Transcript Ch 1. The Purpose Of Business Activity

Read Ch 2. Types of Business
Activity
1
Grade 10, Unit 2 Types of
business activity
Grade 9,
Ch 2. Levels of Economic Activity
2
Grade 10, Unit 2 Types of
business activity
Tasks:Activity 2.1.
Submitt Monday August 4 2008
Business
Primary
Secondary
Tertiary
Insurance
Forestry
Coal Mining
Computer
Assembly
Travel Agent
Brewery
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Car
Showroom
Grade 10, Unit 2 Types of
business activity
Levels of Economic Activity, Examples
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Stage
Business Involved
Primary
Woodcutter
Secondary
Furniture Makers
Tertiary
Retailer
Grade 10, Unit 2 Types of
business activity
The Stage of Production:
1.
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Primary stage,
Extracts and uses the natural resources of
the earth,
Such as farming, fishing, forestry.
Grade 10, Unit 2 Types of
business activity
The Stage of Production (continued):
2. Secondary stage,
Manufactures goods using the raw materials
provided by the primary sector,
Such as building, aircraft making, computer
assembly.
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Grade 10, Unit 2 Types of
business activity
The Stage of Production (continued):
3. Tertiary stage,
Provides services to consumers and the
other sectors of industry,
Such as transport, banking, insurance.
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Grade 10, Unit 2 Types of
business activity
Notes:
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
Developing country:
- Country, primary industries employ many
more people than manufacturing or services
industries.

Most developed country:
- Country where the output of tertiary sector is often
higher than the primary sector and secondary
sector.
Grade 10, Unit 2 Types of
business activity
Public and Private Sectors of Industry
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3 different types of economic system which
are used by countries to manage their
resources as efficiently as possible:
1. Free market economy.
2. Command or planned economy.
3. Mixed economy.
Grade 10, Unit 2 Types of
business activity
Public and Private Sectors of Industry
(continued)

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Free market economy:
- All resources are owned privately.
- There is no government control.
- Profit.
- Prices of goods are influenced by demand
and supply of goods.
Grade 10, Unit 2 Types of
business activity
Public and Private Sectors of Industry
(continued)

Free market economy:
- Advantages:
* Consumers are free to choose.
* Workers are encouraged to work hard.
* Business compete.
* New businesses are encouraged.
- Disadvantages:
* No government control.
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Grade 10, Unit 2 Types of
business activity
Public and Private Sectors of Industry
(continued)

Command or planned economy:
- Government controls the use of resources.
- Advantages:
* There should be work for everybody.
- Disadvantages:
* Less incentive to work.
* The government may not produce goods which
people want to buy.
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Grade 10, Unit 2 Types of
business activity
Public and Private Sectors of Industry
(continued)
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Mixed economy:
- Combines free market economy and
command economy.
Grade 10, Unit 2 Types of
business activity
Privatisation
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Privatisation:
Governments sold off businesses they
previously owned to new owners in the
private sector.
Grade 10, Unit 2 Types of
business activity
Privatisation (continued)
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Arguments in favour of privatisation:
- Profit, run the business efficiently.
- Keep the price low.
- Additional capital.
- Raises money for the government.
Grade 10, Unit 2 Types of
business activity
Privatisation (continued)
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Arguments against of privatisation:
- Some services making losses money may
be closed.
- Worker’s job could be lost.
- The prices could be higher.
- Only few people will benefit.
Grade 10, Unit 2 Types of
business activity
Comparing the Size of Businesses
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Business size can be measured in a number
of ways, such as:
1. By number of employee.
2. By value of output and sales.
3. By profit.
4. By capital employed.
Grade 10, Unit 2 Types of
business activity
Comparing the Size of Businesses
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
Comparing business size by number of employees:
- Easy to understand.

Comparing business size by value of output and
sales:
- Comparing business in the same industry.
- A high sales level does not mean that a business is
large.
Grade 10, Unit 2 Types of
business activity
How Can Businesses Grow?
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Advantages of businesses grow?
- Higher profits.
- More status and prestige for the owners and
managers.
- Lower average costs (economies of scale).
Grade 10, Unit 2 Types of
business activity
Business can expand in 2 main ways:
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1.
Internal growth,
Owner could open another the same
business in other area.
2.
External growth,
Involving “take over” or “merger” with
another business.
Grade 10, Unit 2 Types of
business activity
External growth
Three examples of mergers:
1.
Horizontal merger (horizontal integration),
- one firm merges with or take over another one in the
same industry at the same stage of production.
2.
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Vertical merger (vertical integration),
- one firm merges with or take over another one in the
same industry at a different stage of production.
Grade 10, Unit 2 Types of
business activity
External growth
Three examples of mergers:
3. Conglomerate merger (conglomerate
integration, diversification),
- one firm merges with or takes over firm in
completely different industry.
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Grade 10, Unit 2 Types of
business activity
Integration:
1.
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Horizontal integration,
- benefits: * reduces number of competitors
* opportunities for economies of
scale.
* will have a bigger share of total
market.
Grade 10, Unit 2 Types of
business activity
Integration:
2.
Forward vertical integration,
Example: A car manufacturer takes over a car
retailing business.
- benefits: * an assured outlet for the product.
* prevented from selling competing.
* consumer needs and preferences can
now be obtained by the manufacturer.
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Grade 10, Unit 2 Types of
business activity
Integration:
3. Backward vertical integration,
Example: A car manufacturer takes over a firm supplying car body
panels.
- benefits: * An assured supply of important components.
* The profit margin of the supplier is absorbed by the
expanded business.
* The supplier could be prevented from supplying
other manufacturers.
* Cost of components and supplies for the manufacturer
could be controlled.
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Grade 10, Unit 2 Types of
business activity
Integration:
3. Conglomerate integration,
- The business has activities more than
one industry.
- Business has diversified its activities.
- Spread the risks taken by the business.
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Grade 10, Unit 2 Types of
business activity
Why Do Some Businesses Stay Small?
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
Not all businesses grow.
Some stay small (employ few people; use
relatively little capital).
Several reasons:
1. The type of industry the business operates
in.
Example: hairdressing; car repairs.
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Grade 10, Unit 2 Types of
business activity
Why Do Some Businesses Stay Small?
Several reasons:
2.
Market size,
The total number of consumers is small
Example: The shops which operate in rural
areas far away from cities.
3.
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Owner objectives,
Some business owners prefer to keep their firm
small.
Grade 10, Unit 2 Types of
business activity
Homework:
1. Identify the form of business growth which is
used in each of these situations.
a. A garage agrees to merge with another
garage.
b. A bicycle retailer expands by buying a
shop in another town.
c. A fruit juice firm buys a fruit farm.
d. A business making electrical goods agrees to
join with a business with retail shops specialising
in electrical goods.
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Grade 10, Unit 2 Types of
business activity