BOM UNIT-I.pptx

BOM UNIT-I
I-SEMESTER
HEENA KAUSER
BBA DEPT
HEENA KAUSSER.BBA DEPT.

CONCEPT OF BUSINESS
HEENA KAUSSER.BBA DEPT. NIZAM COLLEGE

CONCEPT OF BUSINESS
◦ Literally, the word “business” means the state of being
busy. Generally, the term 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.
The goods and services produced or purchased for
personal use are not
included in “business”.

BUSINESS
◦ Business: Being busy
◦ Human beings are continuously engaged in some activity or other in order to satisfy their unlimited wants. Every day we
come across the word 'business' or 'businessman' directly or indirectly. Business has become essential part of modern
world.
◦ Business is an economic activity, which is related with continuous and regular production and distribution of goods and
services for satisfying human wants.
◦ All of us need food, clothing and shelter. We also have many other household requirements to be satisfied in our daily
lives. We met these requirements from the shopkeeper. The shopkeeper gets from wholesaler. The wholesaler gets from
manufacturers. The shopkeeper, the wholesaler, the manufacturer are doing business and therefore they are called as
Businessman.
HEENA KAUSSER.BBA DEPT.

Definition of Business
◦ Definitions of Business
◦ Stephenson defines business as, "The regular production
or purchase and sale of goods undertaken with an objective
of earning profit and acquiring wealth through the
satisfaction of human wants."
◦ According to Dicksee, "Business refers to a form of
activity conducted with an objective of earning profits for
the benefit of those on whose behalf the activity is
conducted."
◦ Lewis Henry defines business as, "Human activity
directed towards producing or acquiring wealth through
buying and selling of goods."
◦ Thus, the term business means continuous production and
distribution of goods and services with the aim of earning
profits under uncertain market conditions.

Characteristics of Business
• 1. Exchange of goods and services
• 2. Deals in numerous transactions
• 3. Profit is the main Objective
• 4. Business skills for economic success
• 5. Risks and Uncertainties
• 6. Buyer and Seller
• 7. Connected with production
• 8. Marketing and Distribution of goods
• 9. Deals in goods and services
• 10. To Satisfy human wants
• 11. Social obligations
CHARACTERISTICS
OF BUSINESS

1. Exchange of goods and services
All business activities are directly or indirectly concerned
with the exchange of goods or services for money or money's
worth.
2. Deals in numerous transactions
In business, the exchange of goods and services is a regular
feature. A businessman regularly deals in a number of
transactions and not just one or two transactions.
3. Profit is the main Objective
The business is carried on with the intention of earning a
profit. The profit is a reward for the services of a
businessman
4. Business skills for economic success
Anyone cannot run a business. To be a good businessman,
one needs to have good business qualities and skills. A
businessman needs experience and skill to run a business.
5. Risks and Uncertainties
Business is subject to risks and uncertainties. Some risks,
such as risks of loss due to fire and theft can be insured.
There are also uncertainties, such as loss due to change in
demand or fall in price cannot be insured and must be borne
by the businessman.
◦ 6. Buyer and Seller
Every business transaction has minimum two parties that is a
buyer and a seller. Business is nothing but a contract or an
agreement between buyer and seller.

7. Connected with production
Business activity may be connected with production of
goods or services. In this case, it is called as industrial
activity. The industry may be primary or secondary.
8. Marketing and Distribution of goods
Business activity may be concerned with marketing or
distribution of goods in which case it is called as commercial
activity.
9. Deals in goods and services
In business there has to be dealings in goods and service.
Goods may be divided into following two categories :-
Consumer goods : Goods which are used by final consumer
for consumption are called consumer goods e.g. T.V., Soaps,
etc.
Producer goods : Goods used by producer for further
production are called producers goods e.g. Machinery,
equipments, etc. Services are intangible but can be
exchanged for value like providing transport, warehousing
and insurance services, etc.
10. To Satisfy human wants
The businessman also desires to satisfy human wants
through conduct of business. By producing and supplying
various commodities, businessmen try to promote
consumer's satisfaction.
11. Social obligations
Modern business is service oriented. Modern businessmen
are conscious of their social responsibility. Today's business
is service-oriented rather than profit-oriented.

Objectives of Business
1. Economic
Objectives
•(i) Earning profits
•(ii) Creating customers:
•(iii) Innovations:
2. Social
objectives
•(i) Supplying desired goods at reasonable prices:
•(ii) Fair Remuneration to employees:
•(iii) Employment Generation:
•(iv) Social welfare:
•(v) Payment of Government Dues
3. Human
Objectives
•i.Labour welfare:
•ii. Developing human resources:
•iii. Participative management:
•iv. Labor management cooperation:
4. National
Objectives
•(i) Optimum utilization of resources:
•(ii) Development of small scale Industries
•(iii) Development of backward areas:

1. Economic Objectives:
Business is basically an economic activity. Therefore, its primary objectives
are economic in nature. The main economic objectives of business are as
follows:
(i) Earning profits:
A business enterprise is established for earning some income. It is the hope of
earning profits that inspires people to start business. Profit is essential for the
survival of every business unit.
Just as a person cannot live without food, a business firm cannot survive
without profit. Profits enable a businessman to stay in business by maintaining
intact the wealth producing capacity of its resources.
Profit is also necessary for the expansion and growth of business. Profits
ensure continuous flow of capital for the modernization and extension of
business operations in future. Profit also serves as the barometer of stability,
efficiency and progress of a business enterprise.
(ii) Creating customers:
A businessman can earn profits only when there are enough customers to buy
and pay for his goods and services.
The customer is the foundation of business and keeps it in existence.
In order to earn profit, business must supply better, quality goods and services
at reasonable prices. Therefore, creation and satisfaction of customers is an
important economic objective of business.
(iii) Innovations:
.In these days of competition a business can be successful only when it creates
new designs, better machines, improved techniques, new varieties, etc. Modern
science and technology have created a great scope for innovation in the
business world. Innovation is not confined to the invention of a new machine.
It involves improvements in management, production, selling servicing,
methods of personnel and accounting, etc. Business firms invest money, time
and efforts in Research and Development (R&D) to introduce innovations.
They develop new technology, introduce new designs and new tools and
processes to minimize costs and to satisfy ever increasing wants of customers

2. Social objectives:
Business does not exist in a vacuum. It is a part of society. It cannot survive
and grow without the support of society. Business must therefore discharge
social responsibilities in addition to earning profits.
(i) Supplying desired goods at reasonable prices:
Business is expected to supply the goods and services required by the society.
Goods and services should be of good quality and these should be supplied at
reasonable prices. It is also the social obligation of business to avoid
malpractices like boarding, Black marketing and misleading advertising.
(ii) Fair Remuneration to employees:
Employees must be given fair salary for their work. In addition to wages and
salary a reasonable part of profits should be distributed among employees in
recognition of their contributions. Such sharing of profits will help to increase
the motivation and efficiency of employees.
(iii) Employment Generation:
Business should provide opportunities for gainful employment to members of
the society. In a country like India unemployment has become a serious
problem and the Government is unable to offer jobs to all.
Therefore, provision of adequate and full employment opportunities is a
significant service to society. If unemployment problem increases, the
socioeconomic environment cannot be congenial for the growth of business
activities.
(iv) Social welfare:
Business should provide support to social, cultural and religious organizations.
Business enterprises can build schools, colleges, libraries, hospitals, sports
bodies and research institutions.
(v) Payment of Government Dues:
Every business enterprise should pay tax dues (income tax, sales tax, excise
duty, customs duty, etc.) to the government honestly and at the right time.
These direct and indirect taxes provide revenue to the Government for
spending on public welfare.

3. Human Objectives:
Business is run by people and for people. Labor is a valuable
human element in business. Human objectives of business
are concerned with the well-being of labor. These objectives
help in achieving economic and social objectives of business.
Human objectives of business are given below:
i.Labour welfare:
Business must recognize the dignity of labor and human
factor should be given due recognition. Proper opportunities
should be provided for utilizing individual talents and
satisfying aspirations of workers. Adequate provisions
should be made for their health, safety and social security.
Business should ensure job satisfaction and sense of
belonging to workers.
ii. Developing human resources:
Employees must be provided the opportunities for devel-
oping new skills and attitudes. Human resources are the most
valuable asset of business and their development will help in
the growth of business.
iii. Participative management:
Employees should be allowed to take part in decision making
process of business. This will help in the development of
employees. Such participation will also provide valuable
information to management for improving the quality of
decisions. Workers' participation in management will help in
industrial democracy.
iv. Labor management cooperation:
Business should strive for creating and maintaining cordial
employer employee relations so as to ensure peace and
progress in industry. Employees should be treated as
honorable individuals and should be kept informed.

4. National Objectives
(i) Optimum utilization of resources:
Business should use the nation's resources in the best possible
manner. Judicious allocation and optimum utilization of
scarce resources is essential for rapid and balanced economic
growth of the country.
(ii) Development of small scale Industries:
Big business firms are expected to encourage growth of small
scale industries which are necessary for generating
employment. Small scale firms can be developed as
ancillaries, which provide inputs to large scale industries.
(iii) Development of backward areas:
Business is expected to give preference to the
industrialization of backward regions of the country.
Balanced regional development is necessary for peace and
progress in the country.
It will also help to raise standard of living in backward areas.
Government offers special incentives to the businessmen who
set up factories in notified backward areas.

FUNCTIONS OF BUSINESS
Production
Function
Marketing
Function
Finance
Function
Human
Resource
Function
Innovation
(Research &
Development).

◦ 1. Production function:
Production is the creation of goods and services with the help
of certain processes. The production of goods depends
essentially on the organization of men, money, materials, and
facilities into a smoothly operating business. In modern
organizations, production is highly organized, mechanized, and
specialized mass production, and, therefore, its overall charge
is entrusted to the Production Manager.
◦ The production manager has to perform a number of
functions, such as production planning, production engineering
(concerned with design of tools, jigs, and installation or
equipment), plant layout, plant building, materials handling,
purchasing, inventory management, work improvement and
work measurement, production control, and the maintenance of
physical environment of production.
◦ 2. Marketing function:
Marketing is the process of getting goods and services into the
hands of the consumer with a view to satisfying the needs and
desires of consumers and producers. In other words, the
marketing function creates a process through which producers
and consumers are brought together in an exchange relationship
and transfer of ownership takes place.
◦ For this, the marketing manager must make judicious
decisions regarding 4 P’s: (i) product (decisions about new
product development, packaging, branding, etc.); (ii) physical
distribution (decisions about marketing channels, and policies
and procedures relating to warehousing, transportation, etc.);
(iii) promotion (involving advertising, salesmanship, sales
promotion, and publicity); and (iv) pricing (policies and
procedures relating to the setting up of profitable prices).

◦ 3. Finance function:
◦ Finance function of business is basically responsible for
these decisions and their proper implementation, viz., (i)
investment decisions (financial planning, capital budgeting,
etc.) (ii) Financial decisions (capital structure—fixed and
working; short and long-term and
◦ Business maintains relationship with financial markets
including institutions and major shareholders and also takes
care of other concerns such as share buybacks, capital raising
sources of borrowings and risk management.
◦ 4. Human Resource (HR) function:
◦ The HR function deals with the human side of business. It is
concerned with increasing the effectiveness of human
performance in any organization. Specifically stated, the HR
function aims at obtaining arid maintaining a capable and
effective workforce, motivating the employees individually
and in groups to contribute their maximum to the fulfillment of
organizational goals.
◦ In order to accomplish the goals of dynamic HR
management, the HR manager has to undertake the following
functions : (i) selection—determination of manpower
requirements, job analysis, nature and sources of recruitment,
employee selection, and induction and follow-up; (ii)
training—human resource development; (iii) promotions and
transfers, (iv) employee compensation—wage and salary
administration; (v) employee involvement and welfare
activities; and (vi) industrial relations—industrial discipline,
industrial unrest, trade unionism, and workers' participation in
management. For the accomplishment of these functions, the
personnel department renders specialized services.

◦ 6. Innovation:
◦ "An innovation is the implementation of a new or
significantly improved product (good or service), or
process, a new marketing method, or a new organization
method in business practice, workplace organization or
external relations." Thus, innovation, which means
creativity as well, is more of a philosophy and the entire
business function needs to adopt it.
◦ Here in terms of new product development we are talking
about Research and Development. In this age of increasing
rivalry among competing firms, the importance of
innovation is hardly exaggerating. Normally businesses
innovate through product or process.

ESSENTIAL ELEMENTS OF SUCCESSFUL BUSINESS
Essential elements of Successful Business
• Entrepreneur
• Goods and services
• Profit Motive
• Risk and Uncertainty
• Economic Activities
• Creation of Utilities
• Transactions

ESSENTIAL ELEMENTS OF SUCCESSFUL BUSINESS
1.Entrepreneur
The person who recognizes the need for a product or service is known as
‘entrepreneur’. The entrepreneur is an important factor in the process of
economic growth. It is the entrepreneur who creates and starts a business,
combines different factors of production and see that it continues.
2.Goods and services
The main aspects of business are goods and services.
Every business sells some types of products or services. If you sell
something that can satisfy customers needs than your products and services
will have great business potential energy. However, if your products or
services don’t satisfy customers needs, then business potential energy will
be 0. If the quality of your products or services is excellent, then business
potential energy will be also greater.
3.Profit Motive
The motive of profit is an important characteristic of business. Any
business man starts business to earn profits only. The incentive of earning
profits keeps a person in business and is also necessary for the continuity
of the business.
4.Risk and Uncertainty
The elements of risk and uncertainty always exists in any business. The
factors on which business depends are quite uncertain. Anything may
happen any time. The success of the business depends on how well the
business is handling the risks and uncertain situations. His forecasting and
reacting to the coming problems makes the business a success.
5.Economic Activities
These are those activities which are elated to the production and
distribution of goods and services. These activities are undertaken with
economic motive. To gain profits.
6.Creation of Utilities
Business makes goods which are useful for the human wants. Business
creates various types of products, which are used by consumers. Business
utilities may be time, and place also.
7.Transactions
In business transactions of goods, money and other things are very
important. Which makes day to day work to continue and see that the short
term and long term goals are reached.

Trade:
◦ Trade refers to buying and selling of goods and services
for money or money's worth. It involves transfer or exchange
of goods and services for money or money's worth. The
manufacturers or producer produces the goods, then moves
on to the wholesaler, then to retailer and finally to the
ultimate consumer.
Trade is essential for satisfaction of human wants, Trade is
conducted not only for the sake of earning profit; it also
provides service to the consumers. Trade is an important
social activity because the society needs uninterrupted
supply of goods forever increasing and ever changing but
never ending human wants. Trade has taken birth with the
beginning of human life and shall continue as long as human
life exists on the earth. It enhances the standard of living of
consumers. Thus we can say that trade is a very important
social activity.

Trade:
Trade is a basic economic concept involving the buying and selling of goods and services, with compensation paid by a buyer to a seller, or the exchange of
goods or services between parties. Trade can take place within an economy between producers and consumers. International trade allows countries to expand
markets for both goods and services that otherwise may not have been available to it. It is the reason why an American consumer can pick between a
Japanese, German, or American car. As a result of international trade, the market contains greater competition and therefore, more competitive prices, which
brings a cheaper product home to the consumer.

Aids to Trade:
◦ Aids to Trade:
◦ Trade or exchange of goods involves several difficulties, which are removed by auxiliaries known as aids to trade. It
refers to all those activities, which directly or indirectly facilitates smooth exchange of goods and services.
◦ Aids to trade includes Transport, Communication, Warehousing, Banking, Insurance, Advertising, Salesmanship,
Mercantile agents, Trade promotion organizations in a country and Global organizations for international trade.
Auxiliaries ensure smooth flow of goods from producers to the consumers.

Aids to Trade:
• Transport
• Communication
• Warehousing
• Insurance
• Banking
• Advertising
• Salesmanship
• Mercantile Agents (brokers)
• Trade Promotion Organizations in a Country
• Global Organizations for International Trade
Aids to
Trade:

Aids to Trade:
◦ 1. Transport
◦ In the modern times there is a vast distance between centers of
production and the centers of consumption. This difficulty is
removed by an important aid to trade known as transport.
◦ There are several types of transport such as air, water and land
transport. The geographical distance between producers and
consumers is removed with the help of transport.
◦ Types of transport
◦ The three main modes of transport:
◦ Land :
◦ Road
◦ Railyway
◦ Water :
◦ River
◦ Sea
◦ Canals
◦ Air :
◦ Airway

Aids to Trade:
◦ 2. Communication
Communication means transmitting or exchange of information from
one person to another. It can be oral or in writing. It is necessary to
communicate information from one to another to finalize and settle the
terms of sales such as prices of goods, discount allowed, facility of
credit, etc.
◦ Modern means of communication like telephone, telex, telegraph,
email, teleconference, etc., plays an important role in establishing
contact between businessmen, producers and consumers.

Aids to Trade:
◦ 3. Warehousing
There is a time gap between production and consumption. In
other words, goods, which are produced at one time, are not
consumed at the same time. Hence, it becomes necessary to
make arrangements for storage or warehousing. Agricultural
commodities like wheat and rice are seasonal in nature, but are
consumed throughout the year, on the other hand, goods such
as umbrellas and woolen clothes are produced throughout the
year but are demanded only during particular seasons.
Therefore, goods need to be stored in warehouses till they are
demanded. So it creates time utility by supplying the goods at
the right time to the consumer.

Aids to Trade:
◦ 4. Insurance
◦ Insurance reduces the problem of risks. The
business is subject to risks and uncertainties. These
are inevitable in the field of business. Risks may be
due to fire, theft, accident or any other natural
calamity. Insurance companies who act as risk bearer
cover risks. Insurance tries to reduce many risks by
spreading them out over a greater number of people.
The rate of premium depends upon the type of risks
and the period for which the risk is covered.

Aids to Trade:
◦ 5. Banking
◦ Banking solves the problem of finance. Businessmen
receives money and also pays money in large amounts. It
is risky to carry large amount of cash from one place to
another. Here comes Banking as a solution. Banking and
financial institutions solves the problem of payment and
facilitate exchange between buyer and seller. The
businessmen may also require short-term and long-term
funds. Banks provide such finance to businessmen. Banks
also advances loans in the form of overdraft, cash-credit
and discounting of bills of exchange.

Aids to Trade:
◦ 6. Advertising
◦ Advertising fills the knowledge gap and it solves the
difficulty of information. Exchange of goods and services
possible only if producers can bring the products to the
consumers. Advertising and publicity are important media
of mass communication. Advertising helps the consumers to
know about the various brands manufactured by several
manufacturers. The media used to advertise products are
Radio, Newspapers, Magazines, TV, Internet, etc.
◦ 7. Salesmanship
◦ It facilitates personal selling. Many a times, sales force is
required to book orders directly from dealers or customers.
Salesmanship is very much required in the sales of services
and industrial goods. Again the sales force plays an
important role in direct marketing.

Aids to Trade:
◦ 8. Mercantile Agents (brokers)
◦ It removes personal difficulties. Mercantile agents are the
middlemen who form a link between the buyers and the
sellers. They do not carry on business in their own name. In
the process of distribution, producers and consumers are
unable to have direct contact, as consumers are spread over
a vast area. Mercantile agents remove this difficulty of
personal contact.
◦ There are several types of mercantile agents such as
brokers, commission agents, auctioneers, underwriters,
insurers, etc.
◦ 9. Trade Promotion Organizations in a Country
◦ . These are the organizations established by the business
community to protect and promote their interest. They play
promotional and developmental role for members. They do
market research work, act as a clearing house of information,
put their grievances before the government, make
representations, and help the business community in many
ways.
◦ The examples include Chambers of Commerce, Export
Promotion Councils, Indian Institute of Packaging, etc.

Aids to Trade:
◦ 10. Global Organizations for International Trade
◦ They attend the promotion and development of trade at
international level. The main objective of global
organizations is to promote International trade. It helps
exporters and importer by collecting information about
international marketing trends.
◦ The examples of such global organizations are World
Bank, IMF, WTO, etc.

Industry
◦ Industry
◦ The production side of business activity is referred as
industry. It is a business activity, which is related to the
raising, producing, processing or manufacturing of
products.
◦ The products are consumer's goods as well as producer's
goods. Consumer goods are goods, which are used finally
by consumers. E.g. Food grains, textiles, cosmetics, VCR,
etc.
◦ Producer's goods are the goods used by manufacturers
for producing some other goods. E.g. Machinery, tools,
equipments, etc.
◦ Expansion of trade and commerce depends on industrial
growth. It represents the supply side of market.

Classification / Types of Industries
1. Primary Industry
Primary industry is concerned with production of goods with the help of
nature. It is a nature-oriented industry, which requires very little human
effort. E.g. Agriculture, farming, forestry, fishing, horticulture, etc.
2. Genetic Industry
Genetic industries are engaged in re-production and multiplication of
certain spices of plants and animals with the object of sale. The main aim
is to earn profit from such sale. E.g. plant nurseries, cattle rearing,
poultry, cattle breeding, etc.
3. Extractive Industry
Extractive industry is concerned with extraction or drawing out goods
from the soil, air or water. Generally products of extractive industries
come in raw form and they are used by manufacturing and construction
industries for producing finished products. E.g. mining industry, coal
mineral, oil industry, iron ore, extraction of timber and rubber from
forests, etc.

4. Manufacturing Industry
◦ Manufacturing industries are engaged in transforming raw material into
finished product with the help of machines and manpower. The finished goods
can be either consumer goods or producer goods. E.g. textiles, chemicals,
sugar industry, paper industry, etc.
5. Construction Industry
◦ Construction industries take up the work of construction of buildings,
bridges, roads, dams, canals, etc. This industry is different from all other types
of industry because in case of other industries goods can be produced at one
place and sold at another place. But goods produced and sold by constructive
industry are erected at one place.
6. Service Industry
◦ In modern times service sector plays an important role in the development
of the nation and therefore it is named as service industry. The main industries,
which fall under this category, include hotel industry, tourism industry,
entertainment industry, etc

Commerce
Commerce
◦ Commerce is a branch of business. It is concerned with the exchange of goods and services. It includes all those activities, which directly or indirectly
facilitate that exchange.
◦ Commerce is the conduct of trade among economic agents. Generally, commerce refers to the exchange of goods, services or something of value, between
businesses or entities. From a broad perspective, nations are concerned with managing commerce in a way that enhances the well-being of citizens, by
providing jobs and producing beneficial goods and services.

Importance of Commerce
1. Commerce tries to satisfy increasing human wants
Human wants are never-ending. They can be classified as 'Basic wants' and
'Secondary wants'. Commerce has made distribution and movement of goods
possible from one part of the world to the other. Today we can buy anything
produced anywhere in the world. This has, in turn, enabled man to satisfy his
innumerable wants and thereby promoting social welfare.
2. Commerce helps to increase our standard of living
Standard of living refers to the quality of life enjoyed by the members of
society. When man consumes more products his standard of living improves.
To consume a variety of goods he must be able to secure them first.
Commerce helps us to get what we want at the right time, right place and at
the right price and thus helps in improving our standard of living.
3. Commerce links producers and consumers
Production is meant for ultimate consumption. Commerce makes possible to
link producers and consumers through retailers and wholesalers and also
through the aids to trade. Consumers get information about different goods
through advertisements and salesmanship. The manufacturers are regularly
informed about the likes and dislikes of consumers through marketing
research. Thus commerce creates contact between the centers of production
and consumption and links them.
4. Commerce generates employment opportunities
The growth of commerce, industry, and trade bring about the growth of
agencies of the trade such as banking, transport, warehousing, advertising, etc.
These agencies need people to look after their functioning. Increase in
production results in increasing demand, which further results in boosting
employment opportunities. Thus the development of commerce generates
more and more employment opportunities for millions of people in a country.
5. Commerce increases national income and wealth
When production increases, the national income also increases. In a developed
country, manufacturing industries and commerce together account for nearly
80% of total national income. It also helps to earn foreign exchange by way
of exports and duties levied on imports. Thus, commerce increases the
national income and wealth of a nation.

Importance of Commerce
6. Commerce helps in expansion of aids to trade
With the growth in trade and commerce, there is a growing need for expansion
and modernization of aids to trade. Aids to trade such as banking,
communication, advertising and publicity, transport, insurance, etc., are
expanded and modernized for the smooth conduct of commerce.
7. Commerce helps in growth of industrial development
Commerce looks after the smooth distribution of goods and services made
available by the industry. Without commerce, the industry will find it difficult
to keep the pace of production. It helps to increase demand for goods on one
hand and on the other hand, it helps industries by getting them the necessary
raw materials and other services. Hence, commerce helps in attaining
better division of labor and industrial progress.
8. Commerce encourages international tradeThrough commerce, we can
secure a fair and equitable distribution of goods throughout the world. With
the help of transport and communication development, countries can exchange
their surplus commodities and earn foreign exchange, which is very useful for
importing machinery and sophisticated technology. It ensures the faster
economic growth of the country.
9. Commerce benefits underdeveloped countries
Underdeveloped countries can import skilled labor and technical know-how
from developed countries. While advanced countries can import raw materials
from underdeveloped countries. This helps in laying down the seeds of
industrialization in the underdeveloped countries.
10. Commerce helps during emergencies
During emergencies like floods, earthquakes, and wars, commerce helps in
reaching the essential requirements like foodstuff, medicines and relief
measures to the affected areas.

RELATIONSHIP BETWEEN INDUSTRY COMMERCE AND TRADE

RELATIONSHIP BETWEEN INDUSTRY COMMERCE AND TRADE
◦ Business is divided into two categories: industry and commerce. Commerce is again sub-divided into trade and aids to trade.
Practically all of them are closely related to each other. They are inseparable. All of them are parts of the whole business system.
◦ Industry and commerce are closely related to each other. Industry cannot exist without commerce and commerce cannot exist
without industry. Because every producer has to find his market for his products to sell. But the producer has no direct connection
with the buyers or consumers. Hence, industry needs commerce.
◦ Commerce is concerned with the sale, transfer or exchange of goods and services. Hence commerce needs industry for the
production of goods and services. Commerce makes the necessary arrangement for linking between producers and ultimate
consumers. It includes all those activities that are involved in buying, selling, transporting, banking, warehousing of goods, and
insurance for safeguarding the goods.
◦ Trade includes sale, transfer or exchange of goods. It does not include other functions of commerce like transportation,
insurance, banking, warehousing, etc. If there were no trade, the producers would have to find customers for their products.
Therefore without trade there would be little need for commerce. Similarly trade without aids to trade is meaningless and they
exist for trade.
◦ In conclusion, we can say that industry, trade and commerce are inter-related with each other. Industry is concerned with
production of goods and services and commerce arranges its sales; but the actual operation of sales is in the hands of trade. So
they cannot work independently.

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