What is commerce and the division of commerce in business studies
The world is one economic unit. Goods of one country are now easily available in other parts of the world. For geographical reasons certain parts of the world are richly endowed with some valuable natural resources.
These resources are provided to other parts of the world through commerce-a system which deals with the distribution of commodities.
The word commerce covers wide range of Human activities. Because of its diverse Nature, numerous definitions have been advanced at different times by eminent scholars.
Commerce can be defined as a part of general Economics which deals with how a man gets his income and how he spends it.
Another definition talks of commerce as a system which deals with the distribution of goods.
These definitions are either too wide or too narrow for an average student to comprehend in an elementary work of this nature. While it is agreed that the above definitions go further into the depth of economics than the sphere of commerce, the view is advanced that such definitions as far as possible should be supplemented with current examples.
For the purpose of this work, commerce may be defined as a system with the buying and selling of goods and services and such relative factor like trade, transport, finance, insurance warehousing and advertisement which make the system a success.
Divisions of Commerce
Commerce is broad-based. It covers nearly all the activities of man and enquiries deeply into how he works to satisfy his wants. Commerce is divided into Trade, Transport, Insurance, Banking and Finance, Warehousing and Advertisement.
Trade is the pivot on which the wheel of commerce rotates. It concerns buying and selling of goods and services. In fact, people have often regarded Commerce and trade as synonymous.
This is not so. Commerce covers a wider field and Trade a narrower one. Trade is divided into Home Trade and Foreign Trade.
a. Home Trade
This is a trade which is carried on within a country. It is divided into Wholesale Trade and Retail Trade.
i. Wholesale Trade
This type of trade is conducted by people who can afford to buy goods in large quantities. The wholesale trader buys from the manufacturers or producers in bulk and sells in small quantities to the Retailers.
ii. Retail Trade
The retail trade is carried on by traders who cannot afford to buy in large quantities. The retailer buys in small quantities from the wholesaler and sells in bits to the consumer.
b. Foreign Trade
This is a trade between two countries. A trade between Nigeria and Rwanda is called Foreign trade because both Nigeria and Rwanda are 2 different countries. Foreign trade is divided into Import and Export.
Import trade deals with the bringing into our country goods that are produced or manufactured in other parts of the world. The import of Nigeria includes television sets from Germany, cars from America, textile goods from Britain etc.
This type of trade involves the sending out of our own goods or raw materials to the other parts of the world. The Export Trade commodities of Nigeria consist of cocoa, rubber, palm-kernel, petroleum, crude oil etc.
This is a means whereby goods and passengers are conveyed from one place to another. Nature has not distributed it’s natural resources equitably over the surface of the earth.
It is transport that makes such goods available in places where they are wanted. Transport is divided into Land, Water and Air.
Transport by land includes Motor cars/Lorries, Train, bicycles etc.
Transport by water includes canoe, steamship, cargo-boats, ocean liners, tramp etc.
c. Transport by air includes aeroplane and helicopter.
The place of insurance inthe field of commerce is great. The incidence of loss that would have paralysed commercial activities are heaped on insurance-a sort of guarantee or security against loss.
That is why insurance is commonly defined as a pool of risk, or a provision which a wise trader makes against the occurrence of accidental losses that are likely to arise in the future.
The type of insurance commonly effected by traders includes fire, burglary, fidelity guarantee, Life assurance etc.
4. Banking and finance
A Bank is a financial institution where money and other valuables are kept for safe custody. The place of finance generally in commerce is very important one.
Goods and services are to be bought and paid for. In order to do this money has to be available.
People Keep their surplus funds in the bank so that they may be able to withdraw them at any time they need money to run their business.
It must be stressed that the functions of a bank to commerce include the granting of credits to customers as well as receiving credits from them.
The Bank grants credits to its customers for the purpose of pursuing their commercial activities in two ways. These are by loans and overdrafts.
A loan is an advance given by a bank to a customer. Before loans are granted, the customer must be able to provide reasonable security against repayment. The bank charges some amount of interest on such loans.
An overdraft is a credit facility which a bank gives to customers. In that case, the customer is allowed to draw up to a certain amount in excess of what he has to his credit in the bank.
Thus a customer who has #200.00 in the bank may be allowed to draw a cheque for #300.00. The #100.00 excess is called overdraft.
How banks Receive Credit
Banks receive credits from their customers by collecting money from them for savings. This is usually done by savings Account, Fixed Deposit Account and Current Accounts.
i. Savings Account
People are encouraged to save a part of their earnings with the bank. The customer is given a pass-book.
This pass-book will show the amount standing to his credit at any time. The bank pays interest yearly on savings accounts.
ii. Fixed Deposit Account
Any customer who has surplus funds may keep a fixed deposit account. In this type of account, the customer keeps his money with the bank for a definite time.
It may be one year or three years. This will mean that the customer may not withdraw this money before the agreed time.
The bank would need at least 7 days notice before withdrawal. A fixed percentage of interest is payable on Fixed Deposit Accounts.
iii. Current Account
Current Accounts are kept with a bank in order to meet current expenses. The account is usually operated with a Cheque book for withdrawals. Because of the Services performed to the customer in keeping his current account, the bank charges a commission.
Goods are usually produced ahead of demand. Such goods are kept in a warehouse until they are needed. This service of storage performed by the warehouse is very important in commerce.
If there are no warehouses, producers will run a great risk in producing goods well in advance of demand.
Advertising is a means whereby goods are publicised and the existence of new lines brought to the knowledge of the consumers.
Advertisements are carried on by means of pamphlets distribution, hand bills, trade journal, screen etc.