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AIDS TO TRADE IN COMMERCE

Aids are the services that facilitate trade. They are services that make
buying and selling to happen easily. The aids to trade help in the
production and distribution of goods and services. They are sometimes
referred as auxiliary services.

Transport
 Transport is the movement of raw materials, products and people
from one location to another.

 Transport is an important aids to trade as it makes goods available

to consumers in the right place and at the right time

 The main objective of all commercial activities is to bridge the

gap between consumers and producers

We have four elements of transport

 The way- along which the unit of carriage will move. E.g. land,

water or air.

 The terminal- starting and ending point in the transportation

process.

 The unit of carriage. Modes of transport by which goods or people

are moving

 Method of propulsion-The driving force of unit of carriage, e.g.

petrol or diesel or electrical motors or jet engine

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Importance of transport
i. It widens consumer choices
ii. It facilitates physical movement of people and goods
iii. It widens market
iv. It encourages specialisation
v. It provides employment opportunities
vi. It facilitates exploitation of resources
Modes of transport
There are three forms of transport
i. Land – rail, road & pipeline
ii. Air
iii. Water – Sea & inland water ways
Factors affecting choice of transport
 Nature of goods: Bulky goods like coal or steel can be transported by rail or

ship.
 Speed and urgency: The fastest means should be used if goods are required

to reach particular place within short period. e.g, medicines and doctors for
injured people in accident, can use road transport for short distance or air
transport for a long distance
 Terminals: availability of terminals for unloading and loading need to be

considered.
 Size and weight of goods. Bulk and extremely heavy material like steel can

only transported in large quantities by ship or rail.

 Value of goods being transported. Precious items need to be secured and

transported quickly.
 Risk involved- fragile goods which need careful packing and handling are

normally send by air.

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 Cost of the means of transport: the customer should compare costs for

different means of transport and the value of goods being transported.

 Availability of the required means of transport: Customer should choose the

means of transport available in a particular area.

Read advantages and disadvantages of different modes of transport

Warehousing
 Warehousing refers to storage of goods or materials in large quantities from
the time they are produced or received until they are distributed in the local
or international market
 Warehousing provides protection for the goods against damage e.g. theft,
bad weather etc
 Warehouse warrant is usually issued to certify goods have been received by
the warehouse authorities.
Reasons for warehousing
 Seasonal production: this applies commonly to agricultural products which
are produced seasonally but demanded throughout the year.
 Seasonal demand: some goods have high demand during certain seasons
such as umbrellas and rain coats. Thus, producers, retailers or wholesalers
will build up a large stock of these goods in a warehouse.
 Future demand: Manufacturers may be required to produce goods that meet
customers order e.g. Designers want to launch new fashion, large quantity of
garments will be produced and stored prior the launching day.
 Price stability: warehousing allow organizations to maintain sufficient stock
levels so that there is price stability of goods and materials.
Importance of warehousing
 Stabilises prices
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 Protection of goods
 Supports production
 Preparation of goods for sale
 Reduces transport costs
 Reduces congestion at terminals
 Preserves surplus production
Types of Warehouses
 Private warehouses: these are warehouses owned by producers, retailers
or wholesalers individually. E.g. manufacturers’ warehouse, giant
bins/silos, agents’ warehouse, wholesalers warehouses, retailers
warehouses
 Public warehouses: These are owned by individuals, private firms or
government for public use.
 Bonded warehouse: It is a special type of public warehouse used to store
dutiable goods.
Owners can be individuals, private firms (known as licensed warehouses)
or government (customs warehouses).
Normally, customs authorities approves release of goods from bonded
warehouses once required duty is paid
Essential features of a warehouse
 It should be in good location
 It should be spacious
 It should have proper facilities
 It should have efficient staff
 It should be connected to transport system
 Protection measures
 Security
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 Good system of inventory management.

Communication
 Communication refers to the exchange of information between individuals
or organisations.
 Effective communication should be:
i. Concise-It should contain the facts in clear and simple language
ii. Complete- It should contain all necessary information
iii. Courteous- The send should use polite, respective and considerate
language to avoid causing offence to the recipients
iv. Accurate- The send should make sure that he/she sends accurate
information
Importance of Communication
1. Facilitate business transactions: The communication takes place between
buyer and seller regarding available goods and terms of sale prior actual
transaction
2. It can save life and property: Communication made on time may save life
and goods. e.g in case of accidents such as fire
3. Facilitate choice making: It enable buyers and prospective buyers to
compare various products
4. It enables permanent records to be made: written communication
provides permanent records about transactions.
5. It enhances good relationship in the organization as it facilitate
transmission of information between various stakeholders in an
organisation
6. It increases productivity by reducing misunderstanding in the
organization
Barriers to Effective Communication
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 Unfamiliar language
 Inconvenient timing
 Noise
 Attitude of the parties involved
 Use of improper channel of communication
 Poor preparations
Methods of communication
Channel of communication refers the way in which information is transmitted.
Basic channels of communications are:
i. Oral/verbal e.g. Meeting, instructions, telephone
ii. Written e.g., memos, letters, magazines, brochures, post cards
iii. Visual e.g. Graphs, video display, signs and diagrams, pictures
iv. Electronic e.g. E-mail, video conferencing, teleprinters (Telex),
facsimile/fax, slide presentations

Sales promotion
 It refers to activities carried out by businesses to increase sales
 It involves communication and marketing
 Sales promotion objectives include:
 Stabilization of sales
 Increase sales
 To inform public about available goods
 To sell off old stocks
 To encourage customers to try out new products
Methods of Sales promotion
 Giving out free samples
 Use of gifts and prizes
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 Sponsorship
 Improvement in quality of product
 Branding
 Extension of credit
 Price reduction
 After-sales services
 Use of window display
 Multiple buy offers
 Advertising
Advertising
 It refers to the method of spreading information about the goods available
for sale.
 Advertising can be in four categories:
i. Informative advertising
ii. Persuasive advertising
iii. Collective or generic advertising
iv. Comparative advertising
Advertising Medium
 This refers the channel through which message is conveyed to the public
 It involves:
i. Television
ii. Radio
iii. Newspapers
iv. Magazine and trade journals
v. Window display
vi. Trade fair and exhibitions
Advantages of Advertising
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i. It helps business to introduce new product in the market

ii. It bridges the gap between the producer and the consumer by creating
awareness about existing product
iii. It creates demand for goods and services, thus more sales and consequently,
increased profits
iv. It creates competition among producers, thus improved quality of their
products as well
v. It provides employment to the members of the public i.e. Working in the
advertising media and agents
vi. Company can create brand loyalty and increase market share

Disadvantages of Advertising
i. Advertising may lead to high prices of goods and services, as advert costs
falls to consumers
ii. High advertising costs may reduce producers profit margin
iii. Persuasive advertising may mislead the public into excessive consumption
e.g. Cigarettes
iv. Persuasive adverts exploit the public and may be influenced to buy goods
that they actually do not need

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Banking
Evolution of Banking and Financing concept
Money and banking play fundamental role in the development of modern
commerce.
What is money? Money is anything that is commonly acceptable by an individual
or a group of people for the exchange of goods and services and ac as measure of
value and store of value.
Wealth is the total resources owned by individual or business like money, land,
stock houses etc
Income is the money earned during certain period of time.

Stages in Development of money

i. Barter trade system- This means exchange of goods for goods
ii. Commodity Money- A commodity is a basic item used by almost everyone.
Apart for their utility they assumed the role of currency. Commodities like
salt, tea, tobacco cloth, cows and skins.
iii. Metallic money- Metals like Gold, copper, silver e.t.c Metals were used for
its beauty, immunity to corrosion and economic value.
iv. Paper money-Gold smith initiated and supported growth of paper money the
value of papers were written by hand on the face of the papers.

Primary functions of money

1. Medium of exchange
2. Unit of account/Measure of value
3. Store of value
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4. Standard of deferred Payments-It facilitate credit function

5. Transferring immovable property.

A bank is an entity that engages in the banking business of receiving funds from
the general public through the acceptance of deposits and use such funds, in whole
or in part, for loans or investments (BAFIA 2006).
Types/Nature of Accounts offered by Banks
1. Current account
2. Savings account
3. Fixed deposit account/time deposit account
Current Account
It is a type of an account in which deposits and withdrawals can be made by
the account holder without prior notice to the bank.
It is commonly used by businessmen
Features of current account
• The account holder is not required to maintain minimum amount
• Generally no interest charged in this account
• The account holder is given cheque book to use for making payments or
withdrawal from his account
Features of current account
 Withdrawals can be made anytime without prior notice depending on the
amount available in the account
 Money can be paid to another person by writing a cheque
 Money can be deposited anytime during banking hours
 It provides access to overdraft
Savings account
These are accounts maintained mainly by individuals or households for
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saving purpose

Features of savings account

 It requires the account holder to maintain a minimum balance
 Interest is paid on the deposits
 Withdrawals are limited
 Money can be deposited anytime during banking hours
Fixed Deposit account
 Fixed deposit account allow individuals and firms to deposit funds for a
specified period.
 Features of fixed deposit account
• It provides relatively high interest rate
• No withdrawals prior maturity
• Any withdrawals prior maturity involves penalty
Factors to consider when opening a bank account
i. Interest paid
ii. Ease of withdrawals
iii. Possibility of loans
iv. Initial deposits required
Role of banks in the economy
1. Banks act as a bridge between people with surplus money and those with
deficit. Banks are capable of mobilising resources for borrowing
2. Banks facilitate the development of the national economy by providing loans
and credit available to business of different size and types
3. Banks help to improve the standard of living of the people by lending funds
to fulfil their various wants such as cars, houses and holidays
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4. Banks promotes saving habits amongst people

The central banks

This is apex bank and statutory institution for the monetary transaction of a
country. It is bankers’ banks i.e. it accepts deposits from all other banks and
advances money to other banks when needed. It undertakes the function of guiding
and regulating the banking system of a country.
Function of the central bank
1. To advice the government on monetary and credit policies of the country.
2. To regulate and supervise the banking system in the country to create public
confidence in the banking system of the country.
3. To issue currency notes and regulate their circulation in the county.
4. To regulate the interest rates for the bank loans in a country
5. To act as the banker and fiscal agent of the government.
6. To act as the bankers’ bank.
7. To act as custodian of the foreign exchange reserves of the country

Commercial banks
These are the banks that accept deposits of money from the public for the purpose
of lending.
Functions of commercial the bank
i. Deposit mobilisation: Banks mobilise savings from units with excess funds
and channel them to units in deficit that channel them to productive
investment.
ii. Transfer of funds: Commercial banks are able to transfer funds of a
customer to other customer’s account through the cheques, draft, mail
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transfers, telegraphic transfers etc.

iii. Banks provide short and long term financing facilities such as loans,
overdraft, bills discounting, guarantee, letter of credit and structured finance
iv. Agency functions: commercial banks act as an agent of the customer such
as the Collection of cheques, Purchase and sale of securities. However,
banks charge fee or commission for these functions.
v. Banks buy and sell foreign currencies such as Us dollar, Sterling pound etc
vi. Banks provide safe deposit locker services for valuable items such as
jewellery, important documents like share certificates, title deed etc.

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