Presentation on theme: "GOODS AND SERVICES In business, products that are sold, traded or otherwise provided to consumers or other companies can be classified as either goods,"— Presentation transcript:
GOODS AND SERVICES In business, products that are sold, traded or otherwise provided to consumers or other companies can be classified as either goods, which are tangible, or services, which are intangible. Most countries measure their economies on the production and consumption of both physical goods and intangible services. Some companies provide both goods and services, and others provide only one or the other. GOODS Some goods are consumed, which means that they are gone, ineffective or unusable after they have been used once. Food, petrol, and deodorant are examples of goods that are consumed and must be replaced. Products that are not consumed as they are used will last longer before needing to be replaced. Some wear out after a few weeks, months or years, and others might be replaced by improved products before they wear out. Clothing can be worn many times but eventually can wear out or become out of style. Electronic devices might stop working after a few years, but consumers often upgrade to newer or better devices before then. Other goods are more long-term in nature and might last for many years or even decades. Furniture, dishware and houses are examples of durable goods that are intended to be used for extended periods of time. Some products, such as automobiles, can last for a very long time if they are maintained properly.durable goods SERVICES Services are intangible products — those that cannot be seen or touched — that are provided to consumers or other companies. A physician provides healthcare to patients. Communications companies provide services such as Internet access, television programming and the ability to make local or long-distance telephone calls. Banks provide a range of financial services to customers, such as checking accounts and investment opportunities. Other companies provide services such as lawn care, plumbing, home repair, business consulting or transportation.
TRADE AND COMMERCE The buying and selling of goods and services for money is called trade. home trade (the buying and selling of goods within a country) foreign trade (the buying and selling of goods between different countries). Trade can be classified into Home trade includes wholesale trade (vendita all'ingrosso) and retail trade (vendita al dettaglio), Foreign trade is divided into export and import. Commerce is a more general term: it is used to describe trade and all the services which make trade possible: banking, insurance, transport, technological support, warehousing, communication and marketing.
THE CHANNELS OF DISTRIBUTION The traditional channel of distribution describes how a product passes from the manufacturer to consumers 1.A manufacturer takes the materials extracted or produced by a producer and transforms raw materials into semi-finished or finished products. 1.A wholesaler buys products in large quantities from manufacturers and sells the goods in smaller quantities to retailers. 1.A retailer sells the goods in small quantities to individual consumers.
THE CONTRACT OF SALE The contract of sale is the focal point of the relationship between the buyer and the seller and it is a legally binding document. By the contract of sale the supplier undertakes to sell a stated quantity of goods at the price indicated and within the time agreed, and the customer agrees to pay the price asked for the goods. These are the basic sales terms governing a contract of sale, but the two parties must agree on other sales terms such as means of transport, means of payment, packing, insurance, delivery and documentation.
STAGES OF A BUSINESS TRANSACTION The sequence of operations preceding, accompanying and following a contract of sale can be divided in five stages ENQUIRY / OFFER REPLY TO THE ENQUIRY / REPLY TOTHE OFFER ORDER CONFIRMATION AND EXECUTION OF THE ORDER PAYMENT To each stage correspond a particular type of commercial letter, remembering that a business transaction can be started either by the buyer or by the seller.
Stage 1/A ENQUIRY The letter of enquiry is written by the potential buyer: he introduces his firm, expresses his interest for the product and asks for more information about its quality, availability and price. He can also ask about details of prices, discounts, means of payment required, delivery times, etc. ( Buyer )
Stage 2/A REPLY TO ENQUIRY (Seller) The seller writes the reply to the enquiry to give the potential customer full information about his product, together with the letter he usually sends any illustrative material available, such as a catalogue, brochures or leaflets and, when possible, a sample, a set of samples or a pattern book. He also states availability of the goods, their price, delivery terms and means of payment. To provide information about the goods and his terms of business the seller may fill out and send a normal invoice form, called a Pro-forma Invoice (fattura pro-forma), which does not refer to goods really supplied but simply conveys information about a future sale. Supplying a price list (a list of products accompanied by the price assigned to each product and valid for all customers up to the date of expiry) Supplying a quotation (a special price, based on market conditions or size of the supply, that the supplier offers to a customer. A quotation may refer to the bare cost of the goods or may include other costs such as transport and insurance expenses) The price can be given in two ways The currency in which the quotation is given is always stated, while the composition of the prices given is governed by a set of international rules, called Incoterms, to avoid differences of interpretation.
OFFER (Seller) Sometimes the seller initiates the transaction. He may write an unsolicited offer to promote a particular product, or to contact new potential customers, usually offering his goods at very interesting terms. Stage 1/B
(Buyer) The potential buyer writes the reply to the offer to ask for further information just like in an enquiry. If he is not interested he may politely refuse the offer. REPLY TO THE OFFER Stage 2/B
INCOTERMS Incoterms or International Commercial terms clearly define the responsibility for transport, risks, duties, loading and unloading, insurance and customs formalities costs of both the exporter and the importer in order to avoid differences of interpretation. Incoterms were established by International Chamber of Commerce (ICC) in 1936 and are used in international commercial transactions. The present version dates from 2000.
EXW = EX WORKS + exporter's town (franco fabbrica) The buyer collects the goods at the seller’s premises. The price includes the cost of the goods only. All other expenses are borne by the buyer. FCA = FREE CARRIER + named place (franco vettore aereo / treno / nave / camion) The seller hands over the goods, cleared for export, into the custody of the carrier named by the buyer at the named place. Group E Group F FOB = FREE ON BOARD + port of shipment (franco bordo / nave) The seller loads the goods on board the ship. The buyer must bear all following costs and clear the goods for export. FAS = FREE ALONGSIDE SHIP + port of shipment (franco sotto bordo / nave) The seller delivers the goods alongside the ship on the quay. From the loading of the goods onto the ship all the expenses are borne by the buyer, who has to clear the goods for export. Incoterms
DDU = DELIVERED DUTY UNPAID + place of destination (reso non sdoganato) The seller delivers the goods to a named place in the country of destination. The buyer clears the goods. Group D DDP = DELIVERED DUTY PAID + place of destination (reso sdoganato) The seller pays for all costs up to final destination.
Incoterms CFR = COST AND FREIGHT + port of destination (costo e nolo) The seller pays the costs and freight necessary to bring the goods to the port of destination. The seller must clear the goods for export. Group C CPT = CARRIAGE PAID TO + place of destination (trasporto pagato fino a) The seller pays freight for the carriage of the goods to the point of destination. CIF = COST, INSURANCE AND FREIGHT + port of destination (costo assicurazione e nolo) The seller pays the costs and freight (trasporto) necessary to bring the goods to the port of destination The seller must also pay for insurance and clear the goods for export. ClP = CARRIAGE AND INSURANCE PAID TO + place of destination (trasporto e assicurazione pagati fino a) The seller pays freight and insurance for the carriage of the goods to the point of destination.
ORDER ( Buyer ) QUANTITY AND DESCRIPTION OF THE GOODS (colour, size, article number) PRICE DELIVERY TIME TYPE OF TRANSPORT MEANS OF PAYMENT After carefully examining the offer the customer may write a letter to place an order, which is a legally binding document. The order must contain basic information such as: The buyer can also include special instructions referring to packing, insurance and documentation. Stage 3
CONFIRM ORDER / EXECUTION ( seller ) When the consignment is ready to be forwarded the supplier issue an Invoice, that is a document containing all the data regarding the goods, as well as details concerning packing, transport, insurance and payment. An invoice is issued in several copies because it is a document needed by all the intermediaries that carry out the various operations connected with the sale (forwarding agents (=spedizioniere), carriers, insurers and bankers). After that the supplier transfers the consignment to the Forwarding Agents, who arrange the transport of the goods obtaining all the necessary documents that must travel with the goods and hiring the Carriers. These shipping documents entitle the customer to become the owner of the supply: they are the invoice, the transport contract and the insurance policy. On receiving the order, the seller usually writes a letter to confirm its execution. The confirmation legally binds the seller to effect delivery in conformity to the order. Stage 4 Finally, the buyer, on receiving the consignment, signs a Delivery Note stating that the goods described in it have been delivered and the carrier is no longer responsible for them. If the seller, for any reason, cannot fulfil the order, he must write a letter specifying his inability to execute the order as it is, and usually proposing alternatives.
PAYMENT ( buyer ) The final operation connected with a sale transaction is payment: the buyer writes a letter notifying payment and pays for the goods he has received and gives the seller all details of the transaction. The seller issues the Receipt, a document by which he acknowledges that he has received the stated sum due to him. The seller may issue other documents linked with the financial side of payment; the Credit Note states that the buyer has paid more than what due owing to a clerical error in the invoice; the Debit Note states that the customer has paid less than due owing to a clerical error; the Statement of Account is a report sent periodically to a regular customer to show the goods supplied and the payments still to be effected. Stage 5 Payment can be effected by means of different instruments of credit such as the bank transfer, the bank draft (bill of exchange) or the letter of credit..
DRAFT (or Bill of Exchange) It is a document that orders a bank to pay a fixed sum of money on demand or on a certain date to the company specified. According to the date when it is payable, a draft can be: a sight draft, that is normally cashed immediately; at 30/60/90/120 days after the date specified on the draft; at a fixed date, specified on the draft. LETTER OF CREDIT (L/C) The importer asks his bank to open credit terms in favour of the exporter and gives a list of the necessary documents; his bank issues a Letter of Credit and send it to the exporter's bank; the exporter dispatches the goods and sends the necessary documentation to his bank. The importer’s bank checks the documents and issues a draft for the exporter in payment for the goods, while the importer can collects his goods. BANK TRANSFER It is an unconditional and irrevocable order of payment issued by the buyer's bank to the seller's bank. MEANS OF PAYMENT
DELIVERY TERMS refer to the date of delivery 1.Ready delivery means that the goods object of the transaction are in stock and can be dispatched as soon as the order is received. 2.Prompt delivery means that the supplier needs a few days to process the order and effect the forwarding. 3.A specified date or period of time may be given (delivery by the end of May; delivery by 7th March).
PAYMENT TERMS refer to the means and time of payment 1.(C.W.O.) Cash With Order means that the customer effects payment when placing the order, that is before the order is executed. 2.(C.O.D.) Cash On Delivery means that payment must be effected when the consignment is delivered to the customer. 3.Open Account Terms allow the customer to pay periodically for goods already supplied. 4.Documentary Collection is a type of payment where the shipping documents are given to the importer only when he pays or accepts a draft. 5.(D.P.) Documents against Payment means that the seller, on despatching the goods, sends the buyer the shipping documents against payment of a draft (tratta) at sight. 6.(D.A.) Documents against Acceptance means that the seller, on despatching the goods, issues a draft to be paid at a future date on the buyer; the customer will receive the shipping documents against acceptance of the draft.
COMPLAINT ( buyer ) The seller must then reply, he apologizes politely and explains how the mistake happened. He usually agrees to rectify the problem. The buyer can write a letter to make a complaint for several reasons: if the goods have not been delivered on time, or if the seller has supplied a wrong type or a wrong quantity of goods, or if the goods are damaged. The buyer usually offers a suggestion as to how he would like the problem to be solved. FURTHER LETTERS ARE NECESSARY ONLY WHEN PROBLEMS ARISE DURING THE VARIOUS STAGES OF A BUSINESS TRANSACTION REPLY TO COMPLAINT ( seller )
If the buyer delay payment the seller sends a reminder gently requesting prompt payment. If the buyer continues not to settle his account, subsequent reminders will be sent and finally, the seller may threaten legal action in order to receive payment. REMINDER ( seller ) If the buyer can pay the account, he replies saying that arrangements for payment have been made and apologizes for the delay. He usually offers an excuse for the delay. If he is unable to pay, he explains the reason why and asks for an extension of credit or gives the dates for his settlement. REPLY TO REMINDER ( buyer )