Unit 2

Evolution of Business
 Development of Commerce
• Commerce is that aspect of business activity
which is concerned with the distribution of
goods & services produced by industry.
 Stages involved in development

• Household Economy: The wants are very limited. In

this stage people produced goods themselves to satisfy
their own basic needs. There was no market. There was
thus no exchange of goods. They were independent
,family involvement, like men were busy in doing
hunting, fishing, making weapons & bows etc whereas
women were busy in cultivation of land, fruit gathering
& similar work.
• No division of work except at family level. So
commerce was still unknown.
 Stages involved in development
• Primitive barter economy: The wants of
people increased with development of society.
There was both advancement and civilization
of market.
• for exchange between different districts
became imperative. Commerce made it
beginning & barter began to be practiced. But
it was rather rare & restricted.
 Stages involved in development
• The rise of trade: Goods were delivered at a
particular fixed place in exchange for other
goods. It was generally exercised by princes,
nobles, priest, high officials, landowners, etc. It
used to happen during festivals.
• At this Stage, money appeared as an instrument
& medium of trade. The introduction of weights
& measure was yet another step fwd in the
development of commerce.
 Stages involved in development
• Town economy: production carried out for
catering to the needs of fixed local markets,
division of labour became important.
• Practice of wholesalers & retailers.
• Prices began to be fixed & trade started on
credit.
 Stages involved in development
• International business: goods were now
produced to be sold in foreign market too.
Complexity in commerce, full fledged function of
banking, warehousing, insurance company.
• It is not possible for a country to produce all
demanded goods according to needs and wants.
• Therefore the countries started to import the
goods and other countries exported.
• Slowly, import and export was introduced in all
counties. Trade started to extend in world market.
 Evolution of Industry
It is dated with the evolution of human beings. It is as old as human
civilization. It was developed through various stages.
A. Hunting stage
• In ancient times people lived in caves and fulfilled their basic
needs of food an clothes through hunting the wild animals in
forest. They were not civilized. Their needs were also limited.

B. Pastoral stage
• The stage of further development of human from
barbarism(uncivilized state or condition.) is called pastoral
stage. This stage is basically called the age of keeping animals.
Animals were used for milk, meat, wool, skin and so on beyond
food and clothes. The wants went on increasing and
development also started.
•
 Evolution of Industry
C. Agriculture stage
• Slowly, human beings became a little bit civilized and got idea
about farming and keeping cattle. This stage was the major
stage of development of industry. In this stage people started
to do agriculture and live in river banks. They started to
cultivate crops and domesticate the animals. Development of
agriculture is divided into 5 stages they are
i).Handicraft stage:
• It is the beginning of industrial era. It is the stage of
development of industry. Simple hands made tools were also
developed. Local resources were the major source of raw
materials. In the beginning of this stage people were only
limited to their own needs but later own surplus products were
used to exchange the goods with the roods basically called
barter system. Products were exchanged with product and
market was starting to develop.
•
 Evolution of Industry
ii. Guild stage:
• It was the beginning of organized activities. Organized groups of
traders, craftsmen, artisans used to collect various resources from
the local areas and produced goods using them.

iii. Age of domestic system

• After the stage of guild the age of domestic system was initiated.
Crafts men were not able to fulfill the unlimited and increasing
wants of people by using the limited resource. So, use of hands
and tools for producing quality goods was introduced .People
were employed and were paid according to the units of goods
produced. However salary was very low because the value of
money was much higher at that time.
 Evolution of Industry
Iv. Industrial revolution:
• It began with the replacement of old system. It is the turning point
of modern industrialization. Domestic system of production was
replaced by large scale factory system. There was invention,
innovation .development of scientific techniques which encouraged
mass production and distribution. There were numerous job
opportunities. Salary was increased and quality was maintained.

V. Present age:
• Today’s modern era with industrialization, use of technology,
computerization, modernization is the most developed stage of
industries. Goods are being produced meeting the demand of large
number of people. There are huge number of industries producing
large number of goods to meet large amount of needs and wants by
providing many jobs and salaries
 Industrial Revolution
• The Industrial Revolution, which took place from the 18th
to 19th centuries, was a period during which predominantly
agrarian, rural societies in Europe and America became
industrial and urban.
• Prior to the Industrial Revolution, which began in Britain in
the late 1700s, manufacturing was often done in people’s
homes, using hand tools or basic machines. Industrialization
marked a shift to powered, special-purpose machinery,
factories and mass production.
• The reason behind this was its physical & environment
advantages.
1. Freedom from invasion- no war was faught &
hence led to a great demand for English goods.
2. England was considered as one whole market.
3. Political & financial stability
4. Availability of Capital
5.The availability of coal and iron mines close to
each other.
6.The agricultural revolution.
7.Presence of enterprising people
8.Better means of transport.
 Consequences of Industrial Revolution
A) Economic Consequences
• Mass Production
• Growth of capitalism
a) Production of goods is undertaken not for
consumption but for sale in the market
b) Ownership of means of production
• Specialization
• Improvement in standard of living
• Trade cycles
 SOCIAL IMPACT

• Food and nutrition

• Housing
• Life Expectancy
 Industrialization In India

1.Raising Income:
The first important role is that industrial
development provide a secure basis for a rapid
growth of income. The evidences show a
close connection between the high level of
income and industrial development.
2. Changing the Structure of the Economy:

In order to develop the economy underdeveloped

countries need structural change through
industrialization. History shows that in the process of
becoming developed economy the share of the industrial
sector should rise and that of the agricultural sector
decline. This is only possible through deliberate
industrialization. As a result, the benefits of
industrialization will ‘trickle down’ to the other sectors
of the economy in the form of the development of
agricultural and service sectors leading to the rise in
employment, output and income.
3. Meeting High-Income Demands:

Beyond certain limits, the demands of the people are usually

for industrial products alone. After having met the needs of
food, income of the people are spent mostly on manufactured
goods. This means the income-elasticity of demand for the
manufactured goods is high and that of agricultural products is
low. To meet these demands and increase the economy’s
output underdeveloped countries need industrialization.
4. Overcoming Deterioration in the Terms of
Trade:
Underdeveloped countries like India need
industrialization to free themselves from the
adverse effects of fluctuations in the prices of
primary products and deterioration in their terms
of trade. Such countries mainly export primary
products and import manufactured goods. For
economic development such countries must
shake off their dependence on primary products.
They should adopt import substituting and export
oriented industrialization.
6. Bringing Technological Progress: Research and
Development is associated with the process of
industrialization. The development of industries
producing capital goods i.e., machines,
equipment etc., enables a country to produce a
variety of goods in large quantities and at low
costs, make for technological progress and
change in the outlook of the people. This results
in bringing about an industrial civilization or
environment for rapid progress which is
necessary for any healthy economy.
7. Strengthening the

Economy: Industrialisation of the country can

provide the necessary elements for
strengthening the economy. In this regard the
following points may be noted:
(a) Industrialisation makes possible the production
of goods like railways, dams, etc. These
economic infrastructures are essential for the
future growth of the economy.
(b) It is through the establishment of industries that
one can impart elasticity to the system and
overcome the historically given position of a
primary producing country. Thus, with
industrialization we can change the comparative
advantage” of the country to suit its resources and
potentialities of manpower.
(c) Through industrialization the requirements for the
development of agriculture can be met. For
example, improved farm-implements, chemical
fertilizers, storage and transport facilities, etc,
appropriate to our own conditions can be
adequately provided only by our own industries.

(d) Providing for Security: Industrialisation is needed

to provide for the country’s security. dependence of
foreign sources for defence materials is a risky
affair. It is only through industrial development in a
big way that the national objective of self-reliance
in defence materials can be achieved.