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

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

3. Grade 10, Unit 2 Types of business activity 3 Tasks:Activity 2.1. Submitt Monday August 4 2008 BusinessPrimarySecondaryTertiary Insurance Forestry Coal Mining Computer Assembly Travel Agent Brewery Car Showroom

4. Grade 10, Unit 2 Types of business activity 4 Levels of Economic Activity, Examples StageBusiness Involved PrimaryWoodcutter SecondaryFurniture Makers TertiaryRetailer

5. Grade 10, Unit 2 Types of business activity 5 The Stage of Production: 1. Primary stage, Extracts and uses the natural resources of the earth, Such as farming, fishing, forestry.

6. 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.

7. 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.

8. 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.

9. 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.

10. 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.

11. 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.

12. 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.

13. 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.

14. 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.

15. 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.

16. 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.

17. 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.

18. 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.

19. 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).

20. Grade 10, Unit 2 Types of business activity 20 Business can expand in 2 main ways: 1. Internal growth, Owner could open another the same business in other area. 2. External growth, Involving “take over” or “merger” with another business.

21. Grade 10, Unit 2 Types of business activity 21 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. Vertical merger (vertical integration), - one firm merges with or take over another one in the same industry at a different stage of production.

22. 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.

23. Grade 10, Unit 2 Types of business activity 23 Integration: 1. Horizontal integration, - benefits: * reduces number of competitors * opportunities for economies of scale. * will have a bigger share of total market.

24. Grade 10, Unit 2 Types of business activity 24 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.

25. 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.

26. 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.

27. 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: 1. The type of industry the business operates in. Example: hairdressing; car repairs.

28. Grade 10, Unit 2 Types of business activity 28 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. Owner objectives, Some business owners prefer to keep their firm small.

29. 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.