Evolution of Business
The economic development of a country is measured by the development of commerce and industry. The development of business activities in India has been going on with the changes in civilisation. There was a time when there was no commerce at all and now its development has brought the whole world together. There have been different stages through which the development of trade and industry has passed.
A brief description of evolution of business activities has been discussed herewith:
- Barter System:
Barter is a system of exchange of goods for goods. The earlier system of producing or percuring only for one’s needs gave way to barter system. With the increase in demand for more and more goods and surplus in one’s own production, there was a search for those who wanted to exchange goods for goods. The families started producing more than their needs.
The surpluses were exchanged with those goods which they needed. At a later stage some places were fixed where people used to come for exchanging their surplus products with others. The payment for using the services of other people was also in kind. Though commerce had come into being but it was at an elementary level. There was a problem of bringing together persons who needed each other’s goods. There was no common yardstick for measuring the value of goods to be exchanged.
- Village Economy:
People started setting at particular places and began to sow seeds and rearing cattle on the land which they shared with community. These tribes started producing the things which they required and it was a system of self-sufficiency. With the advent of private ownership of land and cattle, the tribe system split into families. Some families started concentrating on occupations other than agriculture.
This led to exchange of goods for satisfying family needs. There was a system of village economy and all the requirements of the village were met by the people themselves. In order to facilitate exchange, a class of people called traders also emerged. Different families started specialising in producing different goods or taking up specific jobs. All these developments led to a self-reliant village economy.
- Introduction of Money:
The difficulties faced in barter system compelled people to find out some common medium for exchange. In the beginning some commodities were used as a denominator for exchange. The commodities like stones, shells, cattle, feathers etc. were used to value the goods to be exchanged. Gradually, metals like iron, copper, bronze, silver and gold were taken to be more convenient, as a medium of exchange.
The metals were weighed and stamped to fix their value. The metal money facilitated trade not only in the country but also with foreign countries. The coins were also used to make payments for various types of services availed. It was ultimately the use of paper currency which led to all round development of business activities.
- Town Economy:
With the use of money for exchange purposes, the volume of trade started increasing. The system of self-sufficiency gave way to division of labour. Instead of producing for family needs people started meeting needs of the whole village. People started specialising in different products. Certain places were being fixed where people could come to buy and sell goods.
There used to be weekly mandis or fairs where people from nearby villages would come to sell their surplus products and buy goods for their needs. The mandis or fairs became a regular feature. The increased volume of trade encouraged more and more division of labour. A separate class of traders and artisans came into existence.
These persons started settling at central places and established their business premises there. These places were known as towns and became trade centres for people living in villages. The villagers brought raw materials, cattle, milk, etc. to the towns for sale. The artisans would manufacture goods as per the needs of the people. The traders became a link between farmers and artisans.
The traders also started bringing luxury goods from outside places for sale in towns. As the journey was risky, the traders used to move in caravans and with the protection of armed men. The town economy gave further philip to commerce.
- Industrial Revolution:
The word ‘Industrial Revolution’ is used to describe a series of changes in the industrial field in England during the period between 1760 and 1850. The changes of far reaching effects took place during this period. Generally, the word ‘Revolution’ is used for an abrupt change but in this case it is used to describe ‘fundamental change’.
A number of inventions took place in England which changed the entire technique of production. Some of the important inventions were the Spinning Jenny of Hargreaves, the Water Frame of Arkwright, the Mule of Crompton and the Power-loom of Cartwright. With the help of these inventions industrial production started at a mass scale.
The machinery was used for production, division of labour was introduced and the modes of transport were improved. The use of steam-engine in place of labour helped to increase production manifold. The use of machines required more capital investments and it led to the change in ownership from a sole proprietorship to a joint stock company.
According to Mr. L.C.A Knowles, “The so-called Industrial Revolution comprised of six great changes or developments-all of which were inter-dependent”.
These changes were:
(i) Development of Engineering:
Industrial revolution brought about a change in engineering skill. Engineers were required to design machines for textile and coal-mixing industries. The tool making for repairing ships and locomotives were also essential. There was a need for sufficient number of trained persons for taking up these jobs. The development of trained people was a part of industrial revolution.
(ii) Revolution in Iron-making:
The casting of iron for manufacturing machines was the other need of this revolution. A sufficient quantity and goods of iron was the need of the time. This development helped in producing sufficient number of machines.
(iii) Use of Steam Power in Textiles:
The use of mechanical devices in textile industry raised its production. First steam power was used in spinning. It created a surplus of yarn because man-made and traditional methods of weaving could not cope with the situation. It necessitated the use of power for weaving purposes also. The use of power was also extended to other aspects of textile industry.
(iv) Rise of Chemical Industry:
The use of power in textile industry necessitated suitable changes in the processes like bleaching, dying, finishing or printing so that production could be accelerated to keep pace with the output of piece goods. All this was possible only with the development of chemical industry.
(v) Development of Coal Mining:
The development of coal mining was inter-dependent on other developments. The coke was needed for smelting and refining iron and pig iron respectively in blast furnaces as also for producing the steam power which had also become the motive power of the industry.
(vi) Revolution in Transport:
The above mentioned developments could not have been possible without the improved modes of transport. The horse driven carriages could not cope with the needs of large scale production. The moving of inputs to centres of industrialization and then distribution of manufactured goods to places of consumption will be possible only with better transport means.
The industrial revolution led to large scale production. The production large scale reduced prices of goods. The commodities which were considered luxuries earlier were within the reach of a common man. The division of labour was introduced in factories and this led to specialisation.
- Revolution in Transport and Communication:
Industrial production increased manifold after the mechanisation of production methods. There was a need for more and more markets to sell the goods. The discovery of new sea routes, opening of Suez Canal, introduction of railways, steamships, aeroplanes and automobiles revolutionised transport system. The movement of goods among different countries became easy and fast. The trade crossed national boundries.
The trade expanded from local to national and from national to international boundries. The facilities such as insurance and banking also gave philip to the development of trade. The revolution in communication methods has further facilitated the growth of business activities.
The use of telephone, telegraph, radio, T.V. etc. has helped in creating world market for goods. The latest edition of internet, intranet, e-commerce and advanced IT methods has radically changed the structure of trade and commerce both at national and international levels.
- Advancements in Modern Business:
A number of advancements have occurred in commerce and industry in the last fifty years. These changes have revolutionised production and distribution.
Some of these changes are described as follows :
(i) Improved Methods of Production:
The use of latest technology has revolutionised production methods. The rate of production has increased substantially. Mechanisation and automation have also helped in controlling wastes and reducing cost of production. Productivity of workers has also gone up.
(ii) Large Scale Production:
The growth of multinational companies has increased the scale of production. The goods are not produced for local or national markets only but international demand is taken into consideration.
The division of labour has led to specialisation in every industrial activity. Industrial units produce small number of components but specialise in them. Big industrial units also encourage specialisation in small units. The specialisation helps in raising productivity and competitive strength of the units. Even at international level countries produce only those goods in which they can specialise and have natural advantage. This specialisation has further increased international trade.
(iv) Research and Development:
The focus of industrial units is to devise better and better products on a regular basis. This has necessitated an emphasis on research and development. The thrust now is on revolution and not on evolution. Research and development helps in controlling costs, increasing production and raising standards of living of people.
(v) Expansion of International Trade:
International trade is expanding at a greater pace. The organisations like WTO are helping to bring together the whole world by removing various hindrances imposed by countries in the flow of goods and services. The whole world is now becoming one big market.
- Growth of Public and Private Enterprises:
Industrialisation in India mainly started after 1947. British rulers wanted India to be the supplier of raw materials and consumer of their finished goods. After independence the government devised specific roles to public and private sectors. Basic and strategic industries were developed under public sector and consumer goods industries were left to be developed under private sector.
There were a number of changes in industrial policy from time to time. The public sector enterprises could not provide the required quantum for industrial development. It was in 1991 when government decided to limit the role of public sector only to a few industries and rests of the industries were left to be developed by private sector. Foreign entrepreneurs were freely allowed to set up unit in India.
A number of multinational companies, especially in automobile sector and durable consumer goods, have set up their manufacturing facilities in India. Foreign investors are allowed to own majority of equity in a number of Indian industries.
There are basic structural changes in Indian industrial sector in the last 15 years. Under world trade treaties every country has to .allow free access to foreign goods. Indian industries are now operating under intense competition from foreign undertakings. This competition has created awareness about quality and cost among Indian entrepreneurs. Indian exports are now finding good foreign markets.
Businessmen are exploring newer and better foreign markets for Indian goods. The government is also giving proper attention to export promotion. Though public sector is also continuing but the thrust has shifted to private sector. Private sector will have to show results in a fairly competitive environment.