Meaning and Functions of Commerce

Meaning of Commerce

Commerce means activities that directly or indirectly help in taking goods from the place of production to the place of consumption. It includes Trade and Aids to Trade. Aids to Trade are also called Auxiliaries to Trade.

Commerce = Trade + Aids to Trade

 

Functions of Commerce:

Functions of Commerce are hidden in the meaning of Commerce.

1. Removing the hindrance of persons:

Trade removes the hindrance of persons, by creating a link between the producers and consumers.

Trade bridges the gap between producers and consumers by creating a link through which goods and services can be exchanged. This process involves wholesalers, retailers, and various intermediaries who facilitate the movement of goods from manufacturers to end-users.

2. Removing the hindrance of place:

Transport removes the hindrance of place, by removing a place gap between the producers and consumers.

It allows products to be moved from the place of production to the place of consumption. Efficient transport systems—such as roadways, railways, shipping, and air transport—ensure that goods are delivered timely and in good condition.

3. Removing the hindrance of time:

Warehousing removes the hindrance of time, by removing the time gap between the production and consumption.

This function allows businesses to maintain a steady supply of products, manage seasonal demand, and prevent shortages or overproduction. Warehousing also involves activities like inventory management, packaging, and preservation to keep goods in optimal condition.

4. Removing the hindrance of finance:

Banking removes the hindrance of finance, by helping the buyers and sellers in making and receiving payments and providing them credit facilities.

Banks facilitate payments between buyers and sellers through various instruments like cheques, credit cards, and electronic transfers. They also offer credit facilities, loans, and financing options, enabling businesses to manage cash flow, invest in growth, and expand operations without immediate financial constraints.

5. Removing the hindrance of risk:

Insurance removes the hindrance of risk, by providing protection and compensation to the insured against various types of risks.

It offers financial compensation in case of unforeseen events such as natural disasters, theft, or accidents. By mitigating these risks, insurance ensures stability and continuity in business operations, fostering a secure environment for economic activities.

6. Removing the hindrance of knowledge:

Advertising removes the hindrance of knowledge, by making people aware about the product and related particulars.

Through various channels like print media, online platforms, and social media, businesses can reach potential customers, highlight the benefits of their offerings, and create brand awareness. Effective advertising not only drives sales but also helps build customer loyalty and trust.

Check your understanding

 

 

Role of Profit in Business