\n<\/strong>Trade means the purchase and sale of goods with a profit motive. It involves the exchange of goods and services between buyers and sellers. It is the nucleus of commerce as all activities revolve around trade.<\/p>\nTrade activities must be performed to earn a profit. It means that activities having service motive and emotional aspect are not trade activities.<\/p>\n
Trade is the central activity of commerce. Other activities of commerce such as transportation, communication, financing, insurance, warehousing the marketing are the supporting activities of trade.<\/p>\n
<\/p>\n
Trade activities may be shown as under \n <\/p>\n
Internal\/Home trade – Purchase and sale of goods within the boundaries of the country is called internal trade. The purchaser and seller of the commodity belong to the same country and the payment is<\/p>\n
made in the currency of the country, to which buyers and sellers belong. For example, the trade between two cities, two villages, villages, and cities or even between two persons of the same place within the boundaries of the country is called internal trade. On the basis of volume. Internal trade is classified as wholesale and retail trade:<\/p>\n
(1) Wholesale trade – It involves the purchase and sale of goods belonging to a specific type of variety, in bulk. A wholesaler purchases a huge quantity of goods from producers\/manufacturers, stores it in the big godowns, and sells in small quantities to retailers. Wholesalers constitute a link between producers and retailers provides useful services to both the manufacturers and retailers. They are criticized for hoarding goods, creating artificial scarcity, indulging in black-marketing and other malpractices. In spite of all these defects, they render valuable services to society and must remain in the market.<\/p>\n
(2) Retail trade – It relates to the selling of goods by retailers to ultimate consumers. They acting as a link between wholesalers and consumers and render valuable services to both. The retail trade is situated among consumers. It arranges different goods from different places and makes them available to members of the society residing in its locality. These traders inform the producers through the wholesalers about the attitudes, likes and dislikes, preferences, traditions, and habits of the consumers.<\/p>\n
They educate consumers about the utility and working of new products. They are organised in the forms of Departmental Stores, Multiple Shops, Cooperative Store, Super Bazars and self-service stores, etc.<\/p>\n
Foreign Trade or International Trade – The trade between two countries is known as foreign trade. The purchasers and sellers in this type of trade belong to different countries. The payment in foreign trade is made in foreign currency. The foreign trade may be sub-divided into import and export and entrepot! or re-export trade.<\/p>\n
(1) Import trade – It involves the purchase of foreign goods for use in the domestic market. Purchasing goods by an Indian trader from a trader of USA, Russia, UK and Japan etc. is the example of import trade.<\/p>\n
(2) Export trade – The type of trade in which goods are sold and sent to firms located outside the country is known as export trade. Selling and sending goods by Indian firms to other firms located outside India, say Germany, Iraq and Saudi Arabia, etc. is export trade.<\/p>\n
(3) Entrepot trade – It involves the import of foreign goods with a view to re-exporting them. For example, importing goods from Germany and Japan by Indian firms and “exporting it to Nepal and Bhutan is entrepot trade. There are certain countries I five Nepal and Bhutan, which do not have seaports. These countries import their goods through third countries. Nepal and Bhutan also import their goods from abroad through India for which we charge a certain commission.<\/p>\n
<\/p>\n
Auxiliaries To Trade<\/p>\n
Activities which assist or support business and trade are known as auxiliaries to trade. They are an integral part of commerce as they remove various hindrances in the production and distribution of goods. These include Transport. Insurance, Financing, Banking, and marketing discussed as follows<\/p>\n
(1) Transportation and Communication – It helps in removing the hindrance of place in the exchanges of goods and services. It facilitates trade by assembling and distributing goods. It overcomes the barrier of distance and creates place utility. Transport widens the market and helps to equalise prices at different places.<\/p>\n
It makes available the distribution of goods among far-flung areas. Quick and economical means of transport such as railway s, roadways, airways and shipping have widened the scope of trade to include international transactions. Communication facilities such as postal services, telephone and others are also necessary so that producers, traders, and consumers may exchange information with one another.<\/p>\n
(2) Warehousing – There is generally a line lag between the production and consumption of goods. This problem can be solved by storing the goods in warehouses. Many products such as wheat, sugar, rice, etc. are produced in a particular season but they are needed throughout the year.<\/p>\n
Proper storage arrangements must be made in order to make such goods available. Besides, it is necessary to store commodities such as woolen garments and umbrellas to meet the desired \nseasonal demand. Warehousing removes the hindrance of time and thereby creates time utility. It helps to stabilise prices through the process of continuous supply of goods.<\/p>\n
Warehouses are of three types, namely, private, public and bonded. Private warehouses are owned by merchants and producers for their own ‘storage needs. Public warehouses are owned by wharfingers, port trusts, etc. Bonded warehouses are set up by customs authorities to store goods which are liable to customs duty.<\/p>\n
(3) Banking and Finance – There is usually a time gap between production\/purchase and sale of goods. During this period businessmen need funds to carry on their business. Banks and other financial institutions facilitate the required credit in various forms.<\/p>\n
<\/p>\n
Banks also perform the business activity by providing safe and quick means for the remittance of money. They collect bills, cheques, etc. from their customers. Banking removes the hindrance of raising finance and credit on one’s own. Therefore, banks may be regarded as traders in money and credit.<\/p>\n
(4) Insurance – Business involves several types of risks \u2014 due to fire, flood, theft, etc. Insurance removes the hindrance of risk. Insurance provides a cover against the loss of goods in transit and storage. Insurance is based on the \u201cpooling of risks.\u201d A large number of people who are subject to a particular risk contribute to a common fund, out of which compensation is paid to those few who actually suffer the loss.<\/p>\n
There are various types of insurance, e.g. fire insurance, marine insurance, workmen\u2019s compensation insurance, life insurance, etc. Insurance company performs the useful service of compensating the loss to the insured goods through fire, theft, flood or any other hazard.<\/p>\n
(5) Advertising and Publicity – It is a useful function of bridging the knowledge gap about the availability and use of goods. They remove the hindrance of knowledge. The main purpose of advertising is to create and sustain demand. Advertising has become essential for quick disposal of goods in the modern era of large-scale production.<\/p>\n
In the absence of advertising, consumers may remain ignorant of the availability of goods and services and businessmen may not be able to sell their products. There are various forms of advertising and publicity, such as the press, outdoor displays, radio, television, letters to customers, fairs, exhibitions, cinema, etc.-Advertising facilitates mass consumption of goods. Advertising is necessary to bridge the information gap.<\/p>\n
(6) Packaging – Good packaging facilitates delivery’ of quality products to the consumers and also increase the like of the product. Packaging helps protect the goods from damage during transport and warehousing. It also makes the goods attractive. Packaging helps in the conveyance and handling of goods.<\/p>\n
It removes the hindrance diFrisk by keeping goods safe and free from spoilage. Trade and transport of goods have become easier and safer due to improvements in the art and methods of packaging.<\/p>\n
Question 5. \nWhy does the business need multiple objectives? Explain any five such objectives. \nAnswer: \nObjectives Of Business \nThe objective of business means the purpose for which a business is established and carried on. The objective provides the direction towards which all business activities will be directed. Therefore, every businessman must select and define the objectives carefully and cleanly.<\/p>\n
<\/p>\n
Though profit motive constitutes the primary objective of business activities, it should not lead us to conclude that profit is the sole objective of business. Objectives of a business are multi-dimensional in nature. They can be classified into three categories, namely, \n(1) economic objectives \n(2) social objectives and \n(3) human objectives. \n <\/p>\n
Business Objectives \nEconomic Objectives – Business is an economic activity and following are the economic objective of a business. \n(i) Earning of Profits – No business can survive without making adequate profits. Profit is essential to meet the cost of factors of production. Entrepreneurship is one of the important factors of production. Just as other factors get their rewards, the entrepreneur must get reward for his efforts and taking of risk. Moreover, every businessman will like to see that the business he is managing should grow. This is possible only if the business earns sufficient profits for investing them into the business for expansion.<\/p>\n
(ii) Creation of Customers or Markets – A business can earn profits by satisfying consumer needs. Thus, the business must aim at winning and satisfying the customers. Peter F. Drucker has rightly said, \u201cThere is only one valid definition of business purpose, i.e., to create a customer. \u201d Customers are created through advertisement and sales promotion and delivering them \u2018want satisfaction.\u2019<\/p>\n
(iii) Innovations – Innovation is the activity of exploring and discovering ways and means of making products more useful, exploring new markets etc. A business can succeed only with the help of new designs, improved techniques, better machinery etc. Innovation is the result of creative thinking, research and development, computer-aided design and computer-aided manufacturing.<\/p>\n
(iv) Best use of Resources – Business is expected to make best use of scarce resources of men, machine, material, methods and money. Proper allocation and efficient planning to use these resources achieve the purpose of profitability and sustainability in the business.<\/p>\n
Social Objectives – Business does not exist in a vacuum. It is an integral point of society. In other words, the business must be socially responsible. The decision taken by the business has a great influence on the socio-economic conditions in the country. For example, the quality of the product offered and its prices will have an influence on the standard of living of the people.<\/p>\n
<\/p>\n
The type of technique of production (labour intensive or capital-intensive) will have an influence on employment opportunities for the job-seekers. Therefore, it is in the interest of businesses to pursue certain objectives expected by the society.<\/p>\n
Social objectives of a business denote its obligations to society including customers, employees and the government. The important social objectives include the following: \n(i) Better Quality Goods – The business must provide better quality products as desired by the customers. The products should be durable, genuine (not duplicate) and safe. The prices charged for the goods should also be reasonable. The important objective of a business is to produce and supply goods of proper quality to satisfy consumer’s expectations.<\/p>\n
(ii) Fair Trade Practices-The business should follow fair business practices at all times. It should avoid anti-social practices like hoarding, black-marketing, over-charging the buyers, etc. Businessmen must avoid unfair trade practices like spurious products or misleading advertisements to mislead or exploit the people.<\/p>\n
(iii) Generation of employment opportunities – A business is expected to provide means of livelihood to members of society. Business has tremendous scope for the generation of employment opportunities for the unemployed. Further, a business should employ suitable people without any discrimination based on caste, creed, sex or religion. Business firms pursue this objective can improve their public image.<\/p>\n
(iv) Employees\u2019 Welfare – success of any business depends on significant contribution towards the welfare of employees. Besides providing fair wages, the business should also provide good working conditions, canteen facility, housing, transport and medical facilities, etc. to the employees. These measures would increase the productive efficiency of the workers.<\/p>\n
Human Objectives : \nA business is directly linked with two important groups, namely, (a) customers, and (b) employees. Both these groups must have a feeling of having been treated as human beings by the business enterprise. As human beings, customers expect courteous service and fair dealings from the business. The employees look forward to the business enterprise for the following objectives:<\/p>\n
(i) the employees are treated as partners in the business and not as inferior lot; they should get fair wages and healthy working conditions; \n(ii) they are able to acquire and develop new skills in the process of employment; and \n(ii) they derive job satisfaction.<\/p>\n
Question 6. \nExplain the concept of business risk and its causes. \nAnswer: \nBusiness Risks – Meaning \nBusiness activities are not very safe. Business units are surrounded by innumerable risks generated by economic, natural, physical and human aspects.<\/p>\n
\u201cBusiness risks may be defined as uncertainty in regard to cost, loss or damage.\u201d \u2014 C.O.Hardy \n\u201cRisk is the chance of loss. It is the possibility of some unfavourable occurrence.\u201d \u2014 Wheeler<\/p>\n
Causes of Business Risks : \nBusiness risks arise due to a variety of causes which may be classified into the following categories: \n(1) Natural Causes – Nature is an important cause of business risks. Human beings have no control over the nature. Natural calamities such as flood, drought, famine, earthquake, volcanic eruption, lightning, snowfall, hailstorm, tide, epidemic, etc. result in heavy loss of life, property and income.<\/p>\n
Even the death of the owner or a partner may cause the business to be shut down. Human beings have little control over nature. Therefore, natural causes of business risks are beyond the control of a businessman.<\/p>\n
(2) Human Causes – Human causes are very important causes of business risks. Negligence or carelessness on the part of an employee may lead to serious fire or accidents involving loss of life and property. There may be loss due to spoilage, breakage, etc. Ignorance may result in grave errors in estimating demand for products. A feeling of false pride or prejudice may lead to strike or lockout. Inefficient management is often the cause of loss in business.<\/p>\n
Irrational approach of the management, or the owners of business is also a type of human failure causes business risk. A business like Enron Corporation in U.S.A. incurs heavy losses which leads to bankruptcy mainly due to unplanned decision of the management at the top.<\/p>\n
(3) Economic Causes – Economic causes relates to changes in market conditions. Fluctuations in demand and prices are well-known. Availability’ of cheaper substitutes may affect the sale of relatively costly products. Excessive competition may bring down the prices of products.<\/p>\n
Competing businesses may employ more effective techniques of sales promotion. For example, Colour T.V. has replaced Black & White T.V. from the market.<\/p>\n
(4) Physical and Technical Causes – Technical changes and mechanical defects also result in business risks. Changes in technology may make the machines obsolete before their expected life. Mechanical failures such as the explosion a boiler, leakage of gas, etc. may lead to heavy loss of life and property. Assets used in business may depreciate in value due to shrinkage, loss in weight, vaporisationvgtc. Stoppage of work due to power failure may cause loss. There be loss or damage to goods in transit.<\/p>\n
(5) Political and Legal Causes – Such causes of risk include changes in government policies, policies relating to foreign trade, collaboration of MNC\u2019s licencing and taxation policies and changes in law. A businessman may suffer loss due to restrictions on imports and exports and fluctuations in exchange rates. Government control on production and distribution of certain products may deprive businessmen from profits. Changes in government policies and laws are, thus, an important cause of business risks.<\/p>\n
<\/p>\n
Question 7. \nWhat factors are important to be considered while starting a new business. Explain. \nAnswer: \nStarting A New Business \nThe person who undertakes to bear the risk and uncertainty of a new business is known as \u2018entrepreneur. Webster’s dictionary defines an entrepreneur as one who organises, manages and assumes the risks of a business enterprise. At the time of starting a new business, a businessman must take decisions regarding the various factors of production and resources like men, machines & materials.<\/p>\n
The entrepreneur going to start a new enterprise must have various qualities like wide knowledge, skills, experience, foresightedness, dynamism outlook, self-confidence, and willingness to take risks. If an entrepreneur or businessman lacks these qualities, he cannot successfully launch a new enterprise.<\/p>\n
Starting a new business is complex and as difficult as the birth of a child. The entrepreneur has to act both as a mother and a midwife. The ultimate success of a business depends upon the various considerations essential for the successful running of a business enterprise.<\/p>\n
Factors to be Considered for Starting a Business – While starting a business following factors have to be considered \n(1) Selection of Line of Business – He will determine the market demand for the products, he wants to produce and the margin of profit he expects from the sale of products. He will prepare a systematic report of the exercise he undertakes. This is known as \u2018feasibility report’ or ‘project report\u2019.<\/p>\n
While selecting the line of business, a number of criteria must be kept in view. The most important criterion is the expected rate of return on capital to be invested. That line of business will be preferred which is expected to yield higher rate of return on capital invested and has chances of further growth: Besides this, the degree of risk involved in the line of business is also important. The businessman has to decide what type of risk he can afford to take. The line of business chosen must be technically feasible.<\/p>\n
(2) Choice of Form of Ownership – A good form of ownership should be easy to form simple to operate flexible & durable. The choice of the form of organisation will determine the authority of the entrepreneur starting the business. However, in certain lines of business, there is no choice left in the selection of the form of organisation. For instance, the insurance and banking business can be done only by the joint-stock companies.<\/p>\n
Size of the business will also determine the form of organisation. Company form of organisation is more suitable in case of large scale operations. Sole tradership or partnership is suitable for small scale and medium scale operations. The other factors which affect the choice of the form of ownership are capital, requirements, managerial skills requirement, the limit of liability, tax liability, legal formalities, etc. A careful analysis and reconciliation of technical, managerial, financial, market & other factors should be determined by the size of the unit.<\/p>\n
(3) Financial Planning – Proper planning and control of finance are essential to success in business. Adequate funds must be provided at the right time for the start and continuity of the business unit.<\/p>\n
Capital is required for investment in fixed assets like land, buildings, machines, and equipment and in current assets like materials, supplies and book debts. Capital is also needed for meeting the day-to-day expenses of the business. In the case of small enterprises, the promoters can provide funds from their own savings.<\/p>\n
But in case of large enterprises, funds have to be raised from various sources like the general public, commercial banks, financial institutions, etc. It is of utmost importance to have adequate capital for meeting the initial needs and future requirements of the business.<\/p>\n
(4) Location of Business – The location of a business enterprise is an important decision as it influences the costs, profitability and growth needs for expansion diversification & modernisation, etc. should be taken into account. As far as possible, the location must be optimized so that the costs of production and distribution are the lowest possible. Location is selected on the basis of access of raw-material, availability of labour, transportation & banking facilities.<\/p>\n
<\/p>\n
(5) Size of Business Unit. The size of the firm is influenced by various factors like technical, managerial, financial and marketing facilities. Some factors favour the larger size while others operate to restrict the scale of operations. An attempt should be made to achieve the size at which the average cost per unit is minimum.<\/p>\n
Usually, businessmen start their operations at a small or medium scale. If new ideas are to be tried out, it is preferable to start with a small-scale operation. This will help in adapting to changes without much loss. Thus, the entrepreneur must determine the size of business operations before he arranges capital and other resources for the business.<\/p>\n
(6) Machines and Equipment – Machinery and Equipment should be placed in a proper sequence so as to permit a smooth flow of materials through necessary operations. It will depend upon various factors like availability of funds, size of production, and the nature of the production process.<\/p>\n
The benefits to be derived from the machine and equipment must justify the amount of investment made on therti. Availability of repair and maintenance services and spare parts is also an important consideration while selecting a particular machine or equipment.<\/p>\n
(7) Workforce – The entrepreneur cannot run the business himself alone. He has to take the help of a number of persons including skilled and unskilled workers and managerial staff. The employment of the right types of persons fertile enterprise is necessary, otherwise, there will be a huge wastage of time, money, and efforts.<\/p>\n
They have to be given the necessary training to increase their efficiency. The workforce must be motivated through monetary and non-monetary incentives to make their best possible contribution towards the accomplishment of organizational objectives.<\/p>\n
(8) Procedural Formalities – In the case of a sole proprietorship or a partnership, there are practically no procedural formalities. Only permission from the municipality is to be taken to start the specified line of business. Registration of a partnership firm is also not compulsory.<\/p>\n
Government regulation is the minimum possible if the partnership firm operates on a small or medium scale. But a joint-stock company is exposed to greater procedural formalities both at the time of incorporation and during its life. Incorporation of a company is compulsory. For this purpose, many documents have to be prepared and fee deposited with the Registrar of Companies. A public company also needs a \u2018Certificate to Commence Business\u2019 before it could start business operations.<\/p>\n
(9) Launching the Enterprise – The completion of physical, organizational, and financial aspects leads ultimately to the actual launching of the enterprise.<\/p>\n
<\/p>\n","protected":false},"excerpt":{"rendered":"
Detailed, Step-by-Step NCERT Solutions for 11 Business Studies Chapter 1\u00a0Nature and Significance of Management Questions and Answers were solved by Expert Teachers as per NCERT (CBSE) Book guidelines covering each topic in chapter to ensure complete preparation. Nature and Significance of Management NCERT Solutions for Class 11 Business Studies Chapter 1 Nature and Significance of …<\/p>\n
NCERT Solutions for Class 11 Business Studies Chapter 1 Nature and Significance of Management<\/span> Read More »<\/a><\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"default","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"default","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","spay_email":""},"categories":[4],"tags":[],"yoast_head":"\nNCERT Solutions for Class 11 Business Studies Chapter 1 Nature and Significance of Management - MCQ Questions<\/title>\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\t \n\t \n\t \n