Explain the Meaning and scope of Business F.Y.B.COM SEM I Commerce Paper I

 

F.Y.B.COM
( SEMESTER – I )

Commerce
Paper I (Introduction to Business)

 

Q1. Explain the Meaning and scope of Business.

Meaning :- According to L.H.
Haney, “Business is a human activity directed towards producing or
acquiring wealth through buying and selling activities.”

SCOPE OF BUSINESS

Business has a very wide scope. It includes large number of
activities. These activities may be grouped under Two broad categories i.e.
Industry and commerce.

 

I. Industry :

The term industry refers to that part of business activity
which directly concerns itself with production, processing or fabrication of
goods and services. It creates form utility. In industry, raw materials are
converted in to finished products, which can be used for consumption. Some
industries manufacture consumer goods while others manufacture capital goods.
Following are the various types of industriesa) Primary IndustriesThese
industries are engaged in the production of primary goods, such as rice,
cotton, fish etc. The best examples of this type of industries are Agriculture,
fishing etc.

b) Genetic Industries :

`Genetic
industry involves breeding and reproduction of plants and animals for the
purpose of sale. Poultry, Plant nurseries, sericulture etc. are examples of
genetic industry. The price of products available from such activities is
generally less.

c) Extractive Industries :

Extractive industries extract valuable minerals, ores etc.
from the natural elements like soil, water and air. These industries are
concerned with the discovery and utilisation of natural resources such as
minerals and forests.

d) Manufacturing Industries :

Manufacturing industries are concerned with the conversion
of raw material into finished goods. They create form utility. The products of
primary and extractive industries such as cotton, ironore, crude oil, etc. are
used as a raw material in these industries.

e) Construction Industries :

Construction industries are concerned with the construction
work like construction of bridges, dams, canals, roads, harbours, building etc.
These industries do not operate in factory buildings but at the site allotted..

f) Service Industries :

Service industries produce intangible goods i.e. goods
which can’t be seen or touches for example transport, insurance, banking etc.
These services are essential and useful for the expansion of business.

II. Commerce :

Commerce involves all those activities which facilitate
transfer of ownership and movement of goods from the centers of production to
the centers of consumption.
In other word it involves all forms of trade and the services that assist
trading. Commerce include trade and aids to trade.

A) Trade :

Trade means buying and selling of goods and services. It
involves transfer of ownership of goods from the seller to buyer against money.
In other words, trade is an exchange of goods and services for a price which
the consumers are ready to pay. Consumers may be an individuals, government and
industries who need raw materials.

1. Internal Trade :

Internal trade is also known as home trade. It is conducted
within the country. It can be at local
level, regional level or national level.

a) Wholesale trade :

It involves buying in large quantities from producers and
selling in smaller lots to retailers. The wholesaler is a link between
manufacturers and retailers.

b) Retail Trade :

Retail trade involves buying in smaller lots from the
wholesaler’s and Selling in very small quantities to the consumers for personal
consumption. The retailer is the last link in the chain of distribution. He
established a link between wholesaler and Consumers.

2. External Trade :

The trade carried on between the traders of two different
countries is called external trade. It is also called as International trade or
foreign trade. It includes following trade.

a) Export Trade :

Export trade involves selling of goods from one country to
another. For example, when goods are sold from India to America.

b) Import trade :

Import trade involves buying of goods from a Seller of
another country. For example, a buyer from India purchases goods from a seller
of china.

c) Entrepot trade :

When goods are imported from one country and then
reexported to some other country, it is called entrepot. For example an Indian
trader may buy
goods from Bangladesh and then sell it to Pakistan.

B) Aids-To-Trade

Aids to trade constitute another component of commerce.
Aids to trade include various agencies which are useful for the conduct of
trading activities. There are as follows.

a) Warehousing :

There is a time gap between production and consumption.
However, goods which are produced at one time are not consumed at the same
time. Hence, it becomes necessary to make arrangement for storage or
warehousing. Agricultural commodity like wheat and rice are seasonal in nature
but are consumed throughout the year. On the other hand goods such as Umbrellas
and woolen cloths are produced throughout the year but are demanded only during
particular seasons. Therefore goods need to be stored in warehouses till they
are demanded.

b) Transport :

There is a place gap from the place of production to the
place of consumption. Goods are produced in one part of the country and
Consumption in other parts of the nation. Transport fills the place gap. It
meets out the gap between producer and consumer. It helps the manufacturer to
expand their markets from local to regional, regional to national and national
to global.

c) Communication :

Communications facilitates transfer of information. It
involves transfer of messages from one person to another and from one place to
another. It can be in oral or writing form of information. Oral communication
can take place through telephone or personally. Written communication is
possible through letter, fax, e-mail etc. It facilitates quick transfer of
messages to take important decisions quickly.

d) Insurance :

Insurance reduces the problem of risks. Business is subject
to risks and uncertainties. These are inevitable in the field of business.
Risks may be due to fire, theft, accident or any other natural calamity. Insurance
companies who act as risk bearer cover risks. Insurance tries to reduce risks
by spreading them out over a greater number of people. The rate of premium
depends upon the type of risks and the period for which the risk is covered.

e) Banking :

Banking solves the problem of payment and facilitates exchange
between buyers and sellers. Lending and borrowing the funds are the traditional
functions of the banks. Banks provide short, medium and long term loans to the
needy people. Other functions have started gaining importance such as merchant banking,
development banking, credit cards etc. This has further facilitated to trade.

f) Advertising :

Advertising as a powerful marketing tool of communication
is highly useful to the manufacturer, retailers, consumers and the society at
large. Advertising is basically designed to inform, create interest and induce
people to act in a particular way. It can be used for communicating both
commercial and non-commercial messages. It creates awareness of the product and
builds a good brand image in the minds of consumer and society at large.

g) Salesmanship :

Salesmanship refers to personal presentations by the firm’s
sales force for the purpose of making sales and building customer relationships.
It facilitates personal selling. The salesmen provide information to the
buyers. They convince and persuade buyers to buy goods.

 

h) Mercantile Agents :

In the process of distribution, producers and consumers are
unable to have direct contact, as consumers are spread over a vast area;
mercantile agents remove this difficulty of personal contact. Mercantile agents
are the intermediaries who form a link between the buyers and the sellers. They
do not carry business in their own name. These are several types of mercantile
agents such as brokers, commission agents, auctioneers, underwriters, insurers,
etc