1.2 classification of business

• what is the primary sector?

  includes activities that are related to natural resources

  • business extract these raw materials from the ground or sea
  • this is the start of the chain of production
• what is the secondary sector?

  involves activities that are related to the manufacturing of these natural resources that have been collected from the primary sector
• what is the tertiary sector?

  includes activities that provide A service
• how can we define the relative importance of each sector in a region?

  either by:

  • " the percentage of of the countrys total number of workers employed in each sector"
  • " value of output of goods / services in that sector"
• what does business classification allow us to do?

  it allows us to analyze the position of economies globally
• what type of sector do undeveloped countries mainly operate in?

  undeveloped countries mainly operate in the primary sector, producing agricultural and/or mining goods
• what type of sector do developing countries operate in?

  developing countries have started to move away from the primary sector and into the secondary sector. these countries will earn more from exporting products than they would've done in the primary sector leading to an increase in the standard of living
• what type of sector do developed countries operate in?

  have greater reliance on the tertiary sector. these countries have the highest standard of living as services often rely on a highly educated workforce adding value to production
• what are the key drivers of this change?

  • sources of primary products becoming scarce in some developed countries.
  • loss of competitiveness in the primary and secondary sectors due to cheaper labor in developing countries
  • due to the rise in the standard of living, consumers spend more of their income on services such as travel and restaurants than any manufactured goods
• what is industrialization?

  when an economy moves towards secondary sector activities and reduces importance of the primary sector activities
• what is deindustrialization?

  when an economy moves toward the tertiary sector and reduces reliance on the secondary sector
• what is the private sector?


  the sector of the economy that is owned and controlled by a private individuals or group of individuals, rather than the government or state
• what are the aims of the private sector?

  • profit and sales maximization
  • growth
  • survival / recession
  • corporate and social responsibility (no harm to society, other businesses and the environment)
• what are the advantages of being in the private sector?

  • offers a wide range of products and services, catering to different consumer preferences and needs. the availability of diverse and high quality goods and services enhances the quality of life
  • competition encourages businesses to improve quality and introduce innovative products to attract and retain customers
  • major source of employment, creating jobs across various industries. employment often leads to higher income improving the standard of living.
• what are the disadvantages of being in the private sector?

  • limited access to funding. Private businesses often don’t receive the financial support that public-sector businesses might get. They may need to rely on private investors or loans, which can be costly and increase debt.
  • The private sector is highly competitive, making it difficult for businesses to survive and grow, especially against large or established companies.
  • Unlike public-sector businesses, private businesses are more vulnerable to market fluctuations and have no government backing, so the risk of failure is higher.
• what is the public sector?

  is the sector of the economy that is owned and controlled by the government or state. this is usually funded by taxation and revenue from selling goods
• what are the aims of the public sector?

  • improving the quality of services
  • Accessibility to all
  • reducing costs
• what are the advantages of being in the public sector?

  • Public-sector businesses are less likely to go bankrupt because they are often funded by taxpayers and government budgets. These businesses typically provide essential services that are always in demand, so there's consistent demand.
  • Governments provide essential resources, like infrastructure, to support public-sector businesses.
  • Many public-sector businesses operate in areas where there’s little or no competition, such as public transportation or utilities
  • quality over profit
• what is privatization?


  refers to selling a public sector business to the private sectors
• what is a mixed economy?

  is an economy that makes use of both the public and private sector for providing goods and services
• what are the disadvantages of being in the public sector?

  • Since public-sector businesses aren’t profit-driven, they may lack the incentive to operate efficiently or reduce costs. There may be less focus on innovation and improving services compared to the private sector.
  • Public-sector businesses often face heavy bureaucracy, which can slow down decision-making processes and lead to inefficiencies.
  • Public-sector businesses can be influenced by political decisions, which may not always align with effective business practices.
• What is one disadvantage of being in the private sector regarding funding?

  Limited access to funding
• Why might private businesses need to rely on private investors or loans?

  Because they often don’t receive the financial support that public-sector businesses might get
• How does the competition in the private sector affect businesses?

  The private sector is highly competitive, making it difficult for businesses to survive and grow
• What is a significant risk faced by private businesses compared to public-sector businesses?

  Private businesses are more vulnerable to market fluctuations and have no government backing
• What is the risk of failure for private businesses compared to public-sector businesses?

  The risk of failure is higher for private businesses
• What is a common disadvantage of public-sector businesses related to decision-making?

  They often face heavy bureaucracy, which can slow down decision-making processes.
• How does bureaucracy affect public-sector businesses?

  Bureaucracy can lead to inefficiencies and slow down decision-making processes.
• Why might public-sector businesses struggle to adapt quickly to changes?

  Government regulations and protocols can make it difficult for them to adapt quickly.
• What is a consequence of public-sector businesses not being profit-driven?

  They may lack the incentive to operate efficiently or reduce costs.
• How does the focus on innovation in public-sector businesses compare to private-sector businesses?

  There may be less focus on innovation and improving services compared to the private sector.
• What type of market environment do public-sector businesses often operate in?

  They often operate in monopolistic environments.
• What is a potential consequence of operating in a monopolistic environment for public-sector businesses?

  There is less incentive to improve services.
• What might customers experience if a public-sector business does not perform well?

  Customers may have limited alternatives.