‘5 ssSieuy Aan posiy uy ~ ssousng se) -0, ayes 20} spool yo uornnqust f Ssouteng, 8900) ‘apes pure aDs0uw109 ‘apes pur aosousus09 ‘Aa ssouisng jo soyourig pue ydaou0D,“ NATURE AND SCOPE OF BUSINES in Sho ‘ oductionandsale “ofgpods and services for pr geet -Seplession 5.28 occupation involving the provision of personal services of specialised and expert nature. For instance, a doctor helps his paticals Saitioate i i : ional rail i is expert kin walifications. re presebea for entry into a profession nd every profes ? ‘es a high degrce of formal education and specialised training in a ecome a .)For instance, a person must have the LL.B degree in order t0 lawsér. A professional maintains close personal contact with his clients and he charges fee for the services rendered to them. The professional is expected to follow the professional code of conduct. zi nder somcone known as the employer in return... A person who is,.in.the jent-of @ person orean ges OF salary, A -anisation renders persqnal services and performs the duties assigned by the plover from time totic) \Thereis-an cmployer-employce relationship. Profes ly .0 serve as employees in various organisations. For instance, a person wiwo hds passed the chartered accountancy examination may serve as an accountant in a private firm or in a public sector undertaking. ‘Comparison between Business Profession and Employment Business is different from profession and employment in the following ways: 1. Formation. A business enterprise is cstablished by an entrepreneur who takes a decision to carry on production and/or exchange of goods and services in order to earn profits by satisfying the needs of the customers. The entrepreneur hasto complete all the legal formalities like registration of the firm in order to bring the enterprise into existence. On the other hand, a professional firm comes into eaistence when a professional who holds the membership and the certificate of practice of the professional body takes a decision to practise the profession. In the case of employment, a person enters into a written or oral contract of service with 2 business or professional firm and no registration or certificate of practice is required. Business and profession involve self-employment while service involves employment under somebody else. 2. Qualifications. No minimum educational qualifications have been laid down by any authority for a businessman. A businessman necd not be an expert, On the other hand, a professional must-possess the specialised knowledge and personal skills prescribed for the profession concerned. In case of employment, education and special training are not essential in all cases. However, properly qualified person can obtain better employment with business concerns. = 3. Registration or Membership. These days businessmen often have an as- scciation of their own but the membership of the association is not compulsory. Buta professional must be the member of the professional body which exercises statutory control over his profession, In case of employment, membership of any “sialon or professional body isnot essential hug: Nature of work. A businessman supplies goods and services to satisfy 'uman needs. On the other hand, a professional renders personal services of a ¥ecialised natureto the clients, The intimate personal contact and the application {i capert skills so essential in the practice of a profession are lacking in business. Ex tmployee performs the work assigned by the employer under the contract of | | |45, Motive and code of ethics. The basic motive of a business enterprise to earn profits by supplying goods and services to the society. But a profes- to eat is expected to emphasize the scrvice motive and sense of mission to a Seater extent than a businessman, In order to develop the spirit of service, Brotessionals are generally admin oath of service to society’. A ofessional is required to follow ‘code of conduct or cthical Petuviour specifically provided for the profession. In the case of employment the employee is required to observe the terms and conditions prescribed in the contract of service. 6. Investment. Every bt nc capital though the amount ‘ofcapital investment varies with the nature and size of business. A professional fas to invest a limited capital in order to set up his office for rendering ofessional services. In case of employment there is no need for capital Fivestment. Thus, capitai requirements in business are far yreater than in profession and employment. 7 Return. The reward of a businessman consists of the profits he earns. A professional receives the reward for his services in the form of fee while an Employee cars salary or wage. Efficiency of a professional is measured by the {quality of service and not by income carned. '8 Degree of risk. Some clement of risk is involved in both business and profession. But the fee of a professional is more certain and regular than the Profits of a businessman, There can be losses in business but the fee of a Professional is never negative. There is practically no risk in case of employ- ment s0 long as the employer continues the operations. An employee receives wage or salary which is generally fixed and regular. 9. Transfer of interest. A businessman can transfer the ownership interest in the enterprise in accordance with the prescribed formalities. But the transfer of ownership interest is not possible in case of profession or employ- meni. This is because business is a kind of property while professional skill is nota property and it can be acquired only through a formal process of learning. 10. Public advertisement. The success of modern business depends greatly on advertising and publicity. An employee need not advertise at all. As a matter of rouline, professional bodies put restrictions on public advertising of professional scrviccs with a view to discourage competition among the members ofthe profession. eae — forceoing description reveals that there is a great amount of difference between business profession and employment Insite ofthese dillerenes, there is a close interrclationship between them. Business firms employ a large number ‘of persons in order to carry on their operations successfully. Big business firms also need the expert knowledge and skills of professional experts like chartered ac- ‘countants, lawyers, engincers, ct, for tackling various business problems. Profe sionals and other employees provide the organised effort essential for the eflici ‘working of business. Business in turn offers employment to various professional Fore ‘and employees.16 eke “Table 1. Distinct roncof /_dstincion_ a Eatin Jef esab- Promotersdeckionepsia” Membothip of a Sowie contract 1 Me feats geen 2 Meher ato Prescribed by law Fertifieate of practice pointment Goodsandsenices provided Personalised serve Performing work ‘ine pa Teepe ge ye Employee No minimum qeafeions vation and in; Speciied cuca ht ied cetera Eaming profits by satisfying Renderingservice _-Eaming wages or needs ctsocety 7 et he silary by serving, the employer “Se Caital Copital investment required Limitedeaptal neces- No capital re- aspersize ofthe firm sarylorestablishment quired 1» Profits Professional fee Salary or wages Profits are uncertain and ir- Feeisregularandcer- xed and regular regular t pay, no risk Spwsterriner- Taster posible wih some Not pose Not transferable formaktic: oles and regula- tions of the business! But it he keeps a aural becomes business provided the other conditions are also satisfied, 2. Dealing in goods and services. Dealing in goods and services is another ing are ses ery snes cee omc loca rvices to society "The goods or services may be procured by production andor purchase. The foods may be onsumer a sete oF p raw material, ele. The consumer goods ar f original or processed form. Producers: goods or capt ‘re used for producing other goods. Services are intangible and acer Kosth electricity, gas, insurance, transportation, banking, etc, 3-Costnuly in detings Dealings gods aad eres consiute bus carried on regularly. A single transaction like sale-of sewife or the sale of one’s old scooter is not business Bajar g oney in ecchaner op tbe. Hindustan Times Ltdand ths Ato Ltd are businss concerns because they ae regulary dealing in businege Mticle. Recurring sale rather than an isolated deal is the allmark ofAND BRANCHES OF BUSINESS ness is carried on with the purpose.ofearning ‘the hope of making money that induces concn agrees " "ind acquit n a dato business. No business can survive for long without carning: Pes ca carta orsurne Protas eee ee sust he carned through legal and fair means.or by scrvin Hower and not by exploiting it Ie is because of this reason that making of the soci eh gambling, cheating, smuggling and blackmarketing cannot be as fomtete ick or uncertainty, Risk implies. the uncertaint hi ‘i iy ‘The clement of risk is Present in almost aaitgonomic penitics but itis more significant in business. Though business aims at profits, : Fett te posible andl common, Before am activity ean be called business there m ut the risk of Toss. Risk erefore, exist not only the g is \ toparaes because te fature is Unknown and businessmen have retncertaity arises because : or anecaly ne control over several factors affecting profits. These factors ; vcs Changes in consumers tastes, fashions and demand; — pgs. Changes in technology resulting into obsolescence of plant, machinery and techniques of production; (a ereasathe degre of competition ia the marke; )Shostage of raw materials, power, ful, ete. é Ze Labout ube the for of strikes, lockout, gheraes; ete: Be ons concerning the use of capital and"Other ures; and f¢). Fire, theft, and other natural calamities wl sured against” : {nview of the above mentioned characteristics, business may be defined as an ‘economic activity concerned with the regular production and/or purchase of goods and services with the objective of selling them at an uncertain profit through the satisfaction of human wants, ee ay ( Sees ,_ ,, Various business activities may be classified into two broad categories~(a) ‘industry, and (b) commerce. Industry is concerned with the production ‘of goods and services while commerce involves their distribution, industry de oc zes, The term industry aol ete ponte by extracted from the environment, and transformed, rocessed, fabricated Hkiplied is c et multiplied into other. produ ng eM nagar detive industries, These industries extract or draw out various products stural sources suchas earth, soil, wate i Feuer ichas earth, soil, water, air, etc, The products raised by these ining uate Drovided by naturé and collected by human beings. Agriculture, ishing, lumbering, oil-exploration, quarrying, ete. arc examples ies, The products of such industries arc used by manufacturing i plies heredity or parentage. Genet oduction of certain species of plants and1s NATURE AND SCOP" Jg-Forestry, plant breeding nurs is hatcheries and comme cries, cattle breeding farms, poultry farms, animal kethels are cxamples of genct fish fr HUMAN OCCUPATIONS PROFESSION BUSINESS EMPLOYMENT i INDUSTRY aac love GENET wa. conslnuc. tafe nos TO Thane EXTRACT F FACTURING TION He aga a L ct tae DOMESTIC FOREIGN: ‘Anatytical Synthetical Processing Assembling 7 | (Ro-export) ———__— —L, eal WHOLESALE RETAIL 5 B Eas: Melee [ee pec 1 oe pcan ae gee eee Geli co reuse oy nan eae arse and Patina Resear Fig. 11. Human Occupation’ and Banchis of Business, oRerson oF formato’ products into’ finished products. Such industries, therefore, create ‘form utility’. uring industries supply most of the products for daily w oe hese industries are known as factory production. Mam f the following types: : inalytical. In an analytical manufacturing industry, a basic raw material es or Separated into a number of products. For instance, an oil refinery separates crude oil into kerosene, gasoline, diesel oil, lubricat- ing oil and petrol. Stat these industries, two or more materials are combined or mixed ogeer to manufacture anew Product. For example, cement is produced ‘mixing concrete, gypsum and cos p ing, These industries are engaged in the processi ing of a process: materials through different stages of production, Examples ing industry inelude textiles, sugar, steel, etc. (d) varios componehs pars are bought together produce a finshed product, Manufacture of Bieycles, rao (ekesions, iw, watches, automobiles are typical examples of assembly indus sruaiofeaat struction industries, These, a ne vuction ustries use the 1c dina iieindusirics, eg, sono, marble bricks ec. and also the progucts industries such as Har iron an id steel, wires, ctc, These industrics a eieaemamccann ee ment by employing the process of fabrication.) wedistinguishing feature of, th lustries 1s that their products ak ait tino i ee fodiiels are not carried to the market for stle 80°CONCEPT AND BRANCHES OF Sometimes, industries are classified into primary it industry. Primary industry consists of extractive and genetics ol industey Tmnaterals for further production. Manufacturing and construction in- asi reconstitute secondary industry. According to scale ‘of operations industries thay be clasiied alae scaeindustryand smal scale industry Industries requiring rage favestment and sophisticated technology, eg, shipbuilding, iron and stecl petroleum refining ete, are known as Heavy industry wl ile Light industry which Fequires small investment and simple! Technology consists of sugar, paper, textiles, eau all such classifications are relative rather than absolutely watertight categories. of ‘services from producers to consumers. It consi ctries which facilitate trade, According to Stephenson, cerned with the exchange of goods; with all that is involved in the: ‘of goods at any stage in their progress from raw materials to finished goods in corse shan. tcovcrangtom ly the function of buying ‘and sclling and handling, ‘but also the many services which must be pr finance, insure, store, jin the course of these exchanges.” Commierce is thus an ‘sed cystem for the exchange of goods and services between the members of the business world. It bridges the fap between producers and consumers. ‘The process of exchange is beset several hindrances. The principal function of commerce is to remove these hindrances so as to ensure a free and ‘uninterrupted flow of goods and services from producers to consumers. These” hindrances have been described below: ‘gHlindranocof personeTHEtaarfartrers and ultimate consumers of goods are often unknown to each other. They are not always situated at the same place. ‘Therefore, certain persons called traders are required to bridge the gap between them. Various types of traders such as wholesalers, retailers and mercantile agents help to remove the hindrance of person, Trade plays an important role in the field ‘of commerce by establishing a contract between sellers and buyers. eae pameatnacectery ‘often goods are produced at places far away from z ‘of consumption. Various means of transport remove this barrier of distance and hep to cstablisha ink between the two. Packaging of goods o protect them from damage and pilferage in the course of transit ielps to remove the hindrance of place and thereby creates ‘place utility’ “These days goods are generally produced in anticipation of ‘Therefore, it becomes necessary to store them and make them avail and when the consumers demand them. Warehouses perform this function af storage the time lag between juction and consumption, They help to rey balancing lag between prod pt ry help cee alpapaat tet in transportation and storage, goals are subject 0 risk. Goods may be stolen or damaged. Fire, flood, eathquake, ‘storm, riot, etc, and other calamities may result in the destruction of goods. Ansurance removes this hindrance ring the risk of loss or damage to goods, - Exchange or sale of goods requires safe and arrangement for the payment of price. Dealings in wolve the Problems of time and place of payment, Money serves as the mei exchange 2 James Stephenson Principles and Practice of Commerce, p.ee eas NATURE AND SCOP we yw vemoves the hindrance of exchange. Banks facilitate exchange by and He cedit in. various Banking is, therefore, an important part of prone or banks ate useful commercial institutions, mes jce of knowledge. Exchange of goods eam take place only when the te Hinde praaets to the notice of prospective buyers. Advertising and sater DRE et jon to prospective buyers about the utility pete satis prods to this way, they he to remove the hindrance of ara feat’ Krowt yp, commerce isthe sta of those proceses which are engaged in ost a hiulrances of person (through trade), place (through transporta- he NN storage), risk (rough insurance), exchange (through bank teen e Uauledge (through aclvertising and publicity). eet sau ¥. is and services. It involves the buying and selling of goods and a the nucleus of commerce because all commercial set like soration,storace, insurance, banking, packaging, advertising, cle. revolve — superstructure of commerce is built upon the foundation of eis ofthe following types: in trade, It is concerned with the buying and selling of goods wath the Payment for the goods sold is made in national ‘ether in cash or through the banking system. Such trade is also known as Seaeaie rade or inland trade. Internal trade may be further classified into two ‘categories as follows: (a) rrade.{t refers to the purchase and sale of goods of a specific riety in bulk, A wholesaler buys goods in large quantities directly from ‘manfacturer(s) and sells them in comparatively small quantities to the retailers, Wholesale trade constitutes a link between the producers and the retailers. fe: Tt involves the sale of goods to the ultimate consumers. ‘A telailer buys goods from wholesalers or manufacturers and sells them to the final consumers. He serves as the last link in the chain of distribution. i je: Iyconsists of the exchange of goods and services between persons or organisations operating in two or more countries. International trade involves the usc of foreign currency (known as foreign ex- change) and international means of transport. International trade may be further classified into the following categories: (a) Import Trade. It involves purchase of goods from foreign countries for use in the domestic market. () Expon Trade. It is concerned with the sale of domestic goods to foreign buyers or in foreign markets. : x (c). Envepot Trade, Entreport or re-export trad involves the import of foreign ‘wth a viow to re-export them, For instance, India may buy wheat from A 10 supply the same to Bangladesh, “Auniliaries toTrade In addition to trade, commerce includes ate exchange of go erejoes. Thes are denegechange of goods and services. The several ancillary services which uxiliary services or aids (o trade ~se ND BRANCHES OF BUSINESS cone ‘coNcel ransportaion. Transportation carries goods from producers to (i) Transport mally to consumers, It bridges the eeograpnicy rte, ccs and thereby jerforms a useful function in ‘commerce. It makes peed ond atficiency in exchange, Transportation provides the for wheels of commerce. ILis by use of transportation that a producer iT his goods in different pasts of the world. It creates ‘place (a Warehousing or Storage It refers ta the holt and preservation of Haris unt they are finaly consumed. Goods hae 49 be ‘stored at every ge in the process of exchange. Warchousing perform’ ‘useful func tion by matching supply with tie demand. It helps to make available the tion by rt oduced goods throughout the year. In the absence of seascape roducer wil have dispose ofthe goods assoon as hey are produced. Warehousing ercats (ay Insurance. tfaiitates trade by providing a cover agate the loss or JTanrage of goods in the process of transit and storage: BY BF N00, their sured, producers and traders can avoid the risk of Toss due to i pilérage, te. Packing also helps to protect the goods during transit and storage. (Banking, Banks are traders of money and credit They help it the buying and selng of goods by providing a convenient and safe mode of pay. ag eepanks also grant credit to businessmen with which they can carry fon larger volume of trade. (v) Advertsing. Advertising brings goods and services to the knowledge of frospectve buyers. I helps to highlight the distinctive features and Pigg of different products. With the help of such knowledge, constmers rani ain better value for their money. Marketing research helps (0 now and understand the requirements of consumers. “There et clos:interrelationship between the different branches of business described shove, One cannot function without the support of others. Commerce helps industry before and aftr production through the ‘purchase of materials and teas of fished products. Production of goods and services is meaningless Unis they are distributed among the consumers. Trade, involving buying nd Selling of foods, maintains a smooth flow of commerce and thereby SUPpoS ‘edusey, Abe ame time, industry provides the goods and services for distribu- tion and thereby gives rise to commerce. As industry develops, trade and com- merce also grow. nd Trade fedustry, commerce and trade are closely related to each other. For example, ind services which ate distributed through commerce.No cone p nthe absence of industry and production. At the se ime industry an production cannot survive unless he joods and services tre dutriuted among consumers through commerce, Therlor, industry and comme are interdependent. Industry provides the’ base for commerce and ere serves as the backvane of indy, i Trade inves 1 selling of goods, I isthe nucleus of commerce Because al business atts revolve around transfer or exchange, Trade provides {etal foudaton upon wich he pert ‘of commerce nas been raised. Eig core lar a2 . NATURE AND SCOPE OF BUSINESS “INDUSTRY | 7 / 4 \ [ commence | Fig.112, Intertelationship botween branches'ol business, Purchase and sale (of goods and ser — ee ee 7 Ving conversion of materials sunilarcstotrade change of goods vip omens of mac SES Se Fc aoe Some ot edo ets Cede on Sent ame eee Coan Se a Fates Pey in ie heesera fi wen Danie sey FOR FURTHER STUDY Horley ME, Business Adminisration, New Dethi, Prentice Hall of India, 1982 Jackson, John. Hand V.A. Musselman, Business—Contemporary Concepts and Practices, New Jersey, ‘Prentice Hal of India, 1989. Stephenson, James; Principles and Practice of Commerce, London, Pitman, 185, Wheeler. Bayord O: Business—An Introductory Anabss, New York, Uarper & Row, 1986 TEST QUESTIONS 1. Answer each ofthe following, questions in not more than 50 words: (©) Detine the term “Business. (©) Distinguish between Industry and Commerce. (0 What is Bntrepot Trade? 2. Answer each of the following questions in not more than 30 words (2) Explain the concept of “Busines (0) Fowmerate the branches of business (0) Describe the interrlationship between industry, commerce and tradeISS 113 CONCEPT AND BRANCHES OF BUSINI 3, Answer each of the following questions in not more than 1200 words: (a) What do you understand by the term "Business"? Describe the main chi business. (6) Distinguish clearly between Business, Profession and Employment, {c) Define industey and explain the various types of industry. (a) “Commerce is the sumtotal ofall those activities which are engaged in the removal of the hindrances of person, place, time, exchange and knowledge”. Elucidate. () Discuss the various auxiliaries to wrade CASE STUDY R. Ramesh is a youngman of 20 years. He has passed his B.Com, Examination recently and wants to start his own business. During his studies he learnt also the various branches of business like industry, trade and commercial services. But he is at a loss to choose between these various ‘ypes of business. He asks his uncle S. Suresh, awholesale dealer in textiles, for advice. Suresh asks for necessary information from Ramesh. What information should Ramesh provide to enable his ‘uncle to come t2 an appropriate decision?