UNIT 2 – Operative activities in business- Grade 9

Distinguish between Industry and commerce

INDUSTRY COMMERCE

Meaning Industry is an economic Commerce is a

activity, concerned with business activity,
the procurement and wherein exchange for
processing of raw goods and services for
materials into finished value, is done on a
products, that reaches the large scale.
customer.

Capital High Comparatively low

Required

Involves Conversion of resources Activities essential for

into useful goods. facilitating the buying
and selling of goods.

Represent Production part of Distribution part of

business activities. business activities.
 1) What is commerce?

It is the activity of buying and selling especially on a large scale. Here

goods and services are exchanged for money or kind on such a large
enough scale, to require transportation across boundaries is called as
commerce. It also includes auxiliaries to trade

2) Trade: (Definition)
It is only buying and selling and commercial transactions. It involves the
sale and purchase of goods and services.

Trade is of two types:

Internal trade and external trade

3) Describe the two types of trade

Internal trade:

Internal trade is also called domestic trade or home trade it is the

exchange of goods within the country payment is done by a home
currency.

★ Wholesale trade:
It is the link between the producer/manufacturer and the retailer.

A large quantity of goods is purchased by the wholesaler

The wholesaler invests a large amount of goods in maintaining the

stock of goods

The wholesaler sells to the retailer and not directly to the consumer
 ★ Retail trade

In retail trade goods and services are directly provided to the

customer

Retailer purchases small quantities of goods

Retail shops are generally located in residential areas

The retailer is the middleman between wholesaler and retailer

External Trade:

External trade takes place across the boundaries of different countries.

This brings in profit in the productivity of both countries. Payment is
done via foreign currency.

- Import:

An import is goods and services brought into one country from

another country. The buyer is called as an importer.

EG: India imports petroleum products from Iran and Iraq.

- Export trade

Selling goods and services from one country to another country.

The seller is called an exporter.

EG: India exports tea to US and UK

 - Entrepot trade

This is a trade in which imported goods are exported with or

without any additional processing
The goods are not distributed in the country that imports it
-
Example if an Indian company imports rubber from Thailand and
export to Japan

4) Mention some features of entrepot trade:

- There is no import duty on these goods
- Goods are processed and packed for export
- It avoids damage of the products due to long-distance
transportation
- The country acting as the middleman between the two can
earn from both the countries.
- The countries can profit due to entrepot trade

5) Explain Balance of payment

Balance of payment is the relationship between the money earned

through the exports and the money spent through imports of a certain
country

If the value of the exports of a country exceeds the imports, then we say
that it is a favourable balance of payment

If the value of the imports of a country is more than the exports, then we
say that it is an unfavorable balance of payment.

More export is good BOP as the country earns money

 Less export is bad BOP as the country has to make payment to the other
country and loses currency

The main purpose is that the earnings of a country should be more than
the expenditure of that country

6) Explain: Auxiliaries to trade

Auxiliaries to trade are also called as aids to trade. they deal with the
assisting trade by giving certain services.
Following are the aids to trade:

1. Transportation
It is the physical movement of goods and services form the source to the
destination

The geographical distance between producers and consumers is removed

with the help of transport.

Humans and livestock moved from one place to the other.

Transport creates place utility

Eg: The raw material moves from the factory to the wholesaler.

Modes of transport: Air, water, land

Means of transport: car, ship, aeroplane etc.

2.Warehouse

Warehousing is an act of carefully storing goods in warehouses to sell or

distribute them later.

Warehousing is essential because there is a time gap between production

and consumption. In other words, goods, which are produced at one time,
are not consumed at the same time. Hence, it becomes necessary to make
arrangements for storage or warehousing.

warehousing creates time utility by supplying the goods at the right time
to the consumer.

EG: Agricultural commodities like wheat and rice are seasonal in nature
but are consumed throughout the year, on the other hand, goods such as
umbrellas and woolen clothes are produced throughout the year but are
demanded only during particular seasons. Therefore, goods need to be
stored in warehouses until they are demanded.
3.Advertisement
Advertising fills the knowledge gap and it solves the difficulty of
information.

Advertising and publicity are important media of mass communication.

Advertising helps consumers to know about the various brands

manufactured by several manufacturers.

The media used to advertise products are Radio, Newspapers,

Magazines, TV, the Internet, Billboard, social media etc.

4.Banks:

Banking is an industry that handles cash credit and other financial

transactions.

It provides a safe place to store extra cash and other valuables.

They offer savings account current accounts.

Banks use these deposits to extend loans but not all deposits go for loans
15% is kept as liquid cash and 85% for extending loans.

Types of loans given by banks are: home loans, personal loans,

education loan, ka vehicle loan, gold loan, business loan, agricultural
loans
5.Insurance:

It is a contract which is represented by a policy in which an individual or

entity receives financial protection or reimbursement against losses due
to damages to the goods illness death fire from the insurance company

Some of the insurance are:

Life Insurance, Health Insurance, Vehicle insurance, Home Insurance

6.Communication:
It is a way in which information/ knowledge about the product or service
can spread across. It is further divided into e-commerce and m-
commerce

1) E-commerce

E commerce deals with transmitting information across the internet it

allows customers to electronically exchange goods and services with no
barrier of time and distance. It is one of the fastest growing trade
exchanges

Advantages:
E-commerce provides the sellers with a global reach. They remove the
barrier of place (geography). Now sellers and buyers can meet in the
virtual world, without the hindrance of location

● It provides quick delivery of goods with very little effort on

part of the customer. Customer complaints are also addressed
quickly. It also saves time, energy and effort for both the
 consumers and the company.
● One other great advantage is the convenience it offers. A customer
can shop 24×7. The website is functional at all times, it does not
have working hours like a shop.
● Electronic commerce also allows the customer and the business to
be in touch directly, without any intermediaries. This allows for
quick communication and transactions. It also gives a valuable
personal touch.
● Operating cost is very low.
● Easily find the product of your choice

2) M-Commerce: M-commerce entails the e-commerce transactions

done with a mobile phone. So M-commerce is the use of mobile
phones to conduct any type of business transaction

● Application of M-commerce
○ Mobile Banking: Using a mobile website or application to
perform all your banking functions.
○ It is one step ahead of online banking and has become
commonplace these days.
○ For example, in Nigeria, the majority of banking transactions
happen on mobile phones.
 ○ Mobile Ticketing and Booking: Making bookings and
receiving your tickets on the mobile. The digital ticket or
boarding pass is sent directly to your phone after you make
the payment from it. Even in India now IRTC and other
services provide m-ticketing services.
○ E-bills: This includes mobile vouchers, mobile coupons to be
redeemed and even loyalty points or cards system.
○ Auctions: Online auctions having now been developed to be
made available via mobile phones as well.
○ Stock Market Reports and even stock market trading over
mobile applications.

7) What are the advantages of M- commerce

● It provides a very convenient and easy to use the system to
conduct business transactions.
● Mobile commerce has a very wide reach. A huge part of the
world’s population has a mobile phone in their pocket. So
the sheer size of the market is tremendous.
● M-commerce also helps businesses target customers
according to their location, service provider, the type of
device they use and various other criteria. This can be a
good marketing tool.
● ⅓ rd of the E-commerce transaction takes place on mobile
 phone
● The increase is due to a large number of people having
mobile phones
● Some more reasons for using is: Speed, Convenience,
credibility

What are the disadvantages of E commerce/m-commerce?

● The site might not always be accessible

● Customers can fall prey to hackers
● Customer service is limited
● A lot of excessive packaging is used which might lead to the
wastage.
● It relies on the supply chain management
● Software and electronics change very fast. It might be difficult
for people to adapt to new technology

Trade and its importance

● It ensures that we live a life of comfort:

As a country we must know that most of the finished
products we use are not prepared in India and comes from
import. Without this privilege we will not be able to avail
many facilities that we can avail now.
● It gives a boost to the economy:
When any country exports material to another country they
get some foreign exchange. This acts like a boost to the
 country's economy. Many times a country's economy's major
part is the money we get from export.
● Development of the tertiary sector:
Due to external and internal trade there are more
employment opportunities for the citizens of the country.
This also leads to the development of the tertiary sector this
means that the jobs will increase and there by the urban class
will also improve.
● Increases competition:
It increases the availability of various products in the market
and the consumers get a variety of products to make a choice
from. This also makes the producer make goods that are
affordable and preferable by the consumers.

What are some hindrances that commerce solves?

Any business that takes place may face many hindrances and
commerce set out to solve this.
● Hindrance of knowledge: Many times the customer does not know
about a new product in the market and hence does not buy it.
Commerce removes the hindrance by providing advertisement and
information. E.g. if a small business has put up a new cake in the
market there is a high chance that people don't know of it but if
they advertise it people will know of it and buy it.
● Hindrance of finance: During trade a business may not be in the
position to financially support themselves in order to trade
commerce provides banks to the traders. We can borrow money for
their utilisation. E.g. If a businessman is facing some financial
issues he can report to the bank he can also take a loan for the
same from the back.
 ● Hindrance of distance and place: Many products are consumed at a
different place than its source of production. It is important to
make the product available at the place of demand so as to earn
profit. Hence transportation helps remove this hindrance. Eg. If
rice is in demand in Mumbai, though they are produced in Punjab,
they have to be transported
● Hindrance of time and storage: Many a times there is a time gap
between the production of a product and the use of the same. E.g.
raincoats are produced before the rainy season through their use is
only during the monsoon. At this point of time it is important to
protect the product until it is used. Warehouse helps to solve this
issue.

Explain the division of primary sector activities on the basis of raw

materials.
Primary sector is directly related to natural resources and use of
these natural resources
● Agro based industries use plant and animal based products as
their raw materials. Food processing, vegetable oil, cotton
textile, dairy products and leather industries are examples of
agro-based industries.
● Mineral based industries are primary industries that use
mineral ores as their raw materials. The products of these
industries feed other industries. Iron made from iron ore is
the product of mineral based industry. This is used as raw
material for the manufacture of a number of other products,
such as heavy machinery, building materials and railway
coaches.
 ● Marine based industries use products from the sea and oceans
as raw materials. Industries processing sea food or
manufacturing fish oil are some examples.
● Forest based industries utilise forest produce as raw
materials. The industries associated with forests are pulp and
paper, pharmaceuticals, furniture and buildings.

Describe the Division of industries:

On the Basis of sectors:
1) Primary: When a good is produced by exploiting natural resources,
it is an activity of the primary sector. It forms the base for all other
products that are subsequently made. Since most of the natural
products we get are from agriculture, dairy, fishing, forestry, this
sector is also called agriculture and related sector.
2) Secondary Sector: The secondary sector covers activities in which
natural products are changed into other forms throughways of
manufacturing that we associate with industrial activity. It is the
next step after primary. The product is not produced by nature but
has to be made and therefore some process of manufacturing is
essential.
3) The tertiary sector: It helps in the development of the primary and
secondary sectors. This sector does not produce a good but they are
an aid or a support for the production process. Since this sector
generates services rather than goods, the tertiary sector is also
called the service sector.
4) Quaternary Sector:The fourth sector of the economy, the
quaternary sector, consists of intellectual activities often associated
with technological innovation. It is sometimes called the
knowledge economy.
 5) Quinary activities are services that focus on the creation, re-
arrangement and interpretation of new and existing ideas, data
interpretation and the use and evaluation of new technologies. It is
often referred to as ‘gold collar’ professions.

Classification on the basis of inputs:

● Capital intensive :
A business that is capital intensive implies one in which higher
capital investment is required. The business owner needs to invest
more in the acquisition of sophisticated and automated machines,
including diverse equipment. So, there might be a need to hire only
a fewer number of workers, whose primary duty would be to
operate the machines

● Labour intensive:
labor-intensive production techniques, the focus is to hire more
employees (humans) to handle the production process. In labor-
intensive techniques, businesses can only increase production by
asking workers to work extra hours or employ more temporary
staff for a specified period.

Classification on the basis of Activity:

● Analytical industry: In analytical industry, the raw material is
broken down into several useful materials. For example, an oil
refinery separates crude oil into kerosene, gasoline, diesel oil, and
petrol, etc.
● Synthetical industry: These industries put together two or more
materials to form a new product such as plastics, concrete, gypsum
and coals are mixed up to produce cement.
 ● Processing industry: These industries are concerned with the
processing of raw-materials through different stages of production.
Textiles, steel, etc. may be mentioned as examples of processing
industry.
● Assembling industry: These industries are engaged in bringing
together various components or parts of bicycles, television, radio
and these are some examples of assembling industries.

Classification on the basis of Scale:

● Small scale industry: The investment required is merge and there
isnt a requirement of many people working together.
● Medium scale: The investment is more than that of the small-scale
industry and they do not need as many labourers as that of large
scale. The machinery required is not very large. Eg: Jaggery
making
● Large scale: They require a lot of machinery and labour. This
business also requires a lot of capital investment. Eg: Automobile
industry

Classification on the basis of raw material:

● Agro based industries use plant and animal-based products as
their raw materials. Food processing, vegetable oil, cotton
textile, dairy products and leather industries are examples of
agro-based industries.
● Mineral based industries are primary industries that use
mineral ores as their raw materials. The products of these
industries feed other industries. Iron made from iron ore is
the product of mineral based industry. This is used as raw
material for the manufacture of a number of other products,
 such as heavy machinery, building materials and railway
coaches.
● Marine based industries use products from the sea and oceans
as raw materials. Industries processing sea food or
manufacturing fish oil are some examples.
● Forest based industries utilise forest produce as raw
materials. The industries associated with forests are pulp and
paper, pharmaceuticals, furniture and buildings.

State the characteristics of industries:

Industry is a component of business which is related to the production of
goods.
Following are the characteristics of industries:
● Economic activity
Industry is an economic activity. Industrial production is done for
marketing. Its objective is to earn profit. Industry is the engine of
economic growth.

● 2. Production
Production is the main characteristic of industry. Industry produces
products by the use of human and mechanical power. Products
satisfy human wants. Products can be consumer and industrial.

● 3. Utility
Industry creates form utility. It converts raw materials into finished
products.
● 4. Wide scope
Industry has wide scope. Advances in science and technology
create new industries. Information technology industry is an
example.

● 5. Component of business
Industry is a component of business. It is the basis for trade. Trade
is done in industrial products. Services are used by industry and
trade.

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