MOB

• Types of economic activity

  • Primary sector (extractive industries like mining, fishing, forestry, farming)
  • Secondary sector (manufacturing and construction)
  • Tertiary sector (services like tourism, finance, transportation, management)
• Private-sector organisations


  • Sole proprietor
  • Partnership
  • Limited companies
  • Franchising
  • Cooperative
  • Joint ventures
• Public-sector organisations


  • Financial
  • Retail
  • Producer/worker
• Scarcity


  Resources are not sufficient to meet unlimited human wants
• Main economic questions


  • What to produce?
  • How to produce?
  • For whom to produce?
• Legal structure


  Determines how profits/losses are shared, tax obligations, ease of formation, funding, who bears legal liabilities, continuity of existence
• Choosing legal structure depends on the aim of the business owner
• The private sector consists of businesses owned by individuals/groups with the main aim of making profits
• The public sector consists of businesses owned and operated by the government
• Manufacturing companies established


  • Companies that converted agricultural products (cocoa beans, coffee, oranges, bananas) into finished goods
  • Mining sector (bauxite, gypsum, limestone)
• Since the latter part of the 20th century there has been an evident change in the country's economic focus
• Main services being offered in Isle J

  • Tourism
  • Banking
  • Insurance
  • Transportation
  • Telecommunications
• The service industry trend has dampened the once vibrant manufacturing sector to some extent
• A number of manufacturers have been pressing on with production
• Primary sector


  Economic activities that involve the extraction and production of raw materials from nature
• Tertiary sector


  The part of the economy that provides services to consumers and businesses, rather than producing goods
• The tertiary sector is the way forward in the 21st century for the country
• Dependence on the tertiary sector

  Could benefit or cost Isle J
• Sole trader


  • Simplicity of formation
  • The owner is in control of the business
  • Requires little start-up capital
  • The owner and the business are one (they are the same legal entity)
  • Lack of continuity
• Partnership


  • Unlimited liability on partners (except for a limited partner)
  • Two or more members
  • Profits/losses are shared
  • Few legal requirements
  • No separation between business and partners
• Limited company


  • Separate legal identity from that of its owners
  • Can raise capital through the sale of shares to the public
  • Managed by a board of directors elected by shareholders
  • Limited liability for its owners
• Holding company


  A company that purchases enough shares of other companies so that it can control the decisions and policies
• Conglomerate


  A company that expands over time and takes over or purchases controlling interests in other unrelated companies
• There is little difference between a holding company and a conglomerate
• Economies of scale


  Brought about by large-scale production and increased size
• Conglomerate


  • Grace Kennedy Group Ltd (consists of a bank, foreign exchange business, hardware business, manufacturing businesses, supermarket)
• Holding company


  Not usually involved in the day-to-day operations of the companies it controls (subsidiaries), each subsidiary retains legal separation but is controlled by the holding company
• Holding company


  Can become a conglomerate if it expands and takes over a controlling interest in unrelated firms
• Associate company


  Controls between 20 and 50 per cent of the shares in another company
• Cooperative


  A form of business that consists of a group of people who have come together to perform a business venture that is more efficient being done collectively rather than individually
• Cooperatives are expected to be registered with a Registrar of Cooperative Societies
• Cooperatives


  • Democratic organisations - each member has a say
  • Profits are distributed to their members equitably
  • Each member has one vote
  • Membership is voluntary
• Consumer cooperative


  Owned by its customers, who receive mutual benefits, organised to provide each member with items needed at reduced prices
• Producer cooperative


  Usually found in the agriculture sector, farmers are assisted in areas of production, purchasing and marketing, members come together and share marketing and production facilities
• Workers' cooperative


  Owned, controlled and operated by its members, provides employment and members can influence the operation of the business
• Financial cooperative


  Controlled and operated by its members, main aim is to provide members with different financial services at competitive rates (e.g. credit union)
• Advantages of cooperatives


  • Members have limited liability
  • Profit is shared among members
  • Members have equal say in the operation of the business
  • Economies of scale
  • Opportunity to earn interest on investment
• Disadvantages of cooperatives


  • Profits may be minimal or even non-existent
  • Possibility of conflict among members
  • Longer decision-making process
  • Capital deficiency may impede growth
• Franchise


  A system whereby an already established and successful business (the franchisor) enters into a contractual arrangement with semi-independent business owners (the franchisee) to operate under the franchisor's trade name
• Types of franchise arrangements

  • Pure franchise
  • Product distribution franchise (or dealer franchise)
  • Trade name franchise