INTRODUCTION TO COMMERCE
Commerce is an important branch of business which involves buying and selling.
Commerce can be defined as the large scale of buying and selling of goods and services. Commerce is another term for describing trading of goods and services. It looks after the distribution aspect of a business. Transportation plays a very important role in commerce because the goods must be moved from the producer to the consumer.
Importance of commerce
Commerce is important due to the following reasons:
- Through commerce, people are able to move from place to place.
- Through commerce, raw materials and finished goods are able to be moved from one place to where they are needed.
- Through commerce, service providers make their services available to their users.
- Commerce helps to facilitate the distribution of goods and services, thereby leading to improve the quality of life for everyone in the society.
- Commerce encourages specification which leads to increased output of goods and services
- Commerce helps to generate employment
- Commerce provide s businesses with storage by ware housing.
- Commerce helps to create awareness of available goods and services.
- Commerce provides opportunities for business to raise capital with the help of banks. It also enable money to circulate within the economy
- Commerce helps to minimize risks with the help of insurance.
- Commerce provides revenue for government through commercial activities.
- Commerce encourages friendship and international cooperation between nations by enabling countries to import and export goods and services.
Trade can be defined as the buying and selling of goods and services. Trade can occur in a physical market e.g. Yaba market, Oyingbo market even in the school tuck shop. Trade can also occur via electronic media e.g. online trading (Jumia). Though trade, the manufacturer or the produce produces goods and mouse them to the wholesaler and to the retailer and finally to the consumer.
Types of trade
This can be classified into two:
Home Trade Foreign Trade
Whole trade retail trade import export entreport
Home Trade: This is also known as domestic commerce. This is the buying and selling of goods and services which takes place within the boundaries of a country. An example of home trade is the trade between traders from Lagos and those from Kebbi.
Home trade can be classified into wholesale and retail trade.
- Wholesale trade is the type of trade which involves purchasing goods in large quantities of goods from the manufacturers for later sale in smaller quantities to retailers. A wholesale is a person who deals in wholesale trade.
Advantages of wholesaler
The principal merits of the wholesaler are the following:
- The wholesaler offers a wide variety of possible choices under one root because he stocks products from several manufacturers.
- The wholesaler is in a position to offer credit to the retailer by allowing him/her to pay later for the goods collected.
- The wholesaler helps manufacturers to quickly dispose stimulating further production.
- The wholesaler pays the manufacturer in cash. This enables the manufacturer to contribute to produce goods.
- The wholesaler gives information about new products in the market to the retailer.
- The wholesaler sells in smaller quantities than the producer would find difficult.
- The wholesaler gives the producer important information regarding situations in the market as the link between the producer and the consumer.
- The huge storage by the wholesaler ensures steady supply of goods to the market if there are many irregularities.
This is a type of trade which involves buying goods in small quantities from the wholesaler for later sales in much smaller quantities to consumers. A retailers is an agent who deals in retail trade.
Advantages of retail trade
The principal merits of the retailer are as follows:
- The retailer sells a wide variety of products which makes buying convenient for the consumer.
- The retailer support the buying partner of the individual consumer who usually buys small quantities of products on a continuous basis.
- The retailer opens his/her shop at convenient hours usually from morning till night on a daily basis and at accessible locations.
- The relatively large number of goods and physical location of the retailers are convenient to the consumer retailer are found virtually everywhere.
- The retailer obtains essential information on the consumers’ needs, wants, and preferences directly from transfer to the producers.
- The retailer sometimes offers credit to his trustworthy customers under certain situations for examples when salaries are not paid on time.
Foreign trade: This is also international trade. This is the buying, selling and exchange of goods and services between two or more countries. Foreign trade is also called external trade. Good bought, sold or exchange in international trade could be finished products, intermediate goods used in producing other goods used in producing other goods or agricultural products or foodstuffs.
International trade enables a nation to specialize in those goods it can produce most cheaply and efficiently; and can also enable a country to consume more than it can produce if it depends only on its resources.
There are two main types of foreign trade namely: import and export.
Import trade is a trade which involves the buying of goods and services from other countries and bringing them for sale or use within the country. For example, the purchase of cars from china or electronic from japan is called import trade. Different goods and services are imported into various countries
Export trade is trade which involves the transfer of goods and services from one country to another for sale. Different goods and services are exported to various countries.
Agricultural produce, precious metals, stones, construction materials, industrial materials, art objects, computer software, machines, home and industry appliances, motor vehicles, computers and other hardware are all traded internationally. The more a country exports, the more money it earns. This boosts its economy.
Activities which aid trade
Activities which aid trade are:
- Establishment of well-planned markets and shopping centres.
- Transportation: This is the movement of people and goods from one place to another. Transportation aids trade through the following.
(a) The existence of an extensive road network
(b) The existence of a functional rail transportation
(c) The existence of good inland water transportation.
- Banking Institutions: Commerce is driven by the availability of finance, especially in the form of credit. The existence of commercial banks, mortgage banks, agricultural credit banks and other finance houses facilitate the granting of credit facilities to people needing such. This also aid trade.
iii. Insurance: The availability of insurance facilities international commerce. An economy in which there are credible insurance companies is favoured as this promotes commerce.
- Communication: If the existing communication network is efficient, information will move seamlessly within the markets among producers and consumers. This quickens decision-making processes and improve buying and selling.
- Tourism: Tourism provides travelling business men and women with hotel services like accommodation, meeting venues and other services which aids commerce.
vi: Ware housing: Ware houses are used for keeping huge quantities of goods. Where there are warehouses, goods can be quickly evacuated from factories thereby creating space for more production. This also aids buying and selling.
Establishment of well planned markets and shopping centered
The existence of infrastructure which aid trading such as well planned markets and shopping malls having large display spaces and located in secure environments encourage commerce.
Differences between international and domestic trade
International trade or external trade involves trade activities between two or more countries, while internal trade which is also known as domestic trade or home trade, is the buying and selling of goods and services within a given country.
Some of the main differences between international trade and domestic trade are as follows.
- International trade involves the use of two or more currencies while in internal trade only one currency is used.
- International trade involves two or more countries while one country is involve in internal trade.
- Goods and services more across different national boundaries in international trade while in internal trade, goods and services do not cross any international boundary.
- A mixture of locally produced goods and foreign goods are traded in international trade. Internal trade mainly involve locally made goods and services majority involved are locally made.
- There are restrictions in international trade but none in domestic or home trade.
Importance of Export Promotion
Export promotion is important due to the following reasons:
- Earning of foreign exchange: Exported goods are sold and paid for in foreign currencies also called foreign exchange. Foreign exchange is much needed to pay for machines and other equipment which will sustain and expand local production.
- Improvement of the income of manufacturers: Exportation results in an improvement in the income of the producer. The naturally leads to better financial position of the manufacturer and an expansion in the business.
- Granting access to foreign markets: exportation grants access to foreign markets. This helps to ensure continues production of goods and services.
- Define commerce
- List the importance of commerce.
- What is foreign trade
- List the types of foreign trade.
- Mention the aid to trade.
You might also like to learn: HONESTY IN BUSINESS