Commerce is just like a tree. Following are its main branches.
1. Trade:
Trade eliminates the barriers of persons for the smooth flow of goods from producer to consumer. Trade implies buying and selling of goods. The producer always looks for persons who are interested in their goods at sensible price. The producers may not be able to establish get in touch with the prospective customers particularly those who are residing in far flung areas. So, it requires persons as middlemen to establish a contact between producer and scattered customers. Trade removes the hindrance of persons by introducing wholesalers and retailers as middlemen and thus implementation the chain starting with the producers and terminating at vital consumers.
2. Transport:
Transport removes the hindrances of place. Usually in the current set up, the places of production and place of consumption are quite for from each other. The distance between the centre of production and centre of consumption creates a gap between producer and consumer. Therefore, transport provides place utility. The different means of transport are roadways, railways, ocean routes and airlines. The transport has shortened the distances and brought the people closer and so the producers and consumers. Hence, the transport removes the hindrance of place.
3. Warehousing:
Warehousing removes the hindrance of time. There is always a time gap between production and consumption. So, the goods are produced in expectation of demand. Certain goods are produced in a particular season such as sugar, wheat etc. and are consumed throughout the year. While, some other goods such as woolen clothes, coolers, fan etc. are manufactured throughout the year, but are used in particular period. Thus, there is time gap between production and consumption. The hindrance of time is removed by storing the goods in the warehouse and these are made available to the consumers as and when demanded by them. Thus, the warehousing creates time utility.
4. Insurance:
Insurance removes the hindrance of threat. The goods are uncovered to different kinds of risks i.e. theft, destruction by fire etc. when the goods are in transit. Similarly, when the goods are stored in warehouses, there is also a risk of loss due to theft, fire or any other natural calamities etc. Thus, the hindrance of risk is an off shoot of the hindrance of time and place. To cover the risk of loss, there are various types of insurance policies. Fire insurance covers the risk of loss due to fire. The risk of loss from the perils of sea is covered by marine insurance. Thus, the insurance removes the hindrance of risk.
5. Banking:
Banking removes the hindrance of finance and facilitate the exchange. The exchanges of goods take place subject to time, place and price. In the process of distribution, the middlemen have to arrange for finance, since there is a time lag between the production and consumption. Bank provides loans and overdrafts which eliminate the hindrance of finance. Moreover, banking play an important role as a means of transfer of money from one person to another. In the international trade, role of banks is vital in making and receiving payments.
6. Advertisement and Salesmanship:
Advertisement and salesmanship remove the hindrance of knowledge. The lack of knowledge about the goods and their use restrict the exchange of goods. It requires advertising campaigns to make the people aware about the availability and utility of goods. The awareness about the products help in bringing the customers to the showroom and the final thrust of salesmanship helps in maturing the sale or exchange. Thus advertising and salesmanship helps in promoting the exchange by removing the hindrance of knowledge.
To sum up, commerce facilitates the exchange or transfer of goods by removing the hindrance of person (trade), hindrance of place (transport), hindrance of time (warehousing), hindrance of risk of loss (insurance), hindrance of finance (banking) and hindrance of knowledge ( advertising and salesmanship). Thus transport, warehousing, insurance, banking, advertising and salesmanship are the major commercial tools which are essential for the promotion of trade.
1. Trade:
Trade eliminates the barriers of persons for the smooth flow of goods from producer to consumer. Trade implies buying and selling of goods. The producer always looks for persons who are interested in their goods at sensible price. The producers may not be able to establish get in touch with the prospective customers particularly those who are residing in far flung areas. So, it requires persons as middlemen to establish a contact between producer and scattered customers. Trade removes the hindrance of persons by introducing wholesalers and retailers as middlemen and thus implementation the chain starting with the producers and terminating at vital consumers.
2. Transport:
Transport removes the hindrances of place. Usually in the current set up, the places of production and place of consumption are quite for from each other. The distance between the centre of production and centre of consumption creates a gap between producer and consumer. Therefore, transport provides place utility. The different means of transport are roadways, railways, ocean routes and airlines. The transport has shortened the distances and brought the people closer and so the producers and consumers. Hence, the transport removes the hindrance of place.
3. Warehousing:
Warehousing removes the hindrance of time. There is always a time gap between production and consumption. So, the goods are produced in expectation of demand. Certain goods are produced in a particular season such as sugar, wheat etc. and are consumed throughout the year. While, some other goods such as woolen clothes, coolers, fan etc. are manufactured throughout the year, but are used in particular period. Thus, there is time gap between production and consumption. The hindrance of time is removed by storing the goods in the warehouse and these are made available to the consumers as and when demanded by them. Thus, the warehousing creates time utility.
4. Insurance:
Insurance removes the hindrance of threat. The goods are uncovered to different kinds of risks i.e. theft, destruction by fire etc. when the goods are in transit. Similarly, when the goods are stored in warehouses, there is also a risk of loss due to theft, fire or any other natural calamities etc. Thus, the hindrance of risk is an off shoot of the hindrance of time and place. To cover the risk of loss, there are various types of insurance policies. Fire insurance covers the risk of loss due to fire. The risk of loss from the perils of sea is covered by marine insurance. Thus, the insurance removes the hindrance of risk.
5. Banking:
Banking removes the hindrance of finance and facilitate the exchange. The exchanges of goods take place subject to time, place and price. In the process of distribution, the middlemen have to arrange for finance, since there is a time lag between the production and consumption. Bank provides loans and overdrafts which eliminate the hindrance of finance. Moreover, banking play an important role as a means of transfer of money from one person to another. In the international trade, role of banks is vital in making and receiving payments.
6. Advertisement and Salesmanship:
Advertisement and salesmanship remove the hindrance of knowledge. The lack of knowledge about the goods and their use restrict the exchange of goods. It requires advertising campaigns to make the people aware about the availability and utility of goods. The awareness about the products help in bringing the customers to the showroom and the final thrust of salesmanship helps in maturing the sale or exchange. Thus advertising and salesmanship helps in promoting the exchange by removing the hindrance of knowledge.
To sum up, commerce facilitates the exchange or transfer of goods by removing the hindrance of person (trade), hindrance of place (transport), hindrance of time (warehousing), hindrance of risk of loss (insurance), hindrance of finance (banking) and hindrance of knowledge ( advertising and salesmanship). Thus transport, warehousing, insurance, banking, advertising and salesmanship are the major commercial tools which are essential for the promotion of trade.
