NATURE AND SCOPE OF BUSINESS

The scope of business can be explained from the

viewpoint of areas
covered by it. Human activities can be broadly divided into
groups as shown in the following chart
twa

|HUMAN ACTIVITY |

ECONOMIC
NON-ECONOMIC|

Employment Profession Business

Industry Commerce
Primaryy
Genetic
Constructive Home Trade Aids To Trade
Manufacturing
Extractive Banking
L Service Insurance
Home Trade Foreign Trade Warehouse
>Retail Trade
>Transport and
Import Communication
Wholesale Export Advertising
Trade Entrepot and Publicity
Merchantile
Agents, etc.

I. INDUSTRY

The production side of business is referred as industry. It is

concerned with the production of goods and services. The goods
produced or either consumer goods or
processed by industry are
industrial goods. The following are the different types of industry:
 (a) rimary Industy: lt is n v a d with pNONdatam oN primarn
nds sah as rae, vNm. tisheries en

Genetic Industry: lt is enNaRENi m the epnaductim and

multipliatm at vrtam spries et plants and aniumals with the
oyt of sale. Cattle bwending. ultn. plant marseries ane
enamplesot gonwtir industrv.
) Construction Industry: It is conemad with vnstrutiom
activities such as onstruction of buildings, dams. bridges. et
(d) Manufacturing Industry: It is mernai ith the prntutin
of spare parts, compoments, and finished grds

()Extractive Industry: It is comoerned with extracting materials

or minerals from natural nsounvs. Mining, oil drilling ar
examples of extractive industry

() Service Industry: It is concerned with eruting value additiom

through providing service. In India, Servie industry is gnwing
fast as compared to agriculture and industrial sertor.

. cOMMERCE

Commeroe includes trade and aids-to-trade.

1. Trade

Trade refers to buying and selling of goods and services. The trade
can be further divided into two groups: (i) Internal Trade (i) External
Trade.

(i) Internal Trade: It is also known as home trade as it is conducted

within a country. Internal trade can be broadly divided into
two groups:

(a) Wholesale Trade: It involves buying and selling in bulk

The wholesaler buys from manufacturers and sells the
product to retailers or may be to final customers. The
wholesaler serves as a link between manufacturer and
retailers and provides services to both.
(6) Retail Trade: It involves buying from wholesalers and/or
final customers for
manufacturers and then selling it to
 Business Environment (F.Y.B.M.S.: SEM-In
their personal consumption. The retailer serves as a link
wholesaler and customer.
between manufacturer or
trade. It is conducted
External Trade: Itis also known foreign
as
(i) be broadly divided into
between two or more countries. It can
three groups:
by sellers of one
Export Trade: It involves selling goods
of
(a) country. Every country gives
country to buyers of another valuable foreign|
to export trade as it brings in
impetus
exchange.
of goods by buyers of
(b) Import Trade: It sellers ofbuying
involves
another country. Export and
one country from cost
import trade is based on theory of comparative
advantage.
from one
(c)Entrepot Trade: It involves buying of goods
to another country.
country for the purpose of re-exporting
2. Aids-to-Trade
the difficulties or
Aids-to-trade are those activities, which remove
hindrances in the smooth flow of goods from
the producers to the
c o n s u m e r s . There are several
hindrances in trade such as that of
risks, direct contact, finance, etc. Such
place, time,areinformation,
hindrances removed with the help of aids-to-trade. The following

are the important aids-to-trade:

Businessmen require
(a) Banking: It solves the problem of finance.
and fixed capital requirements.
finance for their working capital
the banking sector. In ndia banking
Such finance is provided by reforms
with the process of economic
sector reforms started
from 1991.
to risks and uncertainties. Certain
Insurance: Business is subject
(b) risks such as risks due to fire, theft, etc.,
can be insured to
cover

sector reforms started in

India after the
Insurance
these risks. and Development Authority
Insurance Regulatory
formation of
2000.
(IRDA) in April
c)Warehousing: It removes hindrance of time. There is a time
gap between the production and the consumption of goods. So
the goods need to be stored so that they can be delivered in the
market at the time of demand. Such need is filled by
warehousing.
(d) Transport and Communication: It removes the difficulty of
place. Goods can be moved from place of production to the
place of consumption through transportation. There are
different modes of transportation like Road, railways, air and
water transport.

(e)
e) Advertising and Publicity: It fills the intormation gap. People
are made aware of goods and services available by manufacturer
with the help of advertising and salesmanship. Advertising and
publicity helps manufacturer in creating distinct brand image
tor his product and service.
 TYPES OF BUSINESS ORGANIZATIOONS
1. Sole Trading Concern: It is the oldest form of business
organization. A sole trading business is owned by one person.
It is managed by the owner himself, or he may take the help of
his employees to manage the firm. The following are the
important features of sole trading concern:
Ownership of business lies with a single person.

A sole trader has complete control over his business.

A sole trader has unlimited liability i.e. his personal assets

can be used to pay the debt of the firm.
10 Business Environment (F, Y.B.M.S.: SEM-I
2 Partnership Firm: Apartnership firm is abusiness organization
in which two or more persons come together for business
purpose, which is carried on by all or any one of them acting
tor all. The tollowing are the main features of partnership tirm:

A partnership firm has minimum number of two persons,

and maximum number of ten persons in case of banking
business, and 20 in case of non-banking business activity.|
The partners share profits and losses in certain agreed
proportion.
The business activities may be carried on by all the partners
or any one of them can act on behalf of other partners.
3. Joint Stock Company: The Companies Act, 2013 regulates
incorporation of a company, responsibilities of a company,
directors dissolution of a company. The Companies Act, 2013
has replaced The Companies Act, 1956. The new Act came into
force on 12th September, 2013 with changes. The ownership of
a joint stock company is in the hands of several members. There
can be private limited company, or public limited company.
The main features are:

A joint stock company is an artificial person created by

law.

I t is registered under Companies Act, 2013.

It enjoys separate legal status, distinct from its members.

4 Joint Hindu Family Firms: The joint Hindu family firm is a
distinct form of business organization existing only in India. It
comes into existence by the operation of Hindu law. The main
features are:

The business is jointly owned by all the members of a joint

Hindu family.

The Karta is the main person managing the business. He

is assisted by other members of the family.

The liability of Karta is unlimited, and that of the

coparceners is limited.
5. Cooperative Societies: It is a democratic form of organization
members. The
formed to promote and protect interest of its
following are its features:

It is a voluntary organization formed by members to protect

and promote their interests.

It is registered under Cooperative Societies Act, 1960.

A cooperative society requires minimum 10 members, and
there is no upper limit.