Trade refers to buying and selling of products and services.
- A) DOMESTIC TRADE
Domestic trade takes place inside a country and provides the customers with goods. There are two types:
- Wholesale carried out by companies which buy in large quantities directly from the producer and sells them to small shopkeepers.
- Small trade or retail buys small quantities of product and sells them to the customers.
There are different types of domestic trade:
- Small shops or traditional shops are small business with are specialized in a type of product or they sell basic consumer goods. The sales system counts on shops assistants or the owners.
- Supermarket is a medium size business which markets food and basic consumer goods. They use self-service for the majority of products and shop assistants for meat, fish or fruit products.
- Hypermarkets are large businesses which provide customers with food products, clothes, cleaning products, electrical appliances, books, etc. They have shop assistants but self-service is the most used services.
- Department store are large business divided in departments or sections mainly for fashion and electrical appliances. They have specialized shop assistants and promote on line orders.
- Shopping centre or mall is a large building with small specialized shops inside. The sales system is based on shop assistants and the products sold are clothes, shoes, food products, cosmetics, etc.
B) FOREIGN TRADE
Foreign trade is the exchange of products and services between different countries. IT consists of imports (products bought to other countries) and exports (Products or services sold to other countries).
Imports and exports are registered on the balance of payments, a document that shows the income and expenses from trading goods and services and the capital exchanges between countries.
The balance of payements includes the merchandise trade account which is the difference between the income and payments. The balance can be positive, negative or in equilibrium. Trade has different characteristics depending on the country:
- Industrialized countries like Europe, USA, Canada and Japan: these countries export industrial products and import raw materials and energy sources.
- Newly industrialized countries from Asia and Latin America specialize in exporting industrial products (textiles, electronic, computing, automobiles) at low prices.
- Developing countries (almost all African countries and some Asian and Latin American countries) export raw materials and energy sources. They depend on industrialized from which they buy industrial products.
What factors make trade posible?
Commerce is the name for activities in which money or services are exchanged. In many countries like Spain, commerce is the most important service because of it generates the most money and employs a large number of people.
Commercial activity depends primarily on three factors:
– Development of transportation and infrastructure. A transportation network allows the industry to efficiently bring products to consumers. Normally, easily accessible areas, such as cities, have more commerce.
– The size of the market, i.e., the number of consumers with the ability to purchase a product or service. The bigger the market, the more commerce. Today, electronic commerce, which takes place on the Internet, allows companies access to a huge market. These companies can reach anyone connected to the Internet.
– The wealth of the population. The more money, or acquisitive power, people have, the more they consume.