Cambridge O Level Commerce: Outsourcing, Wholesaling and Communication — Revision Notes (7100)

Quick-recall notes for three sub-topics of Cambridge O Level Commerce (7100): 2.2 Outsourcing, 2.4 Wholesaling and 2.6 Communication. They expand the brief bullet points in the main Commercial Operations revision notes into the facts examiners reward. For explanation and a worked scenario, use the Outsourcing, Wholesaling and Communication study guide.

Key terms

Term	Definition
Outsourcing	Paying another enterprise to carry out work the business could do in-house
Contract manufacturing	Another firm makes the goods to the business’s specification
Contract logistics	Another firm stores, packs, transports and delivers the goods
Wholesaler	Buys in bulk from manufacturers and sells in smaller quantities to retailers
Cash and carry	Wholesale warehouse where retailers choose goods, pay at once and take them away
Voluntary chain	Independent retailers agree to buy mainly from one wholesaler and share a trading name and promotions

2.2 Outsourcing — five reasons for growth, four risks

Reasons (learn with a “so that”):

1. Lower costs — so that each unit is cheaper to produce or deliver.
2. Specialist expertise — so that quality and speed improve.
3. Focus on core activities — so that managers and capital go into design, marketing and selling.
4. Flexibility — so that output can rise or fall without new factories or warehouses.
5. Ecommerce and digital communication — so that fast delivery is available and distant contractors can be managed easily.

Risks: loss of control over quality and timing · dependence on one contractor · confidential designs leaked · reputation harmed by a contractor’s poor conditions.

2.4 Wholesaling — who benefits from what

MANUFACTURER  <-- bulk orders, storage, risk-bearing, prompt payment,
                  distribution, market information  -- WHOLESALER
WHOLESALER    -- breaking bulk, range, credit, delivery, advice,
                  packing and price-marking -->  RETAILER

Importance: fewer transactions in the chain of distribution; manufacturers avoid selling to thousands of shops; small retailers can buy small quantities on credit.

Survival of the independent wholesaler:

• Cash and carry: low prices because there is no credit and no delivery; suits small shops and caterers buying little and often.
• Voluntary chains: wholesaler plus independent shops; bulk buying lowers prices, shared brand and promotions help shops compete with large retailers; shops stay independently owned.

Why wholesalers lose trade: large supermarket chains buy direct from manufacturers and have their own warehouses; ecommerce lets manufacturers sell direct to consumers.

2.6 Communication

Four types: written · oral · electronic · visual.

Eight methods: letter · telephone · face to face · videoconferencing · email · web-based chat (including chatbots) · social media · posters.

Six factors: urgency · cost · security · distance · availability of networks · importance of the message.

Situation	Best method	Factor that decides it
Urgent stock query to local supplier	Telephone	Urgency
Formal legal complaint	Letter	Importance (written record)
Monthly meeting with overseas partner	Videoconferencing	Distance and cost
Sale announcement to many customers	Social media or email	Cost and reach
Confidential staff matter	Face to face	Security
Rural area with poor internet	Telephone or letter	Availability of networks
Instant help on a website at night	Chatbot	Urgency and cost
Notice to people in a shopping centre	Poster	Visual reach at a location

Command words for these sub-topics

• State / identify — a list is enough: “contract manufacturing and contract logistics”.
• Explain — add a reason or effect: “breaking bulk helps the retailer because it can buy small quantities without tying up capital”.
• Recommend / justify — choose one option and back it with a syllabus factor from the scenario: “telephone, because the order is urgent”.
• Discuss — give both sides and a judgement, for example whether a retailer should still use a wholesaler, or whether a firm should outsource.

Worked example

“Explain one advantage and one disadvantage to a retailer of buying from a cash and carry rather than a delivery wholesaler.” [4]

• Advantage: lower prices, because the wholesaler saves the cost of credit and delivery [1], which raises the retailer’s profit margin [1].
• Disadvantage: the retailer must pay immediately and transport the goods itself [1], which uses the owner’s time and harms cash flow [1].

Exam traps

• Writing “outsourcing is cheaper” without explaining why or naming the two growth areas.
• Giving a wholesaler function without saying who benefits.
• Confusing a voluntary chain with a franchise or a chain store.
• Calling email a “type” — it is a method; the type is electronic.
• Choosing a method without a factor from the syllabus to justify it.

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. Define contract logistics.
2. Give two functions of the wholesaler for the manufacturer.
3. Why do voluntary chains help independent shops compete?
4. Which communication method best suits an overseas meeting, and why?
5. Name the six factors affecting choice of communication method.

Answers: 1. Paying another firm to store, pack, transport and deliver goods. 2. Any two of bulk buying, storage, bearing risk, prompt payment, distribution, market information. 3. They gain bulk-buying prices and a shared brand and promotions while staying independent. 4. Videoconferencing, because distance makes travel costly and slow, while it still allows face-to-face discussion. 5. Urgency, cost, security, distance, availability of networks, importance of the message.