Meaning of Commerce, Importance and Scope | Introduction

Introduction To Commerce

What is Commerce?

Commerce has been defined in a variety of ways by many authors, but a concise explanation is “Commerce is the process of purchasing and selling commodities and services in order to meet human needs and earn a living.”



Importance of Commerce

  • Commerce enables the exchanging of goods and services.
  • Commerce contributes to the development of both a nation and a city.
  • Commerce generates employment possibilities for a country’s population via insurance and advertising.
  • Commerce is the process of storing commodities or raw materials via warehousing.
  • Commerce fosters import and export, which results in specialization.
  • Commerce raises the standard of living by increasing the number of persons employed in commercial activity.
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Scope of Commerce

This encompasses any actions that facilitate the distribution and trade of products and services for the benefit of the general public.

Various activities undertaken by those engaged in commercial occupations include the following:

  • Trading
  • Transporting
  • Warehousing
  • Insurance
  • Banking
  • Advertising
  • Communication
  •  Tourism

See an illustration below

1. Trade

  • Retail And Wholesale In The Home Trade.
  • Export, Import, and Interport.

2. Trade Facilitation

  • Financial services
  • Publicity
  • Warehousing and distribution
  • Travel and tourism
  •  Communication
  • Insurance

Features of Commerce

Commerce possesses the following features:

1. Economic: A trader purchases and sells goods in order to accumulate profit. It is quantifiable.

2. Profit: The fundamental nature of commerce is profit. Gifts of products to friends and family are not considered trade. Profit is the motor that powers commerce.

3. Marketing: Commerce is a marketing endeavor. It is concerned with the trade, distribution, and production of goods. This is done on a consistent basis. Marketing is carried out in order to produce goods and satisfy the consumers.

4. Utility: Commerce generates various utility in order to meet consumer wants. It moves products from one location to another in order to create place utility. It enables the creation of time utility.

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Functions of  Commerce or trading

  1. Commerce enables mass production, allowing people worldwide to enjoy commodities and services created both domestically and internationally.
  2. It enables the raising of funds for personal and investment purposes through the use of bank and other credit institutions services.
  3. It provides employment to a huge number of individuals.
  4. It aids in the movement of raw materials and completed items between production and consuming points via transportation.
  5. It strengthens nationalism, causing nations to become reliant as a result of their trading activity.

Activities that Aids Commerce

Commerce is made possible by the following activities:

1. Banking: Banking aids commerce by assisting individuals in safeguarding their money and other precious commodities, as well as providing loans to entrepreneurs.

2. Insurance: Insurance is a protection against risks, and insurance firms assist in re-establishing people’s official positions if they are exposed to any dangers/losses insured against.

3. Advertising: Marketing is the practice by which existing goods and services are brought to the public’s attention, and by which purchasing and selling are facilitated.

4. Warehousing: Warehousing is the technique of storing things ahead of anticipated demand, and it ensures that trade is not hindered since items produced are stored ahead of anticipated need.

5. Transportation: Transportation is the movement of persons and goods between locations, and it facilitates commerce.

6. Communication: Communication is the exchange of information between two persons, a group, or other entities.

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Division of Commerce

Commerce is organized into two distinct sectors:-

  1. Domestic Trade
  2. International Trade

1. Domestic Trade

This is a trade that occurs within a single country. It is also referred to as domestic trade.

Domestic trade is separated into two categories:

Wholesale Trade: Wholesale trade is purchasing in bulk (in huge numbers) from producers or manufacturers and reselling to merchants in small portions. Wholesalers are those who participate in wholesale trading.

Retail Trade: Retail trade is the process of purchasing items in small amounts and distributing them to the final consumer. Retailers are those who participate in retail trade.


2. Foreign Trade

This is the exchange of goods and services between two or more countries. It is sometimes referred to as international trading.

Foreign trade is classified into three categories:

Import Trade: This refers to the process of bringing items into a country from another.

Export Trade: This is the process of commodities being transported outside to be sold in another country .

Entrepot Trade: The process by which imported items are re-exported, either within the same country or to another one. It is the practice of re-exporting imported goods.