Q.Scope of business?

Answer:

Introduction:

All of us live in families and depending on the income, we have different

Standards of living. We require various types of goods and services to satisfy

Our needs and wants. Some members in your family have to work to earn

And provide for the needs of the family. In modern times however, we need a large

Variety of goods and services to satisfy our needs and to raise our standard

Of living. On the one hand the supply of goods and services has led to

Various activities. On the other hand, activities of different types are undertaken

By people to earn sufficiently to fulfill their increasing wants.

Classification of Business Activities:

Business activities are undertaken to satisfy human wants by producing goods

Or rendering services.

We may classify business activities on the basis of functions into two broad

Categories:

01. Industry and

02. Commerce.

01. Industry: Industry is concerned with the production and processing of goods. This type of business units are called ‘industrial enterprises’ which produce

Consumer goods as well as machinery and equipment’s. On the other hand,

‘Commerce’ includes all those activities which are necessary for the storage

and distribution of goods. Such units are called ‘commercial enterprises’which include trading and service activities like transport, banking, insurance and warehousing.Let us examine the characteristics of industry and commerce.

Characteristics of Industry:

Industry means production of goods for sale by the application of human ormechanical power.

The main characteristics of industry are as follows:-

• Production is done by the application of human or mechanical power.

• It creates form utility to natural or partly processed goods.

• It is concerned with the production of both producer and consumer goods.

• Industrial activities are regulated by different laws.

• It involves continuous operation.

Types of Industries:Industry means production of goods for sale by the application of human or mechanical power.

Industries are divided into two broad categories:

(i) Primary industries

(ii) Secondary industries.

      i.        Primary industries: Primary industries include all those activities which are connected withextraction, producing and processing of natural resources. These industriesmay be further sub-divided into two types:

(a)  Extractive and (b) genetic.

A) Extractive Industries:

Extractive industries are concerned with the extraction of materials from the earth, sea and air such as mining, farming, fishing and huntingetc.

B) Genetic Industries:

Genetic industries include activities connected with rearing and breedingof animals and birds and growing plants. Reproduction and multiplication is the main activity in these industries, such as, agriculture, animalhusbandry, dairy, poultry, culture etc. Main products are milk, wool, butter, cheese, meat, egg, fish, seeds of plants, etc.

      i.        Secondary industries :may also be of two types:

(a) Manufacturing and(b) construction.

a)Manufacturing Industries: Industries engaged in the conversion of raw materials or semi-finishedproducts into finished product are called manufacturing industries.

b) Construction Industries: The activities of Construction industries include erection of buildings, bridges, roads, railways canals etc.

02. Commerce:Commerceis the sum total of all the activities connected with the placingof the product before the ultimate consumer. It provides the necessary link betweenthe producer and the consumer of goods.Commerce is defined ‘as activities involving the removal of hindrances in theprocess of exchange’. The main characteristics of commerce are as follows:

Cracteristics of Commerce:

(i) Commerce is the sum total of activities which facilitate the availability ofgoods to consumers from different producers.

(ii) It aims at ensuring proper distribution of goods.

(iii) It adds different type of utilities to the goods by making goods availableat the right time and the right place to the people who need them.

(iv) It includes trade and auxiliary to trade.

01.    Trade:

Classification of Trade:

Trade may be classified into (i) Home Trade or Internal Trade and (ii) Foreign

Trade or External Trade.

i) Home Trade:

Home Trade means trade carried on within the boundaries of a country.

It may be divided into two types (a) Wholesale Trade and (b) Retail Trade

(a) Wholesale Trade: Wholesale trade involves buying goods fromproducers and selling them in small quantities to retailers

(b) Retail Trade: A retail trade consists of selling goods directlyto the consumers in small quantities. A retailer usually purchases goods from wholesalers or manufacturers and deals in a varietyof goods of different manufacturers.

ii) External Trade:

External trade refers to trade between two countries. It implies buyingand selling of goods by traders of two different countries. Externaltrade involves (a) Export and (b) Import.

a) Export:Export is concerned with the sale of goods to foreign countries.

b) Import: Importtrade relates to the purchasing of goods from other countries.

02. Transport:

It is one of the most important auxiliaries to trade. Transportation helpstrade by facilitating the movement of goods and passengers from one placeto another. Transport creates ‘place utility’ of the goods and remove the problemof distance.

03. Communication:

Now-a-days it is not possible to have business without communication.Communication implies transmission of information, ideas, opinions, etc.between two or more persons. Communication may be of two types - (i)internal and (ii) external.

04.Banking and Finance:

Banking provides safe, efficient and convenient mode of payment for goods in inland trade as well as in foreign trade. Banking helps business firms to overcome the problem of finance by lending money as and when required. Banks accept deposits and lend money. Loans are granted through over-draft, cash credit, loans and advances, discounting of bills. Other services of banks include collection of payments on cheques, bills, drafts etc., sending money from one place to another, buying and selling securities, payment of insurance premium, issuing travellers cheques, providing locker system, and providing information on credit worhtiness.

05. Warehousing:

Warehousing refers to storage of goods which are generally produced ona large scale in anticipation of demand. Goods have to be stored for sometime before transportation by manufacturers, wholesalers and retailers.Thus warehousing creates ‘time utility’.

06. Insurance:

Insurance occupies a prominent and valuable place as an aid to business andcommerce. Insurance provides security against risks. It makes trade andbusiness secure by making provision against all probable losses. Insurance isbased on the principle of ‘pooling of risks’. Insurance helps the businessman toconduct his business with confidence and peace of mind.

There are two major types of insurance coverage –

(i) Insurance of life of people and

(ii) Insurance of property.