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Define Business. Discuss the Scope or component of the business?

1. Question: Define Business. Discuss the Scope of the business?
2. Question: Define Business. What are the main Components of the business?
Define Business. Discuss the Scope or component of the business?

1. Question: Define Business. Discuss the Scope of the business?
2. Question: Define Business. What are the main Components of the business?

Answer :

The word “Business” includes all human activities concerned with earning money.  In other words, business is an activity in which various persons regularly produce or exchange goods and services for mutual gain or profit.
Business bears the following components:
1.     Industry
2.     Commerce
3.     Professional Services
Define Business. Discuss the Scope or component of the business?

Industry is connected with the production and preparation of goods and services. It is a place where raw material is converted into finished or semi-finished goods, which have the ability to satisfy human needs or can be used in another industry as a base material.  In other words, industry means that part of business activity, which is concerned with the extraction, production and fabrication of products.
Primary industry is engaged in the production or extraction of raw materials, which are used in the secondary industry. Primary industry can be divided into two parts:
a)        Extractive Industry b)        Genetic Industry

(a) Extractive Industry:
Extractive industries are those industries, which extract, raise or produce raw material from below or above or above the surface of the earth.  For example, fishery, extraction of oil, gas and coal etc.
(b) Genetic Industry
Genetic  industries  are  those,  which  are  engaged  in  reproducing  and  multiplying  certain species of animals and plants.   For example, poultry farm, fishing farm, dairy farm, plant nurseries etc.
These industries use raw materials and make useful goods.  Raw material of these industries is obtained from primary industry. Secondary industry can be divided into three parts:
a)        Constructive Industry
b)        Manufacturing Industry c)        Services Industry

(a) Constructive Industry
All kinds of constructions are included in this industry.  For example, buildings, canals, roads, bridges etc.
(b) Manufacturing Industry
In this industry, material is converted into some finished goods or semi-finished goods.  For example, textile mills, sugar mills etc.
Commerce is the second component of business. The term “commerce” includes all activities, functions and institutions, which are involved in transferring goods, produced in various industries, from their place of production to ultimate consumers.
In the words of Evelyn Thomas:
“Commercial occupations deal with the buying and selling of goods, the exchange of commodities and distribution of the finished goods.”
In simple words, “trade and aids to trade” is called commerce.
The scope of commerce can be explained as:
1.      Trade
2.      Aids to Trade
Trade is the whole procedure of transferring or distributing the goods produced by different persons or industries to their ultimate consumers.   In other words, the system or channel, which helps the exchange of goods, is called trade.
There are two types of trade:
(a) Home trade                    (a) Foreign trade

(a) Home Trade
The purchase and sale of goods inside the country is called home trade.  It is also known as ‘domestic’, ‘local’ or ‘internal trade’. Home trade has two types: (i) Wholesale Trade (ii)       Retail Trade
(i) Wholesale Trade
It involves selling of goods in large quantities to shopkeepers, in order to resale them to the consumers. A wholesaler is like a bridge between the producers and retailers.
(ii) Retail Trade
Retailing means selling the goods in small quantities to the ultimate consumers.  Retailer is a middleman, who purchase goods from manufacturers or wholesalers and provide these goods to the consumers near their houses.
(b) Foreign Trade
Trade or exchange of goods and services between two or more independent countries for their mutual advantages is called foreign trade.  It is also called international trade.  Foreign trade has two types:
(i)        Import Trade
(ii)       Export Trade
(i) Import Trade:
When goods or services are purchased from other country it is called import trade.
(ii) Export Trade:
When goods or services are sold to any other country it is called export trade.
(ii) Enter-port Trade:
When goods are purchased from foreign country and reached at port and sold to an other country it is called enter-port trade.
Trade means buying and selling of goods, whereas, aids to trade means all those things which are helpful in trade.
a)      Banking
b)     Transportation
c)      Insurance
d)     Warehousing
e)      Agents
f)       Finance
g)      Advertising
h)     Communication
(a) Banking
In daily business routine, commercial banks and other financial institutions help the seller and the buyer in receiving and the buyer in receiving and making payments.
(b) Transportation
The goods which are manufactured in mills and factories, reach the consumers by different means of transportation like air, roads, rails, seas etc.
(c) Insurance
The transfer of goods from one place to another is not free from risk of loss.  There is a risk of loss due to accident, fire, theft etc.  The insurance companies help out the traders with this problem through insurance policy.
(d) Warehousing
The manufacturers today, produce goods in large quantity.  Therefore, a need for warehouses arises in order to store the manufactured goods.
(e) Agents
They are the persons who act as the agents of either buyer or seller.  They perform these activities for commission.
(f) Finance
A large amount is needed to set up an industry.   Financial institutions provide long-term finance to the producers.   The producers alone are unable to manufacture goods without financial help.
(g) Advertising
The consumer may sometimes, not know about the availability of goods in the market.  The producer must sell his goods in order to remain in business.  Advertisement is an easy way to inform the large number of customers about the goods.   This can be done through TV, newspapers, radio etc.
(h) Communication
The producers, wholesalers, retailers, transporters, banks, warehouse-keepers, advertisers and consumers live at different place.  This post office, telephone and other similar media is very useful for promotion of trade and industry.

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