Nature And Purpose Of Business Class 11 Notes Business Studies Chapter 1 - CBSE

Chapter: 1

What Are Nature And Purpose Of Business ?

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History Of Trade And Commerce

Trade and Commerce have played a vital role in making India to involve as a major factor in the economic world in ancient times. This period was marked by substantial commercial activities and urban development.
Commercial cities like Harappa and Mohenjodaro were founded in the third millennium B.C.
The civilisation had established commercial connections with Mesopotamia and traded in gold, silver, copper, coloured gemstones, beads, pearls, sea shells, terracotta pots, etc.

Indigenous Banking System

Indigenous Banking System played a prominent role in lending money and financing domestic and foreign
trade with currency and letter of credit.
With the development of banking, people began to deposit precious metals, with lending individuals functioning as bankers or seths, and money became an instrument for supplying the manufacturers with a means of producing more goods.
Documents such as Hundi and Chitti were in use for carrying out transactions in which money passed from hand to hand.

Rise Of Intermediaries

Intermediaries played a prominent role in the promotion of trade. It consists of commission agents, brokers and distributors, both for wholesale and retail goods.
The Indian subcontinent enjoyed the fruits of favourable balance of trade, where exports exceeded imports with large margins and the Indigenous Banking System assisted the manufacturers, traders and merchants with additional capital funds for expansion and development.

Transport

During an ancient times, transport by land and water was popular.
There was a key importance of roads in the process of growth, particularly of inland trade.

Trading Communities Strengthened

Punjabi and Multani merchants handled business in the northern region, while the Bhats handled business in the states of Gujarat and Rajasthan.
In urban centres, such as Ahmedabad, the Mahajan community collectively represented by their chief called Naganseth.
Other urban groups included professional classes, such as Hakim and Vaid (Physician), Wakil (Lawyer), Pundit
or Mulla (Teachers), Painters, Musicians, Calligraphers, etc.

Merchant Corporations

The merchant corporations were organised on formal basis, framed their rules of membership and professional code of conduct, which even kings were supposed to accept and respect. Trade and industry taxes were also a major source of revenue. Traders had to pay duties that were levied on most of the imported articles at varying rates.

Major Trade Centres

Indraprastha
Varanasi
Mithila
Madura
Ujjain
Kaveripatta
Tamralipti
Surat
Kanchi
Broach
Mathura
Pataliputra
Peshawar
Taxila

Major Exports And Imports

Exports included spices, wheat, sugar, indigo, opium, sesame oil, cotton, parrot, live animals and animal products (pearls, sapphires, quartz, crystal, lapis, lazuli, granites, turquoise and copper etc.)

Imports included horses, animal products, Chinese silk, flax and linen, wine, gold, silver, copper, lead, rubies, coral, glass, amber, etc.

Position Of Indian Subcontinent In World Economy

(1 AD Upto 1991)

Between the 1st and the 7th centuries CE, India was estimated to have the largest economy of the ancient and medieval world, controlling about one-third or one-fourth of the world's wealth. The country was referred to as ‘Swaranbhumi’ and ‘Swarndweep’ in the writings of many travellers.
Despite the growing commercial sector, the 18th century India was far behind Western Europe in technology, innovation and ideas.
The British empire began to take roots in India in the mid 18th century. The East India Company used revenues generated by the provinces under its rule for purchasing Indian raw materials, spices and goods. The continuous inflow of bullion on account of foreign trade stopped. This altered the condition of the Indian economy from being an exporter of processed goods to the exporter of raw materials and buyer of manufactured goods.

Types Of Economic Activities

Business

Business refers to those economic activities, which are connected with the production of purchase and sale of goods or supply of services with the main objective of earning profit.

Profession

Profession includes those activities, which require special knowledge and skill applied by individuals in their occupation.

Employment

Employment refers to the occupation in which the people work for others and are remunerated in return. Those who are employed by others are known as employees.

Characteristics Of Business

Economic activity
Sale or exchange of goods and services
Deals in goods and services on regular basis
Uncertainty of return
Element of risk

Objectives Of Business

Economic Objectives

Market standing
Innovation
Productivity
Physical and financial resources

Evasion of unfair trade practices
Welfare of Employees
Conservation of Environment

Role of Profit

Earning profits for business is important for survival
Growth and expansion
Reward for bearing risk
Creating creditworthiness
Yardstick for business performance

Classification of Business Activities

Industry

It involves activities connected with conversion of resources into useful goods using technical, mechanical and professional skills. An industry can be primary, secondary or tertiary.

Primary Industries

Extractive industries
Genetic industries

Secondary Industries

Process raw material provided by primary industries to produce goods for final consumption. They include:

Manufacturing Industries
Analytical Industries
Synthetical Industries
Processing Industries
Assembling Industries
Construction Industries

Tertiary Industries

It provide supporting services to primary and secondary industries. They provide services in the field of banking,
communication, transportation, advertising, warehousing etc.

Commerce

It includes activities directly related to buying and selling or providing services to facilitate buying and selling. It acts as a link between producer and consumer for smooth flow of goods and services.

Trade

It refers to sale of goods by producers or traders.

Domestic/Internal trade

It refers to buying and selling of goods and services within the geographical boundaries of a country. It include wholesale or retail.

External/Foreign trade

It refers to buying and selling of goods and services outside the geographical boundaries of a country. It can be Export, Import and Entrepot.

Auxiliaries to Trade

It involves services which assist all activities related to trade and industry. Important Auxiliaries are: Transportation, Communication, Banking and Finance, Insurance, Warehousing, Advertising.