Commerce

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Commerce is the large-scale organized system of activities, functions, procedures and institutions that directly or indirectly contribute to the smooth, unhindered distribution and transfer of goods and services on a substantial scale and at the right time, place, quantity, quality and price through various channels from the original producers to the final consumers within local, regional, national or international economies. [1] [2] The diversity in the distribution of natural resources, differences of human needs and wants, and division of labour along with comparative advantage are the principal factors that give rise to commercial exchanges. [3]

Contents

Commerce consists of trade and aids to trade [4] (i.e. auxiliary commercial services) taking place along the entire supply chain. Trade is the exchange of goods (including raw materials, intermediate and finished goods) and services between buyers and sellers in return for a offer price at traditional (or online) marketplaces. It is categorized into domestic trade, including retail and wholesale as well as local, regional and inter-regional transactions and foreign trade, encompassing import, export and entrepôt/re-export trades. On the other hand, auxiliary commercial activities (aids to trade) which can facilitate trade include commercial intermediaries, banking, credit financing and related services, transportation, packaging, warehousing, communication, advertising and insurance. Their purpose is to remove hindrances related to direct personal contact, payments, savings, funding, separation of place and time, product protection and preservation, knowledge and risk.

The broader framework of commerce incorporates additional elements and factors such as laws and regulations (including intellectual property rights and antitrust laws), policies, tariffs and trade barriers, consumers and consumer trends, producers and production strategies, supply chains and their management, financial transactions for ordinary and extraordinary business activities, market dynamics (including supply and demand), technological innovation, competition and entrepreneurship, trade agreements, multinational corporations and small and medium-sized enterprisess (SMEs), and macroeconomic factors (like economic stability).

Commerce drives economic growth, development and prosperity, promotes regional and international interdependence, fosters cultural exchange, creates jobs, improves people's standard of living by giving them access to a wider variety of goods and services, and encourages innovation and competition for better products. On the other hand, commerce can worsen economic inequality by concentrating wealth (and power) into the hands of a small number of individuals, and by prioritizing short-term profit over long-term sustainability and ethical, social, and environmental considerations, leading to environmental degradation, labor exploitation and disregard for consumer safety. Unregulated, it can lead to excessive consumption (generating undesirable waste) and unsustainable exploitation of nature (causing resource depletion). Harnessing commerce's benefits for the society while mitigating its drawbacks remains vital for policymakers, businesses and other stakeholders.

Commerce traces its origins to ancient localized barter systems, leading to the establishment of periodic marketplaces, and culminating in the development of currencies for efficient trade. In medieval times, trade routes (like the Silk Road) with pivotal commercial hubs (like Venice) connected regions and continents, enabling long-distance trade and cultural exchange. From the 15th to the early 20th century, European colonial powers dominated global commerce on an unprecedented scale. In the 19th century, modern banking and related international markets along with the industrial revolution fundamentally reshaped commerce. In the post-colonial 20th century, free market principles gained ground, multinational corporations and consumer economies thrived in U.S.-led capitalist countries and free trade agreements (like GATT and WTO) emerged, whereas communist economies encountered trade restrictions, limiting consumer choice. Notably, developing countries saw their share in world trade rise from a quarter to a third by the century's end. [5] 21st century commerce is increasingly technology-driven (see e-commerce), globalized, intricately regulated, ethically responsible and sustainability-focused, with multilateral economic integrations (like the European Union) or coalitions (like BRICS) [6] leading to its reconfiguration.

Etymology

The English-language word commerce has been derived from the Latin word commercium, from com ("together") and merx ("merchandise"). [7]

Relation to business and trade

Commerce is distinguishable from business and trade.

Business is the activity of earning money through engaging in commerce. Therefore, it is a commercial activity carried out to make a living. [8] Business can be defined as an organization or activity typically operating in the primary (dealing with the extraction and sourcing of raw materials) and secondary sector (dealing with manufacturing intermediate or finished goods) of the economy whose goal is to sell raw materials or manufactured goods for profit. In the tertiary sector, there are businesses which sell services for profit. Commerce deals with the movement and distribution of raw materials as well as finished or intermediate (but valuable) goods and services from the manufacturers to the end customers on a large scale. It is not concerned with the extraction of raw materials and the manufacturing of goods. [9] However, commercial firms can be considered business entities operating in the tertiary sector of the economy providing commercial services.

Commerce is distinguishable from trade as well. Trade is the transaction (buying and selling) of goods and services that makes a profit for the seller and satisfies the want or need of the buyer. When trade is carried out within a country, it is called home or domestic trade, which can be wholesale or retail. A wholesaler buys from the producer in bulk and sells to the retailer who then sells again to the final consumer in smaller quantities. Trade between a country and the rest of the world is called foreign or international trade, which consists of import trade and export trade, both being wholesale in general.

Commerce not only includes trade as defined above, but also the auxiliary services or aids to trade [4] and means that facilitate such trade. Auxiliary services aid trade by providing services which such as transportation, communication, warehousing, insurance, banking, credit financing to companies, advertising, packaging, and the services of commercial agents and agencies. In other words, commerce encompasses a wide array of political, economical, technological, logistical, legal, regulatory, social and cultural aspects of trade on a large scale. From a marketing perspective, commerce creates time and place utility by making goods and services available to the customers at the right place and at the right time by changing their location or placement.

Described in this manner, trade is a part of commerce and commerce is an aspect of business.

History

The caduceus - used today as the symbol of commerce, and traditionally associated with the Roman god Mercury, patron of commerce, trickery and thieves Caduceus.svg
The caduceus – used today as the symbol of commerce, and traditionally associated with the Roman god Mercury, patron of commerce, trickery and thieves

Historian Peter Watson and Ramesh Manickam date the history of long-distance commerce from circa 150,000 years ago. [11] In historic times, the introduction of currency as a standardized money facilitated the exchange of goods and services. [12]

Commerce was a costly endeavor in the antiquities because of the risky nature of transportation, which restricted it to local markets. Commerce then expanded along with the improvement of transportation systems over time. In the Middle Ages, long-distance and large-scale commerce was still limited within continents. Banking systems developed in medieval Europe, facilitating financial transactions across national boundaries. [13] Markets became a feature of town life, and were regulated by town authorities. [14] With the advent of the age of exploration and oceangoing ships, commerce took an international, trans-continental stature.

Currently the reliability of international trans-oceanic shipping and mailing systems and the facility of the Internet has made commerce possible between cities, regions and countries situated anywhere in the world. In the 21st century, Internet-based electronic commerce (where financial information is transferred over Internet), and its subcategories such as wireless mobile commerce and social network-based social commerce have been and continue to get adopted widely.

Regulation

Legislative bodies and ministries or ministerial departments of commerce regulate, promote and manage domestic and foreign commercial activities within a country. International commerce can be regulated by bilateral treaties between countries. After the second world war and the rise of free trade among nations, multilateral arrangements such as the GATT and later the World Trade Organization became the principal systems regulating global commerce. The International Chamber of Commerce (ICC) is another important organization which sets rules and resolves disputes in international commerce.

Where national government bodies undertake commercial activity with or inside other states, this commercial activity may fall outside the protection of the international rules which govern legal relationships between independent states: see, for example, the "commercial activity exception" applicable under the United States' Foreign Sovereign Immunities Act of 1976.

See also

Related Research Articles

<span class="mw-page-title-main">Merchant</span> Businessperson who trades in commodities that were produced by others

A merchant is a person who trades in commodities produced by other people, especially one who trades with foreign countries. Merchants have been known for as long as humans have engaged in trade and commerce. Merchants and merchant networks operated in ancient Babylonia, Assyria, China, Egypt, Greece, India, Persia, Phoenicia and Rome. During the European medieval period, a rapid expansion in trade and commerce led to the rise of a wealthy and powerful merchant class. The European Age of Discovery opened up new trading routes and gave European consumers access to a much broader range of goods. By the 18th century, a new type of manufacturer-merchant had started to emerge and modern business practices were becoming evident.

Business is the practice of making one's living or making money by producing or buying and selling products. It is also "any activity or enterprise entered into for profit."

<span class="mw-page-title-main">Wholesaling</span> Sale of goods or merchandise to retailers rather than end consumers

Wholesaling or distributing is the sale of goods or merchandise to retailers; to industrial, commercial, institutional or other professional business users; or to other wholesalers and related subordinated services. In general, it is the sale of goods in bulk to anyone, either a person or an organization, other than the end consumer of that merchandise. Wholesaling is buying goods in bulk quantity, usually directly from the manufacturer or source, at a discounted rate. The retailer then sells the goods to the end consumer at a higher price making a profit.

<span class="mw-page-title-main">Commodity fetishism</span> Concept in Marxist analysis

In Marxist philosophy, the term commodity fetishism describes the economic relationships of production and exchange as being social relationships that exist among things and not as relationships that exist among people. As a form of reification, commodity fetishism presents economic value as inherent to the commodities, and not as arising from the workforce, from the human relations that produced the commodity, the goods and the services.

<span class="mw-page-title-main">Financial services</span> Economic service provided by the finance industry

Financial services are economic services tied to finance provided by financial institutions. Financial services encompass a broad range of service sector activities, especially as concerns financial management and consumer finance.

<span class="mw-page-title-main">Economic system</span> System of ownership, production, and exchange

An economic system, or economic order, is a system of production, resource allocation and distribution of goods and services within a society. It includes the combination of the various institutions, agencies, entities, decision-making processes, and patterns of consumption that comprise the economic structure of a given community.

Capitalism is an economic system based on the private ownership of the means of production, and their operation for profit. Other characteristics include free trade, capital accumulation, voluntary exchange, and wage labor. Its emergence, evolution, and spread are the subjects of extensive research and debate. Debates sometimes focus on how to bring substantive historical data to bear on key questions. Key parameters of debate include: the extent to which capitalism is natural, versus the extent to which it arises from specific historical circumstances; whether its origins lie in towns and trade or in rural property relations; the role of class conflict; the role of the state; the extent to which capitalism is a distinctively European innovation; its relationship with European imperialism; whether technological change is a driver or merely a secondary byproduct of capitalism; and whether or not it is the most beneficial way to organize human societies.

International business refers to the trade of Goods and service goods, services, technology, capital and/or knowledge across national borders and at a global or transnational scale.

Unequal exchange is used primarily in Marxist economics, but also in ecological economics, to denote forms of exploitation hidden in or underwriting trade. Unequal exchange is usually calculated by assuming that any trade between a country with a high price level and a country with a low price level, is exploitation. Originating, in the wake of the debate on the Singer–Prebisch thesis, as an explanation of the falling terms of trade for underdeveloped countries, the concept was coined in 1962 by the Greco-French economist Arghiri Emmanuel to denote an exchange taking place where the rate of profit has been internationally equalised, but wage-levels have not. It has since acquired a variety of meanings, often linked to other or older traditions which perhaps then raise claims to priority.

In economics, a market is a composition of systems, institutions, procedures, social relations or infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services to buyers in exchange for money. It can be said that a market is the process by which the prices of goods and services are established. Markets facilitate trade and enable the distribution and allocation of resources in a society. Markets allow any tradeable item to be evaluated and priced. A market emerges more or less spontaneously or may be constructed deliberately by human interaction in order to enable the exchange of rights of services and goods. Markets generally supplant gift economies and are often held in place through rules and customs, such as a booth fee, competitive pricing, and source of goods for sale.

<span class="mw-page-title-main">Economy</span> Area of production, distribution, trade of, and consumption of goods and services

An economy is an area of the production, distribution and trade, as well as consumption of goods and services. In general, it is defined as a social domain that emphasize the practices, discourses, and material expressions associated with the production, use, and management of resources. A given economy is a set of processes that involves its culture, values, education, technological evolution, history, social organization, political structure, legal systems, and natural resources as main factors. These factors give context, content, and set the conditions and parameters in which an economy functions. In other words, the economic domain is a social domain of interrelated human practices and transactions that does not stand alone.

An online marketplace is a type of e-commerce website where product or service information is provided by multiple third parties. Online marketplaces are the primary type of multichannel ecommerce and can be a way to streamline the production process.

<span class="mw-page-title-main">Marketplace</span> Space in which a market operates

A marketplace, market place or just market is a location where people regularly gather for the purchase and sale of provisions, livestock, and other goods. In different parts of the world, a marketplace may be described as a souk, bazaar, a fixed mercado (Spanish), or itinerant tianguis (Mexico), or palengke (Philippines). Some markets operate daily and are said to be permanent markets while others are held once a week or on less frequent specified days such as festival days and are said to be periodic markets. The form that a market adopts depends on its locality's population, culture, ambient and geographic conditions. The term market covers many types of trading, as market squares, market halls and food halls, and their different varieties. Thus marketplaces can be both outdoors and indoors, and in the modern world, online marketplaces.

Economic law is a set of legal rules for regulating economic activity. Economics can be defined as "a social science concerned with the production, distribution, and consumption of goods and services." The regulation of such phenomena, law, can be defined as "customs, practices, and rules of conduct of a community that are recognized as binding by the community", where "enforcement of the body of rules is through a controlling authority." Accordingly, different states have their own legal infrastructure and produce different provisions of goods and services.

Trade is a key factor of the economy of China. In the three decades following the dump of the Communist Chinese state in 1949, China's trade institutions at first developed into a partially modern but somewhat inefficient system. The drive to modernize the economy that began in 1978 required a sharp acceleration in commodity flows and greatly improved efficiency in economic transactions. In the ensuing years economic reforms were adopted by the government to develop a socialist market economy. This type of economy combined central planning with market mechanisms. The changes resulted in the decentralization and expansion of domestic and foreign trade institutions, as well as a greatly enlarged role for free market in the distribution of goods, and a prominent role for foreign trade and investment in economic development.

<span class="mw-page-title-main">Black market</span> Market in which goods or services are traded illegally

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In Karl Marx's critique of political economy and subsequent Marxian analyses, the capitalist mode of production refers to the systems of organizing production and distribution within capitalist societies. Private money-making in various forms preceded the development of the capitalist mode of production as such. The capitalist mode of production proper, based on wage-labour and private ownership of the means of production and on industrial technology, began to grow rapidly in Western Europe from the Industrial Revolution, later extending to most of the world.

Pakistan's e-trading mainly involves buying and selling goods, and services using internet or telephone, through the use of electronic means such as computer, fax machine, cellular phone, automated teller machines (ATMs), and other electronic appliances with or without using the internet. Online banking, e-tickets, share trading in stock exchange are few examples of e-commerce of modern advancement. With its potential, e-trading can reduce the cost per transaction, increase efficiency, support contest, lower prices and boost international demand. It can open new areas for business in the service sector like online education, medical services, consultancy, and data exchange. It can also provide expansion in trade through domestic and international market research, advertising and marketing. In the financial services area, it can make easy and speedy transactions and transfer of money at a minimum risk. The interesting feature of online trading is that an investor simply sitting in his office or home can buy or sell through the Internet via mobile/tablet or PC and before being an experienced trader he may learn a lot by watching market screens or web portals at his convenience.

This glossary of economics is a list of definitions of terms and concepts used in economics, its sub-disciplines, and related fields.

References

  1. ↑ "Commerce" . Oxford English Dictionary (Online ed.). Oxford University Press.(Subscription or participating institution membership required.)
  2. ↑ James Stephenson (1942), Principles and Practice of Commerce, London: Sir Issac Pitman & Sons, Ltd, p. 95
  3. ↑ James Stephenson (1942), Principles and Practice of Commerce, London: Sir Issac Pitman & Sons, Ltd, p. 14
  4. 1 2 Jonathan Law, ed. (2016), A Dictionary of Business and Management (6th ed.), Oxofrd University Press, p. 26
  5. ↑ IMF Staff (November 2001). "Global Trade Liberalization and the Developing Countries". International Monetary Fund.
  6. ↑ Bas Hooijmaaijers (2021), "China, the BRICS, and the limitations of reshaping global economic governance", The Pacific Review, 34 (1): 29–55, doi:10.1080/09512748.2019.1649298
  7. ↑ Chisholm, Hugh, ed. (1911). "Commerce"  . Encyclopædia Britannica . Vol. 6 (11th ed.). Cambridge University Press. pp. 766–770.
  8. ↑ Oxford Living Dictionaries. Archived from the original on May 1, 2019. business [:] 2 The practice of making one's living by engaging in commerce.
  9. ↑ Mary Trigwell-Jones (2016), Cambridge O Level Commerce Coursebook, Cambridge University Press, p. 19
  10. ↑ Hans Biedermann, James Hulbert (trans.), Dictionary of Symbolism - Cultural Icons and the Meanings behind Them, p. 54.
  11. ↑ Watson, Peter (2005). Ideas : A History of Thought and Invention from Fire to Freud. HarperCollins. ISBN   0-06-621064-X. Introduction.
  12. ↑ Davies, Glyn (2002). Ideas: A history of money from ancient times to the present day. University of Wales Press. ISBN   0-7083-1717-0.
  13. ↑ Martha C. Howell (12 April 2010). Commerce Before Capitalism in Europe, 1300-1600. Cambridge University Press. ISBN   978-0-521-76046-1.
  14. ↑ Fernand Braudel (1982). Civilization and Capitalism, 15th-18th Century: The wheels of commerce. University of California Press. p. 30. ISBN   978-0-520-08115-4. Taken over by towns, the markets grew apace with them.
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