Class 11
Business Studies
Chapter 1
Business, Trade &
Commerce
Section 1
History of Trade and Commerce
History of Trade and Commerce
Trade and commerce have played a vital role in making India as a major actor in the economic word in ancient times
History of Trade and Commerce
Commercial cities like Harappa and Mohenjodaro were some examples for the business development of ancient India
History of Trade and Commerce
These civilizations had established commercial connections with Mesopotamia and traded in gold, silver, copper, gemstones, beads, pearls, sea shells etc.
Mesopotamian Civilisation
Present day Iraq, Kuwait, Iran and Syria
History of Trade and Commerce
There were different types of coins and weighing practices during that time
Indigenous Banking System
As economic life progress, metallic money had been introduced which in turn accelerated the economic activities
Documents such as Hundi and Chitti were in use for carrying out transactions in which money passed from hand to hand
Indigenous Banking System
Hundi as an instrument of exchange, it involved a contract which warrant the payment of money, the promise or order which is unconditional and capable of change through transfer by valid negotiation
Indigenous Banking System
Indigenous banking system played a prominent role in lending money and financing domestic and foreign trade with currency and letter of credit
With the development of banking, people began to deposit precious metals with lending individuals functioning as Bankers or Seths
Hundies practiced by Indian Merchant Communities | ||
Name of Hundi | Category | Function |
Dhani-jog | Darshani | Payable to any persons – no liability over who received the payment |
Sah-jog | Payable to a specific person (someone respectable). Liability over who received the payment. | |
Firman-jog | Payable to order | |
Dekhan-har | Muddati | Payable to the presented or bearer. |
Dhani-jog | Payable to any person – no liability over who received the payment, but payment over a fixed term. | |
Firman-jog | Payable to order following a fixed term. | |
Jokhmi | Drawn against dispatched goods. If goods lost in transit, the drawer or holder bears the costs and the drawee carries no liability. | |
Rise of Intermediaries
Intermediaries played an important role n the promotion of trade. They helped the producers especially in foreign trade.
They consist of commission agents, brokers and distributors for wholesale and retail of goods.
Transport
Land Transport and Water Transport were popular in
ancient times
Roads as a means of transportation had assumed key importance in the process of growth especially in inland trade
Eg: The northern trade route from Bengal to Taxila
Transport
Maritime trade was another important branch of global trade network
Muziris (ancient harbor) in Malabar Coast (near to the present-day Cochin) has a long history of international maritime trade
Transport
Calicut was also an important market for Chinese to acquire items like frankincense, pepper (black gold), pearls, cotton etc.
Pulicat on Coromandel Coast (Tamil Nadu) was a major port in the 17th century
Textiles were the principal export item from Pulicat to Southeast Asia
Merchant Corporations
They were autonomous corporations (guilds) formed to protect the interests of the traders
These corporations were organised on formal basis, framed their own rules and code of conduct, which even kings were supposed to accept and respect
Merchant Corporations
The guild chief directly dealt with the king or tax collectors and settled the market toll (tax) on behalf of its fellow merchants at a fixed sum of money
Major Trade Centres
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Major Trade Centres
Pataliputra
Patna in Bihar today Commercial town and major centre for export
of stones
1
Major Trade Centres
Peshawar
City in Pakistan
Very popular for export of wool and for the import of horses. Major transactions between India, China and Rome in the first century
2
Major Trade Centres
3
Taxila
City in Pakistan, also called Thakshashila Popularly known as the city of financial and commercial banks
Major Trade Centres Indraprastha
Located in the region of present-day New Delhi
It was a commercial junction where most routes leading the east, west, south and north converged (joined)
4
Major Trade Centres
Mathura
City in UP
It was an emporium of trade and people here subsisted (lived) on commerce
5
Many routes from South India touched Mathura and Broach (Bharuch in Gujarat)
Major Trade Centres
Varanasi City in UP
Well known centre for textile industries and became famous for gold silk cloth and sandalwood workmanship
6
It had links with Taxila and Bharuch
Major Trade Centres
Mithila
City in Bihar
The traders in this city crossed the seas by boats, through Bay of Bangal to the South China
7
They established trading colonies in South China
Major Trade Centres
Ujjain
City in MP
Different verities of clothes were exported to different centres.
8
It had trade connections with Taxila and Peshawar.
Major Trade Centres
Surat
City in Gujarat
It was an emporium of western trade during
Mughal period
9
They were also famous for gold boarder sarees
Major Trade Centres
Chinese came here to purchase pearls, glass and rare stones and in return they sold gold and silk
Kanchi
Present day Kanchipuram in Tamil Nadu
10
Major Trade Centres
11
Madura City in Tamil Nadu
It was the capital city of Pandya dynasty who controlled the trade of pearl and fisheries of the Gulf of Mannar (shallow in between India and Sri Lanka)
Major Trade Centres
Broach
Present day Bharuch in Gujarat
It was a major trade centre in Western India
12
Major Trade Centres
Kaveripatta
Present day Kaveripattanam in Tamil Nadu
It was scientific in its construction as a city and provided loading, unloading and strong facilities of merchandise
13
It was also famous for perfumes, cosmetics, scents, silk, wool, cotton and also for ship building
Major Trade Centres Tamralipti
City in West Bengal (Kolkata)
It was one of the greatest ports connected both by sea and land
14
It was linked by road to Banaras (UP) and Taxila
Major Exports
and
Imports
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Major Exports and Imports
Export Items:
Spices, wheat, sugar, indigo, opium, sesame oil, cotton, parrot, live animals and animal products etc.
Spices
Major Exports and Imports
Import Items:
Horses, animal products, Chinese silks, linen, wine, gold, silver, copper, etc.
Chinese silks
Position of Indian Subcontinent in World Economy
(1AD to 1991)
India in World Economy
From 1st to 7th centuries, India was estimated to have the largest economy in the world
The country was often referred as ‘Swarnabhumi’ and ‘Swarnadweep’ by many writers and travelers like Megasthenes, Faxian (Fa Hien), Xuanzang (Huen Tsang) etc. because of its prosperity
India in World Economy
During 18th century, the British empire began to take roots in India, thereby the Indian economic condition was slowly changed from being an exporter of processed goods to the exporter of raw materials and buyer of manufactured goods
India begins to Reindustrialise
India begins to Reindustrialise
After independence, the process of rebuilding the Indian economy have been started
As a part of this the first five year plan was implemented in 1952.
5 Year Plan
India begins to Reindustrialise
Due importance was given to the establishment of modern industries, modern technological and scientific institutes, space and nuclear programs
India begins to Reindustrialise
To overcome the problems of lack of capital, rise in population, huge expenditure on defence, inadequate infrastructure etc. India relied heavily on borrowings from foreign sources and finally, agreed to economic liberalization in 1991
Liberalization
India begins to Reindustrialise
The Indian economy is one of the fastest growing economies in the world today
The high growth sectors have been identified, which are likely to grow at a rapid pace
India begins to Reindustrialise
The recent initiatives of the Government of India such as ‘Make in India’, ‘Skill India’, ‘Digital India’, Foreign Trade Policy 2015-20 etc. is expected to help the economy in terms of exports and imports and trade balance
Section 2
Nature and Concept of Business
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Concept of Business
The term business is derived from the work ‘busy’.
Therefore, business means being busy.
Business refers to an occupation in which people regularly engage in activities related to purchase, production and / or sale of goods and services with a view to earn profits
Concept of Business
Business is defined as the “repeated buying and selling or manufacturing of goods and services with an intention to earn profit which involves the creation of wealth.”
Example; A factory, A retail shop, Commission agents, brokers etc.
Concept of Business
People undertake various activities to satisfy their needs
These activities can be classified into two, they are
Economic Activities and Non-Economic Activities
Economic Activities
Non-Economic Activities
Human Activities
Economic Activities
Economic Activities
Activities undertaken to earn money or money’s worth and related to production and exchange of wealth
Eg; Running a factory, Retail shop, Cultivating land etc.
Economic Activities
Characteristics of Economic Activities
a. Related to Production of Wealth
Economic Activities
Characteristics of Economic Activities
b. To Satisfy Human Wants
Economic Activities
Characteristics of Economic Activities
c. Expectation of Earning Money
Economic Activities
Characteristics of Economic Activities
d. Basis for Economic Development of the Society
Non-Economic Activities
Non-Economic Activities
Activities which are undertaken not for any reward but for the personal satisfaction
Example: A mother looks after her children, A house-wife cooks food for the family, Visiting Temples etc.
Differences Between Economic Activities & Non-Economic Activities
Economic Activities Vs.
Non-Economic Activities
To earn money or money's worth
For personal satisfaction
Non-Economic Activities
Economic Activities
Economic Activities Vs.
Non-Economic Activities
It can be measured In terms of money
It cannot be Measured in Monetary terms
Non-Economic Activities
Economic Activities
Economic Activities Vs.
Non-Economic Activities
Money is the reward
Mental satisfaction Is the reward
Non-Economic Activities
Economic Activities
Types of Economic Activities
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Types of Economic Activities
Profession
Employment
Business
Characteristics of Business
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Characteristics of Business
1. An Economic Activity
It is undertaken with an object of earning money or livelihood but not for love, affection etc.
Eg: Purchase and sale of articles by a shop keeper
Characteristics of Business
2. Production or Procurement of Goods and Services
Every business should either produce or acquire the goods in which it deals
Goods may consists of capital goods and consumer goods Eg: Capital Goods: Machinery, Furniture,
Consumer Goods: Sugar, Pen, Notebook etc.
Characteristics of Business
Services may include facilities offered to consumers like transportation, banking,
electricity etc.
Characteristics of Business
3. Sale or Exchange of Goods & Services There should be sale or exchange of
goods or services between the seller and buyer
Goods produced for personal consumption is not a business
Characteristics of Business
4. Dealing in Goods & Services on a Regular Basis
A single transaction cannot be treated as a business
Eg: A persons sells his old scooter even at a profit cannot be treated as a business as there is no continuity.
Characteristics of Business
5. Earning Profit
The business activity must be intended to earn profit
Businessman should take all possible efforts to maximise the profit by increasing sales volume or reducing cost
Characteristics of Business
6. Uncertainty of Return
No business can predict its future profit
Characteristics of Business
7. Element of Risk
Every business is subject to risk due to various reasons
Eg: Change in fashion, fire, theft, natural calamities etc.
Characteristics of Business
Comparison of Business Profession & Employment
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Business – Profession - Employment
Business
Based on entrepreneur's Decision
Profession
Employment
Appointment Order
Mode of establishment
1
Membership of professional body
Business – Profession - Employment
Business
Providing goods and services to the public
Profession
Employment
Performing work as per service contract
Nature of work
2
Rendering personalised expert services
Business – Profession - Employment
Business
No minimum qualification
Profession
Employment
As prescribed by the employer
Qualification
3
Prescribed qualification and training
Business – Profession - Employment
Business
Profit
Profession
Employment
Salary or Wage
Reward of return
4
Fees
Business – Profession - Employment
Business
Large capital based on the size of business
Profession
Employment
No Capital
Capital investment
5
Limited capital
Business – Profession - Employment
Business
High Risk
Profession
Employment
No Risk
Risk
6
Little Risk
Business – Profession - Employment
Business
Transferable
Profession
Employment
Not Transferable
Transfer of interest
7
Not Transferable
Business – Profession - Employment
Business
No code of conduct is prescribed
Profession
Employment
Laid down by the employer
Code of conduct
8
Professional code of conduct followed
Business – Profession - Employment
Business
Shop, Factory etc.
Profession
Employment
Jobs in banks, insurance, Govt. departments etc.
Examples:
9
CA, Legal, Medical Profession etc.
Comparison: Business, Profession and Employment
| Basics | Business | Profession | Employment |
1 | Mode of Establishment | Entrepreneur’s decision and legal formalities | Membership of a professional body | Contract of employment |
2 | Nature of work | Providing goods and services to the public | Rendering personalized and expert service | As per the contract |
3 | Qualification | No minimum qualification | Prescribed qualification by the professional body | Prescribed by the employer |
4 | Reward or return | Profit | Fees | Salary or wages |
5 | Capital Investment | High | Limited | No capital |
Comparison: Business, Profession and Employment
| Basics | Business | Profession | Employment |
6 | Risk | High | Limited risk | Little risk |
7 | Transfer of interest | Possible | Not possible | Not possible |
8 | Code of conduct | Not prescribed | Prescribed by the professional body | Laid down by the employer |
9 | Examples | Shop, Factory etc. | CA, Legal, Medical Profession etc. | Jobs in banks, insurance, govt. departments etc. |
Classification of Business Activities
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Classification of Business Activities
Industry
Commerce
Classification of Business Activities
Classification of Business Activities
Industry
Industry refers to that part of business which is concerned with the production of goods and
material
An industry may be classified into primary industry, secondary industry and tertiary industry
Types of Industries
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Types of Industries
Primary Industry
Engaged in extracting, producing and processing of natural resources
Eg: Extractive industries and genetic industries
Classification of Primary Industries
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Classification of Primary Industries
Eg: Mining, fishing, agriculture, quarrying etc.
Extractive Industries
They are engaged in the extraction
( collection) of useful materials from the
earth and sea
Classification of Primary Industries
Extractive Industries
The products of these industries are either directly consumed or used as raw materials by other industries
Coal
Classification of Primary Industries
Genetic Industries
Engaged in the reproduction or multiplication of plants and animals
E.g. Plant nurseries, Poultry farms, cattle breeding farms etc.
Types of Industries
Eg: Manufacturing industries and Construction industries
Secondary Industries
They are concerned with the materials which have already been produced at the primary stage
Oil Refinery
Classification of Secondary Industries
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Classification of Secondary Industries
Manufacturing Industries
Engaged with the conversion of raw materials into finished goods
E.g: Cotton into textiles, timber into furniture etc.
Classification of Secondary Industries
Manufacturing Industries
They change the form of goods i.e. raw material into finished goods and thus create form utility
Raw Materials for Cement
Classification of Secondary Industries
Manufacturing Industries
They produce Consumer Goods, Industrial Goods and Capital Goods
Types of Manufacturing Industries
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Types of Manufacturing Industries
a Analytical Industries
Analyses and separates different elements from the same materials
Eg: Oil refinery
Types of Manufacturing Industries
b Synthetical Industries
Combines various ingredients into a new product
Eg: Cement is produced from Lime, Silica, Magnesia etc.
Types of Manufacturing Industries
c Processing Industries
It involves successive stages for manufacturing finished products
Paper Making Process
Eg: Sugar, Paper etc.
Types of Manufacturing Industries
d Assembling Industries
Assembles different component parts to make a new product
Eg: Car, T V, Computer, Mobile Phone etc.
Classification of Secondary Industries
Construction Industries
Engaged in the construction of buildings, dams, roads, bridges etc.
They use the products of manufacturing industries and extractive industries
Types of Industries
Eg: All service activities which are auxiliaries to trade like transport, banking, insurance etc.
Tertiary Industries
They are providing support services to primary and secondary industries and it form part of commerce
Insurance
Commerce
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Commerce
It is concerned with buying, selling and distribution of commodities and it is an organized system for exchange of goods and services in between the businessman and the customers
Commerce
It is also concerned with the marketing aspects of business, i.e. supply of right type of goods to the right persons, at the right time and at the
right price
:. Commerce includes trade and aids to trade
Commerce
Commerce
Aids to Trade
Trade
Commerce
Definition
The sum total of all those activities which are involved in the removal of hindrances in the process of exchange of goods
Functions of Commerce
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Functions of Commerce
1. Removal of Hindrance of Person
It refers to the lack of contact between the producers and customers
Here the trader acts as an intermediary among them and customers are able to find out the products which they are wanted from the market
Functions of Commerce
2. Removal of Hindrance of Place
Producers and customers are in distant places, hence the commodities should be transferred from the production centre to the customers
This problem can be solved by the system of commerce by means of transport, packing and insurance
Functions of Commerce
3. Removal of Hindrance of Risk
Goods and properties of business are subject to various risk such as fire, theft, damage etc.,
They can be protected by insurance
Functions of Commerce
4. Removal of Hindrance of Time
There may be a gap between the production and consumption as the production is carried out in anticipation of future demands
Therefore, it becomes necessary to store the goods until they are sold
This problem can be solved by warehousing
Functions of Commerce
5. Removal of Hindrance of Knowledge
Knowledge of customers about the products and services offered by business organisations is a major problem in business
Advertising helps in the removal of hindrance of knowledge among the buyers
Functions of Commerce
6. Removal of Hindrance of Finance
The problem of finance can be handled by banks, which form part of commerce
It will also help the businessman in exchange of money between different persons at different places
Functions of Commerce
Make in India
It is an initiative launched by the Government of India on 25th September 2014, to encourage national and multinational companies to manufacture their products in India.
Make in India
Its major objectives are job creation and skill enhancement in 25 sectors of the economy.
Some of them are, Automobile, Aviation, Biotechnology, Chemicals, Construction, Defense, Electrical Machinery, Food processing, I T, Oil and Gas, Media and Entertainments, Mining, Railways etc.
Trade
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Trade
Buying and selling of goods, which involves the exchange of commodities for money or money’s worth
Types of Trade
Trade
Foreign Trade
Home Trade
Types of Trade
Home Trade
It is also known as domestic trade or internal trade
Kochi
Buying and selling of goods within the country and both the buyer and seller should belong the same nation
Mumbai
Types of Trade
Home Trade
Retail Trade
Wholesale Trade
Types of Trade
Wholesale Trade
Buying and selling in large quantities
A wholesaler buys goods directly from the producers and sells them to the retailers
a
Types of Trade
Retail Trade
Buying and selling of goods in small quantities
A retail trader buys goods from the wholesalers and sells them to the customers
b
Types of Trade
Foreign Trade
Export
Import
Entrepot
Types of Trade
Foreign Trade
It is also known as External trade or international trade
It involves the buying and selling of goods and services in between the persons belonging to two or more countries
Types of Trade
Export
Sale of goods to foreign countries
a
Types of Trade
Import
Purchase of goods from foreign countries
b
Types of Trade
Entrepot
Importing goods from one country for the purpose of exporting them to some other countries
c
India
China
England
Types of Trade
Home Trade
Foreign Trade
Wholesale Trade
Retail Trade
Export Trade
Import Trade
Entrepot Trade
AidstoTrade
(AuxiliariestoTrade)
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AidstoTrade
The activities which assist trade are called Aids to Trade or Auxiliaries to Trade
AidstoTrade
Aids to trade includes Transport, Insurance, Warehousing, Advertising etc.
Banking,
These service enterprises facilitate movements, finance, risk coverage, storage, and sales promotion of goods
AidstoTrade
Transport and Communication
Usually production takes place in certain locations and consumption all over the country
This problem is removed by transport through various modes such as road, rail or water transport
1
AidstoTrade
Along with transport, Communication is very essential, which helps the producers, traders and consumers in exchange of information
Postal service, telephones and other modern means of communication may be regarded as auxiliaries to business activities
AidstoTrade
Banking and Finance
All business concerns need fund for acquiring assets, raw materials and meeting day today
expenses
2
Finance is the foundation of all business provided by banks
AidstoTrade
How banks help the business ?
Banks accept deposits from the public and provide credit facilities for business
They lend money (O/D, CC, Loans), discounting of bills, collection of cheques, remittance facilities and various other services to the business community
AidstoTrade
Insurance
Insurance provides protection against the risk of loss due to accident, fire, earthquake, theft, damage of goods in stock and transit
3
On payment of a nominal amount called premium, the amount of loss or damage is compensated by the insurance company
AidstoTrade
Warehousing
Production is always in anticipation of future demands, so that the products are to be kept in good condition until they are sold
4
Warehouses facilitates storage of goods and stabilises prices by equalising supplies
AidstoTrade
Advertising
5
It helps to reach millions of customers for promoting sales and giving information about the product
Thus advertising makes possible marketing of goods and services on a large scale
AidstoTrade
(AuxiliariestoTrade)
Objectivesof Business
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ObjectivesofBusines
It refers to the position of an enterprise in relation to its competitions by providing quality products and better service to its customers
Market Standing
a
ObjectivesofBusines
Innovations (Novelty)
Innovation means the introduction of something new to the market. It may be a new design, new quality for the existing product, new method of production etc.
b
1990's
ObjectivesofBusines
Every enterprise should aim at greater efficiency and productivity by the best use of available resources
Productivity
c
ObjectivesofBusines
d
Physical and financial resources
Acquiring physical resources like buildings, plant and machinery, offices etc. and financial resources or fund for its operations and ensure its efficient use
ObjectivesofBusines
Earning profits
Profit is regarded as the life-blood of a
business to survive and to make growth and development of the enterprise
e
ObjectivesofBusines
The enterprise should take much initiative to improve the efficiency of its managers by conducting various programs to motivate them
Manager performance and development
f
ObjectivesofBusines
g
Worker performance and attitude
Every enterprise should aim at improving its workers performance and their positive attitude
ObjectivesofBusines
Social responsibility
It refers to the social obligations of business firms to contribute resources for solving social problems and to work in a socially desirable manner
i
ObjectivesofBusiness
BusinessRisk
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BusinessRisk
Risk = Possibility of loss
It can be defined as the chances of loss due to certain uncertain events in the future
BusinessRisk
Types of Risk
Speculative Risk
Pure Risk
BusinessRisk
Speculative Risk
It involves both chances of gain or loss.
If the market condition is favourable it will result in gain, otherwise, loss.
It arises due to change in demand and supply, change in taste and habits of customers etc.
BusinessRisk
Pure Risk
Possibility of loss or even no loss.
If such events take place, it may result in loss, non-occurrence of such events results in absence of loss, instead of gain
It arises due to fire, theft, earthquake, strike etc.
NatureofBusinessRisk
Eg: Change in demand, Govt. Policy, Epidemic like Corona Virus etc.
1
It arises due to uncertainties
Lack of knowledge about what is going to happen in future
Avoid
Plastic
Use
Paper
Bags
Govt. Policy
NatureofBusinessRisk
Risk can be minimised but cannot be eliminated
2
It is an essential part of every business
Every business has its own risks, no business can avoid risk
NatureofBusinessRisk
Eg: 1. Business dealing with fashionable items has a high degree of risk
2. A large scale business has high risk than small scale
3
Degree of risk depends on the nature and
size of business
NatureofBusinessRisk
4
Profit is the reward for bearing risk
An entrepreneur takes risks under the expectation of higher profit
No risk means no gain
Methodsof dealingwithRisk
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How todealwithBusinessRisk
Methods of dealing with risk:
Causesof BusinessRisk
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CausesofBusinessRisk
1
Natural Causes
Risk due to natural calamities
It may include damages from flood, fire,
earthquake etc.
CausesofBusinessRisk
2
Human Causes
It may arise due to certain human activities
Eg: Theft, bad debt, mistakes, accidents etc.
CausesofBusinessRisk
3
Economic Causes
It includes uncertainties relating to demand for products, competition, price, change in technology, rise in interest rate, higher taxes etc.
CausesofBusinessRisk
4
Other Causes
Political disturbances, mechanical failures, change in exchange rates, etc. come under this category
Natural Causes
Causes of Risk
Other Causes
Economic Causes
Human Causes