Trade and it's types

          WHY IT IS IMPORTANT 

What does trading mean? Have you ever wondered? Business which is what this blog is mainly concerned with, cannot be perfectly discussed without involving trading. Trading is one of the components of business. So that is the reason why, we are interested in trading.Some of those who want to do business would specialize in trading. So just Incase you want to, you need to know what trading means.

              TRADING IS AN ACT

Trading is said to be an act. You would find this judgement in every business textbook. You would also learn of it from business experts. Infact in discussions on business this consideration is featured. As we all know, every act has performers. There can be no act, without actors. Every act is performed by someone. It follows therefore that trading is performed by someone. Who could those be?

                    THE PERFORMERS

The people that performs this act, are the producer and the consumer. A producer as we know is anyone that has created goods or services. All those considered producers are called producers. A consumer on the other hand is one that demands, buys and makes use of the product produced by a producer. The producer usually produces goods to sell it to the consumer and make profit. The consumers objective is to buy those products to fulfil his needs.

                   DEFINITION 

When the producer finishes producing his goods, he takes step to sell them; advertising, marketing etc. The consumer in demand of the product, buys the product from the producer. That is to say, both of them makes an exchange; the producer gives to the producer the product and receives money from the consumer. When this is done trading is said to have occured. 

         THE PLACE OF PERFORMANCE 

 This transfer of ownership could be done anywhere. Anywhere the producer could avail his product for transfer to take place. And this could even be done at home, in the public, streets or just anywhere. As long as the producer could a ail his product in that place. Wholesalers sometimes buys directly from companies.

Traditionally there is a special place meant for trading; markets. Go to every market in the world you would find that what is consistent with them all is the performance of trading on a large scale.

Sometimes producers avail the products theirselves. Sometimes retailers who buys from retailers conveys it to that place for sell.

               HOW IT IS ACHIEVED 

This has been hinted at. We said that the producer produces to make money. Therefore his objective cannot be charity or generosity. His objective is wealth. He can only make wealth if he monetizes his product. And if he does, the consumer would pay for it, and he would derive profit from the revenue incurred from the sell of his product. 

Traditionally this is how trading is usually achieved. The consumers earns their right to own and receive transfer of ownership by paying for it with money. Money is therefore that took which is used to accomplish trading. 

              THE COST OF A PRODUCT 

The consumer has just learned that he would secure ownership of a product he desires by paying for it. He is determined to pay, but he wonders, just how much must be pay? For every product there is a cost.

The amount he would pay varies from products to products. All products do not have the same value, Silver and Sand do not have the same value, and cannot cost the same. Some products are of higher value, thus of higher cost. Those if lower value are of lower cost. 

This however is the producers business. He it is that makes calculation of how much it cost him to produce the product, and then attaches an addition to his capital, when he deducts it, the leftover is his capital.

                      ILLUSTRATION 

Jacks a certain man, desiring to make money decides to use production as a tool to achieve his objective: his dream was to build a company and produce products which he would monetize; sell them to those who desires them- his target.

Jacks secured money to build a company and engages in the process of formation which resulted in formation of a company which he named after himself.

After establishing a company he employs the strategies he devised to make sells. He engages in advertising, which earned him recognition of his products.

He established a department of the business and saddles them with the duty of conveying the goods to the market for sale.

Consumers who have learnt of his products through advertising agencies locates the market. And they secured their right to receive ownership by paying for the products; they exchanged the products with the consumers for money

                   TYPES OF TRADE 

As it is with everything so is it with trading. Trading is of types, each having different characterises and nature. Understanding them is necessary to enhancing our understanding of trading and enhancing our trading skill. For how could we indulge in any of them if we do not understand them? 

                    1. HOME TRADE

It is the kind of trading that occurs within a country. What defines it is occurrence within a nation; it does not affect another country that is not the country of the trading parties. It is also called domestic or internal trade. 

                  AN INSTANCE 

Andrew an American desires a certain products. He makes his research and discovers that there is a company within the country of his birth and origin that produces it. Happy was he on this account. He makes further research and discovers that the product is available in excess in a market in California. He locates this market, and with the local currency which is the U.S.A's Dollars, pays for the product and receives it from the seller.

Andrew's case is an example of home trade, because the trading occured within America; it did not involve any other country. Within that geographical piece, did the trading occur. 

Typical examples of this kind of trade are;

A. WHOLESALING: The process of buying goods in very very large quantities from the producers and selling them to the retailers, usually done by wholesalers.

B. RETAILING: The buying of products from the wholesalers and selling directly to the consumers. This is done by the retailers. 

             2   FOREIGN TRADE

It is the trading between trading parties of different countries. And also the trade between one country and the other. If trading does not affect two trading parties of different countries or different countries it is not a foreign trade. 

                   AN INSTANCE 

Robert an American business man, discovers that there was a high demand for a certain product in his country. The product is rare in America but very abundant in Africa. If only he could import it into America he would make so much profit, by selling them at a very high prize. As one desiring to increase his wealth he decided to invest in the business. Capital was no issue as Roberts was already a successful business man.

Mr Mark, an African was a dealer of this product, and owned a large farm that produced it, according to his research. To cut the story short, Mr Mark bought the products from him, by paying him with the local currency and exported the product into Africa. And so did their trading continue.

Roberts case was not the same as Jack's for it involved trading between two trade parties of different countries; America and Nigeria, which makes it a foreign trade.

Foreign trade is like home trade in that it is of types; export, entrepot and import. 

A. EXPORT 

It is the sale of goods, any kind at all, weather finished or raw, by a trading party of a country to other countries.

B. ENTREPOT 

It is the buying of goods from other countries for exporting or selling them to other countries. The second name for it is, ''re-export trade''. 

Ç. IMPORT

It is concerned with buying from other countries, products, for sale in the country they are imported to.

THE DIFFERENCES BETWEEN HOME TRADE AND FOREIGN TRADE

1. Home trade consists of movement of goods only within a country; it doe not extend beyond a country. If it does, it is no longer home trade. Little wonder why it is also called domestic trade, to suggest that it is the kind that occurs within that geographic piece.

On the other hand, in foreign trade products are moved beyond geographical boundaries. 

2. In home trade as observed only currencies of the country is used, and can be used, since the trading occurs only within that country, and the laws of countries is that their legal tenders must be used for payment.

3. The parties involved in home trade, can easily understand each other by employing the official language of their country.

 But foreign trade, involves the use of different languages. Since countries have different official languages, the official language of a trade party may not be the same with his colleagues. This may even be a barrier or challenge for those who want to engage in foreign trade, they may have to employ interpreters.

4.Less documentation is required for home trade parties, to perform transaction, while more complex and many documentation is involved in foreign trade.

5. In home trade the usage of the same weights and measures are employed, but this is the opposite in foreign trade.