The term business is derived from the word ‘busy’. Thus, business means means being busy. Here are the business trade and commerce class 11 notes.
In other words, business refers to an occupation in which people regularly engage in activities related to the purchase/production and sale of goods and services with the main purpose of earning profits.
Topics Discussed
Economic Activities
These are those human activities that are performed to earn a livelihood. For eg. a business person, a teacher, a worker, etc.
Non-Economic Activities
Those human activities that are performed out of love, sympathy, sentiments, etc. are known as non-economic activities. For eg. a doctor treating his son, a teacher teaching his son, etc.
Difference between Business, Profession and Employment
| Basis | Business | Profession | Employment |
| Mode of Establishment | Business is established by the entrepreneur’s decision or any legal formality if required. | A Profession can be commenced by getting membership in a professional body & certificate of practice. | Employment commences on acceptance of the appointment letter. (Service agreement) |
| Nature of Work | Business involves the provision of goods & services to the public. | The Profession involves rendering personalized expert services. | Employment involves doing the work as per the service contract or rules of service. |
| Qualification | In business, no minimum qualification is necessary. | Professionals are required to be experts in their field possessing a high degree of expertise and training. | Underemployment, training & qualifications are required as prescribed by the employer. |
| Reward or Return | Profit is the reward for performing business activities. | Fees are the reward for providing professional services. | Salary or wages is the reward in the course of employment. |
| Capital Investment | Capital investment is required as per the nature or size of the business. | Limited capital is required in case of establishment. | Capital investment is not required in case of employment. |
| Risk | In business, the profits are uncertain & irregular. Hence, risk is present. | Fees are generally regular & certain. Hence, little risk is involved. | Employment doesn’t involve any risk as compared to business & profession. |
| Code of Conduct | No code of conduct is prescribed in business. | A Professional code of conduct is to be followed in case of profession. | The rules and regulations laid down by the employer need to be followed. |
| Transfer of Interest | In business, transfer of interest is possible with some legal formalities. | In the case of a profession, transfer of interest is not possible. | In case of employment, transfer of interest is not possible. |
| Examples | Owner of a bakery shop. | CA, Lawyer, etc. | An employee working in a call center. |
Industry
Industry refers to economic activities which are connected with the conversion of resources into useful goods. For example, the electronic industry includes all the business units that are producing electronic goods.
Industries are classified into 3 parts:
1) Primary
2) Secondary
3) Tertiary
1) Tertiary Industry
It refers to those industries which are concerned with the extraction & production of natural resources and the reproduction & development of living organisms, plants, etc. These are further divided as;
a) Extractive Industries
These industries involve the extraction of products from natural sources. These industries provide such products which are used as raw materials by many manufacturing industries. For eg. mining, agriculture, etc.
b) Genetic Industries
Genetic industries are concerned with the breeding of plants & animals for their use in further reproduction. For eg. seeds & nursery companies, cattle breeding farms, etc.
2) Secondary Industries
These are concerned with using the material that has already been extractive at the primary state & processing such material to produce goods for final consumption. For eg. Manufacturing steel.
Secondary industries are further divided into:
a) Construction Industries
These are the industries that involve engineering & architectural skills to construct dams, bridges, etc.
b) Manufacturing Industries
These are those which involve conversing or processing those materials into finished goods. For eg. the conversion of iron into steel etc.
- Processing Industries: These industries involve the processing of raw materials through various stages of production for getting finished products. For eg. the Paper industry.
- Assembling Industries: These industries are concerned with assembling different parts to make a new product. For eg. a computer, a car, etc.
- Analytical Industries: These industries are concerned with analyzing & separating different components from the same material. For eg. oil refining.
- Synthetical Industries: These industries combine various components to form a new product. For eg. cement, paint, etc.
3) Tertiary Industries
It provides various services to the primary & secondary industries. They also provide help to trading activities. For eg. transport, banking, etc.
Commerce
The activities which are necessary for facilitating an exchange of goods & services are included under commerce.
The main function of commerce is to facilitate the free flow of goods & services by removing various hindrances in the process of exchange.
Commerce includes 2 types of activities namely, trade and auxiliaries to trade.
1) Trade
Activities relating to the sale, transfer, or exchange of goods are known as components of trade.
Trade is that part of business activity that involves in buying & selling of goods. Trade can be classified into 2 categories:
- Internal Trade
- External Trade
Internal Trade
It refers to the buying & selling of goods within the geographical boundaries of a country. It may be divided into wholesale and retail trade.
External Trade
It refers to the buying & selling of goods and services between persons & an organization belonging to different countries.
It is further subdivided into 3 categories, import, export, and entrepot.
2) Auxillaries to Trade
The activities which help in the process of trading are known as auxiliaries or services to trade. These activities play a supportive role in the free flow of goods & services.
The various auxiliaries are transport, banking, insurance, warehouse, and advertising.
Transport
Goods are produced at a particular location but are needed at different places in a country. For eg. sugar is mainly produced in the U.P. but it is consumed all over the country.
This hindrance of place is removed by various means of transportation like railway, waterways, etc.
Banking
Every business requires funds for long-term or short-term purposes. The money required for a short period is known as working capital requirements whereas the money required for long terms is known as fixed capital requirements.
Banking helps in removing the hindrance of finance.
Insurance
Risk is always associated with business. Various assets like buildings, plant & machinery, furniture, goods in transit, and stock of goods kept in warehouses are subject to risk of loss or damage.
This hindrance of risk is removed by insurance.
Warehousing
Generally, goods are not consumed immediately after production. There is always a time gap between production & consumption of goods.
This hindrance of storage is removed by warehousing.
Advertising
Advertising is always the most important tool of sales promotion. It is not possible for a producer to personally contact each & every consumer and provide information about products.
Advertisement provides the necessary information to the consumer about the new products like price, quality, uses, availability, etc.
Thus, advertising helps remove the hindrance of information.
Characteristics of Business Activities
- Economic Activity
- Production or Procurement(taking from someone else)
- Sale or exchange of goods & services
- Dealing in goods & services regularly
- Profit earning
- Uncertainty of return
Small Business and Entrepreneurship Class 11 Notes
Business Risk
The term business risk refers to the possibility of inadequate profits or even losses due to uncertainties or unexpected events.
There are two types of business risk:
1) Speculative Risk
2) Pure Risk
Speculative Risk
This type of risk involves both the possibility of gain as well as the possibility of loss. In case of favorable market conditions, there would be gains but in the case of unfavorable conditions, there are possibilities of losses.
It is the risk that arises due to changes in the condition of the market. For eg. changes in fashion, technology, etc.
Pure Risk
It involves only the possibility of loss or no loss. It is the risk that arises due to fire, theft, or strike.
The occurrence may result in loss whereas non occurance will result in the absence of loss instead of gain.
Causes of Business Risk
- Natural Cause: Natural calamities such as earthquakes, floods, etc. result in heavy loss of life, property, and income of a business.
- Human Cause: Unexpected events like dishonesty carelessness or negligence of employees, stoppage of work due to power failure, etc.
- Economic Causes: These include uncertainties relating to demand for fashion goods, competition, price, collection of dues from customers, etc.
- Other Causes: These include uncertainties like political disturbances, mechanical failures, fluctuation in exchange rates, etc.
Nature of Business Risk
- Business risks arise due to uncertainties.
- Risk is an essential part of every business.
- The Degree of risk depends mainly upon the nature & size of the business.
- Profit is the reward for risk-taking.
Multiple Objectives of Business
1) Market Standing
It refers to the position of an enterprise about its competitors. A business enterprise must aim at standing on the stronger side of the market.
2) Innovation
Innovation is the introduction of new ideas or methods in the way something is done.
3) Productivity
Productivity is ascertained by comparing the value of output with the value of input. Greater productivity ensures continuous growth.
4) Ensuring Profit
One of the objectives of business is to earn profits. Every business must earn a certain profit which is important for its survival and growth.
5) Manager’s performance & development
Business enterprises need managers to conduct & coordinate business activities. Hence, the manager’s performance is an important objective.
6) Worker performance & attitude
Worker’s performance & attitudes determine their contribution toward the profitability of an enterprise.
7) Social Responsibility
Social responsibility refers to an obligation of business firms to contribute resources for solving problems & work in a socially desirable manner.
Factors to consider before starting a business
- Selection of line of business
- Size of the firm
- Choice of form of ownership
- Location of the business
- Finance
- Tax Planning
- Launching the Enterprise
So, these are the Business Trade and Commerce Class 11 Notes. If you have any doubts, you can ask in the comments, I will try to resolve that doubt.
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