The Evolution of Business can be studied by dividing it into two parts:
- Evolution of Industry
- Evolution of Commerce
(1) Evolution of Industry:
Industry is concerned with the production of goods and services. There was a time in the history of mankind when there were no industrial activities. Our primitive ancestors consumed what they produced. Hunting was the first stage in the evolution of man. The needs of man were limited only to food, clothing, and shelter. This was an economy of self-reliance.
Gradually man entered in pastoral stage under which he started domesticating animals for milk, meat, and skin. He lived near the banks of lakes and rivers because of availability of grass and water. Soon after this, a man entered the agriculture stage. He began cultivating land to grow foodgrains. The economy of the household remained self-sufficient.
The evolution of industry can be traced from handicraft stage where goods were manufactured for local people.
(a) Handicraft Stage:
Human wants to increase with the advance of civilization. They could not produce everything they needed. People came to know that man is skillful in producing a few commodities. They can make quite rapidly in large numbers and in beautiful forms. Hence, under handicraft stage artisans living in a village, produced products for the local people got in exchange what they needed. At this stage, artisan used simple hand tools and manual skill for producing the goods.
The organization of work was quite simple and there was no division of labor. The family was the unit of industrial organization. The money as a medium of exchange helped the expansion in industry and trade.
(b) Guild System:
A guild may be defined as an organized group of artisans or traders. In the middle age (up to 15th century) working people organized themselves into Guilds. These Guilds were – Merchant Guilds and Artisan Guilds. The merchant were associations of traders.
Artisans engaged in the same line formed artisan or craft guilds. The membership of these guilds was compulsory. The guilds were able to help the growth of industries development. The interests of members were protected. The members were protected. The members were expected to produce quality goods. Reasonable profitability was ensured to the craftsman.
(c) The Domestic System:
With the fall guild system, a new system developed which was known as Domestic System. With the increase in population, the demand for goods increased considerably. The artisans were not able to procure huge quantities of raw materials. They were also unable to purchase latest tools because of their limited resources. A new class of entrepreneurs came into existence. The entrepreneurs gave work to the artisans who worked in their homes.
(d) The Industrial Revolution:
The term ‘Industrial Revolution’ is used to describe a series of changes in the British industry during the later part of the 18th century and the earlier part of 19th century. A number of inventions took place in England, which changed the entire technique of production.
The word ‘revolution’ means a fundamental change.
In this sense, the industrial revolution was a change in (a) industrial method, from handwork to work done by machines driven by power, and (b) industrial organization, from work at home to work at factories. The consequences of the industrial revolution were mass production, mechanization, standardization, the growth of capitalism, specialization and improvement in the standard of living.
(e) Present Stage:
The present age has been termed as an era of large-scale production. The 20th century has saw evolution in technology. The latest technology improvements are automation, computerization and use of atomic energy for peaceful purposes. With automation, industrial work can be done faster and better. The machine needs only to be started and everything goes on automatically. All complicated jobs are done with the help of machines.
The computer system helps to analyze various results. The feedback system in automation helps to make an adjustment if necessary. With the developments indicated above the world of industry is passing through a crucial period of change.
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2) Evolution of Commerce:
Commerce includes all those activities, which are concerned with the distribution of goods and services. It embraces purchase and sale of every kind as well as various services like transport, banking, insurance, warehousing, etc. which facilitate trade. Hence, it provides the link between producer and consumer.
They have been expanding along with the development of society. It has passed through a number of stages to reach the present level. The standard of living id directly influenced by the degree of development of commerce. Following are the stages in the evolution of commerce:
(a) Non-Existence of Commerce and Trade:
In the early stages of man, there was no surplus to be exchanged. Our primitive ancestors consumed what they produced. The production of goods was only to satisfy one’s need. Since people did not exchange goods or services, commerce (and trade) was non-existent.
(b) Barter Economy:
Human wants to increase with the advance of civilization. They could not produce everything they needed. People came to know that man is skillful in producing a few commodities. He can make them quite rapidly in large numbers and in beautiful forms. So, at this stage people started producing the excess of their needs what they could produce.
People started searching for persons who could get their surplus products in exchange for those goods, which they required. Commerce made its beginning and barter (exchange of goods for goods) began to be practiced. Means of communication were either absent or wholly primitive and trade was non-existent.
(c) The Rise of Trade:
The barter system was not suitable for expansion of trade. The difficulties of barter system compelled people to find out some common medium for exchange. Several commodities like shells, cattle, oxen, precious stones, metals, etc. have been used for money from time to time. Ultimately coins paper money were changed. With the evolution of money as a medium of exchange removed the defects and limitations of the barter economy.
The money as a medium of exchange helped the expansion of trade. People started producing goods for sale. A class of traders started helping the producers and consumers for an exchange of goods and services. Gradually the traders started selling at particular places, which later on became marketplaces or trade centers. So the introduction of money led to the growth of commerce.
(d) National Economy:
The introduction of money followed by several other improvements of commercial activities (transportation, banking, insurance, etc.) greatly helped to develop commerce and trade. The division of work and specialization helped producers to concentrate on few products only. They started producing goods not only for the local markets but also for national markets.
The specialization in different fields helped the growth of industry and commerce. The development of transport increased the trade manifold. All these developments were responsible for developing commerce at a national level.
(e) World Economy:
The discovery of trade routes between 15th, 16th and 17th centuries brought various countries nearer to each other. The element of specialization extended to different countries. They started exporting those products, which they could produce easily and would import those things in which they were the deficit or could not produce cheaply. In this way, trade extended to world markets in which good were bought and sold between two countries. This is also known as international trade.
The industrial revolution brought a drastic change in industrial method and industrial organization, which increased the scale of production immensely and changed the scope of trade. Several middlemen began to operate between the producer and the consumer. A specialized institution like banks, transport companies, insurance companies and warehousing were set up to help the trader. All these factors facilitated the development of worldwide trade and commerce. This is the globalization of business.
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