BUSSINESS,TRADE AND COMMERCE

All human beings require goods and services to satisfy their needs, which are made available through a chain of economic activities like production, manufacturing, distribution, and exchange. Business is a central economic activity focused on the production and sale of goods and services, influencing economic growth and development.

Historically, the Indian subcontinent had a robust economy with internal and foreign trade, utilizing silk routes and maritime trade. It maintained a favorable balance of trade, supported by indigenous banking systems that featured credit instruments like "hundi." India held a significant share of the world economy for centuries (e.g., 32\% in 1 AD and 1000 AD, 25\% of world's industrial output between 1700-1750 AD) until the British era shifted its role to a raw material supplier. Post-independence, India pursued planned development, followed by economic liberalization in 1991, and recent initiatives like Make in India, Skill India, and Digital India to boost growth.

Dhani-jog Darshani Payable to any person—no liability over who

received payment.

Sah-jog Darshani Payable to a specific person, someone

‘respectable’. Liability over who received payment.

Firman-jog Darshani Hundi made payable to order.

Dekhan-har Darshani Payable to the presenter or bearer.

Dhani-jog Muddati Payable to any person—no liability over who

received payment, but payment over a fixed term.

Firman-jog Muddati Hundi made payable to order following a fixed

term.

Jokhmi Muddati Drawn against dispatched goods.If goods lost in transit, the drawer or holder bears the coasts, and the Drawee carries no liability

Business is defined as an economic activity involving the production and sale of goods and services with the primary motive of earning profit by satisfying human needs. It is distinct from 'profession' and 'employment.'

Characteristics of Business

  • Economic Activity: Aimed at earning money or livelihood.

  • Production/Procurement of Goods and Services: Enterprises either produce or acquire items for consumers.

  • Sale or Exchange: Transactions involve the transfer of goods/services for value.

  • Regular Dealings: Requires continuous transactions, not just a single event.

  • Profit Earning: The main objective is to generate profit.

  • Uncertainty of Return: Profit levels are not guaranteed and losses are possible.

  • Element of Risk: Inherent due to various unpredictable factors (e.g., market changes, natural calamities).

Classification of Business Activities

Business activities are broadly classified into Industry and Commerce.

  1. Industry: Converts resources into useful goods using mechanical appliances and technical skills.

    • Primary Industries: Extract and produce natural resources (e.g., agriculture, mining) or breed living organisms (e.g., cattle farming).

    • Secondary Industries: Use materials from primary industries to produce goods.

      • Manufacturing Industries: Process raw materials (e.g., analytical, synthetical, processing, assembling).

      • Construction Industries: Build infrastructure (e.g., buildings, roads).

    • Tertiary Industries: Provide support services to primary/secondary industries and trade (e.g., transport, banking, insurance, warehousing, communication).

  2. Commerce: Includes trade (buying and selling) and auxiliaries to trade (activities that facilitate purchase and sale). Commerce connects producers and consumers by removing hindrances related to person (trade), place (transport), time (warehousing), risk (insurance), finance (banking), and information (advertising).

Objectives of Business

Beyond just earning profit, businesses have multiple objectives for long-term survival and societal contribution:

  • Market Standing: Maintaining reputation and offering competitive products.

  • Innovation: Introducing new ideas, methods, products, or processes.

  • Productivity: Efficient use of resources.

  • Physical and Financial Resources: Efficient acquisition and utilization of assets and funds.

  • Earning Profits: Essential for survival, growth, and as an indicator of efficiency.

  • Social Responsibility: Contributing to society and operating ethically.

Business Risk

Business risk is the possibility of inadequate profits or losses due to uncertainties. It is inherent in all businesses, cannot be eliminated, and its degree depends on the business's nature and size. Profit is the reward for taking on risk.

  • Types: Speculative risk (potential for gain or loss) and pure risk (only loss, e.g., fire, theft).

  • Causes: Natural (calamities), Human (negligence, dishonesty), Economic (demand changes, competition), and Other (political, mechanical failures).

Starting a Business

Entrepreneurship involves identifying a need, mobilizing resources, and organizing production. Key factors to consider when starting a business include selecting the type and size, choosing a location, financing, securing physical facilities, hiring a competent workforce, tax planning, and launching the enterprise while adhering to legal formalities.