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Topic 2 : Business Activity (2) Lecturer: Zhu Wenzhong Copyright © 2002 by Harcourt, Topic 2 : Business Activity (2) Lecturer: Zhu Wenzhong Copyright © 2002 by Harcourt, Inc. All rights reserved.

LEARNING GOALS • 1. 2. 3. 4. Key learning goals: This topic continues the LEARNING GOALS • 1. 2. 3. 4. Key learning goals: This topic continues the discussion of business activity, focusing on the external influence factors on business activity as well as the classification of business activities. State the external factors affecting the business State the definition of markets and the types of markets Explain the three major types of production Explain the methods of classifying businesses in addition to the three categories of production Copyright © 2002 by Harcourt, Inc. All rights reserved.

Reference Figure 1 -1 The nature of business activity External influences: Government, Economic climate, Reference Figure 1 -1 The nature of business activity External influences: Government, Economic climate, world events, population trends, legislation and regulation, competition, consumers, environmental factors, pressure groups Business Activity Input: Land, labor, Capital, Entrepreneurship Function: Production, Marketing, Finance, Administration, HR , R&D Copyright © 2002 by Harcourt, Inc. All rights reserved. Output: Goods, Services, Waste

Business Activity (2) -External factors affecting businesses • Business activity is affected by quite Business Activity (2) -External factors affecting businesses • Business activity is affected by quite a number of external factors. It is not enough for a business only to consider and control resources and functions. External factors may have a great deal of influence over a company’s business activity or its managers’ decisions, and may prevent its growth, development and profitability. But these external factors are usually beyond the control of the business. Copyright © 2002 by Harcourt, Inc. All rights reserved.

Business Activity (2) -External factors affecting businesses Table 2 -1 External influence factors on Business Activity (2) -External factors affecting businesses Table 2 -1 External influence factors on businesses External factors Brief explanations • The government Influences may come from government policy, government spending, government investment on infrastructure, etc. • Economic climate Businesses are influenced by stable or unstable economic conditions. • World events Influences from drought for growing rice, flooding, war, etc. • Competition Local competition, national competition, international competition, etc. • Consumers Influences from consumer taste changes, low-fat food, green food, new styles of wearing, etc. • Population trends Influences from such factors as aging trends, single-parent family, more minority groups, etc. • Legislation and regulation Influences from changes in law and regulations for producing or exporting a certain product, etc. • Environmental factors Influences from waste disposal requirement, using recycled materials, etc. • Pressure groups Influences may come from stakeholders like local communities, money lenders, etc. Copyright © 2002 by Harcourt, Inc. All rights reserved.

Business Activity (2) -External factors affecting businesses • Questions for your critical thinking: Each Business Activity (2) -External factors affecting businesses • Questions for your critical thinking: Each student chooses one of the above external influences over business and prepare a speech within 5 minutes, telling why or how it may influence business activity. Copyright © 2002 by Harcourt, Inc. All rights reserved.

Business Activity (2) -External factors affecting businesses ØMarkets: Market is anywhere that the buyers Business Activity (2) -External factors affecting businesses ØMarkets: Market is anywhere that the buyers and the sellers communicate to exchange goods or services. A business may be interested in one of the following markets listed in the table: Market condition is related to the external factors, such as economic climate, competition and consumer taste changes. So it is of importance to understand more of the market. Copyright © 2002 by Harcourt, Inc. All rights reserved.

Business Activity (2) -External factors affecting businesses Ø Markets: Categories of markets: • Consumer Business Activity (2) -External factors affecting businesses Ø Markets: Categories of markets: • Consumer goods markets – where foods, clothes, magazines, newspapers …are sold. • Services markets -- where banking, insurance, repairing, cleaning, etc. are provided. • Capital goods markets – where machines, equipment, and tools, etc. are sold. • Labor markets – where people are hired. • Housing markets – where people buy and sell properties. • Money markets – where money is bought or lent. • Commodity markets – where raw materials are bought and sold… Copyright © 2002 by Harcourt, Inc. All rights reserved.

Business Activity (2) -External factors affecting businesses ØMarkets: Where do they exist? Any places Business Activity (2) -External factors affecting businesses ØMarkets: Where do they exist? Any places where buying and selling can be carried out in many forms, such as open air markets for people in the village, shopping centers or super markets for people in the city, and so on. In addition, a market or the buying and selling activity may also take place over the telephone (telephone selling), through mail order (mail selling), through TV (TV shopping), and via internet (online shopping), etc. Copyright © 2002 by Harcourt, Inc. All rights reserved.

Business Activity (2) -External factors affecting businesses ØClassification of business activity: Business activity is Business Activity (2) -External factors affecting businesses ØClassification of business activity: Business activity is often classified by the type of production that takes place. There are three common methods of classifying business by the type of production, which can be seen as the following table: Copyright © 2002 by Harcourt, Inc. All rights reserved.

Business Activity (2) -External factors affecting businesses: Classification of Business Activity Table 2 -3 Business Activity (2) -External factors affecting businesses: Classification of Business Activity Table 2 -3 Three types of production Types of production Brief definition 1) Primary production Activities which takes the natural resources from the earth, i. e. extraction of raw materials, such as oil or coal; the growing of food or crops 2) Secondary production Manufacturing, processing, and construction, which change raw materials into goods 3) Tertiary production Providing various services, such as banking, insurance, tourism, and transportation, etc. Copyright © 2002 by Harcourt, Inc. All rights reserved.

Business Activity (2) -External factors affecting businesses Ø • • • Classification of business Business Activity (2) -External factors affecting businesses Ø • • • Classification of business activity by other methods: 1) By the size of a business According to the British Standards regulated by Department of Trade and Industry, businesses can be: Small firm: 0 -49 employees, no more than GBP 2. 8 million turnover Medium firm: 50 -249 employees, no more than GBP 11. 2 million turnover Large firm: over 250 employees, more than 11. 2 million turnover Copyright © 2002 by Harcourt, Inc. All rights reserved.

Business Activity (2) -External factors affecting businesses Ø • • Classification of business activity Business Activity (2) -External factors affecting businesses Ø • • Classification of business activity by other methods: 2) By the geographic area of a business Local business Regional business National business International business Copyright © 2002 by Harcourt, Inc. All rights reserved.

Business Activity (2) -External factors affecting businesses Ø • • Classification of business activity Business Activity (2) -External factors affecting businesses Ø • • Classification of business activity by other methods: 3) By the sector of a business Private sector business: such as sole trader, partnership, private limited company, public limited company Public sector business: government-owned businesses such as China Railway, China Post, etc. Copyright © 2002 by Harcourt, Inc. All rights reserved.

Business Activity (2) -External factors affecting businesses Ø • • • Classification of business Business Activity (2) -External factors affecting businesses Ø • • • Classification of business activity by other methods: 4) By the ownership of a business Private-owned business Collective-owned business State-owned business Joint-ventures Foreign company … Copyright © 2002 by Harcourt, Inc. All rights reserved.

Question for Critical Thinking: ü Please list at least 5 business activities in your Question for Critical Thinking: ü Please list at least 5 business activities in your local town for each type of production: • Primary production: 1) 2) 3) 4) 5) • Secondary production: 1) 2) 3) 4) 5) • Tertiary production: 1) 2) 3) 4) 5) Copyright © 2002 by Harcourt, Inc. All rights reserved.