Cambridge IGCSE Commerce: Outsourcing, Wholesaling and Communication — Revision Notes (0715)

These notes condense three sub-topics of Cambridge IGCSE Commerce (0715) Topic 2: 2.2 Outsourcing, 2.4 Wholesaling and 2.6 Communication. Each is short in the syllabus but appears in Paper 2 scenario questions, where marks come from applying the named points to a business. For full explanations see the Outsourcing and Wholesaling study guide and the Commercial Operations revision notes.

2.2 Outsourcing

Outsourcing = paying another enterprise to do work the business could do in-house.

Growth area	Meaning	Example
Contract manufacturing	Another firm makes the product to the business’s specification	A clothing brand has its designs sewn by a specialist factory
Contract logistics	Another firm stores, packs, transports and delivers goods	An online retailer uses a logistics firm’s warehouse and vans

Why it has grown: lower costs; specialist expertise; frees capital and managers for core activities; flexibility to scale up or down; growth of ecommerce needing fast delivery; easier coordination through digital communication.

Drawbacks: less control of quality and timing; dependence on the contractor; confidentiality risks; reputational damage if the contractor behaves unethically.

2.4 Wholesaling

Functions for the manufacturer: buys in bulk · stores goods · bears risk · pays promptly · distributes to many retailers · passes on market information.

Functions for the retailer: breaks bulk · wide range in one place · credit · delivery · advice on products and display · packing, labelling and price-marking.

Importance: fewer transactions in the chain; lower storage and selling costs for manufacturers; choice and credit for small retailers.

Independent wholesaler survives through:

Method	How it works	Why it helps
Cash and carry	Retailer collects goods, pays immediately, transports them	No credit or delivery costs, so lower prices
Voluntary chain	Independent retailers agree to buy mainly from one wholesaler and share a brand and promotions	Bulk buying power lets small shops compete with chains

2.6 Communication

Types of communication (2.6.1)

Type	Meaning	Examples
Written	Words recorded on paper or screen	Letter, report, notice
Oral	Spoken	Telephone call, face-to-face meeting
Electronic	Sent through digital networks	Email, web chat, social media, videoconferencing
Visual	Uses images, charts or displays	Poster, chart, sign

Methods of communication (2.6.2)

Method	Best for	Weakness
Letter	Formal, permanent record, legal documents	Slow; postage cost
Telephone	Quick two-way discussion	No written record
Face to face	Sensitive or complex matters; feedback and body language	Needs people in one place
Videoconferencing	Meetings across long distances	Needs reliable internet and equipment
Email	Fast, cheap, attachments, record kept	Can be ignored; security risks
Web-based chat (including chatbots)	Instant customer help, 24 hours	Chatbots may not handle complex queries
Social media	Reaching many customers, promotions	Public complaints; hard to control
Posters	Visual message to people passing a place	One-way; limited information

Factors affecting choice (2.6.3)

Urgency · cost · security · distance · availability of networks · importance of the message.

Apply them: an urgent order change → telephone; a signed contract → letter or secure electronic document; a meeting with an overseas supplier → videoconferencing (if networks are available); confidential salary details → face to face or secure email, not social media.

How the three sub-topics connect

• Outsourcing and wholesaling are both about using a specialist instead of doing the work yourself: a manufacturer that uses a wholesaler is, in effect, handing storage, risk and distribution to another business, just as a brand using contract logistics hands over warehousing and delivery.
• Communication holds both relationships together. A business that outsources depends on clear, secure and timely communication with its contractor; a voluntary chain depends on the wholesaler communicating offers and promotions to its member shops.
• Topic links: in-house and outsourced production (1.2.2), intermediaries in a supply chain (1.2.4), warehousing and transport in Topic 4, and global supply chains in Topic 3.

Worked example

“A wholesaler needs to tell 200 retailers about a price increase starting next week. Recommend a method of communication.” [4]

• Email suits because it reaches all 200 at low cost [1] and quickly, as the change is urgent [1].
• It gives a written record of the new prices that retailers can refer to [1].
• Judgement: email is better than telephone, which would be slow and costly for 200 calls [1].

Exam traps

• Naming outsourcing without the two growth areas.
• Saying wholesalers sell to consumers.
• Confusing a voluntary chain with a multiple chain store.
• Mixing up types (written, oral, electronic, visual) with methods (letter, email and so on).
• Recommending a method without linking it to the factors in the scenario.

Frequently asked questions

Is outsourcing the same as buying from a wholesaler? No. Outsourcing means paying another firm to carry out an activity the business could do itself, such as making the product (contract manufacturing) or storing and delivering it (contract logistics). A wholesaler is an intermediary that buys goods in bulk from manufacturers and sells them in smaller quantities to retailers.

Why might a manufacturer sell direct and cut out the wholesaler? Large retail chains buy in bulk, have their own regional distribution centres and can deal directly with manufacturers, and online selling lets manufacturers reach customers directly. The wholesaler still survives where retailers are small and need to buy small quantities, through cash and carry and voluntary chains.

What is the difference between a type and a method of communication? The type is the form the message takes: written, oral, electronic or visual. The method is the channel used to send it, such as a letter, a telephone call, an email or a poster. One method can belong to more than one type; an email is both written and electronic.

Which communication factor matters most? It depends on the scenario. Read the question for clues: “immediately” points to urgency, “confidential” to security, “overseas” to distance, and “small business” to cost. The best answers name the factor and link it to the method chosen.

Self-test

1. What are the two growth areas of outsourcing?
2. Give three functions of the wholesaler for the retailer.
3. Why are cash-and-carry prices lower?
4. Name the four types of communication.
5. List the six factors affecting choice of communication method.

Answers: 1. Contract manufacturing and contract logistics. 2. Any three of breaking bulk, wide range, credit, delivery, advice, preparing goods. 3. No credit or delivery is provided, so costs are lower. 4. Written, oral, electronic and visual. 5. Urgency, cost, security, distance, availability of networks, importance of the message.