CBSE Class 9 Elements of Business Unit II: Operative Activities in Business

Unit II: Operative Activities in Business:

(a) Industry – concept
(b) Industry – Characteristics, Types, Nature
(c) Commerce – concept
(d) Commerce – Types (i) Banking (ii) Insurance (iii) Transportation (iv) Trade

(a) Industry – Concept:

Industry refers to economic activities, which are connected with conversion of resources into consumable goods. Generally, the term industry is used for activities in which mechanical appliances and technical skills are involved. These include processing or producing of goods.

The term industry is also used to mean a group of industries producing similar or related goods. For example, the many steel producing companies are generally referred to as the Steel industry. Similarly, companies producing cotton textiles are known as Cotton Textile industry, electronic goods manufacturers are known as Electronic Industry and in the financial sector, banks constitute the Banking industry.

(b) Industry – Characteristics, Types, Nature

Characteristics of Industry

1. Transforming raw materials: Industries convert raw-materials into finished products. The finished products are completely different items that satisfy the needs of different customers. This is also termed as production process.

2. Factors of production: The four essential factors of production are:
(i) Land (ii) Labour (iii) Capital (iv) Organisation
The industries use the above to convert raw-materials into finished products.

3. Cluster formation: Localisation in a specific zone is an important characteristic of industry. These areas called industrial zones take care of the logistical needs of each industry. Often similar types of industry come up in a particular area.

4. Technology driven: Modern industries are technology driven and spend a lot on research and product development to stay ahead of the competition. The Information technology industry which is data driven constantly updates itself to stay in business.

Types of Industry – Industries may be divided into three broad categories:

(i) Primary Industries
(ii) Secondary Industries
(iii)Tertiary Industries
(iv) Information technology industry

(i) Primary Industries: Primary industries are of two types: Extractive Industries and Genetic Industries.

Extractive Industries: These industries draw products from natural sources. Products of these industries are transformed into many other useful goods by the manufacturing industry. Important extractive industries include farming, mining, lumbering and fishing operations.

Genetic Industries: These industries are engaged in breeding of plants and animals. Seeds and nursery companies are typical examples. Cattle breeding farm, poultry farms come under this category.

(ii) Secondary Industries: These are industries which utilise materials extracted by primary industries to produce goods for final consumption or further processing. For example, mining of ores is a primary industry but manufacturing of steel by way of further processing of the ore is a secondary industry.
Secondary industry can further be divided into: Manufacturing Industry and Construction Industry.

Manufacturing Industry: These industries are engaged in producing goods through processing of raw materials to bring out diverse finished products or partly finished products. Manufacturing industries may further be divided into four categories:

1. Analytical industry which analyses and separates different elements from the same material as in the case of oil industry.
2. Synthetical industry which combines various ingredients into a new product as in the case of cement.
3. Processing industry which involves successive stages for manufacturing finished products like sugar and paper.
4. Assembly industry which assembles different components and parts to make a new product, as in the case of television, car, computer etc.

Construction Industry: These industries are involved in the construction of buildings, roads, dams, bridges etc. Engineering and architectural skills are essential for this type of industries.

(iii) Tertiary Industry: These are logistical support services provided to primary and secondary industries. This type of industry may also be called auxiliary service providers and includes transport, banking, insurance, warehousing, communication, packaging and advertising.

(iv) Information technology industry: The information technology industry employs computerised solutions to provide various kinds of services to different sectors like banking, insurance, healthcare, education, retail etc. It allows faster and more accurate services and solutions than possible for manpower-oriented services.

Nature of Industry: Industries may be classified into two categories according to their nature of operation (i) manufacturing industries (ii) service industry

(i) Manufacturing Industries convert raw materials into finished or semi-finished products.

(ii) Service industries support other industries by providing various services like transportation, banking and insurance, warehousing, packaging, advertising and communication

(c) Commerce – Concept and objectives:

Commerce provides the necessary link between the producers and consumers. It embraces all those activities which are necessary for maintaining a free flow of goods and services. Thus, all activities involving the removal of hindrances in the process of exchange of goods and services are included in commerce. The hindrances may be in respect of persons, place, time, risk, finance etc.
Buying and selling of goods is termed trade. But there are a lot of activities that are required to facilitate the purchase and sale of goods. These are called services or auxiliaries to trade and include transport, banking, insurance, communications, advertisements, packaging and warehousing. Commerce, therefore, includes both buying and selling of goods i.e. trade as well as auxiliaries such as transport, banking etc.

(d) Commerce – Types (i) Banking (ii) Insurance (iii) Transportation (iv) Trade

(i) Banking:

Business activities cannot be undertakenunless funds are available for acquiring assets, purchasing raw-materials and meeting other expenses. Banks make this possible. The banking system help businesses overcome the problem of finance. The banks provide long term and short -term loans, facilitate working capital by discounting of bills and also help transacting import and export trade. Commercial banks also help promoters of companies raise capital from public. Banks can be classified into four types:
1. Central Bank
2. Commercial Banks
3. Co-operative Banks
4. Specialised Banks

Central Bank: The Reserve Bank of India is the central bank of our country. The Reserve bank of India is the regulatory authority of the banking sector – public and private. It controls and co-ordinates currency and credit policies of a country.

Commercial Banks: The main activities of commercial banks are accepting deposits of money from the public and lending it to clients for investment. There are two types of commercial banks- public sector and private sector banks. The government has major stake (at least 51%) in public sector banks. These banks generally emphasise on the social objectives formulated by the government. Private sector banks are owned, managed and controlled by private promoters and they are free market operators.

Co-Operative Banks: Co-operative banks are governed by the provisions of the State Co-Operative Societies Act. They are essentially formed to provide cheaper credit to their members. These banks
are essential source of rural credit i.e. agricultural finance in India.

(ii) Insurance:

Right from its setting up, a business it is confronted with many risk factors. Factory building, machinery, stock and other assets must be protected from loss or damage by accidents, fire or theft. Employees have to be protected against risks of accidents and occupational hazards. Insurance provides protection in all such cases against payment of a nominal premium.

(iii) Transportation:

Production of goods generally takes place in some particular location. For example, tea is produced in Assam and North Bengal, Cotton in Gujarat and Maharashtra, sugar in Bihar and UP, jute in West Bengal and so on. But these goods are required for consumption all over the country. This problem of distance is solved by transport network of roadways, railways, airways and coastal shipping. So, transportation helps movement of raw-materials from the place of origin to the place of production i.e. factories and then coordinates distribution of the finished products near and far for final consumption.

(iv) Trade:

Trade is the essential part of commerce. It refers to transfer or exchange of goods. It helps making the goods available to consumers or end users. Businessmen engaged in trading activities make the goods available to consumers in different markets. In the absence of trade, it would not be possible to undertake production on a large scale. Trade may be classified into two broad categories:
(i) Internal Trade
(ii) External Trade

Internal trade caters to domestic or home market. It is selling goods within the geographic boundaries of a country. Internal trade may further be divided into:
(i) Retail trade: It involves goods purchased and sold in small quantities to consumers
(ii)Wholesale trade: In wholesale trade large quantities of goods change hands in business-to-business transactions.

External trade or foreign trade consist of exchange of goods and services between two or more countries. External trade may be of three types:
(i) Export trade: If goods are sold to other countries, it is called export trade
(ii) Import trade: When goods are purchased from other countries it is called import trade.
(iii) Entrepot trade: When goods imported from one country are re-exported to another country, it is called entrepot trade.

Auxiliaries to Trade:

Activities which are meant to assist traders to carry on their jobs are known as auxiliaries to trade. These activities are generally referred to as services because they act as facilitators in the business cycle. Transport, banking, insurance, warehousing and advertising are regarded as auxiliaries to trade. These activities play very important supporting roles and are an integral part of commerce. Auxiliary services help remove hindrances that arise in connection with the production and distribution of goods. For example:

Transport facilities help overcome problem of movement of goods from one place to another.

Banking provides financial assistance to tide over financial need of manufacturers and traders.

Insurance covers risks associated with business.

Warehousing creates utility by way of storage facilities.Every business has to hold stock of raw-material and finished stock as goods cannot be disposed of immediately. So, storage of goods is very important to prevent damage or theft. Not only this, warehousing helps to hold prices as crisis sales could bring the prices down. Prices are therefore maintained at a reasonable level.

Advertising is one of the most important methods in promoting the sale of products, particularly consumer items like electronic goods and automobiles, mobile phones as well as soaps, detergents, food items etc. Product specialities, quality and prices are highlighted through advertising to help potential buyers to select them and thus help companies maximise their sales.

CBSE Class 9 Elements of Business Unit II: Operative Activities in Business – Completed

The following topics have been completed in Unit II: Operative Activities in Business:

(a) Industry – concept
(b) Industry – Characteristics, Types, Nature
(c) Commerce – concept
(d) Commerce – Types (i) Banking (ii) Insurance (iii) Transportation (iv) Trade