Ch2 STRUCTURE OF BUSINESS

CHAPTER 2 

STRUCTURE OF BUSINESS

 

INTRODUCTION

The structure of a business refers to the organization, hierarchy, and functional arrangement of a company. It outlines the relationships between various positions, roles, and responsibilities within the organization. A well-defined and organized structure is crucial for the smooth functioning of a business and achieving its objectives.

 

The structure of a business can be depicted through an organizational chart, which outlines the various departments, positions, and relationships among them. There are several types of business structures, including hierarchical, flat, matrix, and network structures.

A hierarchical structure is the most common type of business structure, where there is a clear chain of command with a top-level management team and a hierarchy of lower-level managers and employees. In a flat structure, there are fewer levels of management, and employees have more autonomy and responsibility. A matrix structure combines both hierarchical and flat structures, where employees report to multiple managers or have dual reporting relationships. A network structure is a decentralized structure where independent entities work together to achieve a common goal.

The choice of the appropriate structure depends on the size of the business, the nature of its operations, and the objectives it aims to achieve. A well-designed structure enables the business to effectively allocate resources, improve communication, and streamline decision-making processes. It also helps to promote accountability and efficiency, which are essential for the success of any business.

CLASSIFICATION OF BUSINESS ACTIVITIES

Business activities can be classified into various categories based on different criteria. The following are some common classifications of business activities:

1. Industry Classification: This classification is based on the nature of the product or service that the business produces or provides. For example, businesses can be classified into sectors such as agriculture, manufacturing, mining, construction, retail, transportation, hospitality, and finance.

2. Legal Classification: This classification is based on the legal status of the business entity. For example, businesses can be classified into sole proprietorship, partnership, corporation, limited liability company (LLC), and cooperative.

3. Functional Classification: This classification is based on the specific function or activity that the business performs. For example, businesses can be classified into production, marketing, finance, human resource management, and research and development.

4. Scale Classification: This classification is based on the size or scale of the business. For example, businesses can be classified into small, medium, and large enterprises.

5. Ownership Classification: This classification is based on the ownership structure of the business. For example, businesses can be classified into privately-owned, publicly-owned, or government-owned enterprises.

6. Geographic Classification: This classification is based on the location of the business. For example, businesses can be classified into local, regional, national, or international enterprises.

7. Social Classification: This classification is based on the social purpose or mission of the business. For example, businesses can be classified into for-profit, non-profit, or social enterprises.

Overall, the classification of business activities is important for understanding the different types of businesses and their unique characteristics, challenges, and opportunities.

1.On the Basis of Size

Business activities can be classified on the basis of size into two categories: small scale business and large scale business.

Small scale business refers to the business that is owned and managed by individuals or a group of individuals on a small scale. These businesses operate on a small level and are characterized by limited resources and capital. Examples of small scale businesses include small shops, grocery stores, street vendors, etc.

On the other hand, large scale business refers to the business that operates on a large scale and requires a substantial amount of capital investment. These businesses are owned and managed by individuals, partnerships or corporations. They have a large workforce and operate in multiple locations. Examples of large scale businesses include multinational corporations, large manufacturing companies, etc.

The classification of business activities on the basis of size is important as it helps in understanding the different business models and strategies adopted by small and large scale businesses. It also helps in formulating policies for the development of small and medium enterprises.

2. On the Basis of Ownership

On the basis of ownership, businesses can be classified into the following types:

Sole Proprietorship: It is a type of business in which the ownership and management of the business are in the hands of a single person. The proprietor has unlimited liability and is solely responsible for the debts of the business.

Partnership: It is a type of business in which two or more persons join together to carry on a business. The partners share the profits and losses of the business in a pre-agreed ratio. Each partner has unlimited liability for the debts of the business.

Joint Hindu Family Business: It is a type of business that is run by the members of a Hindu undivided family. The business is owned and managed by the eldest member of the family. The liability of the members is limited to the extent of their share in the business.

Cooperative Society: It is a type of business that is owned and managed by a group of individuals who come together to achieve a common economic goal. The members of the cooperative society have equal say in the management of the business, and the profits are distributed among them.

Company: It is a type of business that is owned by a group of individuals known as shareholders. The liability of the shareholders is limited to the extent of their share in the company. The management of the company is entrusted to a board of directors who are elected by the shareholders.

3. On the basis of functions

On the basis of functions, business activities can be classified into the following types:

 

1. Production: This involves the creation of goods or services using various inputs such as raw materials, labor, and capital. The production process includes activities such as procurement of raw materials, manufacturing, packaging, and quality control.

2. Marketing: This involves promoting and selling goods or services to customers. Marketing activities include market research, advertising, sales promotion, pricing, and distribution.

3. Finance: This involves managing the financial resources of a business. Finance activities include financial planning, raising capital, investing, and managing cash flows.

4. Human resources: This involves managing the workforce of a business. Human resource activities include recruitment, training, performance evaluation, compensation, and employee relations.

5. Information technology: This involves the use of technology to support business operations. IT activities include the development and maintenance of software systems, hardware infrastructure, and communication networks.

6. Research and development: This involves the creation of new products or improving existing ones through research and development activities. R&D activities include scientific research, product design, prototyping, and testing.

Businesses may specialize in one or more of these functions depending on their goals and resources. For example, a manufacturing company may focus on production and marketing, while outsourcing its finance and IT functions to specialized firms.

INDUSTRY: MEANING AND TYPES

Industry refers to the economic activity that involves the manufacturing, processing, and production of goods or services. In other words, it refers to the sector of the economy that is concerned with the production of goods and services. The industry can be categorized into several types based on the nature of the production process and the type of goods or services produced.

 

1. Primary Industry: The primary industry is concerned with the production of natural resources. This industry is involved in the extraction of raw materials from the earth or the sea. Examples of primary industry include agriculture, fishing, mining, and forestry.

2. Secondary Industry: The secondary industry is concerned with the processing of raw materials obtained from the primary industry. This industry involves the manufacturing of goods from the raw materials. Examples of secondary industry include the production of automobiles, electronics, and textiles.

3. Tertiary Industry: The tertiary industry is concerned with the provision of services to consumers and other industries. This industry includes activities such as transportation, banking, healthcare, education, and retail.

4. Quaternary Industry: The quaternary industry is concerned with the production of knowledge-based services such as research and development, consultancy, and information technology.

5. Quinary Industry: The quinary industry is concerned with the production of services that are typically performed by high-level executives or government officials, such as top-level management, public administration, and policy-making.

In addition to the above, some other types of industries include heavy industry, light industry, and green industry. Heavy industry is concerned with the production of large, capital-intensive machinery and equipment, while light industry is concerned with the production of smaller, consumer-oriented goods. Green industry refers to the industry that produces goods and services that are environmentally sustainable and ecologically responsible.

(1) PRIMARY INDUSTRY

Primary industry is a type of industry that involves the extraction and production of natural resources or raw materials from the environment. This sector is also referred to as the 'extractive industry' since it extracts natural resources from the earth's surface, including agriculture, forestry, mining, fishing, and oil and gas extraction.

 

The primary industry involves the production and harvesting of natural resources, which are then sold in their raw or unprocessed form to manufacturers or other businesses for further processing. For example, the mining industry extracts minerals and metals, which are then sold to manufacturers to produce finished goods such as automobiles, electronic devices, and construction materials. Similarly, the agricultural sector grows crops and raises livestock, which are then sold to food processors and retailers.

Primary industry plays a significant role in the economy of many countries, particularly in those that are rich in natural resources. In some countries, primary industries are the backbone of their economy and a major source of employment. However, the primary industry is also subject to many challenges, such as resource depletion, climate change, and environmental regulations, which can affect its sustainability and profitability.

(2) SECONDARY INDUSTRY

Secondary industry is a type of industry that involves the processing of raw materials to produce finished goods. This industry involves manufacturing and construction activities that help to create the products that we use in our daily lives. Secondary industries are important for economic growth and development, as they add value to the raw materials produced by primary industries and provide employment opportunities.

Examples of secondary industries include manufacturing plants, construction companies, refineries, and factories. In these industries, raw materials are transformed into finished products through various processes such as cutting, shaping, molding, refining, and assembling. The finished goods produced by secondary industries may be sold to wholesalers, retailers, or directly to consumers.

Secondary industries are often dependent on primary industries for their raw materials. For example, a steel manufacturer requires iron ore from a primary industry such as mining to produce steel. In addition, secondary industries may also rely on other industries such as transport and communication for their smooth functioning.

Overall, secondary industries play a crucial role in economic development and job creation by adding value to raw materials and producing the goods that we use in our daily lives.

TERTIARY OR SERVICE INDUSTRY

Tertiary or service industry refers to the sector that provides services to the end consumers, other industries, or businesses. This industry is concerned with intangible goods and does not produce any physical products. The tertiary industry includes various services such as transportation, hospitality, healthcare, education, information technology, banking, insurance, consulting, advertising, and entertainment.

The service industry is the fastest-growing industry globally due to the increasing demand for services by consumers and businesses. It plays a vital role in the economic development of a country, as it creates employment opportunities, generates revenue, and contributes to the overall GDP of a nation.

Some of the characteristics of the service industry are:

Intangibility: The services provided by the industry are intangible, i.e., they cannot be touched, felt, or seen.

Inseparability: The production and consumption of services occur simultaneously, and the customers are involved in the production process.

Perishability: Services cannot be stored or saved for future use, and their value decreases with time.

Heterogeneity: The services provided by the industry are heterogeneous, i.e., they vary from provider to provider and are dependent on the skill and knowledge of the service provider.

Customer Interaction: The service industry requires direct interaction with customers, and their satisfaction depends on the quality of service provided.

Overall, the service industry plays a critical role in meeting the diverse needs of consumers and businesses, and its growth and development are essential for the economic progress of a country.

COMMERCE: MEANING AND COMPONENTS

Commerce refers to the exchange of goods and services between individuals or organizations. It encompasses various activities such as buying and selling of goods and services, transportation, banking, insurance, warehousing, advertising, and so on. Commerce is an essential aspect of any economy and plays a vital role in the growth and development of a country.

The components of commerce are:

1.Trade: It refers to the buying and selling of goods and services. Trade can be classified into two types – internal trade and external trade. Internal trade involves the exchange of goods and services within a country, while external trade involves the exchange of goods and services between countries.

2. Aids to trade: Aids to trade are the various services that facilitate trade activities. These include banking, insurance, transportation, warehousing, advertising, and communication. These services help in the smooth functioning of trade activities and promote economic growth.

3. Auxiliaries to trade: Auxiliaries to trade are the various activities that support trade activities. These include banking, insurance, transportation, warehousing, advertising, and communication. These activities are essential for the growth and development of commerce.

Overall, commerce is a crucial aspect of any economy and plays a vital role in the growth and development of a country.

Functions of commerce

Commerce refers to the process of buying and selling goods and services between individuals, businesses, or countries. The functions of commerce include:

1. Exchange of Goods and Services: Commerce facilitates the exchange of goods and services between producers and consumers. It involves activities such as buying, selling, and transporting goods from the place of production to the place of consumption.

 

2. Promotion of Trade: Commerce plays a significant role in promoting trade between different countries. It enables countries to specialize in the production of goods and services in which they have a comparative advantage and exchange them with other countries.

3. Facilitation of Movement of Goods: Commerce facilitates the movement of goods from the place of production to the place of consumption. It involves activities such as transportation, warehousing, and packaging of goods.

4. Providing Employment Opportunities: Commerce provides employment opportunities to people in various sectors such as trade, transportation, warehousing, and banking.

5. Generating Revenue: Commerce generates revenue for the government in the form of taxes, tariffs, and customs duties. This revenue can be used for the development of infrastructure and other public services.

6. Facilitation of Financing: Commerce provides various financing options to businesses, such as loans, credit, and insurance. This helps businesses to expand and grow.

7. Price Determination: Commerce plays a significant role in determining the prices of goods and services. The demand and supply of goods and services in the market determine the prices.

TRADE: MEANINGAND TYPES

Trade refers to the exchange of goods and services between two or more parties. It is an essential component of commerce and economic growth. The different types of trade are:

1. Domestic Trade: It refers to the exchange of goods and services within the boundaries of a country. Domestic trade can be further classified into wholesale trade, retail trade, and e-commerce.

2. International Trade: It refers to the exchange of goods and services between different countries. International trade can be further classified into import and export trade.

3. Bilateral Trade: It refers to trade between two countries where they exchange goods and services with each other.

4. Multilateral Trade: It refers to trade between more than two countries, where goods and services are exchanged between multiple countries.

5. Barter Trade: It refers to the exchange of goods and services without the use of money. In a barter trade, goods and services are exchanged for other goods and services.

6. E-commerce: It refers to the buying and selling of goods and services over the internet. E-commerce has become an important part of trade in recent years due to the growth of the internet and technology.

7. Inter-industry Trade: It refers to the exchange of goods and services between different industries. For example, the automotive industry may trade with the steel industry for raw materials.

AIDS TO TRADE

Aids to trade refer to the various activities and services that facilitate the smooth functioning of trade. These aids help in the production, distribution, and consumption of goods and services. The following are some of the aids to trade:

1. Transportation: Transportation is a key aid to trade as it helps in the movement of goods from one place to another. Different modes of transportation like roadways, railways, waterways, and airways are used depending on the nature and distance of the goods to be transported.

2. Warehousing: Warehousing involves the storage of goods for a temporary period. It provides a place for the safekeeping of goods until they are required by the buyer. Warehouses also help in the proper management of inventory and reduce the lead time for delivery of goods.

3. Banking and finance: Banking and finance play a crucial role in trade by providing various financial services like loans, credit, insurance, and foreign exchange. These services help in the smooth functioning of trade by providing financial assistance to traders.

4. Advertising: Advertising is an aid to trade that helps in promoting goods and services to potential customers. It creates awareness about the product and attracts customers to purchase it. Different modes of advertising like print, electronic, and outdoor media are used to reach out to customers.

5. Packaging: Packaging refers to the process of designing and creating a protective covering for goods. It helps in the safe and efficient handling of goods during transportation and storage. Packaging also provides information about the product and helps in its promotion.

6. Communication: Communication is an aid to trade that facilitates the exchange of information between buyers and sellers. Different modes of communication like telephone, email, and video conferencing are used to negotiate deals and resolve disputes.

7. Standardization: Standardization refers to the process of developing and implementing uniform standards for products and services. It helps in ensuring the quality and reliability of goods and services and reduces the risk of fraud and deception.

Overall, aids to trade are essential for the smooth functioning of trade and help in promoting economic growth and development.

DIFFERENCE BETWEEN INDUSTRY, COMMERCE AND TRADE

Industry, commerce, and trade are interrelated terms that are often used interchangeably, but they have different meanings and functions in the business world. The main differences between industry, commerce, and trade are:

1. Meaning: Industry refers to the production of goods or services by using raw materials and manufacturing processes. Commerce refers to the exchange of goods and services between producers and consumers, which includes buying and selling of goods, transportation, banking, and insurance. Trade refers to the buying and selling of goods and services between countries, regions, or individuals.

2. Scope: Industry is concerned with the production of goods or services, while commerce involves the exchange of goods and services. Trade focuses on the buying and selling of goods and services across borders, regions, or individuals.

3. Function: The main function of industry is to produce goods or services for sale in the market. Commerce helps in the distribution of goods and services to the final consumers through various channels such as wholesalers, retailers, transporters, and financial institutions. Trade facilitates the exchange of goods and services between different countries, regions, or individuals, which helps in increasing the availability of goods and services at reasonable prices.

4. Components: Industry is composed of various sectors such as primary, secondary, and tertiary. Commerce includes various components such as trade, aids to trade, and auxiliaries to trade. Trade is composed of various types such as internal trade, external trade, wholesale trade, and retail trade.

In summary, industry, commerce, and trade are different but interconnected concepts that play a vital role in the economy of a country. Industry produces goods and services, commerce helps in their distribution, and trade facilitates their exchange between countries, regions, or individuals.

Multiple Choice Questions:

1. What is the structure of a business?

a) The legal status of a business

b) The organization, hierarchy, and functional arrangement of a company

c) The scale or size of a business

d) The nature of the product or service that a business produces or provides

2. Which type of business structure has a clear chain of command with a top-level management team and a hierarchy of lower-level managers and employees?

a) Hierarchical structure

b) Flat structure

c) Matrix structure

d) Network structure

3. What is the classification of business activities based on the legal status of the business entity?

a) Industry classification

b) Functional classification

c) Legal classification

d) Scale classification

4. How many categories can business activities be classified on the basis of size?

a) One

b) Two

c) Three

d) Four

5. What is a characteristic of small scale businesses?

a) Large resources and capital

b) Operate in multiple locations

c) Owned and managed by corporations

d) Limited resources and capital

6. Which of the following is not a function of business?

a) Production

b) Marketing

c) Education

d) Finance

7. Which industry is concerned with the provision of services to consumers and other industries?

a) Primary Industry

b) Secondary Industry

c) Tertiary Industry

d) Quaternary Industry

8. What is the primary function of the primary industry?

a) Processing raw materials

b) Production of goods

c) Extraction of natural resources

d) Provision of services

9. Which of the following industries involves the extraction and production of natural resources or raw materials?

a. Secondary industry

b. Tertiary industry

c. Primary industry

d. None of the above

10. What is the main goal of the primary industry?

a. To provide employment opportunities

b. To extract and produce natural resources

c. To manufacture finished goods

d. To provide services to end consumers

11. Which of the following industries is responsible for transforming raw materials into finished goods?

a. Primary industry

b. Tertiary industry

c. Secondary industry

d. None of the above

12. Which of the following characteristics is true for the service industry?

a. Production and consumption of services occur separately

b. Services can be stored for future use

c. Services are tangible in nature

d. Customers are involved in the production process

13. Which of the following is NOT a function of commerce?

A) Exchange of goods and services

B) Providing employment opportunities

C) Facilitation of communication

D) Generating revenue

14. Which type of trade involves the exchange of goods and services within the boundaries of a country?

A) Domestic Trade

B) International Trade

C) Bilateral Trade

D) Multilateral Trade

15. Which aid to trade involves the buying and selling of goods and services over the internet?

A) Transportation

B) Warehousing

C) Banking and finance

D) E-commerce

16. Which of the following is true about industry?

A) It involves the exchange of goods and services

B) It focuses on the buying and selling of goods and services across borders

C) It refers to the production of goods or services by using raw materials and manufacturing processes

D) It helps in increasing the availability of goods and services at reasonable prices

17. What is the main function of commerce?

A) To produce goods or services for sale in the market

B) To help in the distribution of goods and services to the final consumers

C) To facilitate the exchange of goods and services between different countries, regions, or individuals

D) None of the above

18. Which of the following is not a component of trade?

A) Internal trade

B) External trade

C) Wholesale trade

D) Tertiary sector

 

True-False Questions:

1. A well-defined and organized structure is not crucial for the smooth functioning of a business. (False)

2. The choice of the appropriate business structure depends on the nature of the operations and objectives of the business. (True)

3. Business activities cannot be classified into various categories. (False)

4. Functional classification is based on the size or scale of the business. (False)

5. Geographic classification is based on the location of the business. (True)

6. Large scale businesses require a substantial amount of capital investment. True

7. In a cooperative society, the profits are distributed equally among the members.

True

8. The production process includes activities such as procurement of raw materials, manufacturing, packaging, and quality control. (True/False)

9. The quinary industry is concerned with the production of knowledge-based services such as research and development, consultancy, and information technology. (True/False)

10. Green industry refers to the industry that produces goods and services that are not environmentally sustainable and ecologically responsible. (True/False)

11. The primary industry involves the production and harvesting of natural resources. (True/False)

12. Secondary industries are not dependent on primary industries for their raw materials. (True/False)

13. Tertiary industry is concerned with the production of physical goods. (True/False)

14. Commerce plays a vital role in the growth and development of a country. (True/False)

 

15. Commerce refers to the process of buying and selling goods and services between individuals, businesses, or countries. (True/False)

16. International trade can be further classified into import and export trade. (True/False)

17. Standardization helps in ensuring the quality and reliability of goods and services and reduces the risk of fraud and deception. (True/False)

18. Industry, commerce, and trade are often used interchangeably. (True/False)

19. The scope of industry is concerned with the exchange of goods and services. (True/False)

20. The main function of commerce is to produce goods or services. (True/False)

21. Trade helps in increasing the availability of goods and services at reasonable prices. (True/False)

VERY SHORT ANSWER QUESTIONS

Q.1. List the various types of business activities.

Ans. Various types of business activities include production, marketing, sales, distribution, finance, accounting, human resources, research and development, and customer service.

Q.2. What is ‘Commerce’?

Ans. Commerce refers to the exchange of goods and services between producers and consumers, which includes buying and selling of goods, transportation, banking, and insurance.

Q.3. What do you understand by’ Industry’

Ans. Industry' refers to the economic activity of producing goods or services using raw materials and manufacturing processes.

Q.4. Name the components of commerce.

Ans. The components of commerce include trade, aids to trade, and auxiliaries to trade.

Q.5. How is the hindrance of ‘persons’ removed.

Ans. The hindrance of persons is removed through the use of technology and automation in the production and distribution of goods and services. This reduces the dependence on individual skills and abilities, and ensures consistency and efficiency in the business operations. Additionally, the use of standardized processes and procedures, as well as the hiring and training of competent employees, can also help to overcome this hindrance.

SHORT ANSWER QUESTIONS

Q.1. Explain tertiary industry.

Ans. Tertiary industry refers to the segment of the economy that provides services to consumers and businesses, rather than producing goods. It is also known as the service sector and includes a broad range of industries such as transportation, retail, healthcare, finance, hospitality, and education.

The growth of the tertiary industry has been driven by various factors such as the increase in demand for services, advancements in technology, and the shift from a manufacturing-based economy to a service-based economy. The tertiary industry has become a significant contributor to the economy of many countries, employing a large portion of the workforce and generating substantial revenue.

The main characteristic of the tertiary industry is the intangible nature of the services provided. Unlike goods produced by the primary and secondary industries, services cannot be touched or seen, and they are not transferable. The quality of the service provided is highly dependent on the skills, knowledge, and attitude of the service provider.

Q.2. Explain the scope of commerce.

Ans. The scope of commerce is broad and covers a range of activities that are involved in the exchange of goods and services. It includes buying and selling of goods, transportation, warehousing, insurance, banking, and other financial services. Commerce involves all activities that take place between the point of production and the point of consumption. It also involves activities related to the promotion, financing, and marketing of goods and services. The scope of commerce is not limited to national boundaries and includes international trade and commerce as well. In summary, the scope of commerce covers all activities that are involved in the exchange of goods and services, from production to consumption, both at the domestic and international levels.

Q.3. Discuss the importance of commerce.

Ans. Commerce plays a crucial role in the economy of any country. It is an essential component of the business world that involves the exchange of goods and services between producers and consumers. Here are some of the reasons why commerce is important:

1. Generates Employment: Commerce creates job opportunities for people, from retail store clerks to bankers and traders. As commerce grows, it generates more jobs, thereby reducing the unemployment rate in a country.

2. Increases Economic Growth: Commerce is a significant contributor to the growth of the economy. It creates demand for goods and services, which in turn leads to increased production and consumption. As more goods and services are produced, the economy grows, leading to more investment opportunities.

3. Facilitates International Trade: Commerce is vital in facilitating international trade. It enables countries to import goods and services that they cannot produce themselves and export products that they have a surplus of, thereby increasing their earnings and promoting economic growth.

4. Increases Standard of Living: Commerce leads to the availability of a wide range of goods and services at reasonable prices. It enables people to access products and services that they need for their daily lives, improving their standard of living.

5. Boosts Competition: Commerce promotes competition among producers, leading to increased efficiency, better quality products, and more reasonable prices. This benefits consumers as they get access to higher quality products at lower prices.

In summary, commerce is essential in promoting economic growth, generating employment opportunities, and improving the standard of living. It plays a significant role in facilitating international trade and promoting competition, leading to a healthy business environment.

Q.4. What are the components of commerce.

Ans. The components of commerce are:

1. Trade: It refers to the exchange of goods and services between two or more parties for monetary or non-monetary benefits.

2. Aids to trade: These are the services that assist the smooth flow of goods and services in the market. Aids to trade include banking, insurance, warehousing, transportation, communication, and advertising.

3. Auxiliaries to trade: These are the services that help in the performance of trade and commerce activities. Examples of auxiliaries to trade include banking, insurance, advertising, transportation, warehousing, and communication.

Together, these three components of commerce work together to facilitate the exchange of goods and services between producers and consumers, and help in the smooth functioning of the economy.

Q.5. Explain the various kinds of Industry.

Ans. There are various types of industries, and they are classified based on the type of product or service they produce. Some of the significant types of industries are:

1. Primary industry: It is also known as the extraction industry, and it involves the collection and extraction of raw materials from nature. Examples of primary industries are agriculture, mining, forestry, and fishing.

2. Secondary industry: It involves the processing of raw materials obtained from primary industries to create finished products. Examples of secondary industries are manufacturing, construction, and energy production.

3. Tertiary industry: It involves providing services to consumers or other businesses. This type of industry includes services such as transportation, finance, healthcare, education, and hospitality.

4. Quaternary industry: This is a knowledge-based industry that focuses on research, development, and innovation. Examples of quaternary industries are technology, scientific research, and advanced education.

5. Quinary industry: This type of industry is concerned with high-level decision-making and policy formation. It includes top-level executives, government officials, and other decision-makers who make decisions that affect society as a whole.

Each type of industry has its unique characteristics, and they all play a vital role in the economy. Primary industries provide raw materials for secondary industries, while tertiary industries provide services to both primary and secondary industries. The quaternary and quinary industries are important in advancing the overall development of society.

Q.6. What is the classification of ‘business’?

Ans. Business can be classified into different categories based on various factors. Some of the common classifications of business are:

Size: It can be classified based on the size of the business, such as small, medium, and large-scale business.

Nature of ownership: It can be classified based on the nature of ownership, such as sole proprietorship, partnership, and corporation.

Nature of activities: It can be classified based on the nature of activities, such as manufacturing, trading, and service-oriented businesses.

Industry: It can be classified based on the industry, such as agriculture, construction, and information technology.

Geographical location: It can be classified based on the geographical location of the business, such as local, national, and international business.

 

Legal structure: It can be classified based on the legal structure, such as for-profit or non-profit business.

These classifications help in identifying the type of business, understanding its characteristics and requirements, and formulating suitable strategies for its growth and development.

Q.7. Explain the different ‘aids to trade’

Ans. Aids to trade refer to the various services or activities that support trade and commerce. The different types of aids to trade are:

1. Banking: Banks provide various financial services such as loans, deposits, and credit facilities to businesses. They also act as intermediaries between buyers and sellers by facilitating transactions through various modes of payment.

2. Insurance: Insurance companies provide protection to businesses against various risks such as fire, theft, and natural calamities. This helps businesses to manage their risks and ensure business continuity.

3. Transport: Transport plays a vital role in the movement of goods from one place to another. It includes various modes of transport such as road, rail, air, and sea transport.

4. Warehousing: Warehousing involves the storage of goods before they are transported to the final destination. It helps in managing the inventory and ensures timely delivery of goods.

5. Advertising: Advertising is a tool used to create awareness about products and services among the customers. It helps in promoting sales and expanding the customer base.

6. Communication: Communication refers to the exchange of information between buyers and sellers. It includes various modes of communication such as telephone, fax, email, and internet.

7. Packaging: Packaging plays an important role in protecting the goods during transportation and storage. It also helps in promoting the brand image of the product.

8. Standardization and Grading: Standardization refers to the process of maintaining uniformity in the quality of goods produced. Grading involves the classification of goods based on their quality and standards. Both these activities help in ensuring quality and consistency in the products offered.

Q.8. How will you classify the ‘trade’.

Ans. Trade can be classified into various categories based on different criteria. Here are some common classifications of trade:

Internal trade: This type of trade takes place within the geographical boundaries of a country. It can be further divided into wholesale trade and retail trade.

External trade: This type of trade takes place between different countries. It is also known as international trade and can be divided into export trade and import trade.

Wholesale trade: It involves buying goods in large quantities from manufacturers or producers and selling them to retailers or other businesses.

Retail trade: It involves selling goods to the final consumers for personal or household use.

Entrepot trade: It involves importing goods from one country and then re-exporting them to another country without any significant alteration or processing.

Counter trade: It refers to a trade arrangement where goods and services are exchanged between two countries without using money as a medium of exchange.

Bilateral trade: It refers to a trade relationship between two countries where each country exports and imports goods and services from the other.

Multilateral trade: It refers to a trade relationship between more than two countries where they all engage in the exchange of goods and services.

These are some of the classifications of trade based on different criteria.

Q.9. ‘Commerce is the sum total of all those activities which are engaged for the removel of hindrances of exchange’ Discuss.

Ans. Commerce is the process of buying and selling goods and services, as well as facilitating their exchange and distribution. It includes all activities that help in removing the hindrances of exchange between producers and consumers. The main hindrances of exchange are geographical distance, lack of information, financial problems, and legal formalities. Commerce helps to overcome these hindrances and creates a conducive environment for the smooth flow of goods and services.

Commerce is not just limited to buying and selling of goods but it also includes various services like transportation, warehousing, advertising, banking, insurance, and other financial services. These services facilitate the smooth functioning of commerce by providing infrastructure and necessary facilities. For example, transportation services help in the movement of goods from one place to another, warehousing services provide storage facilities, advertising helps in promoting the products, and banking services provide financial support for the purchase and sale of goods.

The importance of commerce in economic development cannot be overstated. It creates job opportunities, generates income and wealth, increases the standard of living of people, and contributes to the growth of the economy. By providing goods and services to consumers, commerce helps in fulfilling their needs and wants. It also helps in bringing people closer by facilitating trade between different regions and countries, thereby promoting cultural exchange and international relations.

In conclusion, commerce is an essential part of any economy, as it helps in overcoming the hindrances of exchange and promotes the smooth flow of goods and services. It is a vital factor in economic development, job creation, and improving the standard of living of people.

Q.10. What is Commerce? Is there any difference between trade and commerce?

Ans. Commerce is a broader term that encompasses all activities related to the exchange of goods and services from the production point to the consumption point. It involves the buying and selling of goods, services, and ideas between parties, which includes activities such as transportation, banking, insurance, warehousing, advertising, and other auxiliary services.

 

On the other hand, trade refers specifically to the buying and selling of goods and services, either domestically or internationally. It is a subset of commerce that deals with the exchange of goods and services between producers and consumers.

Therefore, trade is a part of commerce, but commerce involves a wider range of activities beyond buying and selling, such as transportation, storage, advertising, and financial services.

Q.11. Give five differences between business and ‘profession’

Ans. Here are five differences between business and profession:

1. Nature of work: Business involves the production or exchange of goods or services for profit, while a profession involves the provision of specialized services based on a particular set of skills or knowledge.

2. Purpose: The primary purpose of a business is to generate profits for its owners, while the primary purpose of a profession is to provide a specialized service that benefits society.

3. Education and training: Business may require specialized education and training, but it is not a prerequisite. However, a profession requires specialized education, training, and certification to practice.

4. Ethics and accountability: Business operates with a focus on profitability and shareholder value, while professions have strict ethical codes and are accountable to clients and society.

5. Risk: Business involves higher risk than a profession. In business, the owner is exposed to the risks of market changes, competition, and other factors that can impact profitability. In a profession, the risk is limited to the individual practitioner's reputation and quality of work.

LONG ANSWER QUESTIONS

Q.1. What do you understand by ‘Industry’ Commerce and trade’ Distinguish between then.

Ans. Industry, commerce, and trade are interrelated terms that are often used interchangeably, but they have different meanings and functions in the business world. The main differences between industry, commerce, and trade are:

Industry refers to the production of goods or services by using raw materials and manufacturing processes. Its main function is to produce goods or services for sale in the market. Industry is concerned with the creation or production of goods or services. For example, manufacturing of automobiles, production of software, etc.

Commerce refers to the exchange of goods and services between producers and consumers, which includes buying and selling of goods, transportation, banking, and insurance. Commerce helps in the distribution of goods and services to the final consumers through various channels such as wholesalers, retailers, transporters, and financial institutions.

Trade refers to the buying and selling of goods and services between countries, regions, or individuals. Trade facilitates the exchange of goods and services between different countries, regions, or individuals, which helps in increasing the availability of goods and services at reasonable prices.

Differences between Industry, Commerce, and Trade:

1. Meaning: Industry refers to the production of goods or services, commerce refers to the exchange of goods and services between producers and consumers, and trade refers to the buying and selling of goods and services between countries, regions, or individuals.

2. Scope: Industry is concerned with the production of goods or services, while commerce involves the exchange and distribution of goods and services, and trade focuses on the buying and selling of goods and services across borders, regions, or individuals.

3. Function: The main function of industry is to produce goods or services for sale in the market, commerce helps in the distribution of goods and services to the final consumers, and trade facilitates the exchange of goods and services between different countries, regions, or individuals.

4. Components: Industry is composed of various sectors such as primary, secondary, and tertiary, commerce includes various components such as trade, aids to trade, and auxiliaries to trade, and trade is composed of various types such as internal trade, external trade, wholesale trade, and retail trade.

5. Focus: Industry focuses on production, commerce focuses on exchange and distribution, and trade focuses on international exchange and the import-export of goods and services.

Q.2. What do you understand by’ Industry’ Also discuss the different kinds of industry.

Ans. Industry refers to the economic activity that is concerned with the production of goods and services through various methods such as manufacturing, processing, and construction. It involves the conversion of raw materials into finished products that can be sold in the market.

There are various types of industries, which are classified based on different criteria:

1. Primary industry: This industry is concerned with the extraction and production of raw materials from natural resources. It includes activities such as mining, agriculture, fishing, and forestry.

2. Secondary industry: This industry involves the processing and manufacturing of raw materials into finished products. It includes activities such as manufacturing, construction, and utilities.

3. Tertiary industry: This industry involves the provision of services to the consumers. It includes activities such as banking, transportation, communication, education, healthcare, and tourism.

4. Quaternary industry: This industry is concerned with knowledge-based activities such as research and development, consulting, and information technology.

5. Quinary industry: This industry includes activities that are related to the highest level of decision-making in the government or private sector such as top-level management, policymaking, and research.

Each industry has its own importance in the economic development of a country. The primary industry provides raw materials for secondary industries, which in turn produce finished goods for the tertiary sector. The tertiary industry provides services to both the primary and secondary sectors and also contributes significantly to the GDP of a country.

Q.2. What do you understand by Industry’ Also discuss the different kinds of industry.

Ans. Industry refers to a group of businesses that are involved in the production or manufacturing of goods or services using raw materials and various manufacturing processes. It can be divided into three main types based on the nature of the activities involved:

1. Primary Industry: This type of industry is concerned with the extraction of natural resources from the earth. It includes activities such as mining, agriculture, forestry, fishing, and hunting. Primary industry provides the raw materials for secondary industries to process and manufacture into finished goods.

2. Secondary Industry: Secondary industry involves the manufacturing and processing of raw materials into finished products. This includes activities such as construction, textile manufacturing, automobile manufacturing, and food processing. Secondary industry adds value to the raw materials obtained from primary industry.

3. Tertiary Industry: Tertiary industry is also known as the service sector and involves the provision of services to individuals and businesses. This includes activities such as banking, insurance, transportation, healthcare, education, and tourism. Tertiary industry supports the activities of primary and secondary industries by providing essential services.

These three types of industry are interconnected and play a vital role in the economy of a country. Primary industry provides the raw materials for secondary industry to manufacture into finished goods, which are then distributed and sold through tertiary industry.

Q.3. What do you understand by ‘Commerce’ Explain its components.

Ans. Commerce refers to the exchange of goods and services between producers and consumers, which includes buying and selling of goods, transportation, banking, and insurance. It is an economic activity that involves the distribution of goods and services from producers to consumers.

The components of commerce include:

1. Trade: It refers to the buying and selling of goods and services between countries, regions, or individuals.

2. Aids to trade: These are the various activities that facilitate trade. They include transportation, warehousing, advertising, insurance, banking, and communication.

3. Auxiliaries to trade: These are the various activities that support trade. They include trade associations, chambers of commerce, trade fairs, exhibitions, and conferences.

4. Retail trade: It refers to the selling of goods directly to the final consumers.

5. Wholesale trade: It refers to the selling of goods to the retailers, institutional users, and other wholesalers.

6. Foreign trade: It refers to the buying and selling of goods and services between different countries.

In summary, commerce is an important economic activity that involves the exchange of goods and services between producers and consumers. Its components include trade, aids to trade, auxiliaries to trade, retail trade, wholesale trade, and foreign trade.

Q.4. Discuss the scope and importance of ‘Commerce’

Ans. Commerce refers to the exchange of goods and services between producers and consumers,

which includes buying and selling of goods, transportation, banking, and insurance. The scope of commerce is vast, as it involves all the activities that are required to facilitate trade and commerce between individuals, businesses, and nations. The following are some of the important areas that come under the scope of commerce:

1. Trade: Commerce involves the buying and selling of goods and services between individuals, businesses, and nations. It includes both domestic trade (within a country) and international trade (between countries).

2. Transportation: Commerce involves the movement of goods from one place to another, which requires various modes of transportation such as roadways, railways, airways, and waterways.

3. Banking and finance: Commerce involves various financial activities such as lending, borrowing, investing, and managing funds. Banking institutions such as commercial banks, investment banks, and central banks play a crucial role in facilitating commerce.

4. Insurance: Commerce involves managing risks associated with trade and commerce. Insurance companies provide various types of insurance products such as life insurance, health insurance, property insurance, and liability insurance to protect individuals and businesses from financial losses.

5. Advertising and marketing: Commerce involves creating awareness about products and services among consumers through various advertising and marketing strategies. It includes activities such as branding, packaging, pricing, promotion, and distribution.

The importance of commerce can be understood from the following points:

1. Economic growth: Commerce plays a crucial role in the economic growth of a country by facilitating trade and commerce between individuals, businesses, and nations. It leads to the creation of jobs, income generation, and increased production.

2. Globalization: Commerce has played a significant role in the globalization of the world economy by promoting international trade and investments. It has opened up new markets for businesses and has facilitated the movement of goods and services across borders.

3. Efficiency: Commerce helps in the efficient utilization of resources by facilitating the exchange of goods and services. It leads to specialization and division of labor, which leads to increased productivity and efficiency.

4. Standard of living: Commerce helps in improving the standard of living of individuals by providing them with a wide range of goods and services at reasonable prices. It also provides employment opportunities and increases the income of individuals.

In conclusion, commerce is an essential aspect of the economy that facilitates the exchange of goods and services between individuals, businesses, and nations. Its scope is vast and includes various activities such as trade, transportation, banking, insurance, and advertising. Its importance can be seen from its contribution to economic growth, globalization, efficiency, and standard of living.

Q.5. Explain the various ‘Hindrances’ which are removed by commercial activities.

Ans. Commercial activities are undertaken to remove the hindrances or obstacles that occur in the exchange of goods and services. Some of the hindrances are:

Hindrance of Place: This hindrance arises due to the difference in the location of the producers and consumers. Commerce helps in bridging this gap by providing various modes of transportation like roadways, railways, airways, and waterways.

Hindrance of Time: This hindrance arises when goods are produced at one time and consumed at another time. Commerce helps in overcoming this obstacle by providing warehousing facilities, which helps in storing goods until they are required.

Hindrance of Finance: This hindrance arises when there is a lack of finance to carry out production and exchange activities. Commerce provides various financial institutions like banks and other financial intermediaries that help in providing financial assistance.

Hindrance of Information: This hindrance arises when there is a lack of information about the market, demand, and supply of goods and services. Commerce helps in overcoming this obstacle by providing various types of market research and advertising techniques.

Hindrance of Risk: This hindrance arises due to the uncertainty of demand, supply, and price fluctuations. Commerce helps in mitigating this risk by providing insurance facilities.

In summary, commerce helps in overcoming these hindrances, which facilitates the smooth flow of goods and services in the market.

 

A. One Word or One Line Questions

 

Q. 1. How did India establish trade relations with the rest of the world?

Ans. India established trade relations with the rest of world through ‘Silk Route’.

 

Q. 2. According to archaeological evidence, which were two main routes for trade from India?

Ans. Land route and sea route.

 

Q. 3. Which system of exchange was prevalent in times of ancient civilization?

Ans. Barter system of exchange.

 

Q. 4. In which form of money came into existence with the progress of civilization?

Ans. With the progress of civilization, metallic money came to existence.

 

Q. 5. Name some of the important economic activities of people in ancient India.

Ans. Agriculture, domestication of animals, weaving cotton, dyeing fabrics, handicrafts, sculpting, masonry etc.

 

Q. 6. Which were the intermediaries who played an important role in the promotion of trade and commerce in ancient India?

Ans. These intermediaries were: brokers, distributors, commission agents, Jaga                                   seths, bankers etc.

 

Q. 7. Name the taxes imposed on trade and commerce in the ancient India.

Ans. Octroi duty, custom duty, ferry tax, labour tax etc.

 

Q. 8. Name any four major trade centres in ancient India.

Ans. Pataliputra, Peshawar, Taxila, Mathura.

 

Q. 9. Write any four major exports of India in ancient times.

Ans. Spices, indigo, opium, copper etc.

 

Q. 10. List any four major import items of ancient India.

Ans. Gold, silver, lead, rubies etc.

 

B. Fill in Blanks

 

1. India’s maritime trade with the rest of the world was done through ............ route.

2. The local bankers in ancient India were known as  ............ .

3. ............ and ............ were two financial instruments which were used to carry-out transactions in ancient India.

4. A hundi which is payable at sight is ............ hundi.

5. ............ hundi is that hundi which is payable after a specific period of time.

6.............. Hundi is drawn to cover the risk involved in the process of transit of goods.

 

Ans. 1.silk, 2.jagat seths, 3. Hundi and chitti, 4. darshani, 5. Muddati, 6. Jokhami

 

C. True/False

 

1. ‘Silk route’ was a maritime route for trade.

2. India’s civilisational centres like Harappa and Mohenjodaro had no trade and commerce relations with other contemporary civilisations.

3. The development of a traditional system of weights and measures also made a   significant contribution in the promotion of trade and commerce in ancient times.

4. A hundi is not capable of change through transfer.

5. Firman-jog hundi is payable on the order of the payee.

6. Small factories in the form of Karkhanas (Workshops) were also there in the ancient times.

7. In the ancient times, exports of India were more more than its imports and hence  balance of trade was favourable.

8. In the ancient times, modes of transport for trade were land and sea.

 

Ans. 1. False, 2. False, 3. True, 4. False, 5. True, 6. True, 7. True, 8. True

 

D. MCQ

 

1. Which of the following contributed in the development of trade and commerce in ancient India?

(a) Evolution of money

(b) Development of a traditional system of weights and measures

(c) Development of indigenous banking system

(d) All of these.

 

2. Which of the following is not a feature of Hundi?

(a) It warrants the payment of money

(b) It is not capable of change through transfer

(c) It is not capable of change through transfer by valid negotiation

 

3. The development of indigenous banking system promoted which of the following activities in the ancient India?

(a) Agriculture

(b) Domestication of animals

(c) Small factories in the form of karkhanas

(d) All of these.

 

4. Who provided loans for foreign trade in ancient India?

(a) Intermediaries

(b) Government

(c) Both (a) and (b)

(d) None of these

 

5. At which of the following trading centres of ancient India, did Chinese ships used to visit for trade ?

(a) Pulicat

(b) Calicut

(c) Both (a) and (b)

(d) None of these.

 

6. By whom, were guilds organised in ancient India ?

(a) Local bankers

(b) Intermediaries

(c) Trading communities

(d) All of these.

 

7. Which of the following taxes, was not imposed on trade and commerce in ancient India?

(a) Sales tax

(b) Octroi tax

(c) Ferry tax

(d) Custom duty.

 

Ans. 1. (d), 2. (b), 3. (d), 4. (a), 5. (b), 6. (c), 7. (a),