Business, Industry, Trade and Commerce

Business, Industry, Trade and Commerce — meaning and interrelation

Business is any human activity undertaken with the object of earning a profit, by producing or acquiring goods and services and exchanging them with others, carried on regularly and involving an element of risk. Three ideas sit inside this one definition, and each is worth separating out: (i) business is an economic activity — it is concerned with the production, purchase, or sale of goods and services for a price, not a purely social or charitable act; (ii) business is undertaken with a profit motive — even though a business may also serve social goals, the pursuit of profit is what distinguishes it from a hobby or a charitable activity; and (iii) business involves risk and uncertainty — the outcome (profit or loss) is never guaranteed in advance, which is exactly what separates a business owner's income from a salaried employee's fixed wage.

All business activity can be divided into two broad branches: Industry and Commerce.

Industry covers all activities concerned with the production or processing of goods and materials — converting raw materials into finished or semi-finished goods, or extracting raw materials from nature, or rearing living organisms for human use. Industry creates "form utility" — it changes the FORM of a material to make it more useful (e.g. converting cotton into cloth).

Commerce covers all activities concerned with the distribution and exchange of goods and services — moving goods from the place and time of production to the place and time where they are needed and removing every obstacle that stands between a producer and a consumer. Commerce is itself made up of two parts: Trade (the actual buying and selling of goods) and Aids to Trade (also called auxiliaries to trade — transport, banking, insurance, warehousing, advertising, and communication — the services that make trade possible on a large scale). This chapter introduces Trade and its aids only briefly; the next chapter, "Trade," develops both in full detail.