AUXILIARIES TO TRADE

Auxiliaries to trade are those activities which facilitate business, i.e. assist trade. These are
responsible for removing the numerous hindrances which arise in connection with the production
and distribution of goods. Transport, communication, banking, insurance, warehousing, and
advertising are regarded as auxiliaries to trade. In fact, these activities not only support trade but
also industry and hence, the entire business activity.

The auxiliaries to business are discussed below:

1. Transport and Communication. Transportation carries goods form producers to traders and
finally to consumers.

Importance of Transport with reference to Trade

(i) Transport plays a very important role in marketing and distribution of goods both within a
country as well as outside.

(ii) Transport helps in bring about stable and uniform prices in different markets as traders are able
to equalise the supply of goods at different places according to demand.

(iii) Consumers have the benefit of getting goods according to their needs as supply can be adjusted
to demand through transport.

(iv) Producers can concentrate on production activities as they can fulfill their requirements of raw
materials conveniently through transport.

(v) Traders, producers and consumers living in different parts of the world can interact with each
other with the help of transport.

7.4 Activities relating to Transport

Various activities relating to transport are as follows:

(i) Carrying goods and passengers

(ii) Carrying raw materials

(iii) Carrying live-stock

(iv) Carrying oil and gas through pipe line transport

(v) Carrying mail

(vi) Movement of raw materials and goods within a factory.

7.5 Modes of Transport

The various modes of transport can be divided into the following three categories:

(i) Land Transport, (ii) Water Transport, (iii) Air Transport

(i) Land Transport:

It can be sub-divided into two: (a) Road Transport (b) Rail Transport.

Road Transport: The means of transport by road include carts, thelas, cycles, rickshaws, tempos,
trucks, etc.

Rail Transport: It consists of carriage of goods, livestock, pasengers, etc. by railways.

Motor transport and rail transport are two important means of land transport. Motor transport is
used to carry heavy goods but has limited carrying capacity. Rail transport is used to carry bulky and
heavy goods and goods in large quantities.

(ii) Water Transport:

It includes carriage by inland water-ways and ocean transport.

Inland Waterways: Inland waterways are used in home trade to carry bulky goods.

Ocean Transport: The means of transport by sea or ocean consist of ships which carry goods from
one country to another separated by sea and oceans.

(iii) Air Transport:

Generally less bulky goods of high value are transported by air. Though air transport is relatively
more expensive, it is the speediest means of transport and therefore more time saving than other
means of transport.

2. Banking and Finance.

BANKING

Banking means acceptance of deposits from the public and giving credit or loans. In simple words,
‘Banking’ means the business of a bank or a banker, and bank means an institution which deals in
money and credit.

ROLE OF FINANCE AND BANKING

Finance is the life blood of commerce and industry. Every business firm needs funds to meet various
types of requirement. Some funds are required for long periods while some funds are required for a
short period in order to carry out day to day work. Bank loans and credit are important sources of
finance for trade and industry. Banks occupy an important place in the modern business world. No
country can make industrial and commercial progress without a well organized banking system.
USES OF BANKING AND FINANCE
Banks offer opportunities of investment and safe custody of deposits.
They encourage the habit of saving among the public.
Banks deal in money and credit. They mobilise small savings and channelise them to more
productive uses. By providing adequate funds to business firms,
Banks enable management to generate further wealth for the good of society.
They facilitate settlement of debts and transfer of money from one place to another.
In addition to these, banks also assist consumers to finance their purchases of costly goods and
services.
Thus, banking and finance are indispensable spokes in the wheels of commerce and industry.

3. Warehousing.
A warehouse is an establishment for the storage of goods. Warehousing means storing goods in the
warehouse.

The uses of warehousing are outlined below:

(i) It helps merchants and manufacturers in storing their goods in case they do not have their own
warehouses or their warehouses have limited capacity.

(ii) Special warehouses which store imported goods provide importers the facility of paying custom
duties in installments, thus saving large amounts of capital from being blocked.

(iii) It facilitates the transfer of ownership of goods stored in warehouses without actual delivery of
the same. The owner gets a document known as a warehouse warrant from the warehouse keeper
at the time of keeping his goods in the warehouse. The owner can sell the goods by delivery of the
warrant. Thus, goods kept in a warehouse can change hands several times through a warehouse
warrant without actual delivery.

(iv) It provides the manufacturer with the facility of selling his goods at favourable prices depending
upon the market situation; particularly warehouses situated near the main trading centres.

(v) Warehousing enables the consumer to consume perishable goods, if they so like, throughout the
year by maintaining a regular supply of goods like fruits, eggs and vegetables etc. with the use of
cold storage.

4. Insurance.
There are a number of risks in any business activity. These can be covered with the help of
insurance companies.
Insurance serves as a cover against loss of goods, in the process of transit, storage, fire, theft and
other natural calamities.
Insurance companies undertake to make up for the loss by receiving a small amount of premium in
advance as consideration.

The various types of risks which can be insured may be grouped as follows:

(i) Life Insurance : old age and death.

(ii) Fire Insurance : risk of loss or damage to property, goods and consequential losses caused by
fire.

(iii) Marine Insurance : risk of loss or damage to ship or cargo.

(iv) General Insurance : risk of loss or damage due to theft and burglary in a premises, risk of loss
or damage to properties and assets, and risk of loss or damage due to accidents.

USES OF INSURANCE

Insurance plays an important role in the present commercial world as explained below:

(i) It protects business from losses which may arise due to fire, theft, burglary, etc. as it
compensates for the loss to the insured.

(ii) Business is protected from immediate financial problem due to loss arising from insured events
because the loss can be recovered within a short period.

(iii) Insurance enables the risk of loss to be spread over a large number of people; the premium is
charged from large number of persons but very few have claim for loss.

(iv) The insured does not bear the risk of loss alone.

(v) Business firms can concentrate on business activity and can grow with the protection given by
the insurance company against various risks.

(vi) To a great extent insurance has contributed to the increase in volume of international trade
through coverage of losses in transit.

(vii) It provides employment opportunities to a large number of people

5. Advertising.
In order to find customers, the producer has to inform the prospective customers about the utility
and features of his product. This can be done with the help of advertising.
The media used to advertise products are Radio, Newspapers, Magazines, TV, the Internet,
Billboard, etc

USES

USES

1. Advertisement spreads awareness among the consumers regarding new goods and their
uses.
2. Advertisement directly promotes the sale of goods.
3. Advertising fills the knowledge gap and it solves the difficulty of information.
4. Exchange of goods and services are possible only if producers can bring the products to the
consumers.
5. Advertising and publicity are important media of mass communication.
6. Advertising helps consumers to know about the various brands manufactured by several
manufacturers.
7. It is a way of promotion and improves the knowledge of customers.
8. It helps the traders to sell their goods and increases consumers’ knowledge about the
variety of products and available, and hence, their choice.