1
Business Activity & Economic Sectors
Understanding Business Activity
Business activity is the process of producing goods and services to satisfy consumer needs and wants while adding value through the transformation process.
📊 The Transformation Process ▼
Inputs → Process → Outputs
- Inputs (Factors of Production): Land, Labour, Capital, Enterprise
- Process: Manufacturing, service delivery, value addition
- Outputs: Finished goods/services meeting market needs
- Value Added: Selling Price - Cost of Bought-in Materials
Economic Sectors Explained
🏭 Primary Sector
Extraction of raw materials
- Farming & Agriculture
- Mining & Quarrying
- Fishing & Forestry
Role: Foundation of production chain
🏢 Secondary Sector
Manufacturing & Construction
- Factories & Processing
- Construction Companies
- Assembly Plants
Role: Adds value to raw materials
🛍️ Tertiary Sector
Service Provision
- Retail & Distribution
- Banking & Finance
- Transport & Tourism
Role: Supports production & consumption
💻 Quaternary Sector
Knowledge-based Services
- IT & Software
- R&D Departments
- Consultancy Services
Role: Innovation & information
| Economic Indicator | Developed Economy | Developing Economy |
|---|---|---|
| Dominant Sector | Tertiary & Quaternary (70%+) | Primary & Secondary (60%+) |
| Sectoral Change Pattern | Post-industrial: Focus on services | Industrializing: Manufacturing growth |
| Example Countries | UK, USA, Germany, Japan | India, Vietnam, Nigeria |
| Employment Trends | Decline in manufacturing, rise in services | Shift from agriculture to factories |
2
Enterprise, Business Growth & Size
Entrepreneurship & Enterprise
Entrepreneur: An individual who spots business opportunities and takes risks to exploit them.
🚀 Entrepreneurial Characteristics ▼
- Innovation: Creating new products/processes
- Risk-taking: Willingness to face uncertainty
- Determination: Persistence through challenges
- Initiative: Proactive approach to opportunities
- Leadership: Ability to inspire and guide others
Business Growth Strategies
| Growth Method | Description | Advantages | Disadvantages |
|---|---|---|---|
| Organic (Internal) | Growing from within using own resources | Lower risk, maintains control, gradual | Slow growth, limited by resources |
| Mergers | Two companies join to form one new entity | Shared risk, combined strengths | Culture clashes, integration issues |
| Takeovers | One company buys controlling interest in another | Quick growth, eliminate competition | Expensive, resistance from target |
| Franchising | Licensing business model to franchisees | Rapid expansion, lower capital risk | Less control, revenue sharing |
Measuring Business Size
| Measurement Method | How It's Measured | Best For | Limitations |
|---|---|---|---|
| Number of Employees | Count of full-time equivalent workers | Labour-intensive businesses | Capital-intensive firms appear small |
| Revenue/Turnover | Total sales value over a period | Comparing market presence | Ignores profitability, seasonal variations |
| Market Capitalization | Share price × number of shares | Public limited companies | Volatile, not for private companies |
| Market Share | (Company sales ÷ Total market sales) × 100 | Competitive analysis | Requires accurate market definition |
| Capital Employed | Total assets - current liabilities | Capital-intensive industries | Doesn't measure efficiency or profitability |
3
Types of Business Organisation
Private Sector Organisations
| Type | Ownership | Liability | Key Features |
|---|---|---|---|
| Sole Trader | One person | Unlimited | Easy setup, full control, privacy |
| Partnership | 2-20 partners | Unlimited (except LLP) | Shared skills/capital, Deed of Partnership |
| Private Ltd (Ltd) | Shareholders | Limited | Separate legal entity, shares not public |
| Public Ltd (PLC) | Public shareholders | Limited | Shares traded on stock exchange |
| Franchise | Franchisee (operator) | Varies | Proven model, brand support, fees |
Public Sector vs Private Sector
🏛️ Public Sector Characteristics:
- Ownership: Government/state-owned
- Objective: Service provision, not profit
- Funding: Taxation, government grants
- Examples: NHS, state schools, police
- Accountability: To public through government
📈 Private Sector Characteristics:
- Ownership: Private individuals/shareholders
- Objective: Profit maximization
- Funding: Private investment, profits
- Examples: Tesco, Apple, local shops
- Accountability: To shareholders/owners
More Topics Coming Soon...
Topics 4-6 will be added with detailed explanations, diagrams, and exam tips.