Commerce and Functions / Scope of Commerce or Auxiliaries to Trade:
Commerce - Defined:
Commerce refers to all those activities that bring about distribution of goods among consumers and users according to their tastes, needs and convenience.
Commerce links the producers with consumers. It embraces all those activities which help to break the barriers between producers and consumers. Direct selling to consumers is rather an exception nowadays on the part of the producers. Production is centered at certain places but consumers are scattered far and wide. Between buying from producers and selling to consumers, there arises the necessity of providing a number of services namely transportation, warehousing, insurance, banking, advertising etc.
In short , commerce embraces all such activities which seek to facilitate buying and selling of goods and it has been defined as the sum of those processes which are engaged in the removal of hindrances of persons , place , time , finance , risk and knowledge.
Functions of Commerce / Scope of Commerce:
The scope or functions of commerce can be determined by the fact that it facilitates buying and selling of goods and services by removing all hindrances in the transit of goods and services from their producers to their ultimate consumers. The factors or elements of commerce are following:
- Functions of Exchange / Trade
- Auxiliaries or Aids to Trade a)Function of Distribution b)Facilitating Function
- Function of Exchange / Trade:
Trade means buying and selling. Producers are few in numbers and they cannot sell directly to the ultimate consumers that are scattered far and wide. Therefore, a trader acts as an intermediary between producers and consumers. Trade eliminates the hindrance of persons.
2. Auxiliaries or Aids to Trade:
They are those activities which facilitate buying and selling of goods. The course of exchange is confronted with certain hindrances and difficulties. Activities which help in overcoming those hindrances and difficulties are known as Aids to Trade. The aids or auxiliaries activities which are essential for the growth of trade and production are as follows:
a) Function of Distribution:
The activities connected with the functions of distribution of commodities are transportation and warehousing or storage. They are explained below:
1) Transportation:
Goods are produced at a few places but are required for use at several different places. It is the function of transport to carry goods from centers of production to centers of consumption. Transport thus ensures movement of goods and services and removes the difficulty of distance. It creates place utility by transferring goods from one place to another. Roadways, railways, sea-routes and airlines are the different means of transportation.
2) Warehousing or storage:
These days, goods are produced in anticipation of demand. In addition to this, certain goods such as sugar are produced during particular season but demanded all through the year. Hence there is a need to make suitable arrangement for storage of goods so that they can be made available as demanded by customers. Warehousing performs this function and stores the goods till they are needed. It creates time utility by removing hindrances of time.
b) Facilitating Function:
The activities connected to facilitate the function of exchange and function of distribution are called facilitating functions. They are as follows:
- Insurance
- Banking
- Advertising
1) Insurance:
Due to fire and other causes, there is a great risk that the goods may be destroyed. During the movement of the goods from place to place or during storage, there are chances of goods being damaged or lost. The risk of damage of loss is to be covered by insurance. Thus insurance covers the hindrance of risk.
2) Banking:
Banks are the financial institutions that not only facilitate the transfer of money through cheques but also finance the traders for holding stock of goods between the time when they are bought for sale and when they are sold. Thus, banks remove the hindrance of finance.
3) Advertising:
Since nowadays goods are produced in anticipation of demand, trade is not possible unless prospective buyers are told about the availability and utility of the goods. Thus advertising removes the hindrance of knowledge and help the consumer to buy the goods as per their need, taste and convenience.