Trade, Commerce &

Management

UNIT 3
TRADE & COMMERCE

Trade and commerce are related yet distinct

concepts. Trade refers to the exchange of goods
and services between parties, focusing on buying
and selling activities. On the other hand, commerce
encompasses a broader scope, including trade
activities and auxiliary functions like transportation,
advertising, financing, and market research, to
facilitate the overall flow of goods and services
within the business ecosystem.

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  Commerce is referred to as an economic activity that involves the exchange of
goods and services or valuables between two entities. It involves purchasing
goods and services by large organizations. Commerce mainly deals with
transactions taking place between nations.
 Commerce includes all those activities which are necessary for maintaining the
free flow of goods and services from the producers to the ultimate consumers.
 Commerce refers to the broader system of activities involved in the buying, selling,
and distributing of goods and services. It encompasses all the processes,
institutions, and activities that facilitate trade and the functioning of markets.
Commerce goes beyond the direct exchange of products and includes various
Commerce auxiliary functions such as transportation, advertising, financing, warehousing,
insurance, and market research. It involves the entire ecosystem that supports
trade, ensuring the smooth flow of goods and services from producers to
consumers. Commerce also encompasses aspects of business
operations, marketing strategies, supply chain management, and financial
transactions, aiming to maximize efficiency and profitability in commercial
activities.
 For example: Consider an online store selling handmade jewellery. Commerce
involves not just making and selling the jewelry, but also setting up a website,
showcasing the products, handling online orders, packaging, and arranging
delivery. All these activities together make up the commerce aspect of the
business.
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 1. Trade: trade refers to sale or exchange of goods and services. It is of
two types: internal and external trade. Internal trade refers to the trade
within the country. It is further divided into two parts wholesale trade and
retail trade. In wholesale trade goods are bought in wholesale and sold to
retailers. In retail trade goods are bought from whole-sellers and sold to
the ultimate customers. External trade refers to the trade outside the
country. It is of three types: Import, Export and Entrepot. Import means
purchasing goods from other country. Export means selling goods to other
Branches of country. Entrepot means goods are imported for exporting to other
country.
Commerce
2. Aids to trade: It means all those activities which help in the trading
process. These are: transport and communication, banking and finance,
insurance, advertising, and warehousing. Transport creates place utility
by movement of goods from one place to another. Banking creates
finance utility by providing financial assistance to the businessman.
Insurance creates risk utility by providing cover against business risks.
Warehousing creates time utility by storing the goods and advertising
creates the knowledge utility by providing information to the customers.

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  Trade is referred to as a basic economic activity that involves buying and
selling different goods and services between two or more parties involved
in the transaction. Trade that takes place between two parties is called
bilateral trade, while the same occurring between more than two parties is
called multilateral trade.
 Trade is the voluntary exchange of goods and services between
individuals, businesses, or countries. It involves the buying and selling
products, where parties engage in commercial transactions to obtain
goods they need or desire. Trade can occur within a local market or on a
Trade global scale, facilitating the flow of goods across borders. It plays a crucial
role in the economy by promoting specialization, creating economic
interdependence, and expanding market opportunities for producers and
consumers. Trade can involve tangible goods, such as commodities and
manufactured products, and intangible services, such as consulting or
transportation.
 For example: Consider a bakery trading freshly baked bread to a local café
in exchange for fresh vegetables. The bakery gets veggies, and the café
gets delicious bread. This is trade – swapping things you make for things
you need.

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 Aspect Trade Commerce

Focus Exchange of goods and services Overall business activities and transactions

Narrow scope, specifically buying and

Scope Broader scope, encompasses trade and auxiliary activities
selling

Activities Buying, selling, importing, exporting Trade activities, transportation, advertising, financing, etc.

Transfer of tangible goods or intangible

Transfer Involves the entire business ecosystem and value chain
services

Emphasis Market demand and exchange of products Efficiency, profitability, and overall business operations

Direct interaction between buyers and Involves intermediaries, infrastructure, and supporting
Involvement
sellers functions
Focuses on the exchange aspect of Integrates various business functions for seamless
Integration
transactions operations
Adds value through marketing, logistics, and supporting
Value Addition Primarily concerned with value exchange
activities
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  Management is a process of planning, decision making, organizing, leading,
motivation and controlling the human resources, financial, physical, and
information resources of an organization to reach its goals efficiently and
effectively.
 Management is all about controlling and structuring all available resources,
whether human and physical, in such a way that the goals of the organization,
whatever they might be, are achieved.
1.Management is Goal-Oriented: The success of any management activity is
assessed by its achievement of the predetermined goals or objectives.
2.Management integrates Human, Physical and Financial
Management Resources: Effective management is one where all available resources are
fine-tuned to meet the needs of that organization in the correct balance at the
correct time.
3.Management is Continuous: Management is an ongoing process which
involves the continuous handling of problems and issues around core activity
and which is fine-tuned to customer need, market intelligence and the
activities of competitors.
4.Management is a Team-Orientated process: Successful organizations
know how to blend together the skills and competences of its human
resources to achieve common goals.

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  Both mergers and acquisitions are types of exit strategies,
which are plans outlining how a business owner will sell their
investment. An exit strategy is a key part of your business
plan.
 A business merging with another business is not the same
thing as one being acquired by another company. Knowing
Mergers and the difference between acquisition vs. merger can help you
come up with this all-important exit strategy. Not to mention, if
acquisitions another business wants to merge with or acquire your
business, you need to know what you’re getting yourself into.
 Mergers and acquisitions (M&A) is a generally used term to
describe the process of combining companies through
various types of transactions. The most popular one is an
acquisition, where one company buys another and transfers
ownership.

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  A merger is where two businesses of similar size and scale of
operations combine into one new company. Like a new business, the
newly merged companies must form a new entity, name, ownership,
and management structures.
 Mergers require both businesses to negotiate. Current owners and
Mergers employees of both businesses may stay on board, either in their
same or newly developed roles. Because it is a “new business,” the
company issues new shares to its investors. A merger is a mutual
decision between businesses. If you merge with another company,
you retain ownership—just with a new structure and name.
 Through a merger, you can expand your business, cut through the
competition, and diversify your offerings.

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 Horizontal In a horizontal merger, both businesses come from the same
industry. The two businesses are competitors that offer the
same products or services to the same target audience.

Vertical Vertical mergers are where two businesses in different stages of

the same supply chain join forces to reduce costs and improve
efficiency. Because the businesses do not offer the same
products or services, they are not direct competitors.
Conglomerate In a conglomerate merger, the two businesses come from
different industries or locations, increasing their mission and
scope. The businesses are not direct competitors.

Market Market-extension mergers occur when two businesses that sell

extension similar products but compete in different markets come
together. A market-extension merger can help the companies
access a larger client base.
Product In a product-extension merger, the businesses’ products
extension complement one another. Generally, the businesses compete in
the same market, but they are indirect competitors.

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  An acquisition, or takeover, is where one business buys
another, often smaller, business. Acquisitions tend to have
a negative connotation because one company absorbs the
other company.
 Unlike mergers, acquisitions do not result in a new
company. The company acquiring the other business
Acquisitions remains. If you are the business owner of the acquired
company, you give up ownership of your business.
 In an acquisition, the only negotiation is typically price—
you can determine your selling price if a company is
attempting to acquire your business. The business that is
acquiring the other business does so by purchasing its
stock or paying in cash.

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 • In a friendly acquisition, the
Friendly business being acquired
Types of agrees to it.
Acquisitions
• Hostile acquisitions are
where the business being
Hostile
purchased does not want to
be bought out.

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 Act as exit strategies
Whether you plan on leaving your business or not, you need an exit strategy.
Similarities Again, both mergers and acquisitions are types of exit strategies, along with:
1. Selling the business to a friend
between 2. Taking it public
3. Liquidating the business
merger and Your exit strategy lets investors and lenders know how you plan on protecting
acquisition their money if your business fails. An exit strategy also lets you prepare for life
after your business (i.e., retirement).
If your exit strategy is a merger, you may attempt to find a business that is a
good fit with yours before merging the two. And if your exit strategy is an
acquisition, you may put in some footwork to find a business you want to sell
yours to.

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 Increase company value
During mergers and acquisitions, the business’s customer (and employee)
count generally increases. And depending on the success of marketing efforts
and workplace productivity, mergers and acquisitions may both see boosted
Similarities revenue.

between Not to mention, many businesses see costs decrease (e.g., rent, utilities, etc.),
which could also increase business profits.

merger and With the increase in customers and potential revenue, many businesses that
undergo M&A see a boost in company value, which makes investors happy.
acquisition Offer competitive advantages
Mergers and acquisitions have the potential to offer competitive advantages,
which can boost long-term growth and overall company value.
If the businesses were competitors, mergers and acquisitions eliminate that
competition by combining the companies. Plus, the quick increase in size can
help the new business beat its other competitors.

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  A franchise an authorisation granted by a government or
company to an individual or group enabling them to
carry out specified commercial activities, for example
acting as an agent for a company’s products.
 It is a type of license that grants a franchisee access to a
franchisor’s proprietary business knowledge, processes
Franchise and trademarks, thus allowing the franchisee to sell a
product or service under the franchisor’s business name.
In exchange for acquiring a franchise, the franchisee
usually pays the franchisor an initial start-up fee and
annual licensing fees.

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 When a business wants to increase its
market share or geographical reach at a
low cost, it may franchise its product and
brand name. A franchise is a joint venture
between franchisor and franchisee. The
franchisor is the original business. It sells
the right to use its name and idea. The
franchisee buys this right to sell the
franchisor’s goods or services under an
existing business model and trademark.

Franchises are a popular way for

entrepreneurs to start a business,
especially when entering a highly
competitive industry such as fast food.
One big advantage to purchasing a
franchise is you have access to an
established company’s brand name. You
won’t need to spend resources getting
your name and product out to customers.

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  Outsourcing is the process of employing another person or firm, either
locally or globally, to conduct your business activities. It has become a
widespread business technique that allows small and medium-sized
organizations to acquire services and talents that would otherwise be
difficult to develop due to budgetary or labor constraints, or maybe a
mix of both. That is, you may expand your firm as and when you need
to, without making a large investment.
 It also enables your company to focus on core capabilities while
cutting expenses and improving efficiency with minimal effort. Over
Outsourcing the last decade or so, company owners have realized that there are
numerous reasons why organizations, both large and small, outsource
various services, but the most obvious benefit appears to be that it
saves money.
 Simply said, outsourcing delegated parts of your business activities
that can be readily done by a third party, makes life easier for business
owners. And, most of the time, in addition to being able to delegate
these responsibilities to someone more skilled than yourself (or your
firm), you will also save money compared to employing someone
locally to do the same job.

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 Access to Savings on Focus on
Faster highly infrastructu the Increased
services skilled re and important efficiency
resources technology aspects
Benefits of
Outsourcing
Outsourcing is critical for all types of businesses. It allows one to monitor,
discover weak places and change expenses and needs when the problem is
remedied. Furthermore, it provides a competitive advantage by allowing a
company to get ahead of its competition. Outsourcing should be
considered since it can be cost-effective, enable faster turnaround times
and assure quality. Knowing what kind to adapt to is also important for
reaping the full benefits of outsourcing.

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  Management is the implementation of policies that are
created through effective administration. To ensure proper
administration, each process must be managed at each level.
 Management refers to a broader terminology that indicates
several functions. These including planning, staffing,
organizing, monitoring, supervising and leading. On the other
Administration hand, administration is an action which involves the
implementation of rules, regulations and policies set by the
and management.
Management  These terms are closely related but represent different
responsibilities. Management is linked with higher-level
positions in comparison with administration. In management,
strategic-thinking, decision making and leadership are must-
have skills. For administration, one must have skills such as
organization, communication and attention to details.

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  Administration involves overseeing an organization's day-to-
day operations, ensuring they run smoothly by implementing
policies and decisions set by management.
 This entails tasks like managing schedules, facilitating
communication, optimizing resource allocation, and resolving
issues that arise. Administrators play a vital role in policy
implementation, making certain that guidelines are followed
and organizational goals are pursued.
What is
 Their coordination efforts harmonize different teams and
Administration? individuals, while their adaptability enables them to respond
effectively to changing circumstances.
 While management focuses on strategic direction,
administration handles the practical and operational aspects,
jointly contributing to an organization's overall functionality
and achievement.
 In smaller settings, these roles may merge, whereas larger
organizations might have separate departments or
individuals dedicated to each function.

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  Management encompasses the process of strategically
planning, organizing resources, coordinating efforts, directing
activities, and maintaining control within an organization to
achieve its intended goals and objectives.
 This multifaceted discipline involves making informed
decisions, optimizing resource allocation, fostering
collaboration among teams, providing leadership, and
What is monitoring progress to ensure alignment with established
benchmarks.
Management?  Whether in the context of businesses, nonprofits, or
government entities, effective management is pivotal for
resource efficiency, goal attainment, and adaptability in a
dynamic environment.
 A range of management theories and models, from classical
to contemporary, contribute to shaping management
practices, with approaches tailored to factors such as
organizational culture, industry dynamics, and leadership
preferences.

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Basis Management Administration
Management encompasses the process of strategically
Administration involves overseeing an organisation’s day-to-day
planning, organizing resources, coordinating efforts, directing
Meaning operations, ensuring they run smoothly by implementing policies
activities, and maintaining control within an organization to
and decisions set by management.
achieve its intended goals and objectives.
Management is primarily concerned with planning, organizing,
Administration focuses on establishing policies, guidelines, and
Focus directing, and controlling resources to achieve organizational
procedures to ensure the smooth operation of the organization.
goals.
Management is a broader term that encompasses various Administration is a narrower term, often associated with the
Scope functions such as planning, organizing, staffing, leading, and implementation of policies, rules, and regulations set by the
controlling. management.
Key Person Manager is the key person in the case of management. Administrator is the key person in the case of administration.
Decision- Managers make strategic decisions related to setting goals, Administrators make decisions related to implementing policies,
Making formulating plans, and allocating resources. procedures, and guidelines set by the management.
It is more concerned with establishing a stable framework,
It is more dynamic, action-oriented, and focused on achieving
Nature ensuring adherence to rules, and maintaining order within the
objectives through efficient resource utilization.
organization.
Managers focus on both short-term and long-term goals, with Administrators tend to have a longer-term perspective, aiming to
Time Horizon
an emphasis on adapting to changing circumstances. establish enduring structures and processes.
Administration involves establishing policies, rules, and
Management involves guiding, directing, and leading employees
Function regulations that guide the actions of employees and ensure
toward achieving organizational goals.
organizational efficiency.
Role The role of management is executive in nature. The role of administration is decisive in nature.
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  Limited Liability Partnerships (LLPs) have become popular
for businesses in India due to their unique blend of
partnership and corporate structures. It provides operational
flexibility, ease of operation, and tax benefits while
Limited maintaining a simplified compliance regime.
Liability  The legal framework for LLPs is governed by the Limited
Liability Partnership Act 2008 and regulated by the Ministry of
Partnership Corporate Affairs. LLPs allow entrepreneurs to focus on
business growth without worrying about personal liabilities,
making them a boon for startups and small to medium-sized
enterprises in India.

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 • It has a separate legal entity just like companies.
• Minimum two persons should come together as partners to
establish LLP.
• There is no upper limit on the maximum number of partners.
• There must be a minimum of two designated partners.
Features of LLP • Atleast one designated partner must be a resident of India.
• The liability of each partner is limited to the contribution made by
the partner.
• The cost of forming an LLP is low.
• Less compliance and regulations.
• No requirement of minimum capital contribution.

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  Limited liability of the
partners
 Not liable for the action of
other partners
Advantages of  Separate legal entity
LLP  Managed by Registrar of
Companies
 No limit on Maximum
number of partners

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  Penalty on
non-
compliance
 Winding up
Disadvantages and
dissolution of
LLP
Of LLP  Difficulty to
raise capital

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 Business ethics studies appropriate business policies
and practices regarding potentially controversial
subjects, including corporate governance, insider
trading, bribery, discrimination, corporate social
responsibility, fiduciary responsibilities, and much
more. The law often guides business ethics, but at other
Business times business ethics provide a basic guideline that
businesses can follow to gain public approval.
Ethics Business ethics ensure that a certain basic level of trust
exists between consumers and various forms of market
participants with businesses. For example, a portfolio
manager must give the same consideration to the
portfolios of family members and small individual
investors as they do to wealthier clients. These kinds of
practices ensure the public receives fair treatment.

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Meaning of
Business
Ethics

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 37
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 Provides the framework
 Code of Conduct
 Based on Moral and Social Values
 Needs Willing Acceptance for Enforcement
 Education and Guidance Required for
Introduction
 Not Against Profit Making

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  Reputation
 Trust
 Boosting Sales and Earning Higher
Importance of Profits
 Positive Atmosphere in the
Business Workplace
Ethics to  Legality
Businessmen  Cost
 Motivate Employees
 Employee Engagement
 Survival of the Business

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  Fair Wages and other
Monetary and Non-
Monetary Benefits
Importance of  Just and Fair
Business  Employees are not forced to
act unethically
Ethics to the
 Dignified Treatment
Employees  Job Security

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  Avoidance of
Exploitation.
Importance of  No Need of
Business Ethics Protection from
to the External Agencies.
Consumers &  Consumers’ Rights
the Society at  Avoidance of
Large Malpractice

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 Leadership
Accountability
Integrity
Principles Respect for others
Honesty
of Respect for laws
Business Responsibility
Transparency
Ethics Compassion
Fairness
Loyalty
Environmental concern

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  Henry Mintzberg's theory on managerial roles suggests that
managers perform 10 different roles grouped into three
categories:
Henry
 interpersonal roles (figurehead, leader, and liaison),
Mintzberg’s  informational roles (monitor, disseminator, and
Managerial spokesperson), and
Roles  decisional roles (entrepreneur, disturbance handler,
resource allocator, and negotiator).

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 These roles revolve around a manager’s interactions and
relationships, both within and beyond the organization. Within
this category, managers undertake three primary roles:
• Figurehead: Managers serve as symbolic leaders,
representing their organization through ceremonial duties
Interpersonal and the embodiment of its values.

Roles • Leader: Managers assume the vital responsibility of guiding

and motivating their teams, making pivotal decisions, and
providing support to their staff.
• Liaison: Managers establish and nurture networks and
relationships, fostering connections within and outside their
organization to gather crucial information and access
valuable resources.

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 Within this sphere, managers act as conduits of information,
adept at collecting, processing, and disseminating vital data
that facilitates informed decision-making. This category
encompasses three primary informational roles:
• Monitor: Managers diligently observe their environment,
Informational staying attuned to internal and external developments that
may impact their organization.
Roles • Disseminator: Managers share pertinent information with
their teams and other stakeholders, ensuring that everyone
possesses the essential knowledge required for their roles.
• Spokesperson: Managers represent their organization by
communicating its goals, policies, and actions to external
parties, such as the media, government entities, and the
public.

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 In this domain, managers engage in the critical process of making
choices and resolving issues within the organization. Four primary
decisional roles encompass this dimension:
• Entrepreneur: Managers identify opportunities and champion
innovative projects or improvements within their organization.
• Disturbance Handler: When conflicts or crises emerge, managers
adeptly address them to maintain organizational stability and
Decisional harmony.

Roles • Resource Allocator: Managers allocate resources, including

budgets, time, and personnel, strategically to various projects and
initiatives, aligning them with organizational objectives.
• Negotiator: Managers skillfully navigate negotiations, whether
internally, with employees or departments, or externally, with
other organizations or stakeholders, to secure agreements and
resolve conflicts.

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