Introduction to Commerce and Business Environment
Scope: industry versus commerce
Production is industry; commerce is everything that moves goods from producer to consumer. Commerce = trade (internal and international) plus the auxiliaries to trade: banking, insurance, transport, warehousing, advertising and communication. Auxiliaries do not create goods but remove hindrances of place (transport), time (warehousing), risk (insurance), finance (banking) and information (advertising, communication).
Business, profession and employment
Business involves risk and profit; a profession needs specialised knowledge and a service motive (chartered accountancy, medicine); employment is work under a contract for a fixed wage.
Business environment
Internal factors are controllable: value system, mission, management structure, human resources. External factors are largely uncontrollable: micro (customers, suppliers, competitors, intermediaries, public) and macro (economic, political, legal, technological, social, demographic, natural). India's 1991 New Economic Policy - liberalisation, privatisation, globalisation - and the GST of 1 July 2017 reshaped this environment.
Worked example
A tea factory in Dibrugarh buys green leaf from small growers, processes it, sells through Guwahati auctions, hires trucks, insures stock and advertises a packet brand. Identify the commerce elements. Reasoning: buying leaf and auction sale = trade; trucks = transport; insurance = risk; auction storage = warehousing; packet advertising = promotion. The processing itself is industry, not commerce.
Traps that cost marks
- Writing "commerce = trade". Trade is only one part.
- Listing advertising as an auxiliary but forgetting banking, insurance or warehousing.
- Mixing micro factors (competitors) with macro factors (technology).
- Claiming GST replaced income tax - it replaced many indirect taxes.