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In today’s Business Studies class, We will be discussing Aids to Trade. We hope you enjoy the class!
Aids to trade
What are the aids to trade in commerce? Meaning
Trade or exchange of goods involves several difficulties, which are removed by auxiliaries or supplementary supports known as aids to trade.
Here, aids to trade refer to all those involved activities, which directly or indirectly facilitates the smooth exchange of goods and services.
Aids to trade include transport, communication, warehousing, banking, insurance, advertising, salesmanship, mercantile agents, trade promotion organizations in a country and global organizations for international trade. These important auxiliaries ensure a smooth flow of goods from producers to the consumers.
What are various aids to trade?
The importance of aids to trade in commerce is explained in the following points:
- Transport
In modern times, there is a vast distance between the centres of production and the centres of consumption. This difficulty is removed by an important aid to trade known as transport.
Transport creates place utility.
There are several types of transport such as air, water and land transport. The geographical distance between producers and consumers is removed with the help of transport.
The three main modes of transport:
Land: Road and Railway
Water: River and Sea and Canals
Air: Airway
- Communication
Communication means transmitting or exchange of information from one person to another.
Communication can be oral or in writing. It is necessary to communicate information from one to another to finalize and settle the terms of sales such as prices of goods, discount allowed, the facility of credit, etc.
Modern means of communication like telephone, telex, telegraph, internet, email, teleconference, etc., play an important role in establishing contact between businessmen, producers and consumers.
Communication is the first crucial step in initiating a trading activity.
- Warehousing
Warehousing is an act of carefully storing goods in warehouses to sell or distribute them later.
Warehousing is essential because there is a time gap between production and consumption. In other words, goods, which are produced at one time, are not consumed at the same time. Hence, it becomes necessary to make arrangements for storage or warehousing. Agricultural commodities like wheat and rice are seasonal in nature but are consumed throughout the year, on the other hand, goods such as umbrellas and woollen clothes are produced throughout the year but are demanded only during particular seasons. Therefore, goods need to be stored in warehouses until they are demanded.
So, warehousing creates time utility by supplying the goods at the right time to the consumer.
- Insurance
Insurance reduces the problem of risks involved in the trade. Businesses are subjected to risks and uncertainties. These are inevitable in the field of business. Risks may be due to fire, theft, accident or any other natural calamity. Insurance companies who act as risk bearer cover such risks. Insurance tries to reduce many risks by spreading them out over a greater number of people. The rate of an insurance premium depends upon the types of risk and the period for which the risk is covered.
- Banking
Banking solves the problem of finance. Businessmen receive money and also pays money in large amounts. It is risky to carry a large amount of cash from one place to another. Here comes banking as a solution. Banking and financial institutions solve the problem of payment and facilitate a smooth exchange between buyer and seller. The businessmen may also require short-term and long-term funds. Banks provide such finance to businessmen. Banks also advance loans in the form of overdraft, cash-credit and discounting of bills of exchange, etc.
- Advertising
Advertising fills the knowledge gap and it solves the difficulty of information. Exchange of goods and services possible only if producers can bring the products to the consumers. Advertising and publicity are important media of mass communication. Advertising helps consumers to know about the various brands manufactured by several manufacturers. The media used to advertise products are radio, newspapers, magazines, tv, the internet, billboard, etc.
We have come to the end of this class. We do hope you enjoyed the class?
Should you have any further question, feel free to ask in the comment section below and trust us to respond as soon as possible.
In our next class, we will be talking about “Market”. We are very much eager to meet you there.
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