Commerce and Trade

Difference between commerce and trade

Commerce Trade General term used to describe It is the commercial activity of the sale and distribution of buying and selling goods and goods and services. services.

TRADE is divided into:

Home trade Foreign trade Goods and services are sold and The commercial exchange bought inside country. happens between two different countries.

Import Export Goods and services are bought Goods and services are sold to a from a foreign seller. foreign buyer.

FOUR CHANNELS OF DISTRIBUTION

From manufacturer to consumers

Manufacturer Wholesaler Retailer Consumer Chi produce Chi vende Chi vende al Consumatore all’ingrosso dettaglio

1. From the manufacturer to the consumer: the consumer buys goods and services directly from the producer, via Internet.

2. From the manufacturer to the consumer through a wholesaler, a business who buys large quantities of goods.

3. From the manufacturer to the consumer through a retailer, a business who buys small quantities of goods from wholesaler.

4. From the manufacturer to the consumer, via the retailer. FOUR FACTORS OF PRODUCTION

They are essential to produce goods and services.

Natural Labour Capital Entrepreneurship resources Risorse Forza Capitale Imprenditorialità naturali lavoro Water, It is based on To make Entrepreneur is a natural human goods and person who see forests, capital: services is opportunities for agricultural skills, necessary making a profit, lands, etc. education, investing producing goods and Omce they training and money in services that they are used up, experience. equipment, will sell. they cannot machinery, be replaced resources, easily. etc.

THREE SECTORS OF PRODUCTION

Primary sector Secondary sector Tertiary sector Involves the Takes the raw Involves the extraction and materials and provision of production of raw transforms them services to final materials (wood, into goods and consumers and coal, iron ore). products. businesses. Examples of Examples of Examples of industries: industries: textile, industries: farming, fishing, building, car banking, retailing, forestry. manufacturing. education.

THE CHAIN OF PRODUCTION Follows the construction of a product from its extraction to its final sale. Example: from a tree is cut a piece of wood, a carpenter made it into a table and finally it is sold in a shop. TYPES OF ECONOMY

Planned economy Free market Mixed economy economy State or government Consumers choose We can found makes the main who to buy from and elements of planned decisions about the how much they want economy and free price of products, to spend for a market economy. the production, the product. The Private companies quantities of economics of supply compete for most products, etc. It is and demand goods and services, associated with establish the while the communism. production and the government Example of country price of goods. provides services, with a planned Example of country such as education, economy: Cuba and with a free market transport, etc. Lybia. economy are USA or Japan.

THE ORGANISATION OF BUSINESS

There are six types of business organisations in the private sector: 1. Sole traders 2. Partnerships 3. Private limited companies 4. Public limited companies 5. Cooperatives 6. Franchising

SOLE TRADERS

Meant: a business is owned and operated by just one person who is entirely for his own business debts, that is to say he has unlimited liability.

ADVANTAGES DISADVANTAGES  The owner has complete  Unlimited liability means control of his business that the owner can lose all his personal assets if the  The owner keeps all profit business fails  There are limited financial resources because all the  The owner can make capital is provided by one decisions quickly person  There is no one to share the

workload or exchange ideas with

PARTNERSHIPS

It is a group of two or more people who own and run a business together. The partners contribute to the initial capital and share the responsibility for managing the business. there are two types of partnerships:

UNLIMITED PARTNERSHIP LIMITED PARTNERSHIP All of the partners are liable for the Only some partners contribute debts of any of the other partners. If capital to the business and don’t the business goes bankrupt, they take an active role in management. can lose all their personal assets. They are liable only for the amount of money they initially invest and are known as limited partners. The person who have unlimited liability is known as the general or unlimited partner.

LIMITED COMPANIES

A limited company is formed by two or more shareholders, investors who have shares in the company. Any profits are divided among the shareholders in proportion to the amount they have invested; these payments are called dividends. If the limited comapny goes bankrupt, each shareholder is only liable for his original investment. In the UK there are two types of limited companies:

Private limited companies Public limited companies  They must have Ltd after their  They must have Plc after their name name  They cannot be quoted on the  They can be quoted on the Stock Exchange Stock Exchange  Their shares can only be sold  Their shares can be sold with the aggreement of all the without restrictions shareholders.

COOPERATIVES

 Are business organisations where all the employees have a vote  No member can dominate  All the members help in the running of the company, share the profits equally and have limited liability.

FRANCHISING

IS ONE OF THE EXTREMELY WIDESPREAD FORM OF BUSINESS.

FRANCHISOR FRANCHISEE  Offers the franchisee the right  Receives the shop furniture to use hi strade name and to from the company, marketing sell his products. support and commercial  Invests a little capital in advice distribution outlets  He is his own boss  Receives an initial payment  Has responsability for running from the franchisee and a the company percentage of his annual profits

MULTINATIONALS Multinationals are businesses that produce in more than one country, but they have their headquarters in just one. When they hrow in size, they begin to export their product and to move part of production to foreign conutries. There are a number of reasons why companies become multinational organisation: 1. To produce goods in countries at low costs 2. To extract the raw materials they need for production 3. To produce goods nearer the market to reduce imports 4. To expand into different market areas.

Adavantages and disadvantages for countries where a multinational operate:

ADVANTAGES DISADVANTAGES  Jobs are created and  The jobs created are often unemployment is reduce unskilled  Investment in buildings and  Local comapnies may be machinery increases output forced out of business of goods and services  Mutinationals often use up  Imports may be reduce non-renewable resources  Taxes paid by  Multinationals may have a multinational increase local lot of influence on both the government funds government and the economy of the country

THE GROWTH OF BUSINESS

INTERNAL GROWTH EXTERNAL GROWTH When businesses can expand When businesses can expand in a producing more, buying more number of ways: equipment or opening more shops 1. merges 2. takeovers 3. acquisitions 4. joint ventures

MERGES When two businesses agree to joint together (merger). TAKEOVERS When one large business buys a small business (takeover) ACQUISITIONS When one business buys a part of another business. some acquisitions are takeovers. JOINT VENTURE When a business formed by two or more companies which agree to start a new project together.

TYPES OF INTEGRATION

HORIZONTAL When two businesses involved in INTEGRATION broadly the same activities, join together or integrate FORWARD VERTICAL When one business buys another INTEGRATION business in the same industry but operating at a different stage of production or distribution CONGLOMERATE When the two businesses which MERGER merge have completely different business activities