Classification
of Business Activities
Various business activities may be classified into two
broad categories —industry and commerce.
I. Industry
Industry refers to economic activities, which
are connected with conversion of resources into useful goods. Generally, the
term industry is used for activities in which mechanical appliances and
technical skills are involved. These include activities relating to producing
or processing of goods, as well as, breeding and raising of animals. The term
industry is also used to mean groups of firms producing similar or related
goods. For example, cotton textile industry refers to all manufacturing units
producing textile goods from cotton. Similarly, electronic industry would
include all firms producing electronic goods, and so on. Further, in common
parlance, certain services, like banking and insurance, are also referred to as
industry, say banking industry, insurance industry, etc. Industries may be
divided into three broad categories namely primary, secondary and tertiary
I.
Primary industries:
These include all those activities which are concerned
with the extraction and production of natural resources and reproduction and
development of living organisms, plants, etc. These are divided as follows.(a)
Extractive industries: These industries extract or draw products from natural sources.
Extractive industries supply some basic raw materials that are mostly products
of geographical or natural environment. Products of these industries are
usually transformed into many other useful goods by manufacturing industries. I
m p o r t a n t e x t r a c t i v e industries include farming, mining,
lumbering, hunting and fishing operations
(b)
Genetic industries: These industries are engaged in breeding plants and animals for
their use in further reproduction. Seeds and nursery companies are typical
examples of genetic industries. In additional, activities of cattle breeding
farms, poultry farms, and fish hatchery come under genetic industries.
II.
Secondary industries:
These are concerned with using materials, which have
already been extracted at the primary sector. These
industries process such materials to produce goods for final consumption or for
further processing by other industrial units. For example, mining of iron ore
is a primary industry, but manufacturing of steel by way of further processing
of raw irons is a secondary industry. Secondary industries may be further
divided as follows:
(a)
Manufacturing industries: These industries are engaged in producing goods through processing
of raw materials and, thus, creating form utilities. They bring out diverse
finished products, that we consume, or use through the conversion of raw
materials or partly finished materials in their manufacturing operations.
Manufacturing industries may be further divided into four categories on the
basis of method of operation for production.
·
Analytical industry which
analyses and separates different elements from the same materials, as in the
case of oil refinery.
·
Synthetical industry which
combines various ingredients into a new product, as in the case of cement.
·
Processing industry which
involves successive stages for manufacturing finished products, as in the case
of sugar and paper.
·
Assembling industry which assembles different
component parts to make a new product, as in the case of television, car,
computer, etc.
(b)
Construction industries: These industries are involved in the construction of buildings,
dams, bridges, roads as well as tunnels and canals. Engineering and
architectural skills are an important part in construction industries.
III.
Tertiary industries:
These are
concerned with providing support services to primary and secondary industries
as well as activities relating to trade. These industries provide service
facilities. As business activities, these may be considered part of commerce
because as auxiliaries to trade these activities assist trade. Included in this
category are transport, banking, insurance, warehousing, communication,
packaging and advertising.
2.
Commerce
Commerce includes two types of activities, viz.,
(i) trade and
(ii) auxiliaries to trade.
Buying and selling of goods is
termed as trade. But there are a lot of activities that are required to
facilitate the purchase and sale of goods. These are called services or
auxiliaries to trade and include transport, banking, insurance, communication,
advertisement, packaging and warehousing. Commerce, therefore, includes both,
buying and selling of goods, i.e., trade, as well as, auxiliaries, such as
transport, banking, etc. Commerce provides the necessary link between producers
and consumers. It embraces all those activities, which are necessary for
maintaining a free flow of goods and services. Thus, all activities involving
the removal of hindrances in the process of exchange are included in commerce.
The hindrances may be in respect of persons, place, time, risk, finance, etc.
The hindrance of persons is removed by trade, thereby, making goods available
to consumers from the possession or ownership producers. Transport removes the
hindrances of place by moving goods from the place of production to the markets
for sale. Storage and warehousing activities remove the hindrance of time by
facilitating holding of stocks of goods to be sold as and when required. Goods
held in stock, as well as, goods in course of transport are subject to a risk of
loss or damage due to theft, fire, accidents, etc. Protection against these
risks is provided by insurance of goods. Capital required to undertake the
above activities is provided by banking and financing institutions. Advertising
makes it possible for producers and traders to inform consumers about the goods
and services available in the market. Hence, commerce is said to consist of
activities of removing the hindrances of persons, place, time, risk, finance
and information in the process of exchange of goods and services.
1)
Trade and Auxiliaries to
Trade : Trade
is an essential part of commerce. It refers to sale, transfer or exchange of
goods either physical or virtual. It helps in making the goods produced
available to the consumers or users. These days’ goods are produced on a large
scale and it is difficult for producers to themselves reach out to individual
buyers for selling their products. Businessmen are engaged in trading
activities to make the goods available to consumers in different markets. In the
absence of trade, it would not be possible to undertake production activities
on a large scale. Activities which are meant for assisting trade are known as
auxiliaries to trade. These activities are generally referred to as services
because these are in the nature of facilitating the activities relating to
industry and trade. Transport, banking, insurance, warehousing, and advertising
are regarded as auxiliaries to trade, i.e., activities playing a supportive
role. In fact, these activities support not only trade, but also industry and,
hence, the entire business activity. Auxiliaries are an integral part of
commerce in particular and business activity in general. These activities help
in removing various hindrances which arise in connection with the production
and distribution of goods. Transport facilitates movement of goods from one
place to another. Banking provides financial assistance to the manufacturer and
trader. Insurance covers various kinds of business risks. Warehousing creates
time utility by way of storage facilities. Advertising provides information to
the consumers. In other words, these activities facilitate movement, storage,
financing, risk coverage and sales promotion of goods. Auxiliaries to trade are
briefly discussed below:
(a)
Transport and
Communication: Production of goods generally
takes place in particular locations. For instance, tea is mainly produced in
Assam; cotton in Gujarat and Maharashtra; jute in West Bengal and Odisha; sugar
in U.P., Bihar and Maharashtra and so on. But these goods are required for
consumption in different parts of the country. The obstacle of place is removed
by transport through road, rail or coastal shipping. Transport facilitates
movement of raw material, to the place of production and the finished products
from factories to the place of consumption. Along with transport facility,
there is also a need for communication facilities so that producers, traders
and consumers may exchange information with one another. Thus, postal services
and telephone facilities may also be regarded as auxiliaries to business
activities.
(b)
Banking and Finance: Business activities cannot be undertaken unless funds are available
for acquiring assets, purchasing raw materials and meeting other expenses.
Necessary funds can be obtained by businessmen from a bank. Thus, banking helps
business activities to overcome the problem of finance. Commercial banks,
generally lend money by providing overdraft and cash credit facilities, loans
and advances. Banks also undertake collection of cheques, remittance of funds
to different places, and discounting of bills on behalf of traders. In foreign
trade, commercial banks help exporters in collecting money from importers.
Commercial banks also help promoters of companies to raise capital from the public.
(c)
Insurance: Business involves various types of risks. Factory building,
machinery, furniture, etc., must be protected against fire, theft and other
risks. Material and goods help in stock or in transit are subject to the risk
of loss or damage. Employees are also required to be protected against the
risks of accident and occupational hazards. Insurance provides protection in
all such cases. On payment of a nominal premium, the amount of loss or damage
and compensation for injury, if any, can be recovered from the insurance
company.
(d)
Warehousing: Usually, goods are not sold or consumed immediately after
production. They are held in stock to make them available as and when required.
Special arrangement must be made for the storage of goods to prevent loss or
damage. Warehousing helps business firms to overcome the problem of storage and
facilitates the availability of goods when needed. Prices are, thereby,
maintained at a reasonable level through continuous supply of goods.
(e)
Advertising and
Public Relations: There is an old saying
“Advertising is what you pay for and PR is what you pray for”. Both
advertisement and PR activities are the tools to commerce, influence and
promote your product, services or an idea to you potential customers and
motivate you target customers to recognise your accomplishments. Advertising
and public relation activities are one of the most important methods of
promoting the sale of products and services in a market place. It is
practically impossible for producers and traders to contact each and every
customer. Thus, for promoting sales, information in made available through
advertisements and publicity tools about their features, price, etc., to the
potential customers. Also, there is a need to persuade potential customer’s and
buyers about the utility featuress, quality, price, competitive information
about the goods and services, etc. The publicity of such attributes of products
and services are done using various techniques of maintaining public relation
tools. The popular PR tool is the use of press release in print and social
media platforms. Advertising and Public Relations activities helps in providing
information about available goods and services and inducing customers to buy
particular items. Advertisements are always a paid activity where business
occupies space in print or non-print media to promote its product or a service.
PR activities, on the other hand, are normally unpaid where business enters
into a strategic communication to build a mutually beneficial relationship.
