Scope of business and Classification of Business Activities
Scope of Business
Business refers to an organization or entity engaged in commercial, industrial, or professional activities. These entities can be for-profit or non-profit and aim to provide goods and services in exchange for money or other goods and services. The scope of business is broad and encompasses several key areas including industry, commerce, and aids to trade.
Industry
Industry involves the extraction, production, or fabrication of products. Products can be consumer goods, capital goods, or intermediate goods.
Types of Industry
- Extractive Industries
- Definition: These industries extract raw materials from the earth.
- Examples: Mining, fishing, forestry, and agriculture.
- Genetic Industries
- Definition: Industries engaged in reproducing and multiplying species of animals and plants for sale.
- Examples: Cattle breeding farms, poultry farms, plant nurseries.
- Constructive Industries
- Definition: Industries involved in constructing buildings, roads, bridges, dams, etc.
- Examples: Construction companies.
- Manufacturing Industries
- Definition: Industries converting raw materials or semi-finished products into finished products.
- Examples: Textile mills, shoe manufacturers.
- Service Industries
- Definition: Industries providing intangible goods or services.
- Examples: Healthcare (doctors), legal services (lawyers).
Commerce
Commerce includes all activities related to the transfer of goods from the place of production to consumers.
Components of Commerce
- Trade
- Definition: The process of buying and selling goods.
- Types of Trade:
- Internal Trade: Within a country.
- Wholesale Trade: Buying in large quantities from producers and selling to retailers.
- Retail Trade: Selling goods directly to consumers.
- External Trade: Between countries.
- Import Trade: Buying goods from foreign countries.
- Export Trade: Selling goods to foreign countries.
- Aids to Trade
- Transport: Moving goods from production centers to consumption areas.
- Examples: Railways, ships, airlines.
- Insurance: Protecting goods against risks such as fire, flood, and theft.
- Warehousing: Storing goods safely until they are needed in the market.
- Banking: Providing financial support for trade activities through loans, overdrafts, and cash credits.
- Advertisement: Promoting goods through various media channels to increase sales.
- Transport: Moving goods from production centers to consumption areas.
Characteristics of Business
- Production or Acquisition of Goods
- Definition: Involves producing, manufacturing, or procuring goods to supply them for a price.
- Example: A factory producing electronics.
- Profit
- Definition: The primary motivation and reward for engaging in business activities.
- Example: A business owner earning profits from a new product line.
- Risk
- Definition: The inherent uncertainty associated with future business operations.
- Example: Investing in new technology.
- Dealing in Goods and Services
- Definition: Involves supplying consumer goods, producer goods, and services.
- Example: A grocery store selling food products.
- Regular Dealings
- Definition: Business activities must be regular and recurrent.
- Example: Regularly buying and selling furniture.
Summary
- Industry: Encompasses extraction, genetic, constructive, manufacturing, and service industries.
- Commerce: Involves trade (internal and external) and aids to trade (transport, insurance, warehousing, banking, advertisement).
- Characteristics of Business: Include production/acquisition of goods, profit, risk, dealing in goods and services, and regular dealings.
Understanding the scope of business helps recognize its diverse functions and the importance of various activities in generating profit and ensuring the smooth flow of goods and services from producers to consumers.