Commerce and Trade. Difference between commerce and trade. TRADE is divided into:

Transcription

1 Commerce and Trade Difference between commerce and trade Commerce General term used to describe the sale and distribution of goods and services. Trade It is the commercial activity of buying and selling goods and services. TRADE is divided into: Home trade Goods and services are sold and bought inside country. Foreign trade The commercial exchange happens between two different countries. Import Goods and services are bought from a foreign seller. Export Goods and services are sold to a foreign buyer.

2 FOUR CHANNELS OF DISTRIBUTION From manufacturer to consumers Manufacturer Wholesaler Retailer Consumer Chi produce Chi vende all ingrosso Chi vende al dettaglio Consumatore 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.

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

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

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

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

7 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 All of the partners are liable for the debts of any of the other partners. If the business goes bankrupt, they can lose all their personal assets. LIMITED PARTNERSHIP Only some partners contribute capital to the business and don t take an active role in management. 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 They must have Ltd after their name They cannot be quoted on the Stock Exchange Their shares can only be sold with the aggreement of all the shareholders. Public limited companies They must have Plc after their name They can be quoted on the Stock Exchange Their shares can be sold without restrictions

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

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

10 THE GROWTH OF BUSINESS INTERNAL GROWTH When businesses can expand producing more, buying more equipment or opening more shops MERGES TAKEOVERS ACQUISITIONS JOINT VENTURE EXTERNAL GROWTH When businesses can expand in a number of ways: 1. merges 2. takeovers 3. acquisitions 4. joint ventures When two businesses agree to joint together (merger). When one large business buys a small business (takeover) When one business buys a part of another business. some acquisitions are takeovers. When a business formed by two or more companies which agree to start a new project together. TYPES OF INTEGRATION HORIZONTAL INTEGRATION FORWARD VERTICAL INTEGRATION CONGLOMERATE MERGER When two businesses involved in broadly the same activities, join together or integrate When one business buys another business in the same industry but operating at a different stage of production or distribution When the two businesses which merge have completely different business activities