Stages in Evolution of Business
Explain the evolution of business.
Let's understand the broad meaning of evolution of business.
“Evolution of business means its origin, growth, and continuous development with expansion in various sectors, that contribute and run economies.”
The evolution of business went through many progressive stages or so called developmental steps. In each stage of progress, it evolved itself and got more mature than its previous stage. It is evident that, at every step of evolution; it expanded its scale of operations and also widened its modes of communication.
Business is continuously evolving since then.
The five main stages in evolution of business are depicted below.
Figure shows 5 stages in evolution of business from local to a global one.
The evolution of business went through following five stages:
- First, the local business evolved from its three basic sub-stages, namely; starting with barter economy, then followed by village and town economy.
- Secondly, the regional business grew as a result of cooperation between different states.
- Thirdly, the national business was an outcome of a business presence felt in the entire country.
- Then, international business emerged as an answer to fulfill the scarcity of resources felt within each country.
- Finally, an idea to see the entire world as one huge market was realised. This paved the way to form a new concept called global business.
Now let's discuss in brief each of the above-mentioned main stages that contributed towards evolution of business.
1. Local business
Business had its origin since early ages of human civilization. It began with a mere sharing of food commodities. People use to collect and store whatever surplus they had and use to seek out something they didn't have. This situation was present in various areas around the world which later gave birth to a form of business in local areas.
What is a local area?
“Local area comprises of surrounding neighbourhood, adjacent areas where community of native people mostly dwells, resides, and remains active regularly.”
Explain the simple meaning of local business.
In general, “local business can be stated as various exchange (trade) activities happening regularly among people of a local-area.”
The following diagram depicts the three basic sub-stages through which a local business pass.
The three sub-stages of evolution of local business are as follows:
- Barter economy stage:
- In barter economy stage, money is not used as a medium of exchange. Here, goods are exchanged for goods.
- Monetary transactions are absent in barter exchange.
- Here, the rate of exchange depends upon needs of both parties involved in a barter transaction.
- It is the barter system of trade that laid the very foundation of a business.
- Village economy stage:
- “The village is a self-sufficient communal unit.” Here, people usually live in harmony with each other and their environment by forming different cooperative social groups.
- The village economy is mainly supported and fueled by various agricultural activities.
- Here, people satisfy each other’s requirements by trading among themselves their basic goods and services. However, in some special cases, even gold, silver, and copper are used for trading.
- When villagers started doing their businesses at a village level, it helped to form the world’s first markets.
- In these small markets, the villagers exchanged or sold their surplus goods.
- This overall helps to transcend the economy from a barter stage to become a village economy.
- Town economy stage:
- “Town is a meeting ground for the majority of villages.”
- It is a place where people from different villages come together, interact and mingle.
- This heterogeneous interaction brings the influx of new cultures and traditions, ideas, and creates better opportunities.
- This attracts many new people, and development also starts taking place to sustain the demands of incoming masses.
- This process gradually results in formation of a town's economy.
2. Regional business
What is a region?
In context of this article, “region is a huge landmass or area that comprises of numerous town economies.”
When a business alliance of town economy from any specific region feels the need to extend the scope of their business, it results in business expansion at a regional level.
What is a regional business?
- “Regional-business is a business between different areas within a country.”
- It mainly includes trade between various states, which are political divisions that make up a country.
- Here, credit sales get more importance.
- Better and economic infrastructure facilities, especially, transport and communication are required to develop regional business.
3. National business
Explain the meaning of word nation.
“Nation is an organized political union of its member states.”
What is a national business?
- “National business is present in the entire country.” In a practical sense, it is spread in the most parts of a country.
- The business at a national level first started in England during the era of Industrial Revolution. The joint-stock companies became very popular during this stage.
- The size of a national business is always large when compared with the business done at a regional level.
- National business helps to make the availability of goods and services in the most parts of a country.
4. International business
No nation is 100% self-sufficient with its all available resources. A nation may have abundance of some resources but may also experience scarcity of other resources. To overcome this scarcity, nations often trade among themselves. They satisfy each other's needs by supplying their surpluses and/or expertise, and in return bring home, the scanty resources.
What is an international business?
- The term international business implies “businesses conducted among or between different nations.” Here, two or more countries do business with each other. It mainly consists of imports and exports. For example, crude oil-rich gulf countries export their raw oil and in return import the scare food items.
- The international business is not a phenomenon of modern times. It has its origin in the ancient times. It began when merchants from different kingdoms started exploring remote parts of the old world in search of wealth and opportunities. For examples, European traders came to the south-Asia via a new sea-route in search of cheaper spices, which were in huge demand in Europe.
- It helps to improve friendly relations between different countries.
- It also helps to improve the standard of living of the people.
Today, international business has increased many folds. It is so, mostly due to availability of faster modes of communication and transport, regional cooperation between countries, and adaptation of free trade policies.
5. Global business
First let's understand, What is a global market?
“Global market is one big world level market.” Here, the entire globe or world is considered as one huge market of opportunities. This market has the enormous levels of customer base than any other type of market. It has no borders and is almost restrictions free. All companies can sell their goods and services in this kind of one open global market. However, here, the competition is very severe. Large funds, skilled human resource, an ample amount of creativity and innovation, best quality of produce and services, along with world-class logistics and marketing are required to sustain the tremendous pressures of its severity. Generally, this market is fully controlled by the rich cartels of multinational companies (MNCs).
What is a global business?
- “Global Business is a business in one giant world-level market.”
- It is a new concept and is also referred as Globalisation.
- India entered the world market and started its global business in the early 1990s. Since then its importance is increasing rapidly in India.
- The global business is the most current and latest mature stage the modern business has evolved into.
This is how the evolution of business took place starting from its basic local level and arriving at a global stage.