Foundations of Business

Chapter 1: Business, Trade, and Commerce

Learning Objectives

• Understand the contribution of business activities to economic growth and development.
• Discuss the concept and objectives of business.
• Categorize business activities into occupation, profession, and employment.
• Classify industries into different types.
• Explain risk and profit as a reward for risk.
• Identify factors for starting a business.

Introduction

• Human needs require different goods and services.
• Products and services are available in markets - physical or electronic.
• Business activities involve production, manufacturing, distribution, and exchange.
• Business is central to our lives and is a major economic activity.
• Business starts with production and ends with consumption.
• Industry relates to production, and commerce involves trade and distribution.

Economic Activities

• Types: Exchange, distribution, consumption, production.
• Trade was central to ancient economies, contributing to prosperity.
• Development of indigenous banking systems facilitated trade.
• Hundi and chitties were traditional financial instruments aiding trade.

Role of Business in Economic Development

• Ancient trade routes (Silk and maritime) crucial to economy.
• Favorable trade balance and banking systems supported trade and expansion.
• Major ancient trade centers: Patliputra, Peshawar, Taxila, Indraprastha, etc.
• British rule shifted India’s economy from exporter of goods to raw materials.
• Post-independence economic rebuilding focused on modern industries.
• Recent government initiatives like Make in India aim to boost growth.

Concept of Business

• Business = economic activity for profit; not out of emotion.
• Economic vs. non-economic activities.
• Distinguishing features include regularity, profit motive, risk, and formal dealings.

Business, Profession, and Employment

• Business: Entrepreneurial, profit-oriented, involves risk.
• Profession: Expert service, regular fees, less risk.
• Employment: Contractual, fixed salary, minimal risk.

Classification of Business Activities

• Industry: Production of goods.
  • Primary: Extraction and reproduction (e.g., farming, mining).
  • Secondary: Processing of raw materials (e.g., manufacturing, construction).
  • Tertiary: Support services (e.g., transport, banking).
• Commerce: Trade and supporting activities (e.g., transport, insurance).

Trade and Auxiliaries to Trade

• Trade: Sale, transfer, or exchange of goods.
• Auxiliaries: Services facilitating trade (e.g., transport, banking, advertising).

Objectives of Business

• Profit is key, but not sole objective.
• Other objectives: market standing, innovation, productivity, resource management, social responsibility.

Business Risk

• Inherent in all business activities.
• Types: speculative (gain or loss) and pure (only loss or no loss).
• Causes: natural, human, economic, and other unforeseen events.

Starting a Business: Basic Factors

• Selection of business type: Based on profit potential and entrepreneur's interest.
• Business size: Determined by market demand and capital availability.
• Location: Influences cost and accessibility to resources.
• Financing: Capital needed for assets and operation.
• Physical facilities: Depend on business scale and funding.
• Workforce: Competent staff necessary for operations.
• Tax planning: Essential for financial management.
• Launching: Mobilizing resources and starting operations.

Activities and Case Study

• Activities encourage exploring real business scenarios and understanding economic contributions.
• Case study on innovation in silk weaving highlights business objectives and entrepreneurship.

Discussion and Exercises

• Questions for short and long answers to reflect understanding of business concepts and applications.