Nature and Scope of Business: Trade and its Classification, Commerce and Trade

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All goods and services produced are to be made available by those who need them. It involves a number of additional activities. All these activities taken together are known as Commerce. It provides necessary link between producers and consumers of goods and services and facilitates purchase and sale of goods and services.

Commerce involves following activities

  • Buying and selling of goods and services. It is termed as Trade.

  • Activities essential for smooth and uninterrupted flow of goods and services from production to consumption. It is known as ‘Auxiliaries to trade’ or ‘Aids to trade’.


It is integral part of commerce. It simply refers to sale, transfer or exchange of goods and services. Wholesalers as well as grocery shop owners are said to be engaged in trading.

Features of trade activity

  • It involves actual buying and selling of goods

  • It refers to procuring goods from one place/person to sell it to another person or at another place

  • Traders, also known as middlemen, facilitate to distribute of goods

  • Trading helps in equalizing demand and supply

Classification of Trade

  • Internal Trade: When trade takes place within boundaries of a country it is called internal trade. It means both buying and selling take place within country.

  • External Trade: Trade that takes place between different countries is known as external trade. In other words, external trade refers to buying and/or selling of goods/services across national boundaries. It takes any of following forms

  • Import trade: Firms purchase goods from another county to be sold in its own country.

  • Export trade: Firms sell goods produced in their own country to firm of other country.

  • Entrepot trade: ‘A’ purchase goods from firms of country ‘B’ to be sold to firms of country ‘C’.

Auxiliaries to Trade

It is to facilitate buying and selling of goods other activities are required to be performed. These include, transport of goods, storage of goods, financial transactions, insurance of goods etc.

Image of Classification of Commerce

Image of Classification of Commerce

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