milk must be poured from its container and egg containers are shaped to hold the eggs firmly. A package must also sell the product. It must first attract customer to buy. It must provide information about the product i.e. ingredients, amount of contents, price, the name and address of the manufacturer and instructions for usage. The brand name is also displayed on the package. 24

Production and Marketing

Branding A brand is any exclusive feature of a product which makes it different from its competitor. A brand may be a name, term, symbol, design or combination of these. Examples of brand names include: Avon and Colgate. For example, a brand symbol is Nike. A branded product will increase the value of the product in the eye of the consumers.

Copyright, Patent & Trademark Copyright is a form of intellectual property right that legally protects the innovators of original works. Copyright protects creatorsâ&#x20AC;&#x2122; expressions such as music, painting, movie, photograph and writings. Individuals who wish to use works that are copyrighted must request permission from its originator. Copyright law allows owners of the original work to be paid for them. Patent - protects innovation. It excludes others from making and selling that creation for a number of years. Trademark - legally protects brand names. It gives the trader exclusive rights to use a particular brand name.

Production and Marketing

Methods of Promoting Sales Promotion includes all forms of advertising, public relations and sales promotion. Advertising - is the paid presentation of goods or services through the media for the purpose of encouraging consumer. The media refers to television, radio, magazines, flyers, posters, newspapers, billboards, internet and social media. The purposes of advertising i. ii. iii.

to attract attention from consumers; to inform customers about a product or service; to increase sales and create additional revenue for the company.

Sales Promotion - is a marketing strategy that is used to introduce consumers to buy immediately. Examples of sales promotion methods are: a sale on items; bargain packs, e.g. â&#x20AC;&#x2DC;two for oneâ&#x20AC;&#x2122;; coupons - these are printed in the daily newspapers or magazines. The holders of coupons are allowed a discount on the items bought; games e.g. guessing riddles; contest - purchasers may receive a prize if they are the winners of a contest; trading stamps - these are given to purchases with each item bought. Booklets filled with stamps may be returned by customers for goods, services or money in exchange. Public Relations â&#x20AC;&#x201C; are activities aimed at creating a favorable impression of a business in the eyes of the public. Public includes its customers, its suppliers, the government and any other private and public bodies or authority figures. Public Relations activities include sponsorship of local sporting events, press conferences, and donations to charity. 26

Production and Marketing

Techniques of Selling These are methods used to sell products more efficiently by focusing on each customerâ&#x20AC;&#x2122;s personal needs. Selling techniques include: personal selling; after-sale services such as warranty and installation; merchandising and good customer relations. The table below explains each technique of selling. Personal Selling

After Sales Services

Merchandizing

Good Customer Relations

This is the use of sales persons to present and sell goods and services of a firm. Sales persons promote a firmâ&#x20AC;&#x2122;s goods directly to a specific consumer. They locate new customers, provide display services, demonstrate the use of products, delivered goods, collect payments and provide the firm with feedback. Customers are entitled to these services once they have made a purchase. These include delivery, installation and warranty. These services are free and therefore usually encourage consumers to buy. Merchandizing refers to self service methods of sale. This is used in supermarkets and department stores. It allows for a better display of goods and creates a more comfortable shopping environment. Building good relationships with consumers ensures that customers are satisfied, existing customers and recommendation to new customers. The sales staff must be trained in the principles of good customer relations. This entails, listening to customers being helpful and polite. 27

Production and Marketing

Terms of Sales An entity may propose its customers various terms to settle accounts. The table below list and explain each term of sales Cash

This is preferable by most businesses and therefore customers are encouraged to make cash payments. They are usually offered a lower payment amount for goods bought for cash.

Credit

Customers are allowed to pay at intervals over a shortterm, usually one to three months to settle outstanding balances.

Hire Purchase

Hire-purchase is a long term payment plan e.g. 24 â&#x20AC;&#x201C; 36 months. Interest is charged to the customer increasing the amount owed.

Cash Discount

A reduction in the price of goods that is paid for immediately or over a short period of time by a customer. For example, if an appliance store offers 5% discount on items bought for cash then 5% of the sales price would be deducted from the actual bill.

Trade Discount

Is the reduction in the price of goods given by a manufacturer or a wholesaler to a retailer in order to allow the retailer to make a profit or to encourage bulk buying. For example, if an appliance manufacturer offers 10% trade discount to retailers then 10% of the catalogue price or the quoted price would be deducted from the retailersâ&#x20AC;&#x2122; actual bill. 28

Production and Marketing

Consumer Organizations Consumerism is defined as the education and the protection of consumers to prevent their exploitation. Consumer exploitation includes: overcharging; offering poor quality goods and services; short measurements and weights Consumerism is practiced by various groups in the economy: the government, private institutions and private firms. Consumerism practiced by the government This is done through various government agencies. These include: 1. The Consumer Affairs Commission â&#x20AC;&#x201C; this institution was set up to disseminate information about consumer rights and responsibilities as well as to provide consumers with an avenue for redress if they are exploited. The diagram below highlighted consumer rights Consumer Rights

The right to be heard

The right to safety

The right to be informed

The right to choose The right to redress

The right to a healthy environment

The right to consumer education 29

Production and Marketing

The table below highlighted consumer responsibilities Consumer Responsibilities -The responsibility to beware; -The responsibility to be aware; -The responsibility to think independently; -The responsibility to speak out; -The responsibility to complain; -The responsibility to be an ethical consumer and -The responsibility to respect the environment and avoid waste, littering and contributing to pollution.

2. The Fair Trading Commission â&#x20AC;&#x201C; this agency was set up to administer the fair trading act. It is concerned with matters such as tied selling (marrying of goods), misleading advertising (untruths about goods and services presented for sale), untrue sale (an announced sale for which the price of items remain the same) and the use of market dominance to squeeze firms out of the industry (for example, large firms may drop the price of their goods so low that small firms are unable to compete with them). 3. The Bureau of Standards - the bureau carries out regular checks on business enterprises to ensure that goods and services offered for sale meet the standard stipulation of the institution. 4. The Ombudsman - is a government official who protects the rights of citizens who may suffer any kind of injustice from dealing with a government agency or a government official. For example, the

Production and Marketing

Ombudsman will investigate the death of a loved one due to the negligence of a public hospital. Consumerism practiced by private institutions This can be done through the following agency or media. These are the local consumer groups and radio talk show hosts will listen to consumersâ&#x20AC;&#x2122; complaints. Consumerisms practiced by private firms Consumerisms practiced by private industry are offering warranty or guarantees on items sold and labels carry information on ingredients, nutritional content and health risks that may be associated with the product.

Links inthe Distribution Chain Manufacturers must discover the well-organized ways of getting the goods manufactured into the hands of consumers.

The channels or chains of distribution Channels of distribution refers to the ways by which merchandise reach the hands of consumers from the plant of manufacturers. This may be done directly from the manufacturer to the consumer or indirectly through middlemen such as wholesalers and retailers.

Production and Marketing

Types of distribution channels

1. Direct Channel Manufacturer

Consumer

Goods are bought directly from the producer e.g. purchasing furniture from a manufacturer.

2. Indirect Channel (a) Manufacturer

Retailer

Consumer

Goods are bought from a middle man e.g. a retailer. Retailers display goods, sell in small convenient quantities and offer credit. They therefore aid manufacturers in moving goods quickly.

3. Indirect channel (b) Manufacturer

Wholesaler

Retailer

Consumer

The wholesaler is a second middle man or link on the chain. The wholesaler purchases in bulk from the manufacturer and store them in large warehouses. They therefore assist manufacturers by moving large amounts of items from plant. The retailers purchase goods from wholesalers and sell them in smaller quantities to consumers.

Production and Marketing

Methods of Retailing There are several methods by which retailers can offer items for sale. Six methods are outlined below: i.

Community shops and convenient stores - these locations tend to serve a particular community. Opening hours include all weekend days, holidays and late in the evenings. Costs for some commodities that are not government controlled tend to be higher than other types of retail outlets. Community shops in particular cut and shape products to suit customers and also offer credit to the consumers.

ii.

Department stores - these stores carry a several lines of goods under one roof. A department store may feature a clothing department, household items, stationery, hardware etc. It provides convenience to customers who can pick up several items in one place, and allows the businessman the cost effectiveness of operating several business entities in one location.

iii.

Mail order - companies that retail through mail order benefit from reduced operational cost of location and staff. Since display areas are not required only an office and storage facility are necessary for the operation of this business. Orders are made from catalogues and goods are delivered by courier or mailed to customers. This saves time and effort of consumers to visit shopping locations.

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iv.

E-commerce - orders are made by customers over the internet from the websites of businesses. Payments are also made over the internet. Packages are delivered by mail or courier.

Tele- marketing â&#x20AC;&#x201C; tele-marketers introduce the companyâ&#x20AC;&#x2122;s goods and try to obtain orders via the telephone.

vi.

Vending machines - these self-service machines are placed at various locations by their owners. Customers are required to place the required funds inside these machines and are instructed on how to make their choice. The machine then dispenses the product. This type of business is very cost effective as owners may only pay a fee for locating the vending machine. Examples of vending machines are the food machine or sweets machine which request coins only for items been purchased.

Forms of Transportation Transportation is an integral part of the daily commercial and industrial activities of a country. Transportation moves raw materials from source to manufacturers and finished goods to consumers. It also makes possible overseas trade and thus foreign exchange earnings for an economy. There are various modes or forms of transportation that can be used to transport goods. Commodities may be transported by land, air, sea and pipeline. The mode of transportation will depend on weight and size of the commodities being transported as well as the urgency for delivery and the transportation costs.

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Modes or Forms of Transportation      

Land Road Rail Air Sea Pipeline

Land-Road Types of transportation include trucks, vans, cars etc. It is the most popular mode of transport as all types of goods can be transported by road. Road transport is affected by bad roads, traffic congestion and challenging terrain. Lengthy delays can affect perishable goods such as farm produce being transported from rural areas to cities. Land-Rail This is a cheap form of transportation over long distances. Trains are suitable for heavy and bulky things such as bauxite. Trains are a very slow mode of transportation. Air Types of transportation include cargo planes and helicopters. Because of the high cost involved with air transportation it is suitable for important documents and expensive items e.g. jewelry.

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Sea Cargo ships and barges are some of the types of transportation used for transporting goods by sea. Goods such as oil, bauxite and cars are transported by sea. Pipeline Pipelines are used to transport commodities such as water and gas. High costs are involved in laying pipes initially. However, overtime it becomes very economical.

Problems of Distribution Distribution locally is challenged by poor road conditions and difficult terrain especially in the rural areas. Spoilage of perishable goods is very costly and therefore types of transportation used must be equipped to carry perishable goods. Problems encountered in overseas transportation The challenges faced in transporting goods internationally will impact foreign exchange earnings. These challenges include:  misdirection of goods – goods sent to the incorrect destination; flight delays;  strikes by airport and ship port workers;  narcotics found in containers;

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 Pilferage-of goods while in transit.

Measures To Mitigate Problems of Distribution      

Careful checks before loading packages for shipment Contingency plan when strikes occur Public awareness on the consequences of narcotics found in containers Making persons responsible for any goods lost in their care Assignment of warehouse personnel on each shift or submission of items from one place to the next. Personnel doing delivery must signed a delivery slip along with the recipient of the items on arrival and time and date including.

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CHAPTER 2: ACTIVITY Identify the market structure that exist in question 1 â&#x20AC;&#x201C; 4 below. 1. On Tonili Island there is only one business that provides piped water to all the homes and to the other businesses__________. 2. There are only two banks that operate on Tonili Island ___. 3. All the businesses that mine bauxite on the island have joined forces and will only sell specific quantities and at a particular price __________. 4. There are many garment manufacturers on the island. They all produce shirts that have very similar designs. The main difference is the brand name. These shirts are sold everywhere____________. State whether the following statements are TRUE or FALSE. 5. The method of getting the attention of the public is called public relations ________. 6. The person who is in direct contact with the consumers is called the wholesaler ________. 7. Assignment of warehouse personnel on each shift is a measure to mitigate problem of distribution ________. 8. Land, road, sea are forms of transportation ________.

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Match the words on the left with the statement on the right.

9. Advertising

Protects innovation by excluding others from making and selling an invention for a number of years.

10. Branding

This is the amount that a firm is willing and able to sell at a given price.

11. Distribution

This is the amount that consumers are willing and able to buy at a given price.

12. Marketing mix

This is created to differentiate a product from its competitors.

13. Demand

A mean used to make customers aware of goods and services being offered by suppliers.

14. Supply

This move goods from producers to consumers.

15. Copyright

This tool is crucial when determining a product or brand offer and is often associated with the four P's.

End of Activity 39

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ANSWERS TO ACTIVITY 1 1. 2. 3. 4. 5.

C - Loan D – Production C – Religious reasons A - Subsistence level of production C - Tertiary production

Crossword Puzzle Across 4. Enough 5. Foreign 6. Surplus Down 1. Resources 2. Domestic 3. Budget

7. Production refers to the quantity of a particular item produced whereas productivity refers to the efficiency of production or how well the resources were used. 8. Labour productivity of the first business: Output___ = Number of employees

600 tables = 30 tables per employee 20 employees

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Labour productivity of the second business: Output__ = Number of employees

400 tables = 20 tables per employee 20 employees

The first business has a higher labour productivity than the second one. The employees in the first business are working more efficiently than the employees in the second business.

ANSWERS TO ACTIVITY 2 1. 2. 3. 4. 5. 6. 7. 8. 9.

Monopoly Duopoly Cartel Monopolistic competition True False True True Advertising - means used to make customers aware of goods and services being offered by suppliers. 10. Branding - this is created to differentiate a product from its competitors. 11. Distribution - a mean used to make customers aware of goods and services being offered by suppliers. 12. Marketing mix - This tool is crucial when determining a product or brand offer and is often associated with the four P's. 13. Demand - this is the amount that consumers are willing and able to buy at a given price. 14. Supply - this is the amount that a firm is willing and able to sell at a given price. 15. Copyright - Protects innovation by excluding others from making and selling an invention for a number of years. 41

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References Clarke, J. C. P. (2012). The Basics of Business. (pp. 56 â&#x20AC;&#x201C; 60). Jamaica: Multigraphic Printers Limited. Principles of Business for CSEC. (2011). (pp. 147 - 152). London: Multivista Global Ltd. http://wizznotes.com/pob/factors-of-production/factors-of-production. Retrieved on April 1, 2016. https://www.bing.com/images/search?q=natural+resources&FORM=H DRSC2. Retrieved on April 1, 2016.

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