Commerce includes all those activities which play a key role in the transfer of goods from their place of production (producers) to their place of final consumption (consumers).
In simpler terms, commerce can be defined as all functions connected with the buying and selling of goods and services. In other words, commerce deals with the movement of goods from the men who produce them (the producers or the manufactures) to the men who ultimately consume them (the ultimate consumers).
Learn about: 1. Definitions of Commerce 2. History and Development of Commerce 3. Features 4. Functions and Role 5. Purposes 6. Branches 7. Chamber 8. Hindrances.
Commerce: Definitions, History, Development, Functions, Role, Purposes, Branches, Hindrances and Other Details
Commerce – Definitions
In simpler terms, commerce can be defined as all functions connected with the buying and selling of goods and services. In other words, commerce deals with the movement of goods from the men who produce them (the producers or the manufactures) to the men who ultimately consume them (the ultimate consumers).
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It is the function of commerce to provide the connecting link between producers and consumers. Therefore, such commercial activities connected with production, distribution and consumption etc., are called commercial activities.
In the words of some eminent economists:
“Commercial occupations deal with the buying and selling of goods, the exchange of commodities and the distribution of finished goods.” —Evelyn Thomas
“Commerce, constitutes the sum total of those processes which are engaged in the removal of hindrances of persons, place and time in the exchange of commodities.” —Stephenson
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“Commerce comprises a group of specialised activities which together form an essential part of the process of production. It links suppliers and consumers by means of trade and activities auxiliary to trade, such as transport, banking insurance and warehousing. The most important links are provided by a series of markets controlled by the price system.” -DR. Noel Branton
All these definitions explain the simple fact that the commerce is a link pin between suppliers and consumers. It links by means of trade and activities auxiliary to trade (commonly known as ‘aids to trade’), such as transport, banking, insurance and warehousing. It ensures free and smooth exchange of goods by removing various obstacles in the way of exchange.
Commerce is the sum total of all those activities which are concerned with the transfer of goods and services from the producers to the consumers. Thus, it includes – (i) trading in goods and services, and (ii) aids to trade which facilitate exchange of goods and services. The ‘aids to trade’ include transport warehousing, banking, insurance and advertising. Both trade as well as aids to trade (i.e., services which facilitate trade) bridge the gap between the producers and the consumers.
a. Commerce represents the exchange of goods and services and the activities which facilitate exchange. Thus, it covers both trade and aids to trade.
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b. Commercial activities bridge the gap between the producers and the consumers.
c. Commercial activities facilitate production of goods and services by the industrial enterprises.
d. Commerce creates place utility and time utility for the consumers.
Commerce – History and Developments
In historic time, commerce started with the emergence of barter system, when goods were exchanged for goods. The major problem of barter system was “double coincidence of wants for example”, if a person wants to build a house and need help of labor and he can offer pots then the labor must have want of pots as the transaction cannot take place.
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The present system of Commerce has not emerged overnight but it is the result of an evolutionary process.
Commerce is a branch of business which is concerned with exchange and distribution of goods and services. It comprises of Trade and Auxiliaries to trade.
Present day Commerce is a complex system which includes traders at National level, i.e., wholesalers and retailers and traders at international level, i.e., export and import. It also includes various auxiliaries or aids to trade such as transportation, insurance, banking communication, advertisement etc.
The major breakthrough in the commerce came with the following developments:
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1. Indigenous banking system
2. Rise of intermediaries
3. Transport
4. Trading communities
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5. Merchant corporations.
1. Indigenous Banking System:
Indigenous bankers are private firms or individuals, who operate as banks, receive deposits and give loans like banks, and are different from money lenders as money lender only lends money they do not accept deposits but indigenous banks accept deposits as well as lends money.
The following are the significance of indigenous bankers:
(a) Credit to Small Traders:
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Indigenous bankers advance loans to such small traders who generally fail to obtain credit from the modern banks. These bankers advance loans not only to the urban traders but to rural traders as well. Loans are advance just on personal security. These bankers have personal contacts with their clients and they have full knowledge regarding their economic status.
(b) Credit to Agriculture:
Indigenous bankers advance enough loans to small farmers. Loans are advanced to the farmers on simply pledging their crops. Even landless cultivators are given loans by the bankers.
(c) Long Term Credit:
Indigenous bankers also give long term credit. Besides working capital needs of the small industrialists, their long period fixed capital needs are also fulfilled. These bankers also invest the money in debentures of various industrial institutions.
According to the Central Banking Enquiry Committee, “indigenous bankers function as confident friends, philosophers and guides to their customers.”
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Defects of Indigenous Bankers:
(a) Old Methods of Business – Most of the indigenous bankers adopt old and effective methods of business. Some of the indigenous bankers have restored to modern methods of business but their number is rather small.
(b) Defective System of Money Lending – Indigenous bankers have defective system of money lending. There is virtually no difference for them between productive and unproductive loans. Also, the rate of interest charged by them is very high. Some indigenous bankers use even unfair means to make money.
(c) Lack of Organisation – They are generally jealous of each other and therefore lack any organised set up. Only recently some organisations of these bankers have come up. Bombay Shroff Association, Marwaris Chamber of Commerce, The Commission Agents Association etc., but their membership is very poor.
(d) Banking and Trading – Besides banking activity, the indigenous bankers do various sorts of non-banking activities. Speculation is the most unproductive of these non-banking activities.
(e) Defective System of Accounts – System of accounts of the indigenous bankers is very defective. Details of their accounts are always kept secret, these are never published. Audit of accounts is totally unknown to them. That is why these banks do not get any assistance from the Reserve Bank.
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(f) Lack of Statistical Data – Data are seldom available regarding business activity of the indigenous bankers.
(g) Fraud – These bankers sometimes use fraudulent means. Their rural customers are mostly illiterate and indigenous bankers do not hesitate in cheating then by way of various deductions at the time of advancing loans, recording inflated amount of loan, not issuing receipt of repayment of loan, etc.
(h) High Rate of Interest – These bankers charge a very high rate of interest. Sometimes it is as high as 50% or even 100%. This adversely affects the agricultural, trading and industrial activity.
2. Rise of Intermediaries:
Intermediaries are the middlemen between surplus units and deficit units or buyer and seller.
There are two types of intermediaries:
1. Financial intermediaries
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2. Trading communities or trading intermediaries.
Financial intermediaries play a very important role in flow of money in financial world. Financial intermediaries act as middleman between companies who need money and surplus units who want to invest.
Types of financial intermediaries are:
i. Insurance Company
ii. Mutual Funds companies
iii. Non-banking Finance Companies (NBFC)
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iv. Investment brokers
v. Investment bankers.
i. Insurance Company – These companies not only provide policies to protect the policy holders from various risks but also offer policies for funding a child’s education and marriage, pension scheme etc.
ii. Mutual Funds Companies – Mutual funds companies collect resources from investors and invest in capital and money market.
iii. Non-banking Finance Companies (NBFC) – These are Finance Companies that concentrate mainly on lending activities in a well-defined area. Example – Gold loan, education loan, home loan, etc.
iv. Investment brokers – They guide and help investors in buying and selling of securities in financial markets. They charge commission for their services.
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v. Investment bankers – Investment bankers focus on investment. These bankers help the firms to obtain capital by helping companies in issue of shares and debentures.
3. Transport:
Transport or transportation is the movement of humans, animals and goods from one location to another. Various Modes of transport are – Land transport, Air transport, Water transport, Cable, pipeline transport, Space.
4. Trading Communities:
Trading communities are middle men or link between manufacturer and consumer.
There are mainly four types of market intermediaries or trading communities:
i. Agent/broker
ii. Distributors
iii. Wholesaler
iv. Retailer.
i. Agent/Brokers- Agents and brokers sell goods or services on commission.
ii. Distributors- Distributors are generally privately owned and operated companies, selected by manufacturer. They buy different types of products and sell in a particular geographical area, example North India distributor.
iii. Wholesaler- Wholesale trade refers to the trade in which goods are sold in large quantities. The person who carries on wholesale trade is known as wholesaler. Wholesaler Buys the goods directly from the manufacturer in bulk and sells them in small lots to the retailer. A wholesaler acts as a middlemen between the manufacturer and the retailer.
iv. Retailer- Retail trade is the last link in the distribution chain. It refers to sale of goods in small lots to the final consumers. A retailer buys goods from a wholesaler and sell them to the consumer. Retailing need not necessarily be carried on in a shop or store. Retailing includes selling goods door to door, on television, on telephone on internet.
A retailer may be defined as a dealer in goods and services who purchases from a manufacturer or wholesaler and sells to the ultimate consumers. The person who carries on retail trade is called a retailer.
5. Merchant Corporations:
These are Financial Institutions which provide business loans and acts as underwriter.
Major role of Merchant corporations are:
(a) Promotional activities – In India, merchant bankers acts as promoter and conduct feasibility study.
(b) Advice in project management – They advice regarding the location of the project, preparation of project report, etc.
(c) Providing finance – Merchant corporations help in providing domestic as well as international finance.
(d) Brokers in stock exchange – They buy and sell shares in stock exchange on behalf of the client.
(e) Advise in modernization and expansion – They help and guide companies for modernisation and expansion.
Commerce – Top 6 Features
Commerce includes all those activities which play a key role in the transfer of goods from their place of production (producers) to their place of final consumption (consumers). According to Evelyn Thomas, “Commercial operations deal with the buying and selling of goods, the exchange of commodities and the contribution of finished products.”
Commerce comprises of Trade as well as Aids or Auxiliaries to Trade such as middlemen, transport, warehousing, banking and insurance, advertising and sales promotion etc.
Trade + Aids to Trade → Commerce
The features of Commerce are as follows:
1. Economic Activity:
Commerce is an economic activity because it involves production or purchase and sale of goods for monetary benefit. Commerce facilitates a link between the manufacturer and the consumer. It plays a vital part in making the industrial goods available to consumer in a convenient form, time and location.
2. Part of Business Activity:
Commerce is a part of business activity. It facilitates the movement of goods from the source (producer) to the final destination (consumer).
3. Exchange of Goods and Services:
Commerce incorporates both exchange and distribution of goods and services. Goods may be produced or purchased for sale. Commerce includes trade and aids to trade.
4. Profit Motive:
The primary objective of any commercial activity is to earn profit. If an activity reaps no profit, it cannot be called a part of commerce. For instance, if a retailer gifts a product from his shop to a friend, it is not a commercial activity.
5. Regularity of Dealings:
A one-time transaction cannot be called a commercial activity. A large number of back-to-back transactions make the basis for commerce.
6. Creation of Utilities:
Commerce creates several kinds of utilities. It creates place utility by transporting goods from the place of production to the place where they are required. They create time utilities by storing the products in warehouses during the offseason and making the goods available when they are in demand. Thus, commerce helps in boosting the volume of trade.
Commerce – Functions and Role
Commerce performs the function of removing hindrances in the smooth flow of goods from the producers and consumers and thus linking the producers and consumers. It removes the hindrances of person (through traders), place (through transportation), risk (through insurance), time (through warehousing and storage), financing (through banking), and knowledge (through salesmanship, advertising, etc.,) arising in connection with the distribution of goods and services until they reach the consumers.
The functions and role of commerce are discussed as under:
(i) Linking Producers and Consumers through Traders:
The producers and the consumers of goods are not always situated in the same locality. Thus, the producer is not able to have direct contact with the consumers to sell his products. There is a need of persons who could buy products from the producers and sell them to the ultimate consumers. Traders have emerged to serve as a link between the producers and the consumers. Wholesalers, retailers and mercantile agents operate to remove the hindrance of person.
(ii) Removing the Hindrance of Place:
Goods may be produced at a place where advantages of location other than the market are available. The barrier of distance between the place of production and the market where these products can be sold is removed by different means of transport. Besides transport, the services of insurance to cover the risk of loss during transit and storage, and packaging to protect goods against damage and pilferage, are also aimed at removing the hindrance of place.
(iii) Removing the Hindrance of Storage:
Goods, in modern times, are produced in anticipation of demand and as such they are to be stored till the demand for the same comes up. The function of storage is performed by warehouses which remove the hindrance of time by balancing the time lag between production and consumption, thus creating time utility. During the process of storage, insurance plays its role by providing a cover against the risk of loss or damage through theft or fire.
(iv) Covering the Risks in Trade:
There are a number of risks in any business activity. These can be covered with the help of insurance companies. Insurance companies undertake to make good the loss by receiving a small amount of premium in advance as consideration.
(v) Financing of Economic Activities:
Both businessmen and consumers may face the problem of finance. This problem is solved by the banks and other financial institutions. Businessmen need funds for meeting their working capital requirements. Banks help them by granting loans, cash credit and overdraft facilities. Consumers also need funds to purchase luxury items such as – car, T.V., refrigerator, etc. Banks help the consumers by offering consumer loans.
(vi) Providing Information through Advertising:
A producer may find it difficult to bring to the knowledge of the prospective consumers the utility and the distinctive features of his products. Advertising and salesmanship help to remove the hindrance of knowledge on the part of the prospective buyers. It brings to their notice the utility of the goods and services offered.
Commerce – 5 Important Purposes: Making Profits, Service Motto, Safety of Capital and a Few Others
According to Prof. Thamas commercial activities are those activities which are related to the purchase and sale of goods, exchange of commodities and distribution of the manufactured goods. The main purpose of commerce and trade is to attract the customer and to create new demand in the market.
Following are some important purposes of commerce:
Purpose # (i) Making Profits:
If the concept of profits is eliminated, all activities relating to commerce and trade will come to an end therefore, the main purpose of all commercial activities is to earn profits. The success of every business depends upon its profit and that is why the goodwill of a business depends upon the quantity of its profits. Thus, in present time it will be proper to say that the main purpose of commerce is to earn profit and nothing else.
Purpose # (ii) Service Motto:
According to Prof. Fold profit earning is not only the sole purpose of business or commerce. In modern times, the society and customers along with all other are getting enlightened and the social values are assuming their importance. They feel that they should not be exploited, therefore, along with a reasonable profit, service of the customer and his perfect satisfaction is also very important purpose of commerce.
Purpose # (iii) Safety of Capital:
The businessman has to be careful in the operation of his activities that even if in case he does not earn the profits in some transactions or for sometimes, at least his invested capital should be safe in the course of doing business.
Purpose # (iv) Responsibility towards Society and Government:
Businessman are expected to serve the mankind, keeping in view the human welfare as the primary objective of economic activities. As socially responsible, a businessman should provide the goods of better quality at reasonable place and at lowest price. They should stop hoarding, black-marketing and creation of artificial scarcity.
Apart from this, they should maintain proper accounts and they should pay various taxes due to the Government as a duty bound businessman and a sincere citizen of the country.
Purpose # (v) Responsibility towards Employees:
Every businessman should make prompt and regular payments to his employees, along with some incentives in the form of cash and other benefits and facilities. This will not only provide them good living, but their efficiency will also be increased so as to increase the production of the organization.
Thus the purpose of business is not only to earn profits, but to maintain the service before self-motto, so that they can do something better for the society and for themselves.
Commerce – 2 Branches: Trade and Aids to Trade
Commercial activities can be categorized into two broad categories:
1. Trade
2. Aids to trade or Auxiliaries to trade
Branch # 1. Trade:
Trade is at the heart of commerce. It is that branch of commerce which deals in buying and selling of goods, services or information. It can be defined as the process of purchasing and selling goods or services to create wealth. It involves exchange of goods for money or for money’s worth.
Traders play a key role in bridging the gap between the producers and the consumers. They facilitate the flow of goods from place of production to the place of consumption. They also help in uniform distribution of goods.
Trade is of two kinds:
(i) Home Trade and
(ii) Foreign Trade.
(i) Home Trade:
Home Trade, also known as Internal Trade, refers to the buying and selling of goods within the domestic shores. In home trade, business entities carry out deals using home currency for making payments. For example- New Delhi may import handicrafts and special condiments from Kashmir.
Home Trade or Internal Trade can be classified as:
(a) Wholesale Trade:
It involves buying and selling goods in huge quantities. A person engaged in wholesale trade or a wholesaler buys goods from the manufacturer and sells to the retailers. The wholesaler plays the role of a conduit between the producer or manufacturer and the retailer. A wholesaler specializes in a certain product and keeps a large stock. He purchases the goods for cash from the manufacturer and sells to the retailer on credit. Therefore, wholesale business needs a large amount of capital.
(b) Retail Trade:
In retail trade, the trader buys goods in small quantities from the wholesaler and sells to the final consumer. The traders involved in retail trade are also called Retailers. A retailer acts as a link between the wholesaler and the consumer. Unlike a wholesaler, a retailer maintains a stock of different kinds of products to serve the needs of different consumer groups.
(ii) Foreign Trade:
Also known as External Trade, Foreign Trade refers to the activity of buying and selling of goods between two different nations. It is beneficial to businessmen as it allows them to focus on the production of goods they are best suited to produce. This helps the businessmen to use the available resources in an effective manner. Foreign trade provides large market for the sale of products.
Foreign trade can be divided into three categories:
(a) Import Trade:
When a nation purchases goods from a foreign nation to meet its domestic requirements, it is known as Import Trade. For example- India purchases crude oil from Gulf countries.
(b) Export Trade:
When goods produced by one country are sold to another country for future sale or trade, it is known as Export Trade. For example- India exports tea, handicrafts and spices to Latin America.
(c) Entrepot Trade:
When goods are purchased (imported) from one country for selling (exporting) to another country, it is known as Entrepot Trade. In this process, imported goods are re-exported with or without any further processing or packaging. Entrepot trade comprises both import and export trade. For example, Sri Lanka may import goods from India and export them to Nepal and Bangladesh.
Branch # 2. Aids to Trade:
By Aids to trade or Auxiliaries to trade, we mean the services which are helpful for hassle-free development of trade. For trade to flourish, the goods must reach the consumer from the producer without any obstacles. These obstacles are known as Hindrances to trade. To overcome these troubles, help is rendered by various persons and other entities called Aids to trade.
The primary aids to trade are explained as under:
(i) Middlemen:
Producers are less in comparison to the number of consumers. Therefore, it gets practically impossible for the producers to sell their goods to a large number of consumers. This is the first and foremost issue faced in trade. In this scenario, middlemen come to the rescue by acting as a bridge between producers and consumers.
Wholesalers and retailers are example of middlemen. Wholesalers purchase finished goods from the producers in huge quantities and sell them to the retailers in smaller quantities. The retailers purchase the finished goods in smaller quantities and sell them to the ultimate consumer through their shops or kiosks.
This process is explained by the example below:
Producer → Wholesaler → Retailer → Consumer
(ii) Transportation:
Transport facilitates trade by conveying goods from the place of production to the place of consumption. Consumer goods are produced at a certain locations, but their requirement knows no geographical boundaries. For example, tea is produced in Assam and West Bengal (Darjeeling), but it is consumed throughout the country and even exported to other countries.
Transport helps in making goods available to consumers located at far off place at a fair price. It helps in removing the hindrance of distance and creates place utility. It also expands the scope of business operations and promotes specialisation of business activities. Faster means of transport such as airways have removed the barrier that lay between international business transactions.
(iii) Warehousing:
Soon after the production or purchase of goods, the trader keeps them safe with him till they are sold. Moreover, seasonal goods like paddy, wheat and sugar are produced only during a certain season, but are in demand throughout the year. To accomplish this purpose, the traders needs to make due arrangements for storing the goods.
Goods like woolen garments, raincoats and umbrellas are manufactured in expectation of their demand. Therefore, it is important for business to store these commodities to satisfy the seasonal demand. Festive goods such as decorative lamps, special artifacts etc. can be preserved in warehouses for sale in the next season. Warehousing removes the hindrance of time and thus creates time utility.
It ensures stability of prices and uniform distribution of surplus goods over different seasons. There are three kinds of warehouses – private, public and bonded. Private warehouses are owned and maintained to meet their own storage requirements. Public warehouses are owned by wharfinger and port trusts. Bonded warehouses are established and owned by customs officials to store goods that are accountable to custom duty.
(iv) Insurance:
Insurance shields a businessperson from a number of risks such as risks arising from bad debts, fire, floods, earthquake, price fluctuations, and misappropriation of company funds due to a dishonest staff. Insurance relieves the business persons of anxiety about the security of his/her business. They can be assured about its safety and go about with their day to day economic activities with greater mental freedom. Thus, insurance removes the hindrance of risk.
(v) Banking and Finance:
The contribution of banks in the growth of trade is noteworthy. They collect cash deposits from the people and lend them to traders as capital as per their requirements. A huge amount of capital is required at low rate of interest for production and distribution of goods.
Banks provide funds to the business in the form of loans, overdraft, cash credit, discounting of bills etc. Banks also play the role of agents on behalf of the traders. They collect debts, transfer money via NEFT, provide information about the financial position of customers and provide foreign exchange. Banks remove hindrance of finance.
(vi) Advertising:
In this age of information technology, it is in the best interest of business to make full use of advertisements. It is through advertisements that the target market becomes aware of the availability and use of various goods being sold in the market. Advertising creates and sustains demand for the product.
Without advertising, the consumers shall remain in the dark about the product. Every time a new product is launched, it can be introduced to the consumers via print, television, outdoor, exhibitions, word-of-mouth, or radio advertisement. Thus, Advertising removes the hindrance of knowledge.
(vii) Stock and Commodity Exchange:
Stock exchange is an organised market for purchase and sale of shares and debentures of various companies. When people invest in shares, it results in rational allocation of resources because the funds from the share market are mobilised and re-directed to help companies finance their business activities in sectors like industry and commerce. This leads to better economic growth and higher productivity levels of the business firms. A Commodity exchange is an organised market that allows people to sell and buy produce (products) through a broker or in person. They help in boosting commerce.
(viii) Postal Services:
In the world of business, it is very crucial for information to reach at the right time. Postal departments transport goods from one place to another. They also transmit information from one trade to another in the form of letters and telegrams which may contain documents pertaining to goods and railway receipts. Postal services are also helpful in mail order business.
Commerce – Chambers of Commerce (With Functions and Characteristics)
Chamber of Commerce is an autonomous association of business entities belonging to different industries and trades. It is an association of businesspersons incorporated to endorse and safeguard the interests of its members and foster the development of commerce and industry in a particular locality, region or nation.
It functions as the representative of the traders and keeps the government updated about the issues faced by them in the commercial and industrial growth. Chamber of Commerce does not represent any specific industry or trade. They have a large membership of individuals and firms from the business world. Even professionals such as lawyers, Chartered Accountants, Cost Accountants and Company Secretaries can join chambers of commerce as a member.
Chamber of Commerce exists at the regional, state, national and international level. At the regional level, the name of a chamber of commerce is decided after the name of the region or community it represents.
For example- Bengal Chamber of Commerce, Delhi Chamber of Commerce, U.P. Chamber of Commerce etc. and PHD (Punjab, Haryana and Delhi) Chamber of Commerce and Industry at the multi-state level, while Indian Chamber of Commerce (ICC) operates at the national level. There are also chambers of commerce for different countries at the international level.
Functions of Chambers of Commerce:
The chambers of commerce and industry perform a number of functions.
Some of them are:
1. Education and Training:
These associations facilitate the education and training of the members. They also organise seminars to discuss the issues of domestic trade and look for suitable solutions.
2. Organising Trade Fairs:
They organise industrial exhibitions and trade fairs to promote home trade. Businessmen from various backgrounds get a platform to exhibit their products and services. The citizens also get knowledge about the availability of different products and their uses.
3. Make Recommendation to Government:
The chambers of commerce offer recommendations and exert pressure on the government in matters related to the economic and industrial development and promotion of trade, commerce and industry in the country.
4. Solving Disputes:
The chambers act as mediators for resolving disputes between the members and protect the trademarks, patents and claims of the members.
5. Representation of Business Interests:
The chambers of commerce bring forth various business interests and grievances before the government and urge the legislators to adopt measures that could nurture trade and industry.
6. Other Assistance:
Providing technical, legal and other necessary information and counsel to the members. It also supports the members in marketing shares, debentures and other securities.
7. Publishing Work:
Publishing books, periodicals, journals related to business affairs.
Basic Functions of Chambers of Commerce and Industry:
Role of chambers of commerce and industry is quite important in promoting internal trade.
In order to promote internal trade, chambers of commerce and industry perform the following functions:
1. To put forward the views of the industry before Government and its agencies to protect the interests of their members.
2. To collect data and information about the business.
3. To analyse data and provide information based on this analysis to the members.
4. To make arrangements for research and education in their field of operations.
5. To publish books, magazines and journals containing subject matter of business interest.
6. To organise industrial exhibitions, trade fairs, etc., to promote business.
7. To advise members on matters of export trade.
8. To help members on assessing the creditworthiness of foreign customers.
9. To issue certificate of origin of goods meant for export.
10. To act as centres for collecting claims.
11. To prepare, accept and discount foreign bills of exchange on behalf of the members.
12. To recommend nomination of businessmen on the official bodies of the Government like Port Trust, Improvement Board, etc.
13. To send delegations to foreign countries in order to explore the possibility of export and import trade.
14. To act as arbitrators to settle disputes between members amicably.
Characteristics of Chamber:
A chamber of commerce and industry is an association of business organisations and businessmen which works for the furtherance of interests of its members.
Thus, a chamber of commerce has the following characteristics:
1. A chamber of commerce and industry is an association of business organisations and businessmen.
It may be mentioned here that there are many chambers of commerce and industry whose membership is open to business organisations as well as to individual businessmen though the chambers tend to have more members in the form of business organisations.
2. A chamber of commerce and industry is a voluntary association. It implies that the association cannot force all business organisations and businessmen to become its members. Similarly, the members are free to leave the association.
3. Members of a chamber of commerce and industry belong to various business and industry groups.
4. A chamber of commerce and industry is formed under the provisions of the Indian Cooperative Society Act or any other relevant Act. Thus, the chamber of commerce and industry is an independent entity. Its existence is not affected by change in the composition of membership.
5. The basic objective of a chamber of commerce and industry is to further the interests of its members.
6. Chambers of commerce and industry are formed at different levels-
(i) Local level,
(ii) State level,
(iii) Country level, and
(iv) International level.
Commerce – Hindrances
The hindrances have been discussed as below:
i. Hindrance of Person:
The producers of goods and the ultimate consumers of goods are not always situated at the same place so that they could buy the products for their consumption from the producers. At times there is big distance between the producers and the ultimate consumers.
Commerce helps to remove this hindrance of distance and persons by means of trade. Various traders, namely wholesaler, retailer, and mercantile agents operate to remove the hindrance of person.
ii. Hindrance of Exchange:
Production of goods on large scale is undertaken for the purpose of selling them for money. Most of the people sell their labour in exchange of money. Commerce helps them to bring together the producers of goods ready to sell their goods for money and the consumers of those goods ready to part with their money (purchasing power), thus, removing the hindrance of exchange.
iii. Hindrance of Place:
Goods may be produced at a place where advantages of location other than the market may be available whereas the buyers of such goods may be situated at a far off place. The barrier of distance between the place of production and the market where these products can be sold is removed by different means of transport.
Besides transporting goods from the place of production to that of consumption, the services of insurance to cover the risk of loss during transit and storage and packaging to protect goods against damage and pilferage are also aimed at removing hindrance of place.
iv. Hindrance of Time:
Goods in modern times, are produced in anticipation of demand and as such they are to be stored as long as the demand for the same comes up. Such stored goods are to be released as and when demand materialises.
This function of storage and preservation is performed by warehouses which remove the hindrance of time by balancing the time lag between production and consumption, thus, creating time utility. During this process of storage, insurance plays its role by removing the risk of loss or damage through theft or fire.
v. Hindrance of Knowledge:
A producer may find it difficult to sell his products unless and until he brings to the knowledge of the prospective consumers, the utility and the distinctive features of his products. Advertising and salesmanship help to remove the hindrance of lack of knowledge on the part of the prospective buyers by bringing to the notice of the people the utility of buying the goods and services offered.