LECTURE # 02

TYPES OF BUSINESS ACTIVITY

BY FAIZ MOHAMMAD BHUTTA

15/03/07

LEVELS OF BUSINESS ACTVITY

Tertiary Sector

Extraction

Primary
Manufacturing

Natural/resources

Secondary
Services JOBS Environment

Baking Aircraft Construction computers

Tertiary Price and quality

Insurance Hotels Banking Transport

LEVELS OF BUSINESS ACTVITY

Tertiary Sector

Extraction

Primary
Manufacturing

Extracts and uses natural resources Of earth

Secondary
Services JOBS

Manufactures goods using Raw materials provided by Primary sector Provides services to consumers Environment And the other sectors Price and quality Of industry

Tertiary

Which sector of industry is most Important in your country? DISCUSSION

1. Number of workers employed in each sector 2. The value of output of goods and services

Business insurance
forestry

Primary

secondary

Tertiary

Coal mining
Computer assembly Travel agent Car show room Hotel

Academy
Health care

LEVELS OF BUSINESS ACTVITY

Tertiary Sector

Free market economy

Private owned Profit oriented Demand/supply Incentive based

Planned economy
JOBS Environment

State controlled No incentives

Mixed Economy
Price and quality

Mix of both

FREE MARKET ECONOMY

Advantages

Tertiary Sector

Consumers are free to choose what they want to buy Workers are encouraged to work hard because of low tax on incomes Business can compete thus making prices low new businesses are encouraged to set up in order to make profits Profit oriented

Disadvantages
No government provided goods Only those who can afford to buy can enjoy life No government control on economy Business can develop monopolies

No country in the world which has complete free market system

COMMAND OR PLANNED ECONOMY

Advantages

Tertiary Sector

Govt control should eliminate any waste resulting from competition between firms There should be work for every body The needs of population are met but little production for luxury goods for wealth people Basic needs of people are met at all cost

Disadvantages
There is little incentive for work as Govt fixes wages and private property Is not allowed. Govt may not produce goods which people want to buy Lack of a profit motive for firms leads to low efficiency

Communist countries before 1989

Tertiary Sector

MIXED ECONOMY Every country has mixed of private and Public sector with Government as regulatory body

ITEM Railway Local bus service

GOVT

PRIVATE

Water supply
Electric supply TV and Radio

Telecom Hotel Train

Health care

SECTORS OF INDUSTRY
PRIMARY SECONDARY TERTIARY

By Activity

By Ownership

Private sector Owned by Private people

Public sector, Owned by Govt or state Agencies

Privatization Tertiary Sector

Arguments in favor of privatization and Against privatization

Assignment # 02

Activity # 2.4 Group assignment

COMPARING THE SIZE OF BUSINESS

Tertiary Sector

Comparing by number of employees Comparing business by value of output and sales Comparing business size by profit Comparing business size by capital employed

JOBS Environment Price and quality

HOW CAN BUSINESS GROW

Tertiary Sector

By internal growth Open more offices By external growth Take over or merger

Horizontal Merger or horizontal integration - Merger or take over in same industry with same stage of production Vertical Merger or Vertical Integration JOBS - Merger or take over in same industry with Environment different stage of production

Price and quality

VERTICAL INTEGRATION
Tertiary Sector

Backward integration - Merger or take over with earlier Stage of production

Forward Integration - Merger or take over in same industry with later stage of production Conglomerate merger JOBS - when one firm merges or takes over a firm in Environment A completely different industry. This is known as Diversification. Price and quality

SUMMARY

Internal How business grow

External
Merger or take over
Horizontal

Conglomerate

Vertical

THANKS