Thursday, March 18, 2010

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 modem economic life Commerce 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, insurance), hindrances of time (warehousing), and hindrances of information (adverting and salesmanship ). In modern era commerce include all the functions which are required to buy and sell the product. Commerce provides a link between producer and consumer.

According to Evelyn Thomas, “Commercial occupation deals 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, and (2) Aids to Trade.

(1) 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. Trade 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, and (b) Foreign Trade.

(a) 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 retailer. It serves as a link between the producers and the retailers. Retail Trade on the other hand, involves purchase if 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.

(b) 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 sun-divided into import, export and entreport trade. Import Trade implies purchase of goods from a foreign country. Export Trade on the otherhand, 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.

(2) 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 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 : 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 centre of consumption. It creates place utility by transferring goods from one place to another. It has linked all parts of the world.

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

(c) 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.

(d) 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 form the fear of loss of goods. The fear of loss of goods due to any cause acts as an obstacles in the development of industry and trade.

(e) Warehousing : Warehouse is a kind of storage. Warehouse 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, warehouse are used to keep the stock of goods when not required for immediate use.

(f) 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 producer will also like to increase his customers. The advertisement promotes 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.

1 comments:

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