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unit-1-nature-and-scope-of-business

Unit-1 Nature And Scope Of Business

In this introductory unit, you will learn the exact connotation of terms like business, commerce, trade, industry etc.

What is the difference between internal trade and external trade?




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Written on Apr 15, 2019 3:43:11 PM

  • Internal Trade: When the trade takes place within the boundaries of the country, you can call it 'internal trade'. It means that both buying and selling should take place within the country. Payment for the same is generally made in national currency. This internal trade is also termed as inland trade or national trade or home trade or domestic trade. On the basis of the scale of operations, we can classify internal trade into: a) wholesale -trade, and b) retail trade. a) Wholesale Trade: Buying and selling in relatively larger quantities is called wholesale trade. A person who is involved in wholesale trade is called wholesaler. b) Retail Trade: This refers to buying and selling in relatively smaller quantities. A person engaged in retail trade is called a retailer.
  • A wholesale trader buys goods in large quantities from the manufacturers and sells in relatively smaller quantities to the retailers. Thus, the wholesale traders constitute a link between the producers on the one hand and the retailers on the other hand.
  • Retailers who buy goods from the wholesalers, sell them in smaller quantities to the consumers. Thus, retail traders establish link between wholesale traders on the one hand and consumers on the other. Thus, the wholesalers and retailers establish a link between the producers and consumers and eliminate the hindrance of person.
  • However, sometimes producers may take the services of only either wholesalers or retailers, or may establish a direct link with the consumers. The whole chain of traders/middlemen operating in between producer and consumer is referred to as 'channel of distribution‘.
  • External Trade: This is also called 'foreign trade' or 'international trade'. When the trade takes place across the boundaries of a country, you can call such trade as external trade. In other words, external trade refers to the trade between nations. This trade could be in the form of exchange of one commodity for another or for money.
  • We can classify foreign trade into three categories: a) Import Trade: when a country buys goods from another country, it is called 'import trade'. For example, India bought machinery from the USA. This is an import trade for India. b) Export Trade: When a country sells goods to another country, it is called 'Export Trade'. For example, India sells leather goods to USSR, and tea to USA. For India such selling of goods shall be termed as ‘export trade'. c) Re-export Trade: When the goods are imported from one country and the same are exported to another country, such trade is called 're-export trade'. Re-export is done by those countries which have ports that are conveniently situated to serve as distributing points for neighboring countries. Such countries import large quantities of goods and re-export the same to the neighboring countries.