INTER-RELATIONSHIP BETWEEN INDUSTRY, TRADE AND COMMERCE

Business is divided into two categories: industry and commerce. Commerce is again sub-divided into trade and aids to trade. Practically all of them are closely related to each other. They are inseparable. All of them are parts of the whole business system.
Industry and commerce are closely related to each other. Industry cannot exist without commerce and commerce cannot exist without industry. Because every producer has to find his market for his products to sell. But the producer has no direct connection with the buyers or consumers. Hence, industry needs commerce.
Commerce is concerned with the sale, transfer or exchange of goods and services. Hence commerce needs industry for the production of goods and services. Commerce makes the necessary arrangement for linking between producers and ultimate consumers. It includes all those activities that are involved in buying, selling, transporting, banking, warehousing of goods, and insurance for safeguarding the goods.
Trade includes sale, transfer or exchange of goods. It does not include other functions of commerce like transportation, insurance, banking, warehousing, etc. If there were no trade, the producers would have to find customers for their products. Therefore without trade there would be little need for commerce. Similarly trade without aids to trade is meaningless and they exist for trade.
In conclusion, we can say that industry, trade and commerce are inter-related with each other. Industry is concerned with production of goods and services and commerce arranges its sales; but the actual operation of sales is in the hands of trade. So they cannot work independently.

Advertising and Publicity:

The consumers may not be aware of the availability of various goods in the market. The producer will also like to increase his customers. The advertisement is used to educate customers and to publicize goods and services to promote their sales. Publicity is a method of promoting sales. It is essential for increasing sales and profit. There are several media of publicity like newspaper, radio, T.V., etc.

Warehousing:

Warehouse is a kind of storage. It creates time utility. Some goods are produced seasonally but they are required throughout the year. So there is need to store them, so that they may be supplied according to demand. Hence, warehousing are used to keep the stock of goods when not required for immediate use.

Insurance:

During the movement of goods from place to place or during storage, there are chances of goods being damaged or lost. It protects the traders from the fear of loss of goods. The fear of loss of goods due to any cause acts as an obstacle in the development of industry and trade. The insurance companies provide coverage for all types of losses of goods. It has given a great impetus for the development of business.

Banking and Finance:

Banks and financial institutions provide finance to business units. They are traders of money and credit. They provide capital for the business in shape of loan and they also help them in remitting money from one place to another. They play an important role in international trade where each other do not know trading parties. The documents are sent through banks, which release the documents after collecting the dues.

Communication

The transmission of information from one place to another for various purposes is known as communication. Development of industry and trade is very much dependent on means of communication. Most important communication media are telephone, fax, telegrams, radio, T.V., etc. They are very much helpful in communicating their message with persons at distant places. Communication also gives information of new product to individuals and firms.

Transport

Goods are produced at a few places but are required for use at several different places. It is the function of transport to carry goods from centers of production to centers of consumption. It creates place utility by transferring goods from one place to another. It has linked all parts of the world. Transport helps in assembling the goods and in distribution. It widens market, increases mobility of labor and capital, and facilitates large-scale production. The various modes of transport have helped the growth of industry and trade.

Aids to Trade(Auxiliaries to Trade)

There are various obstacles in the way of smooth running of trade. All the obstacles are overcome with the help of various agencies known as Aids to Trade. Aids to trade are those activities that facilitate buying and selling of goods. In other words, it is the sum total of those processes which are engaged in the removal of hindrance of place (transport and insurance) and time (warehousing) in the exchange (banking) of commodities. So it links the consumers and traders. These aids are essential for the growth of trade and industry. Thus, they are also known as aid to business and auxiliary services. Aids to trade include the following services:
(a) Transport
(b) Communication
(c) Banking and Finance
(d) Insurance
(e) Warehousing
(f) Advertising and Publicity

Foreign Trade:

Foreign trade involves purchase and sale of goods between different countries. For example, trade carried on between kathmandu and Tokyo is foreign trade. Two countries are involved in foreign trade. It may be further subdivided into import, export and entreport trade. Import Trade implies purchase of goods from a foreign country. Export Trade on the other hand, implies sale of goods to other countries. Entreport Trade is only re-export. A country imports something not for own use but to export it to other countries is known as entreport trade.

Home Trade:

Home trade consists of buying and selling goods within the boundaries of a country. Payments for such sale are made in national currency directly or through banks and the internal transportation system is utilized for the movement of goods . It may be further sub-divided into wholesale and retail trade . Wholesale Trade consists in buying in lots from producers and then selling them to the large number of retailers. It serves as a link between the producers and the retailers. Retail Trade on the other hand, involves purchase of goods from the wholesaler or the producer directly and sale those goods to the large number of consumers in small lots. Hence, it is the final stage of distribution.

Trade

Trade refers to the sale, transfer or exchange of goods. It is an activity by which buyers and sellers exchange useful goods and services for mutual advantage. It is the process of by which goods are taken from the source of production to the consumers. The persons engaged in trade are called 'traders' or middlemen'. A trader acts as an intermediary between producers and consumers. Trade may be broadly classified into two parts:
(a) Home Trade
(b) Foreign Trade

meaning and classification of commerce

Commerce is concerned with buying, selling and distribution of goods and services, which are produced by industry. James Stephenson has defined commerce as 'an organized system for the exchange of commodities and distribution of finished productions." It signifies a process of exchange, which is the foundation of modern economic life. It helps in transforming the goods from the place of production to those places where it is scarce. Hence it is concerned with the supply of goods and services to the consumers at the right place, at right time and condition.
Commerce deals with the processes which are engaged in the removal of hindrances of persons (trade), hindrances of exchange (banking and finance), hindrances of place (transport, insurances), hindrances of time (warehousing), and hindrances of information (advertising and salesmanship). In modern era commerce includes all the functions which are required to buy and sell the product. It provides a link between producer and consumer.
According to Evelyn Thomas, "Commercial occupations deal with the buying and selling of goods, the exchange of commodities and distribution of the finished goods".
Commerce is primarily concerned with two main types of activities:
1. Trade
2. Aids to Trade.

Manufacturing Industry

Generally the term 'industry' refers to the manufacturing industry. This industry is mainly concerned with the production of different types of goods by using raw materials or semi-finished goods. It creates form utility in them. Manufacturing industries produces most of the goods that are used by the consumers. Textile, cement, soap, television, petrol, etc. are examples of manufacturing industries. It may be classified as follows:
(a) Analytical Industry: In this industry many types of products are manufactured by analyzing and separating different elements from the same material. For example crude oil is processed and separated into petrol, diesel, kerosene, lubricating oil, etc.
(b) Processing Industry: In this industry raw material is processed through different stages of production resulting in the final product. Textiles, paper and sugar are examples of this type.
(c) Synthetic Industry: In this industry various raw materials are put together in manufacturing process to make a final product. For example combining and mixing concrete, gypsum, coal, etc produces cement.
(d) Assembling Industry: In this industry various instruments or component parts already manufactured are assembled to make new useful product. For example, car, bicycle, radio, television, etc.

Construction Industry:

This industry is concerned with the construction, erection, fabrication or building products. Examples of such industries are road, bridge, dams, canals, building construction, etc. In this type of industry basic materials are manufactured by other industry like cement, iron, etc. The distinctive characteristic is that their products are not carried to the market for sale, they are erected or built at a fixed site. The products of construction industries are immovable.

Extractive Industry:

The Extractive Industry is concerned with the extraction or drawing out products from natural sources. It supplies basic raw materials to other industries. Examples of such industries are farming, mining, hunting, lumbering, fishing, etc. Materials once extracted from earth cannot be replaced. Hence, these industries are also called exhaustive industries because with extraction there is depletion of resources and exhausts.

Genetic Industry:

Genetic Industry is related to the reproducing, breeding, and multiplying certain species of plants and animals with the object of earning profit from their sale. The activities involved are rearing, breeding of animals, birds and growing plants. Nurseries where plants are grown for sale, cattle breeding farms, poultry, etc. come under genetic industry.

Meaning and Types of Industry

"Industry" refers to production of goods by manufacturing or processing. It converts raw materials into finished goods and thus creates form utility. Goods produced by an industry maybe "consumers' goods" or "producers' goods". Consumer goods are in the form in which consumer wants them e.g. clothe, radio, television, foodstuffs, etc. They directly satisfy human wants. Producers' goods are used by other producers for further production e.g. machinery, factory buildings, plants, tools, etc. Industry may be further divided into four different types.
1. Genetic Industry
2. Extractive Industry
3. Construction Industry
4. Manufacturing Industry

Human Objectives

Business activity can be conducted only through the medium of human beings working as individuals or groups in organizations. If the human factor is overlooked, it will be difficult to achieve its objectives. Human objectives of business require that a workable balance should be maintained among the claims of various interested groups like employees, shareholders and consumers. Some to the important human objectives are:
(a) Welfare of Employees: The employees should be looked upon as human beings. The help in increasing the profitability and should be given a due share in profits in form of bonus, increased allowances or spending money on their welfare. The best prerequisite for getting the best out of people is providing a fair wages and other incentives.
(b) Satisfaction of Consumers: The business is meant for consumers and their satisfaction should be the main objectives of business. So goods should be produced according to the needs tastes and purchasing power of the consumers. They should be provided with quality goods at reasonable prices.
(c) Satisfaction of Shareholders: The management should give reasonable return on the money invested by the shareholders. At the same time, the business should grow so that there is capital appreciation also. The shareholder should also feel that the management does not misuse their money.

social Objectives

Since business operates in society it cannot survive and grow unless it meets the needs of the society. For the survival of any business, social objectives are essential. profit should be earned along with service and this concept does minimize the importance of profit. According to Henry Ford. "service first and profit next should be the motto of every businessman." Thus, it is an important part of business objectives to fulfill its obligations to the society whose ethical and moral code of conduct should not be violated. The philosophy of running a business should be in tune with what is considered right by the society. Some of the social objectives of business are as follows:
(a) Providing Goods: The business should provide goods and services for benefit of the society. Goods are used to satisfy physical as well as mental needs. Providing goods are used to satisfy physical as well as mental needs. Providing goods and services for society is the first duty of businessmen.
(b) Supply of Quality Goods: It is the duty of businessmen to study wants and needs of consumers and provide them with quality goods. It is necessary that goods and services should conform to some specified standards. The supply of adulterated goods, low quality, unusable or harmful to health will be against business ethics. A business cannot flourish in the long run if it ignores consumers.
(c) Proper price: Business should supply desirable goods and services at proper prices. Efforts should be made to reduce cost in order to reduce price. When the price is decreased, demand increase and more people are able to satisfy their wants.
(d) Providing Employment: Business activities are the greatest source of employment. The business community should plough back its profit for further expansion of business activities that will ultimately create new job opportunities.
(e) Utilizing the Scarce Resource Properly: The business should put the scarce national resources to the best possible use. A business is not free to damage or cause discriminate depletion of natural resources.
(f) Avoiding Social Nuisances: Business activities generate filth and dirt also and make social environment unhygienic. Constant noise makes living unpeaceful. So, every precaution should be taken to maintain cleanliness, public health and minimum noise.

Economic Objectives

Business is basically an economic activity, its primary objectives are economic. The economic objectives of a business are to earn sufficient profit to give reasonable reward to the investors of capital and to provide funds for expansion and diversification. The main economic objective of business may be described as under:
(a) Earning Profit: Business activity is undertaken for earning profit. Profit is the basic incentive to business pursuits. It is the most important objective of business. A business needs profit not only for the existence but also for expansion and diversification. The profit is also a measuring rod for business efficiency. Therefore the businessman should charge a reasonable profit which will be beneficial to both business and society.
(b) Production of Goods: Business involves sale or exchange of goods and services for earning profit. So the next objective of business is to produce more goods and sell them to satisfy the needs of consumers. A businessman creates form, place and time utilities and meet the requirements of the society.
(c) Creation of Markets: Business activity can be sustained only if there are enough people to buy the products and services offered by the Enterprise. Without customers a business cannot survive. Customers collectively constitute the market. Thus the objective of business is the creation of market for its products and services to meet the needs of the customers.
(d) Technological Improvements: In business there is cut-throat competition in which businessman try to sell their products by offering quality goods at lower prices. This is possible when the latest technology is used for manufacturing goods. The businessman should introduce new designs using new techniques and tools to keep pace with the changing business world. It should aim at increasing efficiency in terms of "cost per unit of production" or "units produced per day by each employee". Otherwise it cannot survive long in the market.

OBJECTIVES OF BUSINESS

Business is a very important economic activity. The success of any activity depends on definite objectives. So, it is necessary to have definite objectives for it, to perform successfully. The objectives are goals where all efforts are concentrated for the fulfillment of the objectives.
The main objective of business is to earn profit. It makes continuity in the business. It also measures the success of business. No business can continue for long if it ignores public service. So earning profit and public service are the main objectives of business. However, the objectives of business may be broadly categorized under the following heads:
1. Economic Objectives
2. Social Objectives
3. Human Objectives

characteristics of business

The important characteristics of business are as follows:
(1) Entrepreneur: There must be someone to take initiative for establishing a business. The person who recognizes the need for a product or service and bears the whole risk is known as entrepreneur. He visualizes a business, combines various factors of production and puts them into a going concern. He is the main figure and promotes business. A business is not possible without an entrepreneur.
(2) Production, Distribution and Exchange: All business activities are directly or indirectly concerned with the production, distribution and exchange of goods and services. Production of goods and services for personal consumption do not constitute business. Hence, if a person cooks his food at home is not business because it does not involve any exchange.
(3) Regular Dealings: Business includes only those transactions which have regularity and continuity. Even if the person earns profit. A person builds a house for himself, but later sells on profit. This is not called business. Hence in business the exchange of goods or services should be undertaken regularly.
(4) Profit Motive: The main objective of business is to earn reasonable profit. It makes continuity in the business. The survival of business depends upon its ability to earn profits. Every businessman wants to earn profits to earn profits. Every businessman wants to earn profits to receive interest on his capital and to reward himself for his services. Any activity undertaken without profit motive is not business. However, service motive is also essential for the progress for the business.
(5) Element of Risk: Risk means the possibility of loss. The business involves some degree of risk. A risk arises due to uncertainties of future. The element of risk exists due to variety of factors, which are outside the control of business enterprise. The risks associated with business are change in technology, change in consumer tastes and fashion, strike by employee, shortage of raw materials, increase in competition, natural calamities, etc. Hence, all business involve some element of risk and uncertainties.
(6) Creation of Utility: Creation of utility is the main feature of the business. Business creates various types of utilities in goods so that consumer may use them. The utilities may be form utility, place utility, time utility, etc. When raw materials are converted into finished goods, it creates form utility. The goods are transported from the place of production to the ultimate consumers, which creates place utility. The process of storing goods when they are not required and supplying them at a time when they are needed is called creation of time utility.j
(7) Satisfying the Consumers: The ultimate aim of business is to supply goods or services to the consumers. The business should try to satisfy the consumers so that the demand for his product is maintained. Hence the business should try to produce goods according to the liking and tastes of consumers. Goods should be made available where and when the consumers require. Without the satisfaction of consumers business cannot exist.
(8) Finance: Business cannot exist without proper financial arrangements. Finance is required for providing fixed and working capital. The availability of other factors of production also depends upon the availability of finance. A proper capital structure is essential for the success of the business.
(9) Organization: Business should be done in a planned way and to execute the plan, an organization is essential. A proper organization is helpful in the smooth running of the business and helps to achieve its objectives.
(10) Human Economic Activities: Business is an activity which can be executed only by human beings. Thus, in business we include human economic activities. Economic activities are engagement in production, distribution, and exchange of goods and services with profit motive. Non-economic activities are not included in the business.
In conclusion, we can say that business is an human economic activity which involves regular exchange of goods and services with the aim of earning profit through the satisfaction of human wants.

meaning of business

The meaning of business is very comprehensive. The word 'Business' literally means 'a state of being busy'. Every person is engaged in some kind of occupation to earn livelihood while doing some work. Hence the term business includes all human activities directed towards producing or acquiring wealth. According to L.H. Haney: "Business may be defined as human activities directed towards providing or acquiring wealth through buying and selling goods".
In the words of W.R. Spriegal: "All of the activities included in the production and sale of goods or services may be classified as business activities". According to Prof. Owen: "A business is an enterprise engaged in production and distribution of goods for sale in market or the rendering of services for a price".
Essentially all socially desired (legal) economic activities pursued for the purpose of earning profit can be defined as 'business'. The main aim of business is to satisfy the unlimited wants of men living in society. So, it becomes necessary to create values and fulfill the needs of ultimate consumers with the help of industry, trade and commercial services. Thus, business may be defined as an activity directed to create values for fulfilling needs of man in society through exchange.
Technically, Business implies an enterprise engaged in the production and distribution of products for sale in a market or rendering services for a price. Functionally, business is a form of activity involving production and purchase of goods and services with the object of selling them at a profit. Wheeler's definition of business also supports these views in a different way. He calls business as "an institution organized and operated to provide goods and services to society under the incentive of private gain."
Every business activity is performed with a view to earning profit. According to C.F. Abbot, "Business without profit is not business". No private entrepreneur will start a business unless he hopes to earn profit.
In conclusion, we can define business in the following way: "Business involves all the activities of production, distribution and exchange performed to provide goods and services to fulfill wants of society with an equitable adjustment of profit and public welfare".