MEANING AND SCOPE OF COMMERCE
Definition of Commerce
Commerce is trade and the aids to trade.
OR
Commerce is exchange and distribution of goods and services.
Commerce is all the activities involved in buying, selling and distribution of goods and services.
Commerce has to do with trade and the activities that help trade to take place.
Note: 1. Receiving goods & services and giving money is referred to as exchange. So exchange is buying and selling.
2. Distribution is moving goods from producer to consumer.
OR
Commerce is exchange and distribution of goods and services.
Commerce is all the activities involved in buying, selling and distribution of goods and services.
Commerce has to do with trade and the activities that help trade to take place.
Note: 1. Receiving goods & services and giving money is referred to as exchange. So exchange is buying and selling.
2. Distribution is moving goods from producer to consumer.
3. The most important function of Commerce is facilitating exchange of goods and services. That is, helping trade to take place.
Scope of Commerce
By scope of Commerce, we mean how wide the subject of Commerce covers.
First, we use a diagram to illustrate the scope of Commerce.
Definition of Trade
Scope of Commerce
By scope of Commerce, we mean how wide the subject of Commerce covers.
First, we use a diagram to illustrate the scope of Commerce.
Definition of Trade
Trade is buying and selling of goods and services.
Trade is divided into home trade and foreign trade.
(a) Home Trade
This is buying and selling of goods and services within a country. Home trade is also known as domestic trade or internal trade.
Types of Home Trade
(i) Retail Trade: This refers to selling in small quantities to final consumers.
(ii) Wholesale Trade: This is buying goods in bulk (i.e. in large quantity) from the producers/manufacturers and selling in small quantity to retailers.
(b) Foreign Trade
This is buying and selling of goods that occur between people in different countries. Another name for foreign trade is international trade or external trade.
Types of Foreign Trade
(i) Import Trade: This refers to purchasing goods from other countries.
(ii) Export Trade: This refers to selling goods to other countries.
(iii) Entrepot Trade: This refers to importing goods from one country and then exporting the goods to another country. Example, a Nigerian company imports goods from Germany and exports same to Ghana, without using the goods in Nigeria.
(c) Aids-to-Trade
These are activities that help trade to take place. It is also known as ancillary to trade.
The aids to trade are:
(i) Advertising: To bring information about goods and services to the knowledge of the customer. Or, creating awareness about goods and services.
(ii) Banking: This involves accepting business money as deposits for safe keeping and lending money to finance business activities.
Trade is divided into home trade and foreign trade.
(a) Home Trade
This is buying and selling of goods and services within a country. Home trade is also known as domestic trade or internal trade.
Types of Home Trade
(i) Retail Trade: This refers to selling in small quantities to final consumers.
(ii) Wholesale Trade: This is buying goods in bulk (i.e. in large quantity) from the producers/manufacturers and selling in small quantity to retailers.
(b) Foreign Trade
This is buying and selling of goods that occur between people in different countries. Another name for foreign trade is international trade or external trade.
Types of Foreign Trade
(i) Import Trade: This refers to purchasing goods from other countries.
(ii) Export Trade: This refers to selling goods to other countries.
(iii) Entrepot Trade: This refers to importing goods from one country and then exporting the goods to another country. Example, a Nigerian company imports goods from Germany and exports same to Ghana, without using the goods in Nigeria.
(c) Aids-to-Trade
These are activities that help trade to take place. It is also known as ancillary to trade.
The aids to trade are:
(i) Advertising: To bring information about goods and services to the knowledge of the customer. Or, creating awareness about goods and services.
(ii) Banking: This involves accepting business money as deposits for safe keeping and lending money to finance business activities.
(iii) Transport: To carry goods and providers of services from one place to another. Transportation is a commercial activity that facilitates distribution of products; it helps a firm cover the market with its goods.
Note: Transport and transportation are the same. In British English the word “Transport” is both a noun a verb. “Transportation is commonly used in American English.
(iv) Warehousing: This is storing goods until when needed by the customers/consumers.
(v) Communication: This is sending and receiving information and messages for business purposes. It links the seller (i.e. supplier) and the buyer (i.e. consumer)
(vi) Insurance: This is an arrangement where a periodic payment called premium is made in exchange for a promise of compensation for certain potential future losses.
Trade vs Commerce
Note: Transport and transportation are the same. In British English the word “Transport” is both a noun a verb. “Transportation is commonly used in American English.
(iv) Warehousing: This is storing goods until when needed by the customers/consumers.
(v) Communication: This is sending and receiving information and messages for business purposes. It links the seller (i.e. supplier) and the buyer (i.e. consumer)
(vi) Insurance: This is an arrangement where a periodic payment called premium is made in exchange for a promise of compensation for certain potential future losses.
Trade vs Commerce
Now we compare trade and commerce
Basis for comparison | TRADE | COMMERCE |
Meaning | Exchange of goods & services for money | Exchange of goods & services plus activities such as transportation, banking, insurance, etc, carried out for money |
Scope | Narrow | Wide |
Link | Between buyer and seller | Between producer and consumer |
Functions/Importance of Commerce
The functions of Commerce are reasons why it is important. They are:
1. Facilitates exchange of goods and services: This means that commerce makes it possible for exchange of goods and services to take place.
2. Provision of employment opportunities: Those who engage in trade and other commercial activities such as advertising, transportation, banking, etc are said to be employed.
The functions of Commerce are reasons why it is important. They are:
1. Facilitates exchange of goods and services: This means that commerce makes it possible for exchange of goods and services to take place.
2. Provision of employment opportunities: Those who engage in trade and other commercial activities such as advertising, transportation, banking, etc are said to be employed.
3. Creation of Utility: Utility means satisfaction. When goods and services are exchanged, the consumers do have satisfaction when they use them.
4. Generation of revenue to the government: The govt do tax commercial organizations and commercial activities, thereby generating revenue through tax to the govt.
5. Foreign Exchange Earnings: Countries do earn foreign money (foreign currencies) from export trade and other commercial activities.
Hint: When a country earns foreign currencies such as the US dollar, the British pounds, etc. through its exports; it would then have foreign currency to pay for its imports. Without having foreign currency, how would you pay for your imports? Except the exporter accepts to receive payment in your own currency.
6. Commerce helps to increase standard of living: Standard of living refers to how people enjoy goods material things. Goods and services (i.e. material things) move from the producer to the consumer through commercial activities.
7. Commerce links the producer and consumer: Goods that are manufactured are meaningful only if they get to the final consumer. It is commercial activities that brings manufactured goods to the consumers
8. Commercial activities increase national income and wealth of a country: National income is money value of goods and services produced in a country. The money value of commercial activities, which are services, adds to the national income and wealth of a country
9. Meeting of consumers’ needs and wants: All commercial activities occur in an attempt to satisfy the needs and wants of the users – the consumers.
Hint: Needs are goods and services that are necessary or important to humans. They are otherwise known as necessities. Wants are luxuries. Luxuries are what people like to have for prestige, or what people want but do NOT need.
However, it is NO offence to have luxuries. So it is made available to consumers that desire and can afford them.
4. Generation of revenue to the government: The govt do tax commercial organizations and commercial activities, thereby generating revenue through tax to the govt.
5. Foreign Exchange Earnings: Countries do earn foreign money (foreign currencies) from export trade and other commercial activities.
Hint: When a country earns foreign currencies such as the US dollar, the British pounds, etc. through its exports; it would then have foreign currency to pay for its imports. Without having foreign currency, how would you pay for your imports? Except the exporter accepts to receive payment in your own currency.
6. Commerce helps to increase standard of living: Standard of living refers to how people enjoy goods material things. Goods and services (i.e. material things) move from the producer to the consumer through commercial activities.
7. Commerce links the producer and consumer: Goods that are manufactured are meaningful only if they get to the final consumer. It is commercial activities that brings manufactured goods to the consumers
8. Commercial activities increase national income and wealth of a country: National income is money value of goods and services produced in a country. The money value of commercial activities, which are services, adds to the national income and wealth of a country
9. Meeting of consumers’ needs and wants: All commercial activities occur in an attempt to satisfy the needs and wants of the users – the consumers.
Hint: Needs are goods and services that are necessary or important to humans. They are otherwise known as necessities. Wants are luxuries. Luxuries are what people like to have for prestige, or what people want but do NOT need.
However, it is NO offence to have luxuries. So it is made available to consumers that desire and can afford them.
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