THEORIES OF MANAGEMENT

Concept, Nature and Scope of business

By: Andrew Kiggundu

Business is a commercial or economic activity and procedure involving the
regular production of goods and services to satisfy human needs and wants
often in exchange for money in order to attract a profit. Business involves
industry which is responsible for the production part of business, commerce
which is responsible for the distribution part of business and trade which
involves the buying and selling of goods and services between different
economical agents to the ultimate final consumer.
This essay will explore the broad importance of business and industry,
explain the pros of formal business studies in the present era, discuss
what commerce is and further explore its component parts, explain the
relationship between industry, commerce and trade. Firstly we shall
explore the broad importance of business and industry as explained below

Business and industries foster economic development and economic growth of

countries, states, communities and regions. For example The petroleum sector
accounts for roughly 87% of Saudi Arabia’s budget revenues, 90% of export
earnings, and 42% of its Gross Domestic Product (GDP).Through regular
production of goods and services it further enables the subsequent creation of
inter-linked industries of communication, transportation, trade, banking and
insurance, transport which also help contribute to a rise in income and Gross
Domestic product (GDP). For example 40% of Saudi Arabia’s GDP comes from
production by the private sector.

Every country or Region has diverse natural resources, Business enable

efficient and effective utilization of these resources. Without business and
industry resources such as minerals, water and so on cannot be put to use,
business facilitates the utilization of these resources to the final consumer.

Business facilitates the creation of employment opportunities. Through regular

production of goods and services employment opportunities for the masses
rise. For example Tesla Inc a car and electronic battery manufacturer had a
total output of 509,737 vehicles and 3,022 MWh batteries employing 70,757
workers as of year 2020.

Business enables the continual production of goods and services to satisfy

human needs and wants. For example Pharmaceuticals produce important
medicines for the healthy well being of humans, car manufacturers produce
automobiles that enhance quick, effective and efficient means of transport,
electronic giants such as apple Inc and sum sang produce the much needed
gadgets or smart phones that foster human communication.
Business enhances production of quality products due to competition in the
market place, as different manufacturers or service providers both local and
international within the same industry compete for the same customer which
drives them towards production of superior better quality products to attract
more consumers towards a particular brand.

Business is the bedrock national revenue generation. Business and its

subsequent industries pay different forms of tax to governments all over the
world, fees, custom duties, and other things which help generate government
revenue. A case in point is that Petroleum and natural gas are the key
cornerstones of Qatar’s economy and account for more than 70% of total
government revenue.

Businesses and industries are the greatest source of attracting foreign

currency. Through exportation of goods and services business attracts foreign
currency not only for governments but also for individual investors. For
example as of 2019 china exports to the United States totaled $106.4 billion.

Business enables fair pricing of goods and services. This is due to the presence
of different manufacturers and service providers who through commerce are
able to distribute their products to different places of consumption which
enhances price competition therefore enabling a fair price to the ultimate
consumer.

Business is a great medium of national and international relations and

relationships. Through international business and trade countries are mutually
bound to maintain close and fair diplomatic relations with each. For instance
even with a history of aggressive and provocative action against its neighbors
the People’s Republic of North Korea maintains a close and fair relationship
with the People’s Republic of China because China is its largest and greatest
trading partner responsible for approximately 62% of its exports essential for
its economic survival.

Business enables the development of economic and social infrastructure.

Economic infrastructures are facilities which directly benefit the production
and distribution processes in an economy. Economic infrastructures may
include railways, Roads, telecommunication systems, Airways, electricity,
waterways, financial institutions and so much more. Social infrastructures on
the other hand are amenities such as education, health which come up as a
result of change in people’s incomes and mindsets.
Through business and various industries, countries are able to achieve self
sufficiency hence improving the standards of living for their people and hence a
significant reduction on debt reliance. For example through significant oil
production, the United Arab Emirates (UAE), Saudi Arabia, Kuwait, Qatar and
other oil rich gulf Nations were able to achieve self reliance and hugely boost
the standard of living for their citizenry.

We need to explore further the importance of business studies in the

present era as explained below
Teachers and tutors or lecturers share ideas to inspire the individuals they
teach from politicians, policy makers, and executives to mere students. Making
your idea stand out can be a laborious task, but taking a business course can
teach you to understand your audience and how one can appeal to them which
can be helpful when setting up or growing a business.
 

Businesses studies can overwhelmingly determine the income of individuals.

Business studies can determine the nature of employment or jobs people hold
which inwardly plays a crucial role in individual development. Business
Companies play a significant role in determining the quality of life that people
lead and their standards of living.

Nowadays business studies are something that all individuals, professionals,

students and the global citizenry will inevitably interact with. Considering the
case business studies gives a head start, confidence, competence and a certain
level of preparedness to engage with companies as business has an
overwhelming role in modern society that it serves.

Business Studies involve the study of many other disciplines such as

mathematics, economics, marketing, social sciences, Data science and many
much more, these subjects are all relevant in the business world as they act as
solutions to human social and economical challenges through production of
relevant products and services. Business studies help me manage change in
such dynamic environments in which they operate

Commerce
Commerce refers to the exchange of goods and services or something of value
between businesses entities or economic agents from place of their production
to the place of their consumption. Commerce is the middle man between
industry and trade tasked with the distribution aspect of business. In order to
facilitate exchange Commerce relies on ancillary services of banking,
communications and transportation, warehousing, insurance, and advertising
which directly or indirectly enhances the exchange process within the market
at large.
There are two basic components of commerce which include Trade and
ancillary services or Aids to Trade.

Trade
Trade is the transfer of goods and services from one business, entity,
institution, economic agent, individual, investor to another often in exchange
for money. Trade between two entities is called bilateral trade, while trade
involving more than two traders is called multilateral trade. There are three
main forms of trade, home trade Which is the exchange of goods and services
within the same country, foreign trade or international trade which involves the
exchange of goods and services between different countries, re-export which is
the importation of commodities with the intention of re-exporting them to
another country usually under the same conditions to make a profit. With
international trade the market is cutthroat competitive as it involves
manufacturers and service producers with different superior comparative
advantage. For example a British consumer can pick between a British, Italian,
American, French or German car.

Aids to Trade
Aids to trade refer to all those activities that facilitate the smooth exchange of
goods and services. Aids to trade or auxiliary services are imperative and
crucial enables of commerce. They include banking, communications and
transportation, warehousing, insurance, and advertising as explained further
below.
Banking and finance facilitate payment for goods and services in the most
efficient, safest and convenient way. Banking facilitates finance ensuring both
efficient and effective transfer of large sums of money between businesses,
entities, economic agents and investors. Banking also enables businesses and
investors to access both short term and long term funds in forms of loans
required to facilitate different business activities.

Transport enables the movement of goods and services from places of

production to places of consumption. In the modern times there is a vast
distance between centers of production and centers of consumption. Transport
removes the barrier of distance and geographical location as goods and services
can be delivered to the ultimate consumer from all far places of production.
There are different types of transport that include land transport, Water
transport and Air transport.

Communication enables the smooth exchange of information from one person

to another. It facilitates communication between the places of production and
places of consumption. Effective and efficient means of communication is a
cornerstone to efficient operation of commercial activities as it creates Oder in
the market place. These include E-mail, Internet, Fax, Posts and many more.
Without effective and efficient mediums of communication the market place
would be filled with chaos.

Insurance: Business and trade come with several types of risk. Risk is the
probability that actual results will differ from expected results or simply the
volatility of returns. Risks may take different forms such as systematic risk,
unsystematic risk, political risk, financial risk, interest rate risk, social risk,
environmental risks and so much more. Insurance helps protect businesses
from different forms of risk hence enabling business continuity in the face of
unfortunate calamities.

Advertising brings goods and services to the awareness of prospective

customers or consumers. Advertisement creates awareness of the uniqueness
of different goods and services in the market hence bridging the knowledge gap.
Today there are different forms of advertisement such as newspapers, internet,
radio, television, billboards and etcetera.

It should be worthy of note that production, commerce and trade are

closely inter linked to each other and none is fully independent but work
in close proximity interdependently as explained below.
There is a close interconnection between the different industry, commerce and
trade. Each cannot function without the support of others. Commerce
facilitates industry before and after production through the purchase of
materials and the sale of finished products to the final consumer. Production of
goods and services (industry) is meaningless until the final state of distribution
to the final consumers. Trade involves the actual buying and selling of goods
which eliminates existing stock hence enabling a smooth flow of commerce
which distributes new stock and thereby supporting industry or continuous
production. Industry involves the production of goods and services for
distribution giving rise to commerce. As industry develops, trade and
commerce also grow and when industry slows down, commerce and trade move
in the same direction.

Industry and production cannot function unless goods and services are
distributed to the final consumer which is only enabled through commerce.
Commerce makes the necessary arrangement for linking between producers
and ultimate consumers. At the same time without industry there is no
necessity for commerce and trade as they cannot operate in the absence of
goods and services to distribute, buy and sell. Industry, commerce and trade
are the cornerstones of each other.

Trade involves the buying and selling of goods and services whereas commerce
ensures the efficient and effective distributions of these goods and services.
Commerce facilitates trade. Commerce is subsequently the middle man
between industry and trade coordinating the smooth flow of each.
Commerce facilitates feedback between industry and trade. Through commerce
industry is able to get access to important production information about what
to produce, when to produce and for whom to produce. The interrelationship
between industry, commerce and trade is illustrated further by the diagram
below

Conclusively business is in every part of human lives, business is as old as

human existence. Without production or industry human life would not be
sustainable. Human activity and survival significantly depends on
business/production, from essential medicines to the Automobiles and
ensuring a profit for the innovators, owners or risk takers ensures continuity.
Business continuity and survival is regarded as national security issue by
every existing nation, no wander the “Brexit” deal between Britain and the
European Union reached stagnation so many times due to failure of an
agreement on some fundamental business issues such as fishing rights.
Business and production are fundamentally imperative as explained earlier. To
ensure its existence business is not independent of commerce, commerce
ensures a smooth business environment as without it produced goods would
never reach their destination to the ultimate consumer. Commerce involves
‘aids to trade” services such as banking, communication, transport,
advertisement, warehousing and insurance which all foster a smooth
sustainable business environment, commerce is the back born of business. On
the other had commerce cannot exist without business/production as it would
have no base for its existence. It therefore should be noted that Business and
commerce are not independent of each other but intertwined to support each
other.
 References

Mahajan, J.P. (2009).Business organaisation and management. Mumbai: Himalaya publishing house.

Agarwal, R. D. (1998). Organization and management? New Delhi: TataMcgraw-Hill

publishing company limited

Hiles, A. (2011) Business continuity Management. (3rd ED) West sussex: john willey & sons
limited.