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BusinessStudiesOnline:Slide1

What Are Businesses?


What Are Businesses?
Businessescanbeclassifiedin3mainways:
(1)ByActivity (2)BySize
(3)ByLegal
Structure
BusinessStudiesOnline:Slide2
1) Classification by Activity
1) Classification by Activity
Traditionallybusinesshavebeenclassifiedinto3
sectors:
ThePrimarySector:
Firmsinthissectorextractrawmaterialsfromnaturallyoccurring
resources.
TheSecondarySector:
Firmsinthissectorassembleandmanufactureproducts
TheTertiarySector:
Firmsinthissectorprovideservices
Somearguethata4thsectornowexists:
TheQuarternary:
FirmsinthissectorprovidesupportforITbasedproducts
BusinessStudiesOnline:Slide3
The Link Between These Sectors
The Link Between These Sectors
Eachsectorisdependentontheothers:
ThisiscalledTheChainofProduction
BusinessStudiesOnline:Slide4
Trends in the UK Industrial Sectors
Trends in the UK Industrial Sectors
2.4
1.9 1.9
1
0.5
0.6
3.6
2.8
1997 1998 1999 2000
4
3
2
1
0
1
2
3
%changeyearonyear
Manufacturing
AllServices
EMPLOYMENTCHANGEINTHEUK
BusinessStudiesOnline:Slide5
Reasons for the Trends
Reasons for the Trends
Tertiarysectorhasgrownfor2mainreasons
Wagesandleisuretimeareincreasing,andpeoplespend
muchoftheirextratimeandmoneyonservices.
TheUKisanetexporterofservices,soworldwideeconomic
growthincreasesdemandforservices.
TheSecondarysector
nowemploysfewerpeople,butproducesmore!
Thisisduetocapitaldeepening.
ThePrimarysector
hasseenlittlechange:
althoughoutputhasincreasedthishasbeenatalowerratethat
therestoftheeconomy.
In1950Agricultureaccountedfor6%ofGDP,butby2000this
hasdroppedtobelow2%.
BusinessStudiesOnline:Slide6
2) Classification by Size
2) Classification by Size
Businesssizecanbemeasuredin5ways:
Turnover:
Measuresthetotalvalueofsalesoveragiventime.
Small =Turnover<1.4M
Medium =Turnoverbetween1.4Mand5.75M
Large =Turnoverover5.75M
Employees:
Classifiesbusinessesaccordingtothenumberofworkers:
Small =Lessthan50workers
Medium =Between50and250workers
Large =Over250Workers
CapitalEmployed:
Comparestheamountofmoneyinvestedwithinthebusiness
Profit:
Comparestheprofitlevelsoffirms
StockMarketValue:
Comparesthevalueofcompanieswhosesharesaretraded
BusinessStudiesOnline:Slide7
Is Size Everything?
Is Size Everything?
Inpracticemeasuringthesizeofabusinessisvery
difficult.Considerthefollowing:
In2001,Vodafonehadmarketcapitalof154,683.6Million,
withturnoverof7,873Million.
Tescomeanwhile,hadmarketcapitalof17,771.2Million,
whilsttheirturnoverwas20,988Million.
Whichisthebiggestcompany?
Usingprofitscanbeusedbutfluctuationsmakeit
unreliable,e.g.Marks&Spenceretc
Usingemployeenumbersisunreliablesinceasmall
businesscancreatehugesalesturnover
BusinessStudiesOnline:Slide8
3) Classification by Legal Structure
3) Classification by Legal Structure
TheUK
Economy
ThePrivate
Sector
ThePublic
Sector
Unincorporated
Businesses
Incorporated
Businesses
Franchises
SoleTrader Partnership
PrivateLimited
Company(LTD)
PublicLimited
Company(PLC)
Local
Government
Central
Government
Nationalised
Industries
BusinessStudiesOnline:Slide9
Public Vs Private Corporations
Public Vs Private Corporations
PublicSector PrivateSector
Shareholders
WhoGets
TheProfits?
Government
ManagingDirector
WhoMakes
daytoday
Decisions?
Managers
BoardofDirectors
WhoMakes
Longterm
Decisions?
Relevant
GovernmentMinister
Shareholders WhoOwnsIt?
Governmenton
behalfofthepeople