Trade can be sub-divided, firstly, on the basis of operation. Accordingly, we find
internal trade and international trade. Secondly, the classification can also be based
on the unit of sale. Thus, we find wholesale trade and retail trade which are
explained briefly.
i) Internal Trade: Internal trade, also known as home trade, consists of buying and
selling of goods and services within the boundaries of a country. Payments are
usually made in national currency or through the national banking system. The
internal transportation system is utilized for the movement of goods. Large numbers
of middlemen are not generally involved. Government regulations are not varied and
rigid. Internal trade may be conducted on either of the wholesale or retail bases (see
the explanation of wholesale and retail trade in the marketing unit).
ii) International Trade: International trade, also called foreign trade, refers to the
exchange of goods and services between two or more countries. International
trade may be further sub-divided into import, export and entrepot trade.
a) Import Trade: consists procuring of foreign goods for home consumption.
b) Export Trade: consists in the supply of domestic goods for foreign use.
Ethiopia exports coffee, hides and skins, flowers, oil seeds and pulses to foreign
countries mainly to western nations.
c) Entrepot Trade: involving the import of foreign goods for re-exporting them to
foreign consumers and making a profit in deal. For instance, United Emirates
is a major re-exporter of many of the products of far eastern and western
countries to the African market including Ethiopia.
3.1.2 Aids to Trade
Trade cannot prosper unless it is supported by an infrastructure. Various auxiliary
services are important to facilitate trade. The exchange process is not always smooth.
There is long distance between sellers and buyers. There is risk of loss during transit.
There is time gap between production and demand. Customers may not get
information about the product, price and cost. All those activities which help trade in
overcoming these problems are called aids to trade. A brief discussion about these
activities is given below even though some of them are covered in detail in the
marketing part.
1. Banking: Banking provides a means through which payments for purchasing and
selling of goods can be made. It pools resources from individuals in the form of
savings and deposits and make them available to those who can use theses
resources profitably.
2.Transportation: As stated earlier in marketing part of this textbook, transportation
ensures a smooth and uninterrupted flow of goods from producers to wholesalers,
to retailers, to customers.
3. Insurance: It provides a cover against the loss of goods in the process of transit
and storage.
4. Warehousing: As stated earlier, warehousing creates time utility. It maintains
goods in perfect condition until they are required by customers.
5. Advertising: Advertising provides information to customers and other middlemen.
6. Packaging and packing: They protect goods from damage during transportation.