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Commerce flashcards

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Topic 1: Commerce and production

What is commerce?: All the activities involved in distributing goods and services to the consumer: trade (buying and selling) plus the aids to trade that support it.
Needs vs wants: Needs: essentials for survival, such as food, shelter and clothing. Wants: everything people desire beyond their needs.
What is opportunity cost?: The next best alternative given up when a choice is made. It arises because resources are limited but wants are not.
Home trade vs foreign trade: Home trade: buying and selling within one country. Foreign trade: buying and selling across national borders, which adds different currencies, customs duties, more documents and longer transport times.
Name the main aids to trade: Banking, insurance, transport, warehousing, communication and advertising.
Place utility vs time utility: Place utility: value added by transport moving goods to where they are wanted. Time utility: value added by warehousing storing goods until they are wanted.
What is production?: The creation of goods and services to satisfy human wants.
What are the four sectors of production?: Primary (extractive): mining, farming, fishing, forestry. Secondary: manufacturing and construction. Tertiary: commercial services (trade and aids to trade) and direct services. Quaternary: digital technology.
Commercial services vs direct services: Commercial services: trade and the aids to trade that help distribute goods. Direct services: services given straight to people, such as doctors, teachers and hairdressers.
What is specialisation?: Concentrating on producing one thing, or one part of a process, rather than a whole range. It makes exchange, and so commerce, necessary.
Give an advantage and a disadvantage of specialisation for an individual, a factory and a country: Individual: highly skilled; but work is repetitive. Factory: can mechanise and gain economies of scale; but relies on one product. Country: exports what it makes efficiently; but depends on imports and trade.
What is the chain of production?: Extraction → manufacture → wholesale → retail → consumer. Each stage adds value, for example by processing, branding, transporting or storing.

Topic 2: Commercial operations

Sole trader vs partnership: ownership and liability: Sole trader: one owner with unlimited liability. Partnership: two or more owners; ordinary partners also have unlimited liability. More partners bring more capital and skills.
What changes when a business becomes a private limited company?: It becomes a separate legal person and the owners (shareholders) have limited liability, but it must register and shares cannot be sold to the general public.
Private limited company vs public limited company: Private (Ltd): shares sold privately, not to the public. Public (plc): shares can be sold to the general public, raising large amounts of capital, but it must publish accounts and risks takeover.
Cooperative vs public corporation: Cooperative: owned and run by its members, who share the profits. Public corporation: owned and run by the government in the public sector.
What is a franchise? Give a benefit and a drawback for the franchisee.: A franchisee trades under an established brand using the franchisor’s systems in return for fees and a share of revenue. Benefit: lower risk from a proven model. Drawback: less independence and ongoing payments.
What are the benefits and drawbacks of hosting a multinational company?: Benefits: jobs, investment, technology transfer and export earnings. Drawbacks: profits may leave the country, local firms face strong competition, and decisions are made abroad.
Which factors affect where a business locates?: Physical: labour, markets, transport, power, raw materials, competition, suppliers, communication and government influence. E-commerce: wi-fi, warehousing, technology specialists and logistics.
What is outsourcing?: Paying another business to carry out an activity that the enterprise could do itself.
Contract manufacturing vs contract logistics: Contract manufacturing: paying another company to produce goods. Contract logistics: paying another company to handle storage and distribution.
Why might an enterprise outsource?: Lower costs, access to specialist expertise, and freeing capital and management time for its core activities.
What are the risks of outsourcing?: Less control over quality and delivery, dependence on the supplier, and damage to reputation if the supplier behaves badly.
Why do small-scale retailers survive against large ones?: Personal service, flexible opening hours and additional services, such as delivery or credit for known customers, plus convenience and local knowledge.
What are the advantages of large-scale retailers?: Economies of scale, lower prices, a wide range, own brands and self-service. Drawbacks: less personal service and often less convenient locations.
What does e-commerce need in order to work well?: Reliable delivery and secure online payment. It removes the need for a physical shop and lets customers buy at any time.
Name digital retail trends: Omnichannel and multi-channel retailing, click and collect, EPoS, self-service checkouts, cashless stores, subscription commerce, QR codes, VR showrooms, dropshipping and mobile apps.
What is click and collect?: A customer orders online and collects the goods from a store or collection point, combining online convenience with no delivery wait or charge.
Retailer vs wholesaler: Retailer: sells to the final consumer. Wholesaler: buys in bulk from manufacturers and sells in smaller quantities to retailers.
How does a wholesaler help retailers?: Breaking bulk so they can buy small quantities, granting credit to improve their cash flow, delivering goods, and advising on new lines.
How does a wholesaler help manufacturers?: Buying in bulk, storing goods (warehousing), bearing the risk of goods deteriorating or falling in price, and passing on information about demand.
When is the wholesaler eliminated from the chain of distribution?: When manufacturers sell directly to large retailers such as supermarkets, or straight to consumers online or by mail order, and for perishable or bulky goods.
How do independent wholesalers survive?: Mainly through cash-and-carry outlets and by forming voluntary chains with small retailers.
Put the main trading documents in order: Enquiry → quotation → order → invoice → delivery note → credit note (if needed) → statement of account → receipt.
Enquiry vs quotation: Enquiry: the buyer asks a seller for details of goods, prices and terms. Quotation: the seller replies with prices, terms and delivery details.
Invoice vs delivery note: Invoice: the bill, showing the goods supplied, prices and total owed. Delivery note: goes with the goods; the buyer signs it to confirm they arrived.
When is a credit note issued?: When the amount a buyer owes must be reduced, for example because goods were returned, damaged or overcharged.
Statement of account vs receipt: Statement of account: summarises transactions over a period and shows the balance owed. Receipt: proof that payment has been made.
What do a bill of lading and a certificate of origin do in international trade?: Bill of lading: issued by the shipping company for goods sent by sea; it is evidence of the contract and a document of title. Certificate of origin: states the country where the goods were made, for customs purposes.
Which factors affect the choice of communication method?: Urgency, cost, security, distance, network availability and the importance of the message.
How does modern communication help trade?: Email, websites, video conferencing and messaging let traders agree orders, prices and delivery quickly and cheaply across countries, and allow e-commerce and online tracking.
What are the limitations of digital communication for businesses?: The cost of equipment and training, dependence on a reliable network, and risks such as hacking and fraud.
How should you answer "recommend a communication method"?: Weigh the factors (urgency, cost, security, distance, importance) against the specific scenario and justify one choice, rather than listing every method.

Topic 3: Globalisation of trade

What are the benefits of international trade to a country?: Wider choice of goods, a higher standard of living, cheaper imports where other countries produce at lower cost, more investment and job creation.
What challenges do exporters and importers face?: Distance and language, methods of payment and documentation, transport and customs duties, risk of non-payment, exchange-rate risk, competition and different legal systems.
Visible vs invisible trade: Visible trade: trade in goods. Invisible trade: trade in services, such as tourism, banking, insurance and shipping.
Balance of trade vs balance of payments: Balance of trade: exports minus imports of goods only. Balance of payments: trade in goods and services, plus financial flows such as investment.
A country exports goods worth $850m and imports goods worth $920m. What is its balance of trade?: $850m − $920m = −$70m, a deficit of $70m.
Tariff vs quota vs embargo: Tariff: a tax on imports, raising their price. Quota: a limit on the quantity imported. Embargo: a ban on trade in a good or with a country.
What are the advantages and disadvantages of a trading bloc for members?: Advantages: easier access to members’ markets, often with no internal tariffs. Disadvantages: loss of an independent trade policy and exposure to the bloc’s economic problems.
Simple vs complex supply chain: Simple: supplier → manufacturer → consumer. Complex: supplier → agent → wholesaler → retailer → consumer.
Upstream vs downstream in a supply chain: Upstream: suppliers and raw materials coming into the enterprise. Downstream: distribution from the enterprise to the end consumer.
Why do businesses manage global supply chains?: Lower costs of production, labour and purchasing, helped by advances in logistics and communication.
What are the six named types of global supply chain risk?: Environmental, natural disaster, financial, ethical, technological and political.
A new tariff is imposed in a supplier’s country. Which type of supply chain risk is this?: Political risk, because it comes from a change in government policy.
Why is risk assessment important in a global supply chain?: Identifying risks and planning for them in advance, for example by using several suppliers, reduces disruption when something goes wrong.

Topic 4: Logistics in commerce

What are the three functions of transport in the supply chain?: Time, place and quantity: transport delivers the right quantity of goods to the right place at the right time.
Road vs rail transport: Road (delivery vans, trucks, couriers): door-to-door and flexible, but limited loads and congestion. Rail (freight trains): cheap for heavy, bulky loads over long distances, but fixed routes and usually needs road at each end.
Sea vs air transport: Sea (ferry, tanker, container ship, cargo liner): cheapest for heavy, bulky goods internationally, but slow. Air (freight planes): fastest over long distances for perishable, urgent or valuable goods, but the most expensive.
What are the advantages and disadvantages of pipelines?: Advantages: continuous flow, low running and labour costs. Disadvantages: very high cost to build, carries only liquids and gases, and leaks can be hard to find.
Which six factors affect the choice of transport method?: Nature of goods, urgency, cost, security, distance and reliability of the transporter.
Which transport method suits fresh flowers sent abroad for a festival, and why?: Air freight, refrigerated: the flowers are perishable, urgent and valuable for their weight, so the high cost is justified.
What is containerisation?: Packing goods into standard-sized sealed containers that move between ships, trains and trucks without being unpacked, cutting handling, damage and theft.
What is transshipment?: Transferring containers from one ship or vehicle to another at a hub port on the way to their destination.
What are the five functions of warehousing in the supply chain?: Links with seasonal production, links with demand, protecting supply, price stability and logistics postponement.
Bonded vs cold storage warehouse: Bonded: holds imported goods until customs duty is paid. Cold storage: refrigerated or frozen storage for perishable goods such as food and medicines.
What is a regional distribution centre (RDC)?: A large warehouse owned by a retail chain; suppliers deliver full loads to it and it sends mixed loads to the chain’s shops in that region.
Name three uses of automation in warehousing and two benefits: Uses: robotics, automated sorting and voice picking. Benefits: any two of lower labour costs, less human error, improved picking accuracy, improved inventory control and improved customer service.

Topic 5: Aids to trade that support commerce

What are the purposes of advertising?: To inform customers about products and prices, persuade them to choose a brand, remind them of existing products, and build a brand image.
Informative vs persuasive vs collective vs competitive advertising: Informative: gives facts. Persuasive: creates a desire to buy. Collective (generic): promotes a whole product type for an industry. Competitive: compares a brand with its rivals.
What is sales promotion? Give three methods: Short-term incentives to raise sales, such as free samples, coupons, special offers, competitions, loss leaders and free gifts.
Standing order vs direct debit: Standing order: a fixed amount paid on set dates, set up and changed by the payer. Direct debit: the receiver collects an amount that can vary, such as a utility bill.
What has been the impact of digital banking?: Closure of bank branches, more digital-only banks and less use of cash, a move towards a cashless society.
What are the five purposes of insurance in the syllabus?: Risk reduction, compensation, financial protection, business confidence and investment.
Name the seven types of insurance risk in the syllabus: Consequential loss, employer’s liability, fire, motor, premises, public liability and theft.
How does pooling of risk work?: Many policyholders pay premiums into a common fund; only a few suffer losses in a year, so the fund can compensate them.
Stock worth $80,000 is insured at $1.50 per $100. What is the premium?: 80,000 ÷ 100 × 1.50 = $1,200 a year.
Proposal form vs cover note vs policy: Proposal form: the application, giving full facts about the risk. Cover note: temporary proof of cover until the policy is issued. Policy: the full contract setting out what is covered.
What does an insurance broker do?: An independent adviser who compares insurers to find the most suitable cover at a good price for the client.
Name three short-term and three long-term sources of finance: Short-term: trade credit, debt factoring, overdraft, leasing, hire purchase, sale and leaseback, retained profit. Long-term: ordinary and preference shares, loans, debentures, venture capital, crowdfunding.
Mark-up % vs gross profit margin %: Mark-up = (average selling price − unit cost) ÷ unit cost × 100. Gross profit margin = gross profit ÷ revenue × 100.
Unit cost $40, selling price $50: what is the mark-up?: (50 − 40) ÷ 40 × 100 = 25%.
How do you calculate working capital and net profit?: Working capital = current assets − current liabilities. Net profit (profit for the year) = gross profit − expenses.

Topic 6: Sustainability and ethics

What is the purpose of sustainability in the supply chain?: Making commercial processes eco-friendly and environmentally responsible for future generations.
Name five of the nine actions to improve sustainability: Any five of: sustainable materials, sustainable logistics, reducing packaging, eco-friendly products, recycling and reducing waste, reducing returns and exchanges, digital resale marketplaces, free repair services, water stewardship.
How does reducing returns and exchanges improve sustainability?: Fewer returns mean fewer delivery journeys and less wasted stock, for example by giving accurate size guides and clear product photos.
What is a digital resale marketplace?: An online platform where customers resell used items, keeping products in use for longer.
What is water stewardship?: Reducing, reusing and treating the water used in production so that local water supplies are protected.
What does ethics mean in commerce?: Moral principles about what is right and wrong, guiding how a business behaves, often beyond what the law requires.
What is the role of fair trade in commerce?: Producers in lower-income countries receive a fair, stable price and decent conditions; consumers get an ethical choice and retailers gain reputation.
Which two ethical issues does the syllabus name?: Misleading advertising and harmful disposal of products.
Why do consumers need protection?: Sellers know more than buyers, goods may be unsafe, faulty or not as described, advertising can mislead, and individuals have less power than large businesses.
What should a buyer do to resolve a complaint?: Keep the receipt and evidence, complain to the seller first, escalate to the manager or head office, contact a consumer protection organisation, and take legal action as a last resort.
How should a seller respond to a complaint?: Listen and record it, offer a repair, replacement or refund, apologise or offer goodwill, investigate the cause and train staff.

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Written for Cambridge IGCSE Commerce (0715), syllabus 0715 (2028).

Cards by Marlbridge Academic Team. This deck has not yet been reviewed as a whole by a subject teacher. Report an error.

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