UNIT-2 TYPES OF BUSINESS ACTIVITY

UNIT-2   TYPES OF BUSINESS ACTIVITY

Vertical integration backwards is with the business in the same industry but at a different stage of production: towards the raw material.

Conglomerate integration is with firms in a different industry.

Horizontal integration will offer more economies of scale and reduces average costs

Integration

Conglomerate integration is also known as diversification

Vertical integration forwards is with a business in the same industry but towards the consumer.

Horizontal integration is with a business in the same industry at the same stage of production.

                                                                                                                                                                                  

1.      Primary production:-Industries that extract and exploit the natural resources of the earth.

Examples: Mining, agriculture, forestry and fishing

2.      Secondary production:- Industries that manufactures goods made from the raw materials provided by the primary sector.

Examples: Car production, computer assembly, food canning and steel making.

3.      Tertiary production:- Industries that provide services to consumers and other sectors of industry.

Examples: Travel agents, banking, insurance, health services and transport.

4.      De-industrialisation:- Relative decline in the importance of a country’s secondary sector.

5.      Public sector:- The sector of the economy in which organisations are owned and controlled by the state (government).

Examples: In most mixed economies, health services and railway services are in the public sector.

6.      Private sector:- The sector of the economy in which organisations are owned and controlled by individuals.

Examples: In most mixed economies, retailing and farming businesses are in the private sector.

7.      Free market economy:- All resources are privately owned. Prices are determined by supply and demand.

8.      Planned economy or command economy:-An economic system in which the state is responsible for resource allocation.

9.      Mixed economy:- An economic system which allows both the state and the market mechanism to allocate resource.

10.  Privatisation:- The sale of state owned assets such as public corporations to the private sector.

11.  Capital intensive business:- Use a high proportion of capital equipment to produce their output.

12.  Labour intensive business:- Use a high proportion of labour to produce their output.

13.  Internal growth:- Business growth achieved by expanding the existing business.

14.  External growth:- Business growth achieved by merging with or taking over other business.