(UGC & Govt.

Approved)

WORLD UNIVERSITY
O

INTRODUCTION TO BUSINESS
TYPES OF BUSINESS ACTIVITY (LEC-2)
primary
1. Extracts and uses the
natural resources of
the earth,

secondary
1. Manufactures
goods
using
the
raw
materials
provided
by
the
primary
sector,

Tertiary
1) Provides
services
to
consumers and the other
sectors of industry,

2. It use and work with

natural resources.

2. It
includes
2) It includes services to
manufacturin
consumers
g
raw
materials
from primary
sector
3.
3. Example:
3) Example:
Example:farming,fishing,f
Building
Transport,banking,insurance,
orestry
construction,
hotels etc.
aircraft making,
computer
assembly etc.
1. Explain the difference between primary, secondary and tertiary
sectors of industry.

2. Which sector of industry is often the most important in the most

developed economics? State one reason for this.
Tertiary sector is often the most important in most developed economics.

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Usually the three sectors primary, secondary, tertiary is compared by:

The number of workers employed in each sector or the value of output goods
and service.
Because in most developed country most of the workers will be employed in the
service sector. The output of tertiary sector is often higher than other sectors
combined.
3. State three features of a market economy.
1. Resources are owned privately:
In a free market economy all the resources are owned privately. There is no
government control over land, capital and labour.for the reason there are no
government-provided goods or service, such as health and education services.
2. Low or nonexistent tax:
In free market economy a product can go to any other country of the world under
in low or nonexistent tax system. So the workers are encouraged to work hard as
they can keep most or all of their incomes because of low or existent tax. As a
result production will increase as well as more production will increase the profit.
3. Quality product:
In free market economy consumers are free to choose what they want to buy. In
other way most of the consumers seek quality product at fair price. So, consumer
buys the product of which company that provides quality product at fair price.
4. Outline the befits of free market economics to:
1. Owner of firms
2. Consumers
1. Owner of firms:
Business produces goods to make profit. They make more of the more profitable
goods-those most demanded by consumers; also workers are encouraged to
work hard as they can keep most or all of their incomes because of low or
nonexistent tax. So production will get rise and by selling more products owners
of the firms can get more profit.
2. Consumers:
In free market economy there will be many products from many countries in the
world.so,consumers are free to choose what they want tobuy.onn the other hand,
in free market economy business compete with each other and this could keep
the prices low.sso,we can easily say that in free market economy consumers can
buy quality product at lower price.

5. Explain the major difference between command economics and

mixed economics.

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Command economy
1. A command economy does not
have private sec torso as all
resources are owed by state.
2. In command economy there
should be work for everybody

Mixed economy
1. A mixed economy has both a
private sector ad a public sector
2. In mixed economy, private
sectors works for more profit

6.
State three possible disadvantages of
industries such as electricity and gas supplies.

the

privatizations of

High price:
Private busies made up of busies to owed by the ggoverment.these business will
make their decisions about what to produce, how it should be produce and what
price should be charged for it.so,I private business the consumers have to buy
the products in high fair.
Work with limited people:
Most business in the private sector will aim to run profitably. So they demand
high price for high quality products. As a result a few number of people can buy
the products or service whether inn public sector, there should be work for
everybody.
Less production and limited wealth and high profit:
Inn private sectors the private companies have limited wealth. So, big service
like water, gas supplies, and electricity not possible to provide it for everybody in
the country and if they provide that service to some people, there will be huge
charge of each of the service.
7. List three groups that are interested in comparing the size of the
business and explain why they want to do this.
The three groups that are interested in comparing the size of the business, they
are given below:
1. Investors
2. Governments
3. Competitors
Business size can be measured in a number of ways. The most common are:
1.
2.
3.
4.

By
By
By
By

number of employees
value of output and sales
profit
capital employed

They all have advantages and disadvantages.

Comparing business size by number of employees:

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The method is easy to understand. However, some firms use production methods
which employ very few people us which produce high output levels. This is true
for automated factories which use the latest computer controlled equipments.
These firms are called capital intensive firms-they use a great deal of capital
equipment to produce their output. Therefore, a company with a high output
levels could employ fewer people than a business which produced less output.
Comparing business size by the value of output and sales:
This is a common way of comparing business in the same industry because it
shows that which one is most important in most important in that industry.
However high sales level does not mean that a business is large when using the
other methods of measurement. A firm employing few people might sell several
very expensive computers every year. This give higher sells figures than a firm
selling cheaper products but employing more workers.

Comparing business size by profit:

This is one of the least accurate ways of comparing the size of the business
firms. Profits depend on more than just the size of the firm it depends on the
efficiency and the skills of the managers as well. Some very large business can
make very low profits if they are badly managed.
Comparing business size by capital employed:
This means the total amount of capital invested into the business. The same
problem applies as before. A company employing many workers may use laborintensive methods of production. These gives low output levels and use little
capital equipment.
These give low output levels and use more than one method and to compare the
results obtained.
8.
(a)Which forms of measuring business size does each owner seem to be
using?
Owner of printing firm:
It seems to me that he is using business size by capital employed
Owner of fruit firm:
I think he is using the business size by the number of employees.
(b) Which method of measuring business size would you advice the two
owners to use and why?
It seems to me that there is no perfect way of comparing the size of business. It
is quite common to use more than one method and to compare the results.so, I
would advise them to use the following ways:
Comparing business size by number of employees:
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The method is easy to understand. However, some firms use production methods
which employ very few people us which produce high output levels. This is true
for automated factories which use the latest computer controlled equipments.
These firms are called capital intensive firms-they use a great deal of capital
equipment to produce their output. Therefore, a company with a high output
levels could employ fewer people than a business which produced less output.
Comparing business size by the value of output and sales:
This is a common way of comparing business in the same industry because it
shows that which one is most important in most important in that industry.
However high sales level does not mean that a business is large when using the
other methods of measurement. A firm employing few people might sell several
very expensive computers every year. This give higher sells figures than a firm
selling cheaper products but employing more workers.
Comparing business size by profit:
This is one of the least accurate ways of comparing the size of the business
firms. Profits depend on more than just the size of the firm it depends on the
efficiency and the skills of the managers as well. Some very large business can
make very low profits if they are badly managed.
Comparing business size by capital employed:
This means the total amount of capital invested into the business. The same
problem applies as before. A company employing many workers may use laborintensive methods of production. These gives low output levels and use little
capital equipment.

9. What is the difference between take over and merger?

Take over

Merger

1. A takeover or acquisition is when

one business buys out the owners
of another business, which has
then
becomes
part
of
the
predator business.
2. Example:
Aktel

warid

Robe

Airtel

1. A merger is when the owners of

two business agree to join their
firms together and make one
business
2. Example:
Jamuna
group

Bashundha
ra group

a. bashundhara
Jamuna
group

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10. Explain the difference between internal external of business.

Internal growth
1. Internal growth occurs when a
business expands its existing
operations.
2. This growth is often paid for by
profits from the existing business.
3. Example: World University could
open other campus in banana.

External growth
1. External growth is when business
takes over or merges with another
business
it
often
called
integration.
2. External growth, involving a
takeover or a merger with another
business.
3. Example:
Aktel

Robi

Warid

Airtel

11. Give two examples of horizontal integration of business.

The two examples of horizontal integration are given below:
1. Jamuna-bashundhara group
2. Standard chartered-greenless bank

12. Give two examples of forward vertical integration of business.

The two examples of forward vertical are given below:
1. Malacha dhanmonndi branch.
2. Fokruddin dhanmondi branch
13. Explain the benefits to business of vertically integrating (forwards)
with each other.
Example: A car manufacturer takes over a car
Retailing business.
- Benefits:
An assured outlet for the product.
Prevented from selling competing.
Consumer needs and preferences
manufacturer.

can

Now

be

obtained

by

the

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 The profit margin made by the retailer is absorbed by the expanded

business.
Information about consumer needs can now be obtained directly by the
manufacturer.

14. Give two examples of backward vertical integration of business.

The two examples of backward vertical are given below:
Wood
supplie
r

Copper
mine

Copper
wire
Otobi
1

Electrical
contract
or
2

15. This is an example of internal growth because:

(a)
Internal growth occurs when a business expands its existing operations. On the
other hand external growth is when a business is taken over or merges with
another business.
As the owner of hairdressing business wanted to open new branches and employ
more staffs in that, so, it is the expansion of existing operations.so, it is internal
growth.
(b)
Advantages:
1.
2.
3.
4.
5.

Profit will be increase.

More customers will get the service.
Popularity of the business/products will increase
This will Make the business competitive
Many people will get job in the business

Disadvantages:

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1. It will Difficult to offer close and personal service demanded by the

consumers
2. There will be a limited number of customers
3. It will increase stress and worry.
4. Sometimes large personal business go out of control
16. Explain two reasons why some businesses remain small?
The required two examples of why some business remains small are given below:
The type of industry the business operates in:
There are some examples of industries where most firms remain small:
Hairdressing, car repairs window cleaningetc.firms in these industries offer
personal service or specialized products.uif they were to grow too large, they
would find it difficult to offer the close and personal and personal service
demanded by the consumers.
In these industries, it is often very easy for new firms to be set up and this
creates new competition, this helps to keep existing firms relatively small.
Market size:
If the market-that is, total number of consumers-is small, the businesses are
likely to remain small. This is true for firms, such as shops, which operates in
rural areas, far away from cities. It is also why firms which produce goods or
services of special kind, which appeal only to a limited number of consumers,
such as very luxurious cars or expensive fashion clothing, remain small.

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