Commerce
Question bank
Chapter 3
Section A
1
Channels of distributionthe wholesale trade
Short questions
Explain the function of a broker and a ‘del credere’ agent respectively.
(4 marks)
A broker brings buyers and sellers together. He/she will find out what customers want and
find someone who sells it. (1) He/she does not own or directly handle the goods (1).
A ‘del credere’ agent sells goods on behalf of the principal (1) and guarantees that the people
buying the goods will pay for them (1).
2
The Fish Marketing Organization (FMO) in Hong Kong sells fish to those who are willing to
pay the highest price.
(a) Identify the method of dealing used by the FMO.
mark)
(1
Auction sales (1).
(b) Apart from handling the wholesale of fish, what are the other functions of the FMO?
(4 marks)
Provide low interest loans to fishermen (1) to assist them in buying fishing facilities (1).
Improve the facilities of the fish market (1) to raise the efficiency of the sale of fish (1).
Provide educational scholarships for children of the fishermen (1) to encourage them to
work hard in school (1).
(Any 2)
3
Some local retail outlets import electronic appliances directly from manufacturers in Japan.
(a) List the channels of distribution of the above case, and explain the role played by the
local retail outlets.
(2
 Oxford University Press 2001
1
Commerce
Question bank
marks)
ProducerRetailersConsumers (1)
The role of the local retail outlets: Retailer (1).
(b) State how consumers benefit in this particular channel of distribution.
(4 marks)
In this channel of distribution, profit gained by the middleman is eliminated (1). Goods
can be sold at a lower price (1).
As the retailers import goods directly from manufacturers (1), customers can always get
the latest model (1).
4
What is a ‘channel of distribution’? What is the significance of having an effective channel of
distribution?
(6 marks)
Channel of distribution: The method by which products are distributed from producers (1) to
consumers (1).
OR
It is a route formed by different organizations (1) so that the right of possession is passed from
producers to consumers (1).
Selling goods at an appropriate time (1) so that they can be sold at the highest price (1).
5
What factors should we consider before setting up a wholesale business.
(6 marks)
Location (1): We should consider where to set up the business. The location must provide
enough space for storing goods and for loading and unloading (1).
Organization (1): We should consider what departments we need to set up in order to facilitate
transactions (1).
Finance (1):
A large sum of money is needed to set up a wholesale business. We have to
consider whether we should bring in business partners or borrow loans from banks
(1).
 Oxford University Press 2001
2
Commerce
Section B
1
Question bank
Long questions (20% each, 17% for content, 3% for effective communication)
Mr Cheung is a wholesaler who specialized in the wholesaling of frozen meat.
(a)
What type of wholesaler does Mr Cheung belong to? State the features of this type of
wholesaler.
(5
marks)
Specialist wholesaler (1).
These wholesalers specialize in selling one type of product to retailers (2).
They provide a whole range of wholesaling services for customers, such as storage,
transport and trade loans (2).
(b)
With reference to Mr Cheung, elaborate the function of a wholesaler.
marks)
(8
Breaking bulk (1): After buying a large quantity of frozen meat from producers, Mr Cheung
packs them into smaller quantities for retailers (1).
Providing trade credit (1): Retailers can get their goods first and pay for Mr Cheung after a
period of time (1).
Providing a variety of goods (1): Mr Cheung buys goods from different suppliers over the
world. He provides a variety of goods for purchase (1).
Providing information (1): Mr Cheung can provide information for both retailers and
producers. For example, he may introduce the features of frozen meat from different
countries of origin as reference for retailers (1).
(c)
Why did a warehouse so important to Mr Cheung?
marks)
(4
He needs a warehouse to store the ‘ready to be sold’ goods (1), so that they are sheltered and
protected (1).
 Oxford University Press 2001
3
Commerce
Question bank
A warehouse with freezing facilities (1) can prevent the frozen meat from rotting (1).
 Oxford University Press 2001
4
Commerce
2
Question bank
Mr Chan is a wholesaler who specializes in selling construction machinery. He has bought a
large number of piling machine recently, and has stored them in the warehouse. Besides, he
has sent some marketing representatives to Japan to promote the piling machines.
(a) What type of wholesaler is Mr Chan?
(1 mark)
Specialized wholesaler (1).
(b) State the risks of storing a large amount of stock in the warehouse.
marks)
(4
If the demand for, or price of, the piling machine falls (1), Mr Chan will suffer a loss (1).
He has to bear the risk of goods deteriorating in storage (1) and of theft (1).
(c) Apart from sending marketing representatives, how can Mr Chan promote the piling
machines to increase sales?
(6 marks)
Mr Chan can display the machines in a showroom (1) and introduce their features to
retailers (1).
Mr Chan can advertise for the product in Hong Kong and Japan (1) to make the machine
known to retailers (1).
Mr Chan can publish catalogues and brochures (1), and send them to retailers in Hong Kong
and Japan (1).
Mr Chan can set up a web site for his company (1) and promote the machines in the site (1).
(1 mark for each point, 1 mark for the explanation, max. 6 marks)
(d) Explain the advantages for Mr Chan to sell the machines in both Japan and Hong Kong.
(6 marks)
Mr Chan can expand the market for his product (1). The number of potential customers
increases as the product is sold not only in Hong Kong, but also in Japan (1).
Production cost decreases as manufacturers produce in bulk to meet the increasing demand
(1). Mr Chan can thus enjoy a lower factor cost (1).
 Oxford University Press 2001
5
Commerce
Question bank
Through international trade, wholesalers in Hong Kong can sell the surplus goods to other
countries (1) to avoid any waste (1).
3
Large-scale supermarkets nowadays usually cover a large area and are well-equipped. Most of
them buy goods directly from manufacturers without going through wholesalers.
(a) Give an example of large-scale supermarket in Hong Kong. Explain how it changes its
operation to meet customers’ changes in lifestyle.
(9 marks)
Example: Park’n Shop/ Wellcome Supermarket (1).
Changes in its operation:
More people are busy at work and have no time to prepare meals nowadays (1). The
supermarket is selling some cooked or seasoned dishes for their convenience (1).
Customers are more sensitive to price (1). Some goods are labelled to guarantee that they
are sold at the lowest price among all other competitors. The supermarket also gives special
offers to attract more customers (1).
Consumers enjoy shopping in self-service shops where they can choose whatever goods
they like freely and leisurely without being disturbed (1). The self-service supermarket
meets their preference and encourage impulse buying (1).
The use of credit cards or electronic monies has become popular (1). The supermarket now
accept these methods of payments (1).
Online purchasing is getting more popular (1). Customers can order goods online. The
supermarket will then deliver the goods for them directly (1).
(Any 4)
(b) Why can large-scale supermarkets eliminate the role of the wholesaler in the channel of
distribution?
(8 marks)
Most large-scale supermarkets have their own transport department (1). Delivery service
provided by wholesalers is unnecessary (1).
 Oxford University Press 2001
6
Commerce
Question bank
Nowadays, many goods have been labelled and packed properly when they leave the
factories (1). It is not necessary for wholesalers to break bulk (1).
Supermarkets have their own production lines, such as the Park’n Shop brand (1). They
transport their manufactured goods directly to their retail outlets (1).
Supermarkets are rich in capital (1). They do not need any trade credits from wholesalers
(1).
 Oxford University Press 2001
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