Short essay on Scope of Business

The following Chart shows constituent parts of different business activities.

(a) Industry

Industry includes all those activities which are engaged with the production of goods by utilising all the available resources. It constitutes the whole series of human efforts leading to generation of want satisfying potential in the shape of goods and services.

The activities in the industry are concerned with the raising, production, processing or fabrication of goods. The produce of an industry may be either for the use of the final consumers or for further production or processing.

Types of industry

On the basis of kinds of goods produced by the industries, they may be classified as Primary industries and Secondary industries.

Primary Industries:

These are nature oriented industries i.e., industries engaged with the production of goods with the help of nature. E.g.: Agriculture, Fishing, forestry, etc. The application of human efforts in this type of industries is comparatively lesser as the final product produced is with the help of nature and not by manual labour. Primary industries are further classified into Genetic industries and Extractive industries:

(i) Genetic industries:

These industries engage in reproduction and multiplication of certain species of plants and animals with the object of earning profit from their sale. E.g.: Nurseries, where desired plants are multiplied, cattle breeding, poultry farming etc.

(ii) Extractive industries:

These industries are engaged with extracting or drawing out or raising various forms of raw-materials from beneath the surface of earth. These are also called Exhaustive industries Eg: Mining, oil exploration, afforestation (growing forests with a view of procuring products from the forests).

2. Secondary Industries:

These are labour oriented industries, wherein man plays a major role than nature. They are further classified into Manufacturing industries and Construction industries, i) manufacturing industries: These industries ire engaged with the conversion of raw materials or semi-finished goods into finished products.

The products of extractive industries generally become the raw materials of these industries. These industries are operated with more human efforts as the task of producing a complete product lies with these industries.

Most of the needs of consumers are met-with by them. This is the reason why, ordinarily the term industry is used to refer to manufacturing industry.

E.g.: Paper industries which convert bamboo into paper, industries which convert sugarcane into sugar, industries which convert iron ore into steel. The goods produced here are on large scale.

ii) Construction industries: These are industries which are engaged with the creation of an infrastructure for orderly and efficient conduct of economic activities. These industries produce goods which are not marketed, but are built or erected at a fixed place.

They use the product of manufacturing and extractive industries. These are more or less permanent in nature. E.g.: Construction of roads, canals, bridges, railway tracks etc.

(b) Commerce

Industries are involved with the activity of producing a product which is needed by the people to satisfy their wants. But there has to be a way through which, the producer of industries reach the consumers who actually want them.

These activities or commercial occupations which distribute the goods to the final consumer constitute commerce. Commerce is “an organised system for the exchange of goods between the members of the industrial world.” (James Stephenson: “Principles and Practice of Commerce”).

It establishes the necessary link between the producers and consumers and sees that an uninteresting and free flow of goods and services to the consumers is ensured, whenever they need and wherever they want. “It is the sum total of those processes which are engaged in the removal of hindrances of persons (trade), place (transport and insurance), and time (warehousing) in the exchange (banking) of commodities.

Commerce includes all those processes which help to break the barriers between the producers and consumers”. (James Stephenson)

Commerce is broadly classified into two groups:

I. Trade

II. Aids to Trade

I. trade

Trade refers to the sale, transfer or exchange of goods or buying and selling of goods. A trader is a businessman who is engaged with trade. He purchases goods, not for his own use, but stocks them to sell it to other traders or consumers at profit. He acts as a link between the producers and the consumers.

Trade may be either internal or external:

Internal trade or home trade refers to buying and selling of goods within the nation. The transactions are carried out within the country. It is also known as domestic trade. This type of trade can be further classified as:

Wholesale trade:

Sale of goods in large quantities to those traders who are in direct contact with the consumers. They act as link between producers and traders who sell directly to the consumers.

Retail trade:

Sale of goods in small quantities to the final consumers. They act as link between the wholesalers and the consumers.

2) External trade a foreign trade for International trade refers to trade between two countries. This type of trade is mostly on wholesale basis. According to the direction in which goods are moved, external trade may be classified as:

Import trade:

Import trade refers to purchase of goods from foreign countries. The goods are bought from abroad and sold inside the country.

Export trade:

Selling the goods to traders in other countries. The goods are produced in the country and sold to purchaser of foreign countries.

Entrecote trade:

This denotes the re-export of imported goods. It refers to import of goods not for the purpose of consumption but for the purpose of re-exporting. Here, the imported goods remain in the dock-warehouse of the importing country for being processed or they are just transferred from one ship to another in order to be carried over to another country.

II. Aids to trade

The operation of buying the goods from producers and selling them to consumers comes across various obstacles or hindrances which have to be eliminated- There is a chain of activities which help in overcoming the hindrances and assist the traders to carry on their trade. These activities are called “Aids to trade”. They are also called as “Auxiliaries” to trade, or assistants to trade.