Business is an economic activity, concerned with the provision of goods and services with an aim of earning profit. There is two major classification of business activities, i.e. industry and commerce. Many think that these two business activities are one and the same thing but the fact is that industry is related to the production of goods, whereas commerce focuses on their distribution. In this article excerpt, we have compiled the basic difference between industry and commerce, have a look.
Content: Industry Vs Commerce
|Basis for Comparison||Industry||Commerce|
|Meaning||Industry is an economic activity, concerned with the procurement and processing of raw materials into finished products, that reaches the customer.||Commerce is a business activity, wherein exchange for goods and services for value, is done on a large scale.|
|Capital Required||High||Comparatively low|
|Involves||Conversion of resources into useful goods.||Activities essential for facilitating the buying and selling of goods.|
|Represent||Production part of business activities.||Distribution part of business activities.|
Definition of Industry
Economic activities associated with the procurement or extraction of raw materials and converting them into finished products which reach the final customer is known as an industry. The term ‘industry’ is used to denote those activities which involve the use of mechanical appliances and technical skills, i.e. activities with the manufacturing, production, and processing of products. It indicates the supply side of the market. The activities covered under industry are as under:
- Extraction of materials such as coal, petroleum etc.
- Conversion of raw materials into useful goods like soaps, fans, cement, etc.
- Construction of buildings, dams, roads etc.
The industry represents a group of factories, specialized in a specific product line. The different types of industries are as under:
- Primary Industry: Industry concerned with obtaining and providing natural raw materials like mining, agriculture or forestry.
- Secondary Industry: Industry engaged in conversion activities, i.e. converting raw material provided by primary industry, into finished products.
- Tertiary Industry: Industry that provides support services to the primary and secondary industry.
Definition of Commerce
The term ‘commerce’ means a business activity that involves buying and selling of goods or services for value (cash or kind) and that too, on a large scale, between businesses or entities, from one place to another. When there is a purchase or sale of a particular item, it is known as a transaction, but commerce refers to all the transactions associated with the buying and selling of that item in an economy.
All the economic activities which are in some way or the other related to exchange comes under commerce. It covers the distribution aspect of business, i.e. it facilitates consumption process by providing proper distribution channel. Therefore, it ensures the availability of goods and services to the customers, at the right time and place. It is broadly classified into two activities:
- Trade: The process of buying and selling of goods and services for money.
- Auxiliaries to trade: All the activities which assist trade directly or indirectly are auxiliaries to trade. It includes transportation, warehousing, banking & finance, advertising, insurance and so on.
Key Differences Between Industry and Commerce
The significant differences between industry and commerce are discussed in detail, in the points given below:
- The industry is defined as an economic activity, concerned with the procurement and processing of raw materials into finished products, that reaches the customer. Commerce is described as a business activity, wherein exchange for goods and services for value is done on a large scale.
- A huge capital investment is required to start an industry. On the other hand, commerce requires comparatively less capital investment.
- Industry involves the conversion of resources into useful goods. As opposed to, commerce which involves activities that are essential for facilitating the buying and selling of goods.
- The industry is an indicator of production part of business activities. Unlike commerce which deals with the making goods available to the customers,i.e. the distribution part.
- Industry involves high risk in comparison to commerce.
Classification of Business Activities
Industry and Commerce cover all the aspects of business. Industry looks after production, procurement, fabrication, extraction, construction activities of business. On the other hand, commerce looks after the movement of product from the source location through distribution channels (such as wholesalers, retailers, distributors, etc.), to the final consumer.