Nature and Purpose of Business

Commerce is related to the exchange and distribution of goods and services. It involves trade and activities which facilitate trade like transportation, banking, warehousing, and finance, etc. Commerce can be defined as the sum total of all such activities which are related to transfer of goods and services from manufacturer to consumer, i.e., from the place of production to the place of consumption.
Commerce is of great importance in the business world:
Removal of Obstacles or Hindrance of Trade:

• Removing the hindrance of person: It means lack of information to producer about consumer and to consumer about the producer. It is removed by advertising.
• Transportation removes the hindrance of place.
• Storage and warehousing activities remove the hindrance of time.
•  Banking removes the hindrance of finance.
• Insurance removes the hindrance of risk.
• Advertising removes the hindrance of information.

These functions are divided into:

1. Service Functions
   Those activities which help in removing hindrance of place, i.e. distance, knowledge, information and risk are included in service functions. These activities make use of the following means:
   (i) Transportation (ii) Communication (iii) Insurance (iv) Advertisement (v) Entertainment services.
2. Financial Functions
   It includes those activities which help in removing hindrance to finance. It includes:
   (i) Commercial banks
   (ii) Financial institutions like LIC, UTI, etc.
   (iii) Stock exchanges .
   (iv) Private financiers
   (v) Lease, hire purchase and installment supply agencies.
3. Marketing Functions
   Those activities which help in the removal of the hindrances of exchange and person are included in this category.
   It includes:
   (i) Channels of distribution (ii) Storing and warehousing facilities (iii) Packaging, grading and trade marks.