First year intermediate - Principle of commerce - Chapter 1

Commerce and Its Scope

Scope of Commerce

Commerce means the process of distribution of goods which means removal of goods from a place where they are produce and found in abundant to a place where they are scare and hence in demand. It is a vast and complex organism and embraces all the functions involved in the buying and selling of goods. It is rightly said that commerce is the life blood of a nation. A nation economic prosperity is entirely dependent upon the development in the field of commerce. The most obvious effect of the development as said before has been the availability of such goods to a community which, out of necessity are produce elsewhere.

Some of the definitions of commerce is reproduced below;

“The term commerce embodies all the operations connected with the act of exchange goods and services”

“In the widest sense the term commerce is applied to all these activities or functions which are intended to bring about an exchange of goods and services against money or money’s worth. It covers trade as well as the aids to trade, such as banking, insurance and transport.”

“Commerce comprises a group of specialized activities which together from an essential part of the process of production. It links the suppliers and the consumers by means of trade and activities auxiliary to trade such as banking, insurance and transport and warehousing.”

It is now made clear that commerce is basically concerned with the production and distribution of goods. Under commerce we study those activities which help produce good and services and their distribution. In the chain of productivity the first in the line is the extractors or cultivators and the last link is the consumers. To elaborate this statement it can be said that extractive activities related to raising from the soil or obtain from beneath earth various form of wealth. Manufacturing consists of activities which are concerned with the working up of the raw material from the extractive industry into finished products. The commercial and distributive group includes all those people who are concerned with the transfer of raw material from the producer to consumers. It consists of this entire person who is engaged in the distribution of goods such as railways, banks, insurance companies, brokers, wholesalers, retailers, etc.

Thus it can be fairly said that commerce is the sum of total of all the activities beginning from the place of production and ending at the retailer’s shop from where the consumer purchases his goods.

Divisions of Commerce

Commerce is divided into trades and auxiliaries of trade. Trade simply means selling and buying of goods. A mediation of the exchange of goods between the producer and the consumer is called trade. Trade is of two kind Home trade and foreign trade. The trade which is done with in the country is called home trade. The trade which is done between two countries is called foreign trade. Auxiliaries to trade mean aids to trade. It includes the following services; banking, insurance, warehousing and agents.

BANKING:

Banking business not only provides the facility of advancing the loans but also provides the facilities of transferring the money from one country to another. Foreign trade is impossible with out the services of the bank. Bank provide loan and thus advance means by which capital is transferred from those who can not profitable use it to those who can use it more productively for the benefits of society as a whole.

INSURANCE COMPANY:

At the present stage of business development every capitalist does not invest capital in large amount without any security from loss. Insurance company come forward and takes the risk enabling the business man to run the business without any hesitation.

TRANSPORTS:

Transportation services are considered as a backbone for the development of the trade. Highly developed transport system is very necessary for the commercial development of the county. Transport performs the entire work of assembling and distributing of goods. It adds place utility to producer things. It helps widen the market for the commodity. It services the purpose of. Commerce to large extends. i.e. in getting the greater satisfaction by using product of greater diversity of choice at reasonable prices.

WARE HOUSING:

Business man needs some place to store his goods. If he cannot afford his own gawdon than he hires the go-down i.e. he obtains the service of ware house to store his good in bulk or small quantity.

MERCANTILE AGENTS:

They are those middle men who create links between the producer and the wholesaler. They take the goods from producer on their behalf and sell the goods to the wholesalers.

Difference between Commerce and Trade, Commerce and Industry, Commerce and Business

Business is a wide term and it includes all the activities carried out for mutual gain or profit and where exchange of something valuable (goods or services) takes place. Business activities may be classified as:

1) Commerce

2) Industry

3) Service.

Industry involves the production of goods and materials. Commerce deals with their distribution. As far services doctors, teachers. Fisherman’s, weavers, they are all businessmen since they sell their services. Hence an agency through which business is regularly conducted may be an industrial enterprise, commercial unit or a service establishment.

COMMERCE:

Commerce is the branch of business. It is the aggregate of all the activities which take place between the producer and the consumers. All these occupations which affect the exchange of goods and services between producers and consumers stand within the scope of commerce. It embraces all those functions which are essential for maintaining a free and uninterrupted flow of goods and services between those who produce and those who consume. It includes trade as well as auxiliary to trade.

TRADE;

Trade stand within the scope of commerce. It is concerned with buying and selling of goods. It fulfills the aims of productions which is consumption. It is a mean to exchange things we do not need for things which we need. Trade can be of two types.

1) Foreign or international trade.

2) Home or internal trade.

Foreign trade means trade with foreign countries. Such a trade is carried out on a whole sale basis. It can be classified as follow.

a) import trade: buying goods from suppliers in other countries.

b) Export trade: selling of goods to purchasers in other countries.

The trade which is done with in the country is called home trade. It can be conducted on one of the following basis;

a) Whole sale trade

b) Retail trade

A whole sale merchant deals in large quantity but limited variety of goods. A retail merchant on the other hand deals in small quantity of large variety of goods.

INDUSTRY:

The term industry refers to the productive aspects of business. It creates “Form Utility’ for the satisfaction of human wants and hence play and important role. Industry may be classified into following ways.

a) Extractive Industries: In which goods are extracted or raised from the soil, air, or water.

b) Genetic Industries: they involve reproducing or multiplying certain species of plant and animals as in the case of agriculture, cattle breeding etc.

c) Manufacturing Industries: which are considered with the transformation of the raw material or semi manufactured goods into finished products creating “form utility” as in case of spinning and weaving textiles from cotton.

d) Construction industries; which include construction of buildings, roads, bridge, dams, canals etc.