Meaning And Importance Of Commerce

Table Of Contents

1. Introduction To Commerce
2. Meaning Of Commerce
3. Importance Of Commerce
4. Activities That Aids Commerce

Introduction To Commerce

Commerce is the activity of buying, distributing of goods and services to make profit. It covers the services which helps in carrying out buying and selling. Such services include transportation, warehousing, banking, insurance, communication, advertising etc. These services are performed to meet basic human needs.

Meaning Of Commerce

Commerce is the subject that studies the whole process of trade and distribution. By trade we mean the buying and selling of goods and services. Distribution on other hand involves transportation and communication, and all activities needed to make goods available to consumers.

Commerce generally is concerned with making what has been produced available to the consumers. It constitutes the tail end of the production process. It is divided into two major parts, namely:

1. Trade
2. Aids To Trade

Trade: This is buying and selling of commodities. It is also an exchange of one thing for another, for a price.

Aids To Trade: They are the activities that make trade to be possible, more effective and efficient. The essence of such activities make trade to be difficult to be conveyed to the market, or to the place where they will be used. From the foregoing discussion, we can see that commerce is trade and at the same time, aids trade.

Importance Of Commerce

1. Commerce makes the exchange of goods and services to be fast. It makes easier the movement of people and goods from one place to another.

2. It provides funds for the difficult and effective running and expansion of business through the banking industry.

3. It promotes international trade.

4. It elevates and improves the standard of living of people by offering variety of products for peoples well being.

5. It assists manufacturers and wholesalers to store their goods until they are needed or bought.

6. It provides employment to various categories of people.

7. It motivates people’s interest in the consumption of goods and services.

8. It facilitates risky undertaking, especially in international trade through insurance.

9. It disseminates useful information to manufactures and commercial firms about goods and services.

10. It creates good relationship between buyers and sellers.

Activities Which Aid Commerce

1. Transport: The places where the goods are produced are usually far from the places they are sold and consumed. This create a problem which is solved through an importance aid of trade, called transport. Transport moves people and goods from one place another. It makes goods available where they are needed, from the place of production, that is factory to the place they are sold, that is market, the door step of consumers. Transport means include, trucks, train, aeroplane, water vessels, motor cars, motor bikes etc.

2. Banking: Through banking, the problem of finance is solved. Business required money and also makes payments in large amounts. It is risky to carry large amount of cash from one place to another. Banking also enables traders to save their returns or income. Banking solves the problems of payment and facilitates exchange between buyers and seller. Examples of banks are the commercial banks, central banks, community banks, mortgage banks, etc.

3. Warehousing: Goods that are produced at a time are not usually consumed at the same time. It becomes necessary to arrange storage for goods. Agricultural commodities like wheat and rice are seasonal in nature but are consumed throughout the year. Also goods like umbrella and woolen clothes are demanded mainly during a particular season. Therefore, goods need to be stored till they are needed. Warehousing does not only stores goods, it also protects the goods against storage and deterioration. Warehousing ensures that goods not sold are properly or safely kept and protected from spoilage. Warehousing creates time utility, by availing the goods at the right time to consumers.

4. Advertising: This type of aid of trade fills the knowledge gap between production and consumption. There is need for mass communication, for it helps the consumers to know about the various brand of goods that are manufactured. Advertising creates demand which enhances large sale volume(turnover). It guides consumers in the choice and purchase of goods and services.

Advertising can be through Radio, Television, Newspaper, Internet, Short Message Service (SMS), Hand bills and Bill boards.

READ ALSO: Advertising In Business Studies

5. Communication: This is the means of sending information from one person to another. It can be oral or written. Communication is needed to finalize and settle terms of sales, such as, prices of goods, discount, credit facility etc. It facilitates business transaction as it brings two people(buyer and seller) into close contact irrespective of distance. It enables a person to buy goods from a distance or oversea country without travelling to such an area or country. For instance someone in Nigeria(a buyer) can place an order for goods from malaysia (seller) online and make payment online and the goods are delivered to the address specified. Examples of forms of communication are Telephone, E-mail, Call phone, Fax, letter, etc. Communication therefore plays an important role in establishment contact between businessmen, producers and consumers.

6. Insurance: Insurance is an important aid to commerce because it provides protect against possible risk arising from commerce. Such risks are usually unplanned and unexpected in business. Such risks arise from fire, theft, accident or any natural calamity like flood, earthquake, extreme wind ,loss of goods in transit, marine hazards( losses arising from ship wreck), etc. One who insured his car, properly or goods, get paid in case any of the aforementioned risks or disasters.

The insurance company pays for the loss of the property or goods. The money paid by insurance is known as Indemnity. Insurance therefore reduces the risks involved in business transactions hence it is an aid to commerce.

Suggested Posts: