MEANING AND SCOPE OF COMMERCE

Commerce is the study of production, distribution and exchange of goods and services aimed at satisfying human wants and making a living.

It is the process of buying, selling and distributing services.

According to James Stephenson, "Commerce is an organized system for the exchange of commodities and distribution of finished productions:"

Commerce involves transforming goods from the place of production to the place where it is needed.

Commerce is also an exchange process because it involves the purchase and sale of goods and services.

Therefore, the scope of commerce includes the buying and selling of goods and services (trade) as well as other activities that facilitate it (aids to trade)

Scope Of Commerce

Commerce is concerned with two main activities: trade and aid to trade.

Scope of commerce

Trade

This occurs when commodities and services are sold, transferred, or exchanged.

It is the process of buying and selling goods and services.

Trade is the process by which goods produced or services rendered are transferred to the final consumers in exchange for something of equivalent value.

Trade is the pivot on which the wheel of commerce rotates.

Trade can be broadly classified into two: home trade and foreign trade

1. Home trade: This refers to the exchange of goods and services within a country's national borders.

It is the buying and selling of goods and services within a country.

Home trade is also called internal trade, regional trade or domestic trade.

Home trade is subdivided into wholesale trade and retail trade

A. Wholesale trade: This involves buying goods in large quantities from the producer and selling them in units to retailers.

A wholesaler is a person who engages in wholesale trade and acts as a middleman between the producer and the retailer.

B. Retail trade: This involves buying goods in small units from the wholesaler and selling them in smaller units to the consumers.

Just like how the wholesaler serves as an intermediary between the producer and retailer, the retailer serves as an intermediary between the wholesaler/producer and consumers.

2. Foreign trade: This refers to trade between countries. It is the buying and selling of goods outside the national boundaries of a country.

Other names for foreign trade are international trade, inter-regional trade, external trade

Foreign trade can be sub-divided into entrepot trade, import trade and export trade

1. Export trade: This is the selling of goods and services to other countries.

It is the process where goods and services are sent out of the country

2. Import Trade: This involves purchasing goods and services from other countries.

It is the process by which goods are brought into the country.

3. Entre-port trade: This involve importing goods, not for consumption, but for re-export.

Because of this, entre-port trade is also called re-export trade.

Aids to trade

As its name seems to suggest, aids to trade are activities that facilitate trading activities.

In other words, aids to trade are activities that facilitate the buying and selling of goods both domestically and internationally.

Aids to trade include activities such as transportation, warehousing, tourism, communication, banking, insurance and advertising.

1. Transportation: As the popular line goes "production is not complete until it gets to the final consumer".

Transportation is how goods are produced to get to the final consumers.

It is the movement of goods and people from one place to another.

It is the movement of goods and services from point of production to the point of consumption.

One advantage of transportation is that it creates place utility for the final consumers.

Transportation creates place utility by making goods available at a location convenient for the end-user

2. Warehousing: Goods must be kept in a secure location until they are required

This is the function of warehousing. Warehousing is the process of storing goods ahead of anticipated demand.

Warehousing allows producers to store goods so that they can be supplied when there are needed.

This is because there is always a time gap between production and production as goods produced may not be consumed immediately.

By storing goods, warehousing creates time utility.

Warehousing creates time utility by making goods available when they are needed.

3. Advertising: Consumers may be unaware that goods are available.

Also, Producers may want to increase their market share or their customers.

Advertising is the process through which a company tells consumers about the availability of a new product or raises awareness about an existing product.

It is the process of making people aware of a new product or existing product.

4. Communication: This is the transmission of information from one location to another.

It is the process of sending and receiving information from one person to another, from one place to another and from one group to another.

Communication aids trade as it provides information on new technology and new products to consumers and producers.

Communication aids trades by informing customers and producers about new products and customers respectively.

Furthermore, for any trade to be completed, communication between the buyer and seller is essential.

5. Banking: Commercial activities cannot take place without adequate finance.

Also, there can be no commercial activities if there are no adequate means of payment.

Banking takes care of all of this. Banks and other financial institutions play an important role in the economy.

They lend money to companies who want to establish a business or expand an existing one.

They also play an important role in remitting money from one place to another, especially in international trade where the buyer and seller are located hundreds of kilometres apart.

6. Insurance: Risk is inherent in business and commercial activities, just as it is in everything else.

For example, a business's goods and services may be destroyed while in transportation, which may discourage people from engaging in commercial activity.

To prevent this, insurance is required. Insurance is the process by which businesses transfer risk to an insurance company in exchange for a payment of a premium.

Insurance reduces the problem of risks  by protecting businesses against financial losses 

It ensures that businesses are adequately compensated should the insured peril occur.

7. Tourism: Tourism is an activity that facilitates international trade.

Tourism is part of the hospitality industry, which includes things like entertainment, good hotel accommodations, and tourist attractions.

Tourism facilitates international trade by bringing tourists to a country, who will then will bring foreign currency into the country.

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