Chapter 3

Chapter 3: Commerce
 Commerce is concerned with distribution of goods and services. Does not

deal with making goods but providing service that make the exchange of
goods and services more efficient
 It may be described as trade and the aids to trade or as trade
 May also be defined as services that improve distribution of goods and
services or services that enable right goods to be at right place, or at right
time and at right price
 May also be defined as activities which contribute to transfer of surplus
goods from original producer to final consumer
Commerce
Trade Aids to trade
Banking and finance
Home Foreign communications
Advertising transport
Wholesale Export and Import Warehousing insurance
Retail
 Trade
 Trade is the buying and selling of goods and services to make a profit
 If people buy and sell without any money involved, they are bartering
or swooping goods and services which is not trade
 Trade is basis of all commercial activity
 Home trade:
o Internal trade of the country
o Both buyers and sellers are citizens of same country
o Home trade involves wholesalers and retailers who may trade
in large or small quantities
o Home trade enables more personal contact between buyer
and seller
o Terms of payment are easily arranged and delivery of goods is
usually by road or rail
 Wholesale trade:
o Concerned with buying from producers or manufacturers,
usually in bulk
o They break bulk in to small quantities and sell to retailers
o Wholesale trade also takes place in foreign trade with agents
and brokers bringing buyers and sellers together
 Retail trade
o Is selling of goods (usually in small quantities) and services to
consumers who make use of them for their own purposes
o Retail trade also involves purchase of goods from producers,
manufacturers, and wholesalers, so that there are supplies to
sell to final consumer
o Retail trade takes place in shops in villages, towns and cities,
but increasingly in other forms of selling such as mail order,
telesales, and internet shopping
 Foreign or overseas trade
o External trade of country
o Involves buying and selling between countries
o Foreign trade involves exporters and importers who usually
deal in large quantities
o Widens the variety of goods and services available in a
country, raises standard of living, and also disposes of
country’s surplus products
o Most countries are not self-sufficient so trade is important for
them
 Export trade:
o Sale of goods and services to buyers in other countries to
earn foreign currency and dispose of surpluses
 Import trade:
o Buying of goods and services from sellers in other countries
 Reasons for increase in all kinds of trade
 Improvement in transport have led to goods being delivered quicker
and in greater quantities
 Improvements in communication have made it easy for people to
contact each other overseas
 Improved standard of living and rising expectations of consumers
have increased demand for all types of goods and services
 Mass production and increased use of technology in production
have led to increased output of cheap standardized goods
 Economic success of particular countries
 Development on international system of banking has made easier
to obtain payment for exported goods
 Many governments keen to promote trade, they encourage
exporters by organizing trade missions overseas and have trade
representatives in many countries overseas
 Growth of multinational companies with offices and factories in
many parts of the world has made it possible for greater export of
their products
 Low costs of production, particularly wage rate, in some countries
has led to much manufacturing being from developed countries to
developing countries
 Aids to trade
 Aids to trade are commercial services which assist functioning of
trade. There are 6 of them:
 Banking and finance:
o Concerned with methods by which payments are made
o Banking allows seller to receive their payments into their
bank accounts
o Also offer bank statements and ATMs
o Also provide finance for trade and commercial activities in
form of loans, overdrafts, and mortgages
 Communications:
o Enable people to contact one another both at home and
abroad
o Buyers and sellers can make transactions over short or long
distance using variety of telecommunications and postal
services
 Advertising:
o Import part of marketing goods and services
o May be used to introduce new products or services, to
inform people of new changes in products, or to persuade
them to buy the products
o Without advertising, no one would know of the products
and there would no point in producing them
o Advertising also attempts to maintain and create future
demand by using variety of media such as t.v or radio or
other appealing methods
 Transport:
o Movement of good, raw materials, equipment, and people
from one place to another
o Enables people to get to work
o Helps to extend markets for goods
o Plays important part in development of global economy
o Without these forms of transport, people would be confined
to their immediate areas and would be forced to trade
locally
 Warehousing:
o Provides storage of goods after processing or manufacturing
and after purchase
o Goods stored may be raw materials, semi-manufactured
good or finished goods
o Goods may be stored for long time to maintain supplies, to
prevent fluctuations in prices or to cope with seasonal
demand
o Warehousing needed by wholesalers but also required by
manufacturers and retailers to ensure safe storage of their
goods
 Insurance:
o Method by which people obtain protection by payment of
premiums against losses which result from risks
o Compensation is provided when a claim is made and this
financial protection enables many businesses to trade with
confidence

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Chapter 3

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Chapter 3: Commerce

 Commerce is concerned with distribution of goods and services. Does not

Trade Aids to trade

Banking and finance

Home Foreign communications

Wholesale Export and Import Warehousing insurance

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