A level

Business
9609
By
Yaseen Kashan Samla
CHAPTER#2
Business structure

Learning outcomes

• classify industries into levels of economic activity -

primary, secondary, tertiary and quaternary - and
analyse changes in their relative importance
• understand the differences between the private sector
and public sector in your country
• identify the different forms of legal structures of
business and evaluate the most appropriate one for
different businesses
• analyse the advantages and disadvantages of changing
from one type of business ownership to another.

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Economic sectors

1. Primary sector: it is part of the economy in which the businesses are involved in the extraction of raw material
and natural resources such as farming, fishing and mining.
2. Secondary sector:: it is also known as the manufacturing sector, in which the business processes and adds
value to the raw material extracted in the primary sector and converts them into semi finished or finished
goods.
3. Tertiary sector: services sector is part of the economy in which the businesses are involved in providing
services to the consumers and other businesses.
4. Quaternary sector: it is part of the economy in which businesses are involved in innovation and creating
something new in the market such software houses, medical research agencies

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 Importance of the sectors
The importance of the Changes in the importance of the sector
sectors vary from Industrialization: it occurs when the
importance of the secondary sector is
country to country. increasing in the economy usually in
developing economies.
Importance depends: Deindustrialization: it occurs when the
importance of secondary sector is
1. Level of employment declining in the economy usually in
developed economy.
2. Output
3. Taxes collection Causes for the change in the importance
economic sectors
1. Depletion of resources
2. Increase in the living standard of the
country
3. Businesses relocating to more
competitive countries
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 Industrialization
Consequences of industrialisation: Consequences of industrialisation:
benefits problems
• Total national output (gross • The chance of work in
domestic product) increases and manufacturing can encourage a
this raises average standards of huge movement of people from the
living. countryside to towns, which leads
to housing and social problems.
• Increasing output of goods can
result in lower imports and higher • Imports of raw materials and
exports of such products. components are often needed,
which can increase the country’s
• Expanding manufacturing import costs.
businesses will result in more jobs
• Much of the growth of
being created.
manufacturing industry is due to
• Expanding and profitable firms will the expansion of multinational
pay more tax to the government. companies. These can have a
negative impact on the economy
• Value is added to the country’s too.
output of raw materials, rather
than just exporting these as
basic,vunprocessed products. 5
Deindustrialization

Consequences of deindustrialization
• job losses in agriculture, mining and manufacturing industries.
• movement of people towards towns and cities
• job opportunities in service industries - tertiary and quaternary sectors
• increased need for retraining programmes to allow workers to find employment in service industries.

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Public sector and private sector of the economy
• Public sector is part of the economy in which the resources are owned and controlled by the government and
their objective is social welfare.
• Private sector is part of the economy in which the resources are owned and controlled by individuals or group of
individuals and their objective usually is profit maximization.

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Public-sector enterprises: public corporations

• They are the businesses operating in the public

sector, owned and controlled by the government and
their objective is social welfare.
• Example: P.I.A, P.S.O

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Private sector businesses

• Businesses in the private sector may be owned by

one person or by many thousands. There are various
forms of business ownership.

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Sole trader

• It is a business owned and controlled by a single

individual, it does not have separate legal identity,
continuity and has unlimited liability.

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Partnership

• It is when 2 or more individual join their resources

together and set up a business, they do not have
separate legal identity, continuity and have unlimited
liability.
• It is suggested to have a partnership agreement to
avoid future conflicts.

ADD A FOOTER 11
Limited companies

• There are two types of limited companies, • They have:

1. Private limited (not listed on the stock exchange) 1. Separate legal identity
2. Public limited (Listed on the stock exchange) 2. Continuity
3. Limited liability
3. The owners of these companies are known as
shareholders.

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Private limited companies

• It is an incorporated business which has separate

legal identity, continuity and limited liability while the
business is not listed on the stock exchange.

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 Public limited companies

• It is an incorporated business
which has separate legal identity,
continuity and limited liability.
While the business is listed on the
stock exchange

Terms to remember: dividend, annual general meeting, article of association, memorandum of 14

association
Cooperatives

• It is a legal structure in which individuals or • The advantages of such business units are:
businesses join their resources together and set up a
business, they have equal ownership and rights • buying in bulk
while the profit and losses are distributed equally. • working together to solve problems and take
decisions
• good motivation for all members to work hard as
they will benefit from shared profits.
• The potential drawbacks can include:
• poor management skills, unless professional
managers are employed
• capital shortages because the sale of shares to non-
members is not allowed
• slow decision-making if all members are to be
consulted on important issues.

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Franchises

• It is the use of business name, logo and trading

method of an existing successful business, while
being a franchise a business can be a sole trader,
partnership or a limited company.

Terms to remember: franchisor, franchisee 16

Joint ventures

• It is when 2 or more business join their resources • The reasons for joint ventures are
together for a particular project, once the project is • The costs and risks of a new business venture are shared,
complete the venture ends which is a major consideration when the cost of developing
new products is rising rapidly.
• Different companies might have different strengths and
experiences, and therefore fit well together.
• They might have major markets in different countries and
they could exploit these with the new product more
effectively than if they both decided to ‘go it alone’.
• Such agreements are not without their risks:
• Styles of management and culture might be so different
that the two teams do not blend well together.
• Errors and mistakes might lead to one company blaming
the other for mistakes.
• The business failure of one of the partners would put the
whole project at risk.
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Social enterprise

• It is a business operating in the private sector but it

does not have profit maximization as an objective, it
generates a profit but the profit is reinvested back
into the business to benefit the society.
• It works on the triple bottom line.
• 1) social
• 2) economic
• 3) environment

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Changing the form of business ownership

• Changes likely occur due to: • The most likely disadvantages of changing the form
of business ownership are:
1. access to more finance
1. legal costs and formalities
2. gaining legal identity
2. legal costs and formalities
3. protecting owners’ capital through limited liability.
3. profits are shared.

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THANK YOU!