Revision for A-level Business studies 1.2



3 sectors in Business activity

Primary sector

Secondary sector

Tertiary sector

 

Primary sector

Primary sector involves changing natural resources into primary products

The primary sector of the economy extracts or harvests products from the earth

Examples:

Fishing, Mining

Farming, Forestry

 

Secondary sector

Secondary sector converts the primary goods into manufactured goods

The secondary sector of the economy manufactures finished goods.

Examples:

Construction

Textile production

Processing

 

Tertiary sector

Tertiary sector is the service industry.

This sector makes the lives of people much easier by providing services

Examples:

Banking

Hair cutting

Teaching

 

Private sector

The sector controlled and run by private individuals and organizations

 

Public sector

The controlled and run by the government

 

Types of business organisations

Sole trader

Partnership

Limited companies

Franchise

Joint ventures

 

Sole trader

A business owned and managed by one person

One person makes the decisions

Sole trader raises finance by his/her own savings, retained profits and loans

If business loses money, the sole trader has to sell his/her personal assets to pay off creditors (unlimited liability)

 

Partnership

The business is owned and managed by 2-20 people

Partners make the decisions

Profit is shared among the partners

Partners raise finance by putting their savings and capital into business

If business loses money, the partners have to sell their personal assets to pay off creditors (unlimited liability)

 

Limited company

A business owned and managed by a group of people

Directors make the decisions

Profit is shared among the shareholders

Limited companies raise finance by issuing shares

If business loses money the shareholders don’t have to sell their personal assets to repay creditors

 

Franchise

To use the name of a large business to conduct business activities

Franchisee uses the name

Franchisor grants the permission to franchisee to use the name for fees

Eg.

Mc Donald’s has many restaurants all over the world which are running by the franchisee

 

Problems of changing from one legal structure to another

Sole trader to partnership

Partnership to private limited company

 

Changing from Sole trader to Partnership

Sharing profits

Interference in decision-making

Bad decision of one partner affects all partners

 

Changing from Partnership to limited company

Owners may lose control

Legal work required

Financial accounts have to be made public

Decrease in privacy

 






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