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Read Ch 2. Types of Business Activity

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  1. Read Ch 2. Types of Business Activity Grade 10, Unit 2 Types of business activity

  2. Grade 9,Ch 2. Levels of Economic Activity Grade 10, Unit 2 Types of business activity

  3. Tasks:Activity 2.1. Submitt Monday August 4 2008 Grade 10, Unit 2 Types of business activity

  4. Levels of Economic Activity, Examples Grade 10, Unit 2 Types of business activity

  5. The Stage of Production: • Primary stage, Extracts and uses the natural resources of the earth, Such as farming, fishing, forestry. Grade 10, Unit 2 Types of business activity

  6. 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. Grade 10, Unit 2 Types of business activity

  7. The Stage of Production (continued): 3. Tertiary stage, Provides services to consumers and the other sectors of industry, Such as transport, banking, insurance. Grade 10, Unit 2 Types of business activity

  8. Notes: • 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

  9. Public and Private Sectors of Industry • 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

  10. Public and Private Sectors of Industry (continued) • 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

  11. 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. Grade 10, Unit 2 Types of business activity

  12. 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. Grade 10, Unit 2 Types of business activity

  13. Public and Private Sectors of Industry (continued) • Mixed economy: - Combines free market economy and command economy. Grade 10, Unit 2 Types of business activity

  14. Privatisation • Privatisation: Governments sold off businesses they previously owned to new owners in the private sector. Grade 10, Unit 2 Types of business activity

  15. Privatisation (continued) • 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

  16. Privatisation (continued) • 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

  17. Comparing the Size of Businesses • 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

  18. Comparing the Size of Businesses • 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

  19. How Can Businesses Grow? • 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

  20. Business can expand in 2 main ways: • Internal growth, Owner could open another the same business in other area. • External growth, Involving “take over” or “merger” with another business. Grade 10, Unit 2 Types of business activity

  21. External growth Three examples of mergers: • Horizontal merger (horizontal integration), - one firm merges with or take over another one in the same industry at the same stage of production. • 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

  22. External growth Three examples of mergers: 3. Conglomerate merger (conglomerate integration, diversification), - one firm merges with or takes over firm in completely different industry. Grade 10, Unit 2 Types of business activity

  23. Integration: • 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

  24. Integration: • 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. Grade 10, Unit 2 Types of business activity

  25. 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. Grade 10, Unit 2 Types of business activity

  26. Integration: 3. Conglomerate integration, - The business has activities more than one industry. - Business has diversified its activities. - Spread the risks taken by the business. Grade 10, Unit 2 Types of business activity

  27. Why Do Some Businesses Stay Small? • Not all businesses grow. • Some stay small (employ few people; use relatively little capital). Several reasons: • The type of industry the business operates in. Example: hairdressing; car repairs. Grade 10, Unit 2 Types of business activity

  28. Why Do Some Businesses Stay Small? Several reasons: • Market size, The total number of consumers is small Example: The shops which operate in rural areas far away from cities. • Owner objectives, Some business owners prefer to keep their firm small. Grade 10, Unit 2 Types of business activity

  29. 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. Grade 10, Unit 2 Types of business activity