Key Notes: Business, Trade and Commerce | Business Studies (BST) Class 11 PDF Download

Classification of Activities

• Economic Activities: Economic activities are activities carried out to generate money and sustain a living. A manufacturing worker or a school teacher, for example. There are three main types of economic activities:
  • Business
  • Profession
  • Employment.
• Non-economic activities: Non-economic activities are those which we do out of love, affection, pity or any other emotion other than profit. Social service and religious activities are examples of non-economic activities.

Role of Business in The Development of Economy:

People have been conducting business since the dawn of time. There was a flow of goods both within and beyond the country, and the earnings from such economic activities were used to support more investments.

One such example is given below:

• Hundi: It is an old type of commerce that involves a contract that guarantees money payment, an unconditional promise or order, and the capacity to be swapped through appropriate conversation.
  Patliputra, Peshawar, Taxila, Indraprastha, Mithila, Madhuram, Surat and other historic commercial hubs sprung up to handle goods imports and exports.

Business

• Business is an economic activity conducted on a regular and continuous basis to fulfil societal demands while also making a profit via the sale and purchase of goods and services.

Characteristics of Business Activities

• A source of revenue: A business’s principal purpose is to generate money by selling or trading goods and services. As a result, it is a for-profit endeavour.
• Consistent dealings: Dealings in commodities and services at regular periods are required to form a business. A single transaction is not a business transaction. Selling old books or furniture and buying new ones, for example, is not considered a business.
• Goods and services produced or procurement: Production occurs in every business operation before consumption. So, a company either creates its items or buys them from manufacturers before selling them to end customers.
• Making money: Every business’s principal goal is to increase profits. Without profit, no firm can survive. As a result, the entire company’s whole efforts are directed toward making a suitable profit.
• Return uncertainty: It is impossible to predict how much profit a company will make because the changing environment may result in losses. Every company must deal with both losses and profits.
• Risk: Every firm is vulnerable to various hazards, which might arise from natural, human, financial, or personal sources. As a result, profit and loss are inextricably linked, and every firm must take some risk to exist.

Profession

A profession is any economic activity carried out by a person with specialised knowledge and abilities to benefit society.

Employment

Employment refers to any economic activity that involves doing labour for someone else in exchange for money.

Classification of Business Activities

The following are the main categories of business activities:

• Industry
• Commerce
  • Trade
  • Auxiliaries to Commerce

Industry

It is primarily focused on the commercial production of products and services. It is then separated into the following groups:

• Primary
• Secondary
• Tertiary

Primary Industry: It includes all those activities concerned with the extraction and production of natural resources and the development of plants, etc.
It is further divided into two parts:

• Extractive industries: These industries provide some basic raw materials that are mostly products of the natural environment. It includes farming, mining, etc.
• Genetic industries: These industries breed plants and animals for their use in further reproduction. Examples- are cattle breeding and poultry farms.
• Secondary Industries: These industries deal with the additional processing of materials extracted in the primary sector to turn them into finished goods. Consider iron ore mining.

It is broken into two sections:

• Manufacturing industry: Manufacturing industries process raw materials and create utilities to produce commodities. It is broken into four sections:
• Analytical industries: It separates and bifurcates distinct components from the source material to create many by-products from the same element. Petrol, diesel and other fuels are all derived from crude oil.
• Synthetical industries:  These businesses blend materials and components from several sources to create a new product. Consider the cement business.
• Processing industries: It is concerned with extracting and processing resources and raw materials to generate semi-finished or completed goods. For instance, consider the sugar, paper and textile industries.
• Assembling industries: It brings together diverse components from many companies to create a new product. For example, diverse components from many industries are brought together to assemble and turn into a television, computer or automobile

Construction industries: 

These businesses are involved in the construction industry.

Tertiary Industry: 

These businesses provide support services to primary and secondary sectors, allowing them to complete their tasks without interruption. For instance, the banking, transportation and communication industries.
Commerce:
All actions necessary for exchanging commodities and services are included in commerce. It also includes any actions that aid in reducing people, location, time, money, risk and information barriers that arise during the exchange of products and services.
It consists of two kinds of activities:

Trade:

• The term “trade” refers to buying and selling goods and services for a profit. Traders are those who work in the trade industry. Two types of trade can be distinguished:

Domestic trade refers to buying and selling within one’s nation. It might be:

• Local trade refers to buying and selling inside some geographic area.
• State trade is defined as buying and selling inside a single state. It is called intra-state trade.
• National trade is the buying and selling of goods and services between states. It is an interstate business.

Foreign Trade refers to the purchase and sale of goods and services outside a country’s borders. It includes the following aspects:

• Imports: Imports are the buying of goods and services from other countries.
• Exports: Exports are products and services that are sold to other nations.
• Entrepot: Entrepot is the process of importing goods and services from one country and exporting them to another.

Auxiliaries to Trade:

Auxiliaries to trade facilitate the purchase and sale of products and services by reducing barriers such as location, people, time, money, risk and information. Auxiliaries to trade include:

• Communication and Transportation: Transportation of raw materials and finished goods from production to the point of consumption. Communication allows for simple engagement between parties that are geographically separated. It aids in the elimination of the impediment caused by the location.
• Finance and banking: It assists businesses in overcoming financial difficulties by providing loans and credit facilities. Businesses cannot operate if money is not available to purchase materials. It aids in the reduction of financial barriers.
• Insurance: It protects businesses from many threats including fire, theft and other natural disasters. It aids in the reduction of risk obstacles.
• Warehousing: It assists businesses in overcoming storage issues and improving product availability. It aids in the reduction of time constraints.
• Public Relations and Advertising: It assists them in increasing sales and expanding their consumer base by advertising a wide range of company products or services. It’s a tool for persuading customers. It aids in the reduction of informational barriers.
• Middlemen: These people serve as intermediaries between the producer and the customer. It helps people overcome their obstacles. Wholesalers, merchants and others are examples of a middleman.

Objectives of Business

• Market position: Goodwill is the most critical component for any firm to distinguish itself from its competition. Every firm must provide high-quality items at reasonable costs to gain more goodwill.
• Innovation: It entails the creation of new items or the modification of current ones. To thrive in a competitive market, any firm must reinvent its goods or develop new concepts to combat competition.
• Productivity: Every company should strive to increase production by maximising resource use.
• Making money: Every company’s goal is to make increasing amounts of money to stay afloat and develop.
• Resources, both physical and financial: Every firm must acquire physical resources, such as land and plants and financial resources, such as finances, according to their needs and use them effectively.
• Social accountability: Every company must operate in a socially desirable manner and contribute resources to solving social issues.

Business Risk

The danger of insufficient profits or losses because of uncertainty or unexpected occurrences is a business risk.

Nature of Business Risks

• Every business entails some element of risk. It can only be decreased, not completely abolished.
• It arises due to unavoidable uncertainties, such as natural calamities like earthquakes and floods.
• The kind and size of the firm affect the degree of risk.
• Every company should adhere to the “no risk, no reward” approach. As a result, profit provides an incentive to take risks.

Causes of Business Risks

• Natural causes: Natural disasters such as floods and earthquakes are to blame. These factors are beyond the control of any individual.
• Human causes: Unexpected occurrences produced by man, such as employee carelessness, power outages, employee or customer dishonesty, and so on are among these reasons.
• Economic factors: Economic reasons include changes and variations in the economy, such as uncertainty caused by changes in technology and manufacturing methods, political upheavals, pricing fluctuations and tax rates.
• Other factors: Other reasons include anything that isn’t covered by the other categories such as exchange rate swings.

Factors for Starting a Business:

• Type of business to choose: The first stage is determining what type of business and how big it will be. It depends on the market’s client requirements and the person’s expertise in the goods. A person can choose between Primary, secondary and tertiary industries depending on profit potential, demand and client preferences, among other factors.
• Size of Company: Every individual must select if they wish to operate on a large or medium size. It relies on the product’s demand and the person’s financial resources. If a person is positive about all of the elements, they may scale up their business and vice versa.
• Business enterprise location: It is a crucial consideration when beginning a firm. The accessibility of raw materials and labour and banking and transportation facilities all influence the location of a firm. Any blunder here might result in significant corporate losses.
• The proposal’s funding: When it comes to launching a business, the availability of cash or funds is critical. Because money is required for every activity and component of a business, such as investing in fixed assets and stocks and paying day-to-day costs.
• Physical resources: When launching a firm, the availability of machines, equipment and structure is also taken into account. The size and scope of physical facilities are determined by the kind and size of the business and financial resources.
• A workforce that is capable and dedicated: To execute its business operations properly, any company needs qualified employees. Hiring the appropriate workers at the right time and at the best cost requires careful preparation and training.
• Tax preparation: Because of the country’s growing tax rules, every firm must perform comprehensive tax planning ahead of time to avoid future problems.
• Starting the business: After completing all of these procedures, a person is ready to establish a business. It might be a partnership, a sole proprietorship or a corporation.