Class

11
Business
Studies
Chapter 1

Business,
Trade&
Commerc
e
 Section 1

History of Trade and

Commerce
History of Trade and Commerce

Trade and commerce have played a

vital role in making India as a major
actor in the economic word in
ancient times
History of Trade and Commerce
Commercial cities like Harappa and
Mohenjodaro were some examples for
the business development of ancient
India
 History of Trade and Commerce

These civilizations had established

commercial connections with
Mesopotamia and traded in gold, silver,
copper, gemstones, beads, pearls, sea
shells etc.
Mesopotamian Civilisation
Present day Iraq, Kuwait, Iran and Syria
History of Trade and Commerce

There were different types of

coins and weighing practices
during that time
 IndigenousBanking System

As economic life progress, metallic money had

been introduced which in turn accelerated the
economic activities

Documents such as Hundi and Chitti were in

use for carrying out transactions in which
money passed from hand to hand
 IndigenousBanking System

Hundi as an instrument of exchange, it

involved a contract which warrant the
payment of money, the promise or order
which is unconditional and capable of change
through transfer by valid negotiation
 IndigenousBanking 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
 Hundies practiced by Indian Merchant Communities

Name of Hundi Category Function

Dhani-jog Payable to any persons – no liability over who

received the payment

Darshani Payable to a specific person (someone

Sah-jog
respectable). Liability over who
received the payment.
Firman-jog Payable to order

Dekhan-har Payable to the presented or bearer.

Dhani-jog Payable to any person – no liability over who

received the payment, but payment over a fixed
Muddati term.
Firman-jog Payable to order following a fixed term.

Drawn against dispatched goods. If goods lost in

Jokhmi transit, the drawer or holder bears the costs and the
drawee carries no liability.
 Rise of Intermediaries
Intermediaries played an important
role n the promotion of trade. They
helped the producers especially in
foreign trade.

They consist of commission agents,

brokers and distributors for wholesale
 Transport
Land Transport and Water Transport were
popular in
ancient times

Roads as a means of transportation had

assumed key importance in the process of
growth especially in inland trade
Eg: The northern trade route from
 Transport
Maritime trade was another important
branch of global trade
network

Muziris (ancient harbor) in Malabar Coast

(near to the present-day Cochin) has a
long history of international maritime
 Transport
Calicut was also an important market for
Chinese to acquire items like frankincense,
pepper (black gold), pearls, cotton etc.

Pulicat on Coromandel Coast (Tamil

Nadu) was a major port in the 17th
century
 Merchant Corporations
They were autonomous corporations
(guilds) formed to protect the
interests of the traders

These corporations were organised on

formal basis, framed their own rules and
code of conduct, which even kings were
supposed to accept and respect
 Merchant Corporations
The guild chief directly dealt with the
king or tax collectors and settled the
market toll (tax) on behalf of its fellow
merchants at a fixed sum of money
Major Trade Centres
 Major Trade Centres
1
Pataliputra
Patna in Bihar today
Commercial town and major centre for
export
of stones
 Major Trade Centres
2
Peshawar City in
Very popular for exportPakistan
of wool and for the
import of horses. Major transactions
between India, China and Rome in the
first century
 Major Trade Centres
3
Taxila
City in Pakistan, also called
Thakshashila Popularly known as the
city of financial and commercial banks
 Major Trade Centres
4
Indraprastha
Located in the region of
present-day New Delhi
It was a commercial junction where most
routes leading the east, west, south and
north converged (joined)
 Major Trade Centres
5
Mathura City in
UP and people
It was an emporium of trade
here subsisted (lived) on
commerce

Many routes from South India

touched Mathura and
 Major Trade Centres
6
Varanasi City in
UP centre for textile industries
Well known
and became famous for gold silk cloth and
sandalwood workmanship

It had links with Taxila and

Bharuch
 Major Trade Centres
7
Mithila City in
Bihar the seas by
The traders in this city crossed
boats, through Bay of Bangal to the
South China

They established trading colonies in

 Major Trade Centres
8
Ujjain City in
MP
Different verities of clothes were exported
to
different centres.

It had trade connections with

 Major Trade Centres
9
Surat City in
Gujarat
It was an emporium of western trade
during
Mughal period

They were also famous for gold boarder

 Major Trade Centres
10
Kanchi
Present day Kanchipuram in Tamil
Chinese came here Naduto purchase pearls,
glass and rare stones and in return they sold
gold and silk
 Major Trade Centres
11
Madura City in Tamil Nadu
It was the capital city of Pandya dynasty who
controlled the trade of pearl and fisheries
of the Gulf of Mannar (shallow in
between India and Sri Lanka)
 Major Trade Centres
12
Broach
Present day Bharuch in
Gujarat
It was a major trade centre in Western
India
 Major Trade Centres
13
Kaveripatta
Present day Kaveripattanam in Tamil
Nadu
It was scientific in its construction as a city and
provided loading, unloading and strong facilities
of merchandise

It was also famous for perfumes,

cosmetics, scents, silk, wool, cotton and
 Major Trade Centres
14
Tamralipti
City in West Bengal (Kolkata)
It was one of the greatest ports
connected both by sea and land

It was linked by road to Banaras

(UP) and Taxila
 Major
Exports
and
Imports
 Major Exports and Imports
Export Items:
Spices, wheat, sugar, indigo, opium,
sesame oil, cotton, parrot, live animals
and animal products etc.

Spice
s
 Major Exports and Imports
Import Items:
Horses, animal products, Chinese silks,
linen, wine, gold, silver, copper,
etc.

Chinese
silks
Position of Indian
Subcontinent in
World

Economy(1AD to 1991)
 India in World Economy

From 1st to 7th centuries, India was

estimated to have the largest economy
in the world
The country was often referred as
‘Swarnabhumi’ and ‘Swarnadweep’ by
many writers and travelers like
Megasthenes, Faxian (Fa Hien), Xuanzang
(Huen Tsang) etc. because of its
prosperity
 India in World Economy

During 18th century, the British empire

began to take roots in India, thereby the
Indian economic condition was slowly
changed from being an exporter of
processed goods to the exporter of raw
materials and buyer of manufactured
goods
India begins to
Reindustrialise
India begins to Reindustrialise

After independence, the process of

rebuilding the Indian economy have
been started
As a part of this the first five
year plan was implemented in
1952.

5 Year Plan
India begins to Reindustrialise

Due importance was given to the

establishment of modern industries,
modern technological and scientific
institutes, space and nuclear programs
 India begins to Reindustrialise

To overcome the problems of lack of capital,

rise in population, huge expenditure on
defence, inadequate infrastructure etc. India
relied heavily on borrowings from foreign
sources and finally, agreedto economic
liberalization in 1991

Liberalization
 India begins to Reindustrialise

The Indian economy is one of the fastest

growing economies in the world today
The high growth sectors have been identified,
which are likely to grow at a rapid pace
 India begins to Reindustrialise

The recent initiatives of the Government

of India such as ‘Make in India’, ‘Skill
India’, ‘Digital India’, Foreign Trade Policy
2015-20 etc. is expected to help the
economy in terms of exports and imports
and trade balance
Section 2

Nature and Concept

of Business
Concept of Business
The term business is derived from the work
‘busy’.
Therefore, business means being busy.

Business refers to an occupation in which

people regularly engage in activities related
to purchase, production and / or sale of
goods and services with a view to earn
Concept of Business
Business is defined as the “repeated buying and
selling or manufacturing of goods and services with
an intention to earn profit which involves the creation
of wealth.”

Example; A factory, A retail shop,

Commission
Concept of Business
People undertake various activities to
satisfy their needs

These activities can be classified into two, they

are
Economic Activities and Non-Economic Activities
Economic
Activities Non-Economic
Activities

Human
Activities
Economic
Activities
 Economic
Activities
Activities undertaken to earn money or
money’s worth and related to
production and exchange of wealth

Eg; Running a factory, Retail shop, Cultivating

land etc.
 Economic
Activities
Characteristics of Economic
Activities

a. Related to Production of
Wealth
 Economic
Activities
Characteristics of Economic
Activities

b. To Satisfy Human Wants

 Economic
Activities
Characteristics of Economic
Activities

c. Expectation of Earning
Money
 Economic
Activities
Characteristics of Economic Activities

d. Basis for Economic Development of

the Society
Non-Economic
Activities
 Non-Economic
Activities
Activities which are undertaken not for
any reward but for the personal
satisfaction

Example: A mother looks after her

children, A house-wife cooks food
for the family, Visiting Temples
Differences Between
Economic Activities &
Non-Economic
Activities
 Economic Activities Vs.
Non-Economic

To earn money or
money's worth For personal
satisfaction

Economic Non-Economi
Activities c
Activities
 Economic Activities Vs.
Non-Economic

It can be measured
It cannot be
In terms of money Measured in
Monetary terms

Economic Non-Economi
Activities c Activities
 Economic Activities Vs.
Non-Economic

Money is
the reward Mental satisfaction
Is the reward

Economic Non-Economi
Activities c
Activities
 Types of
Economic
Activities
 Types of Economic
Activities

Business Profession Employment

Characteristics of
Business
 Characteristics of Business

1. An Economic Activity
It is undertaken with an object of
earning money or livelihood but not for
love, affection etc.

Eg: Purchase and sale of articles by a shop

 Characteristics of Business

2. Production or Procurement of
Goods and Services
Every business
should either
produce or acquire
the goods in which
it deals
Goods may consists of capital goods and consumer
goods Eg: Capital Goods: Machinery, Furniture,
Consumer Goods: Sugar, Pen, Notebook etc.
 Characteristics of Business

Services may include facilities offered to

consumers like transportation, banking,
electricity etc.
 Characteristics of Business
3. Sale or Exchange of Goods & Services
There should be sale or exchange of
goods or services between the seller and
buyer

Goods produced for personal consumption is not a

 Characteristics of Business

4. Dealing in Goods & Services on a

Regular Basis
A single transaction cannot be treated as a
business

Eg: A persons sells his old scooter even at a profit

cannot be treated as a business as there is no
 Characteristics of Business
5. Earning Profit

The business activity must be intended

to
earn profit

Businessman should take all possible efforts to

maximise the profit by increasing sales volume
or reducing cost
 Characteristics of Business
6. Uncertainty of Return

No business can predict its future

profit
 Characteristics of Business
7. Element of Risk
Every business is subject to risk due
to various
reasons

Eg: Change in fashion, fire, theft, natural

calamities etc.
 Characteristics of Business
1. Economic Activity
2. Production of Goods and Services
3. Sale or exchange of Goods and
Services
4. Regular Dealings
5. Earning Profit
6. Uncertainty of Return
7. Element of Risk
Comparison of Business
Profession & Employment
Business– Profession - Employment

1 Mode of establishment

Business Profession Employment

Based on Membership Appointme

entrepreneu of nt
r's Decision professional Order
body
Business– Profession - Employment

2 Nature of work

Business Profession Employment

Providing Performin
goods and Rendering g work as
services to personalised per
the public expert service
services contract
Business– Profession - Employment

3 Qualification

Business Profession Employment

Prescribe As
No prescribed
d
minimum by the
qualificati
qualificatio employer
on and
n
training
Business– Profession - Employment

4 Reward of return

Business Profession Employment

Salary
Profit Fees
or
Wage
Business– Profession - Employment

5 Capital investment

Business Profession Employment

Large Limite
capital d No
based on Capit
capit
the size of al
business al
Business– Profession - Employment

6 Risk

Business Profession Employment

Hig Littl No
h e Ris
Risk Risk k
Business– Profession - Employment

7 Transfer of interest

Business Profession Employment

Not Not
Transferable
Transferabl Transferabl
e e
Business– Profession - Employment

8 Code of conduct

Business Profession Employment

Profession
No code
al code of Laid down
of
conduct by the
conduct
followed employer
is
prescribe
d
Business– Profession - Employment

9 Examples:

Business Profession Employment

Jobs in
CA, Legal, banks,
Shop, Medical insurance,
Factory Profession Govt.
etc. etc. departments
etc.
 Comparison: Business, Profession and Employment
Basics Business Profession Employment

1 Mode of Entrepreneur’s Membership of Contract

Establishme decision and legal a professional of
nt formalities body employme
nt

Rendering
2 Nature of work Providing goods As per the
personalized
and services to and expert contract
the public service

Prescribed
3 Qualification No minimum Prescribed by
qualification by
qualification the professional the employer
body

4 Reward or return Profit Fees Salary or wages

5 Capital High Limited No capital

 Comparison: Business, Profession and Employment
Basics Business Profession Employment

6 Risk High Limited risk Little risk

7 Transfer of Possible Not possible Not possible

interest

8 Code of conduct Not prescribed Prescribed by Laid down by

the the employer
professional
body

Jobs in banks,
9 Examples Shop, Factory etc. CA, Legal,
insurance,
Medical govt.
Profession etc. departments
etc.
 Classification of
Business
Activities
Classification of Business
Activities

Industry Commerce
Classification of Business
Classification of Business
Activities
Industry

Industry refers to that part of business

which is concerned with the
production of goods and
material

An industry may be classified into

primary industry, secondary
Types of
Industries
 Types of Industries
Primary Industry

Engaged in extracting, producing

and processing of natural
resources

Eg: Extractive
industries and
Classification of Primary
Industries
Classification of Primary Industries
Extractive
Industries
They
are
engage
d in the
extracti
on
( collec
tion) of
Eg: Mining, fishing, agriculture,
useful
Classification of Primary Industries
Extractive
Industries

The products of these industries are

either directly consumed or used as
raw materials by other industries

Coal
Classification of Primary Industries
Genetic
Industries

Engaged in the reproduction

or multiplication of plants and
animals

E.g. Plant nurseries, Poultry farms, cattle

breeding farms etc.
 Types of Industries
Secondary Industries

They are concerned with the

materials which have already been
produced at the primary stage
Oil Refinery

Eg: Manufacturing
industries and
 Classification of
Secondary
Industries
 Classification of Secondary
InMdanuusfatcrtiuerisng
Industries

Engaged with the conversion

of raw materials into
finished goods

E.g: Cotton into textiles, timber into

furniture etc.
Classification of Secondary
InMdanuusfatcrtiuerisng
Industries

They change the form of goods

i.e. raw material into finished
goods and thus create form
utility

Raw Materials
for Cement
Classification of Secondary
InMdanuusfatcrtiuerisng
Industries

They produce Consumer Goods,

Industrial Goods and Capital
Goods
 Types of
Manufacturing
Industries
 Types of Manufacturing
Industries
a Analytical Industries

Analyses and
separates
different
elements from
the same
materials
 Types of Manufacturing
Industries
b Synthetical Industries

Combines various ingredients into

a new product

Eg: Cement is produced from

Lime,
 Types of Manufacturing
Industries
c Processing Industries
It involves successive
stages for manufacturing
finished Paper
products
Making
Process

Eg: Sugar, Paper

 Types of Manufacturing
Industries
d Assembling Industries

Assembles different component

parts to make a new
product

Eg: Car, T V, Computer, Mobile Phone

Classification of Secondary
InCdounsstrturcietiosn
Industries

Engaged in the construction of

buildings, dams, roads,
bridges etc.

They use the products of

manufacturing industries and
 Types of Industries
Tertiary Industries

They are providing support

services to primary and secondary
industries and it form part of
commerce
Insuranc
e

Eg: All service activities which are auxiliaries

to trade like transport, banking,
Commerce
Commerce
It is concerned with buying, selling and
distribution of commodities and it is an
organized system for exchange of goods
and services in between the businessman
and the customers
Commerce
It is also concerned with the marketing
aspects of business, i.e. supply of right
type of goods to the right persons, at
the right time and at the
right price

:. Commerce includes trade and aids to

trade
Commerce

Commerce

Trade Aids to
Trade
Commerce

Definition

The sum total of all those activities

which are involved in the
removal of hindrances in the
process of exchange of goods
Functions
of
Commerce
Functions of Commerce
1. Removal of Hindrance of Person
It refers to the lack of contact
between the producers
and customers

Here the trader acts as an intermediary

among them and customers are able to find
out the products which they are wanted
from the market
Functions of Commerce
2. Removal of Hindrance of Place
Producers and customers are in distant
places, hence the commodities should
be transferred from the production
centre to the customers

This problem can be solved by the

system of commerce by means of
transport, packing and insurance
Functions of Commerce
3. Removal of Hindrance of Risk
Goods and properties of business are
subject to various risk such as fire,
theft, damage etc.,

They can be protected by

Functions of Commerce
4. Removal of Hindrance of Time
There may be a gap between the
production and consumption as the
production is carried out in anticipation of
future demands
Therefore, it becomes necessary to
store the goods until they are sold

This problem can be

Functions of Commerce
5. Removal of Hindrance of Knowledge
Knowledge of customers about the
products and services offered by
business organisations is a major
problem in business

Advertising helps in the removal of

hindrance of knowledge among
Functions of Commerce
6. Removal of Hindrance of Finance
The problem of finance can be handled
by banks, which form part of
commerce

It will also help the businessman in

exchange of money between different
persons at different places
 Functions of Commerce
1. Removal of Hindrance of Person
2. Removal of Hindrance of Place
3. Removal of Hindrance of Risk
4. Removal of Hindrance of Time
5. Removal of Hindrance of
Knowledge
6. Removal of Hindrance of Finance
 Make in India
It is an initiative launched by the
Government of India on 25th September
2014, to encourage national and
multinational companies to manufacture
their products in India.
 Make in India
Its major objectives are job creation
and skill enhancement in 25
sectors of the economy.
Some of them are, Automobile, Aviation,
Biotechnology, Chemicals, Construction,
Defense, Electrical Machinery, Food
processing, I T, Oil and Gas, Media and
Entertainments, Mining, Railways etc.
Trade
Trade

Buying and selling of goods, which

involves the exchange of commodities
for money or money’s worth
Types of
Trade

Trade

Home Foreign
Trade Trade
Types of
Trade

Home
It Mumb
ai
isTarlasdoekno
wn as
Kochi
domestic trade
Buying and selling
or internal of goods within the
country and both the buyer and seller
trade
should belong the same nation
Types of
Trade

Home
Trade

Wholesale Retail
Trade Trade
 Types of
Trade
a Wholesale Trade
Buying and selling in large
quantities

A wholesaler buys goods directly

from the producers and sells
them to the retailers
 Types of
Trade
b Retail
Buying and sellinTgraodf
geoods in small quantities

A retail trader buys goods from the

wholesalers and sells them to
Types of
Trade

Foreign
Trade
Export Import

Entrepot
Types of
Trade
Foreign Trade
It is also known as External
trade or international
trade

It involves the buying and selling of

goods and services in between the
persons belonging to twoor more
 Types of
Trade
a Export
Sale of goods to foreign
countries
 Types of
Trade
b Import
Purchase of goods from foreign
countries
 Types of
Trade
Entrepot
c
Importing goods from one country for
the purpose of exporting them to
somerie
coun other
t s

Englan Indi Chin

d a a
 Types of
Trade

Home Foreign
Trade Trade

Wholesale Retail
Trade Trade

Export Import Entrepot

Trade Trade Trade
AidstoTrade
(AuxiliariestoTrade)
AidstoTrade

The activities which assist trade

are called Aids to Trade or
Auxiliaries to Trade
 AidstoTrade
Aids to trade includes Bankin
Transport, Insurance, g,
Warehousing, Advertising etc.

These service enterprises facilitate

movements, finance, risk coverage,
storage, and sales promotion of
goods
 AidstoTrade
1 Transport and Communication
Usually production takes place in
certain locations and consumption
all over
y the countr

This problem is removed by transport

throughvarious modes such as road,
rail or water transport
AidstoTrade
Along with transport, Communication is
very essential, which helps the
producers, traders and consumers in
exchange of information

Postal service, telephones and other

modern means of communication may
be regarded as auxiliaries to business
AidstoTrade
2 Banking and Finance
All business concerns need
fundraw
acquiringassets, formaterials and
meeting day today
expenses

Finance is the foundation of all

business
AidstoTrade
How banks help the business ?
Banks accept deposits from the
public and provide credit facilities
for business

They lend money (O/D, CC, Loans),

discounting of bills, collection of cheques,
remittance facilities and various other
AidstoTrade
3
Insurance
Insurance provides protection against
the risk of loss due to accident, fire,
earthquake, theft, damage of goods in
stock and transit

On payment of a nominal amount

called premium, the amount of loss
or damage is compensated by the
AidstoTrade
4 Warehousing
Production is always in anticipation of
future demands, so that the products
are to be kept in good condition
until they are sold

Warehouses facilitates storage of

goods and stabilises prices by
AidstoTrade
5 Advertising
It helps to reach millions of
customers for promoting sales
and giving information about the
product

Thus advertising
makes possible
marketing of goods
and services on a
 AidstoTrade
(AuxiliariestoTrade)

1. Transport and Communication

2. Banking and Finance
3. Insurance
4. Warehousing
5. Advertising
Objectivesof
Business
 ObjectivesofBusine
a s
Market Standing
It refers to the position of an enterprise
in
relation to its competitions by providing
quality products and better service to its
customers
 ObjectivesofBusine
b s
Innovations (Novelty)
Innovation means the introduction of
something new to the market. It may be
a new design, new quality for the existing
product, new method of production etc.

1990's
 ObjectivesofBusine
c s
Productivity
Every enterprise should aim at greater
efficiency and productivity by the best
use of available resources
 ObjectivesofBusine
d s
Physical and financial resources
Acquiring physical resources like
buildings, plant and machinery, offices
etc. and financial resources or fund for
its operations and ensure its efficient use
 ObjectivesofBusine
e s
Earning profits
Profit is regarded as the life-blood of a
business to survive and to make
growth and development of the
enterprise
 ObjectivesofBusine
f s
Manager performance and
development
The enterprise should take much
initiative to improve the efficiency of its
managers by conducting various
programs to motivate them
 ObjectivesofBusine
g s
Worker performance and attitude
Every enterprise should aim at improving
its workers performance and their
positive attitude
 ObjectivesofBusine
i s
Social responsibility
It refers to the social obligations of
business firms to contribute
resources for solving social
problems and to work in a socially
desirable manner
 ObjectivesofBusiness
a) Market Standing
b) Innovations
c) Productivity
d) Physical and Financial
Resources
e) Earning Profits
f) Manager Performance
g) Worker Performance
h) Social responsibility
BusinessRisk
 BusinessRisk
Risk = Possibility of loss
It can be defined as the chances of
loss due to certain uncertain events
in the future
 BusinessRisk

Types of
Risk

Speculative Pure
Risk Risk
 BusinessRisk
Speculative Risk
It involves both chances of gain or
loss.
If the market condition is favourable
it will result in gain, otherwise, loss.

It arises due to change in

demand and supply, change
 BusinessRisk
Pure Risk
Possibility of loss or even no loss.
If such events take place, it may
result in loss, non-occurrence of such
events results in absence of loss,
instead of gain

It arises due to fire, theft, earthquake,

strike etc.
 NatureofBusinessRisk
1
It arises due to
uncertainties
Lack of knowledge about what
is
going Policy
Govt.
to
tic
Pl oid
as

happen in future
gs r
Av

Pa e
Ba pe
Us

Eg: Change in demand, Govt. Policy,

Epidemic
 NatureofBusinessRisk
2
It is an essential part of every business
Every business has its own
risks, no business can
avoid risk

Risk can be minimised but cannot be

eliminated
 NatureofBusinessRisk
3
Degree of risk depends on the nature
and
size of business

Eg: 1. Business dealing with fashionable items has

a high degree of risk
2. A large scale business has high risk than small
 NatureofBusinessRisk
4
Profit is the reward for bearing risk
An entrepreneur takes risks
under the expectation of
higher profit

No risk
means
no gain
 Methodsof
dealingwithRisk
 How todealwithBusinessRisk

Methods of dealing with risk:

1. Not to enter high risky transactions

2. Take precautionarymeasures
like fire fighting equipments etc.
3. Take an insurance policyto
cover various risks.
4. Take measures like provision for
bad debts, investment
 Causesof
BusinessRisk
 CausesofBusinessRisk
1
Natural Causes
Risk due to natural
calamities

It may include damages from

flood, fire,
 CausesofBusinessRisk
2
Human Causes
It may arise due to certain human
activities

Eg: Theft, bad debt, mistakes,

accidents etc.
 CausesofBusinessRisk
3
Economic Causes
It includes uncertainties relating to
demand for products, competition,
price, change in technology, rise in
interest rate, higher taxes etc.
 CausesofBusinessRisk
4
Other Causes
Political disturbances, mechanical
failures, change in exchange rates,
etc. come under this category
 Natural
Causes

Other Causes Human

Causes of Risk Causes

Economic
Causes