Most people think that the scope and nature of the business are very wide. It covers almost all activities associated with the production and distribution of goods and services from a source (the production place) to the destination (consumers) and aims to earn the profit.
There are two types of business activities or Business Components. These components actually define the scope of a business to us. Let’s enlighten the scope of a business organization with the help of these components.
Role of Business Components in the Scope of Business Organization
Following business components play an important role in the scope of business:
Industry
The word “Industry” refers to the business activities which are linked with the extraction and production or manufacturing of products. The product formed by an industry is either used by the vital consumers or again by the industry. If the product is used by the consumer it is called consumers’ goods such as clothes.
If the product is used again by the industry it is called the producer’s goods or capital goods. In a case when a product produced by the industry is further processed into finished products for other purposes they are called intermediate goods. e.g. plastic.
The industry is further divided into types on the basis of business activity:
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Extractive Industries
The industries which extract, raise and manufacture raw materials from above or under the Earth’s surface are known as Extractive Industries and they include mining, fisheries, forestry and agriculture, etc.
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Genetic Industries
The industries which are involved in reproducing and multiplying certain species of animals and plants and sell them in the market to earn a profit are named as Genetic Industries. These industries include cattle breeding farms, poultry farms and plant market, etc.
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Constructive Industries
The industries which are involved in the construction of building, canals, bridges, dams and roads, etc. are called Constructive Industries.
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Service Industries
The industries which are involved in manufacturing the intangible goods which cannot be seen but felt such as services of professionals like doctors, lawyers are examples of Service Industries.
Commerce
The second component of the scope of business is Commerce. It involves the buying and selling of goods and all the activities which are associated with the transfer of goods from the production source to the ultimate consumers or destination. The ranges of activities related to Commerce take place through:
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Trade
The process of buying and selling goods is called Trade. It is the process of exchanging goods and services amongst the buyers and sellers and both of them earn profits. Trade can be classified into two types; internal and external.
- Internal Trade: The process of buying and selling goods within a country is called internal trade. The internal trade can be either wholesale trade or retail trade.
- Wholesale Trade: In wholesale trade, the goods are purchased in bulk from the producers and sell them to the retailers. These retailers then sell these goods to the final consumers.
- Retail Trade: In the retail trade, the retailer sells goods and services to the final consumers.
- External Trade: The process of buying and selling goods between the two countries is called external trade. The external trade has two types; import trade and export trade.
The elements which help in the purchasing of goods and services are called aid to trade. There are certain constituents that are essential for the progress of the trade and are as follows:
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Transport
By using different ways of transport, the goods are transported from industry to the consumers. It includes railways, ships, airlines, etc.
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Insurance
Insurance is very important to aid to trade. Insurance reduces the risk of damage to goods due to fire, flood or earthquake, etc. by paying a good amount in this regard.
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Warehousing
Warehouses are used to keep the goods and are released and are delivered to the market when demanded. Thus, warehousing plays an important part to overcome the barrier of time and helps the goods reach the consumers in a short span of time.
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Banking
Commercial banks play an important role in financing trade activities. They provide funds to the traders for stock holding and transporting the goods. They also support the producers in purchasing and receiving at both national and international levels. The banks also offer credit facility in the form of cash credit, overdrafts and loans to the traders.
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Advertisements
Advertisements play an important part in selling the good to the consumers. The advertisement is either shown on television or printed in newspaper or magazines etc. and help the consumers to choose their desired product. Thus, advertisements are very important for the seller as well.
Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
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