Benefits and Problems of Industrialisation

Industrialisation describes the growing importance of the secondary sector (manufacturing processes) in developing countries. This brings many benefits as well as problems. Benefits: Increase in GDP More employment Higher exports lower imports More independence Tax revenue Problems: Environmental issues Shortage of skilled labour Import of raw materials? Multination companies rule Urbanisation

Deindustrialisation
The situation is reversed in most developed countries. Here the secondary sector looses importance to the tertiary sector. This process is called deindustrialisation. Reasons; - Rising incomes lead to higher living standard and higher demand for services - Industrialisation in developing countries forms strong competitors, which tend to be cheaper Problems: - Structural unemployment: Employment patterns change

The skills of an entrepreneur

Innovation Commitment and self-motivation Multi-skilled Leadership skills Risk taker Belief in himself

Why start a business?

Identifying a nice market Losing job at the old employer Opportunity to make profit Desire for independence

Start-Up Business
Start up ideas: own skills; previous employment experience; franchising conferences; market research Problems: - Competition from old and established competitors - Building a customer base o Customer service? o Knowledgeable pre- and after-sales service - Lack of record keeping - Lack of working capital (liquidity and cash flow) o Cash flow forecast o Invest sufficient capital o Establish good bank relations o Credit control over customers accounts

Start-Up Business
Poor management skills o Leadership o Management o Planning and coordination o Risk-taking o Decision-making o Communication o Marketing, promotion, selling Changes in business environment o New competitors o Legal changes o Economic changes o Technological changes

Sole trader
A business in which one person provides the permanent finance and, in return, has full control of the business and is able to keep all of the profits

Benefits: No legal formalities Complete control Profits are not shared Independence Personal relationships

Problems: Unlimited liability Big competition Limited Capital Long working hours Lack of continuity

Partnership
A business formed by two or more people to carry on a business together, with shared capital investment and, usually, shared responsibilities

Benefits: Partners can specialise Shared-decision making Additional capital source Shared losses Not many legal formalities

Problems: Unlimited liability Shared- decision making No shares to sell Shared profit Lack of continuity

Private limited company

A small to medium-sized business that is owned by shareholders which are not able to sell their shares to the general public.

Benefits: Limited liability Continuity Legal personality Capital from shares Greater status

Problems: Legal formalities Less secrecy over financial affairs Difficulty of selling shares Shares cannot be sold to public

Public limited company

A limited company, often a large business, with the legal right to sell shares at the stock exchange to the general public. Its share price is quoted on the national stock exchange. Business: Limited liability Continuity Legal personality Ease of buying and selling shares Substantial capital sources. Problems: Legal formalities Conflict between owners and leaders Financial status is published Prices of shares are vulnerable for price fluctuations Risk of takeover

Public sector organisations

A business enterprise owned and controlled by the state also known as nationalised industry

Advantages: Social objectives Ensured supply Finance from Government

Problems: Inefficient Unnecessary? Political influence on sector

Pressure groups
Pressure groups want to induce changes in: - Policies by the government - Businesses policies - Consumers purchasing habits They try to do this in a number of ways: - Publicity through media coverage - Influencing consumer behaviour - Lobbying of government

Public-private partnership (PPP)

There are three main types: - Government funded and privately managed - Private sector funded (Private Finance Initiative) - Government directed but financed and managed privately Benefits: More efficient Impossible without private sector involvement Faster provision and lower taxes Problems: Too profit aimed Private sector earns too much leans paid by taxpayers Lack of experience