Classification of businesses

Primary sector
1. Secondary sector
  1. Tertiary sector
    1. Providing services to the final consumers or businesses
  2. Taking the natural resources produced by primary sector activity and turning it into finished goods
2. Extracting or harvesting natural resources from the land or sea
Chain of production
1. The production and supply of goods to the final consumer involves activities from primary, secondary and tertiary sector businesses
Industrialisation
1. The growing importance of secondary sector business activity and the reduced importance of primary sector business activity
De-industrialisation
1. The growing importance of the tertiary sector and the reduced importance of the secondary sector
Mixed economy
1. Resources are owned and controlled by both the private and public sectors
  1. Private sector
    1. The part of the economy owned and controlled by individuals and companies for profit
      1. Enterprise and entrepreneurship
        Entrepreneur
        An individual who has an idea for a business and takes the financial risk of starting and managing a new business
        Business plan
        A detailed written document outlining the purpose and aims of a business
        Types of business organisation
        Sole trader
        A business owned a managed by one person who takes all the risks and receives all the profits
        Start-up capital
        The finance needed when first setting up a business
        Partnership
        A business owned and managed by two or more people
        Private limited company
        A small to medium-sized company owned by shareholders who have limited liability
        Public limited company
        A large company owned by shareholders who have limited liability
        Limited liability
        The shareholders only risk losing the amount they have invested in a company and not any of their personal wealth
        Unlimited liability
        Owners might have to use their personal wealth to finance any business debts
        Franchise
        A business system where entrepreneurs buy the right to use the name, logo and product of an existing business
        Business objectives and stakeholder objectives
        Objective
        A specific target to be achieved. They should be SMART (Specific, Measurable, Achievable & Agreed, Realistic & Relevant, Time-specific)
        Different business objectives
        Survival
        Profit
        Growth
        Market share
        The revenue of a business expressed as a percentage of total market revenue
        Corporate Social Responsibility (CSR)
        Businesses taking responsibility for the impact their activities might have on society and the environment
        Pressure group
        Organisations of like-minded people who put pressure on businesses and government to change their policies to reach a predetermined objective
        Social enterprise
        A business with social objectives that reinvests most of its profits back into the business or into benefiting society at large
        Stakeholder
        An individual or group which has an interest in a business because they are affected by its activities and decisions
        Internal stakeholders are within the business whereas external stakeholders are outside the business
        Internal: owners and shareholders, managers, employees
        External: lenders, suppliers customers, government, local community
        Stakeholder objectives
        Owners
        Receive high dividends as a reward for investment risks
        Benefit from an increase in share value
        Managers
        Job satisfaction and status
        Receive salary increase and bonuses
        Employees
        Job security
        Receive a fair wage
        Lenders
        Receive investment payments when due
        Borrowing repaid by date due
        Suppliers
        Receive prompt payment
        Treated fairly
        Customers
        Receive quality goods and after sales service
        Charge a fair price
        Government
        Paid the correct amount of taxes on time
        Minimal spending on unemployment benefits
        Public corporation
        A business organisation that is owned and controlled by the state
        Joint ventures
        Two or more businesses agree to work together on a project and set up a seperate business for this purpose
        Business start-up
        A newly formed business
        Revenue
        The amount a business earns from the sale of its products
        Innovative
        Self-motivated and determined
        Self-confident
        Multi-skilled
        Leadership qualities
        Initiative
        Results driven
        Risk-taker
        Good at networking
        Measuring business size
        Capital employed
        The value of all long-term finance invested in a business
        Value of output
        The amount businesses earn from selling their products
        Number of employees
        Market share
        The portion of a market controlled by a particular company or product
        Why owners may want to expand their business
        Increase in profits
        Increase in market share
        Economies of scale
        Greater power to control the market
        Protection from the risk of takeover
        Internal growth
        Why some businesses remain small
        Owner's choice
        Market size
        Access and availability
        Market domination
        Reasons for business failure
        Poor planning
        Poor cash-flow management
        Poor management skills
        Lack of objectives
        Failure to invest in new technologies
        Lack of finance
        Poor choice of location
        Poor marketing
        Competition
        Economic influences
        External growth
    2. Public sector
      1. The part of the economy controlled by the state or government

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Classification of businesses

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