Chapter 1 Overview of Commercial Business

1.1. Essential conditions to establish and develop commercial

business

The division of social labour and the different ownership of means of

production found commodity economy. The division of labor
improves both the skill of the worker and the productive power of
society, and thus its "function" would simply be to produce and
secure those economic, artistic. (Adler, 1990)

4 stages of commodity economy:

Production => Distribution => Exchange (Circulation) => Consumption”
1.2. Definition and characteristics of
Commercial business
§ Definition
“Commercial business is an economic activity that invest all
resources into distribution and circulation to gain profit” (Hoang Duc
Than, 2018)

“Retailing is the set of business activities that adds value to the

products and services sold to consumers for their personal or family
use.” (Levy and Weitz, 2012: 6)
-

-The distributive trade as an activity consists of (i) provision of a service to

customers by storing and displaying a selection of goods in convenient
locations and making them easily available for buying; and (ii) provision of
other services incidental to the sale of goods or subordinated to the selling such
as the delivery, after-sale repair and installation services.
1.2. Definition and characteristics of
Commercial business
Characteristics of Commercial business
§ Resale: the activity of buying and selling associated with the
same subject- same enterprise carries out the purchase and resale

§ Sale without transformation: commercial business enterprises

are service providers.
§ The following actions are not considered as substantial transformations of goods by :
sorting, grading and assembling of goods, mixing (blending) of goods (for example
wine or sand), bottling (with or without preceding bottle cleaning), packing, breaking
bulk and repacking for distribution in smaller lots, storage (whether or not frozen or
chilled), cleaning and drying of agricultural products, cutting out of wood fiberboards or
metal sheets as secondary activities.

§ Commercial business operates in distribution and circulation of

goods
1.3. Goals of Commercial business

goals of Commercial business

• Profit
• Position
• Safety
• Sustainable development
• Linkage between production and consumption, bridging the
circulation of goods from domestics to international market
1.3. Goals of Commercial business
§ Every business aims to achieve an objective.
§ An objective gives a business direction; that is, it provides the
business with a path to follow, increasing its chances of being
successful.
1.3. Goals of Commercial business
Profit:

§ Revenue is the money a business receives as payment for its

products.

§ Operating expenses are all the costs of running the business

except the cost of goods sold.

§ Profit is what remains after all business expenses have been

deducted from sales revenue.

The relationship
between sales
revenue and
profit
1.3. Goals of Commercial business
• Profit: Making a profit is an objective that is central to many businesses.
Ø The main activity of a business is to sell products to its customers.
Ø A business receives money (sales revenue) from its customers in exchange
for products.

Ø It must also pay out money to cover the numerous expenses involved in
operating the business.

Ø If the business’s sales revenue is greater than its operating expenses, it has
earned a profit.

Ø More specifically, profit is what remains after all business expenses have
been deducted from the business’s sales revenue
1.3. Goals of Commercial business

§ Position –Vị thế: business size and market share

§ To increase market share

market share is a business’s proportion of total sales in a market or an

industry. This is easy to visualise using a pie chart that shows the percentage
of sales the business has in relation to all its competitors.

In most industries, market share is usually an objective only for large

businesses.

Such businesses often develop an extensive product range, using many

different brand names, to gain an extra few percentage points of market
share.

Small market share gains often translate into large profits for these businesses.
1.3. Goals of Commercial business

§ Position –Vị thế: business size and market share

§ Business size : While there is no single universally accepted definition of a small,
medium or large business, a number of measurements can be used to determine the
size of a business

§ the number of employees (those who are hired to do work for the business) — a
large number of employees, for example, will suggest that a business is large.
§ the number of owners (of the business) — for example, if a business is a sole trader
(a type of business that has one owner), it is likely to be small. Medium and large
businesses tend to be companies with many owners (or shareholders).

§ the legal structure — for example, is the business set up as a sole trader,
partnership or company?

§ the amount of revenue earned — for example, a large business will earn revenue of
several million dollars annually.
§ the amount of assets owned :
1.3. Goals of Commercial business

§ Position –Vị thế: business size and market share