1.2 Economic sectors

Hal wants to be a successful entrepreneur. He plans to leave his job to start up a bakery. The bakery will operate in the private sector. The business will have many stakeholder groups. Hal has been told it is important for a new business to select an appropriate source of start-up capital. He also knows new businesses are at a greater risk of failure.

a) Define ‘private sector’. [2]

SEP operates in the tertiary sector. As a social enterprise, SEP has many objectives. It collects old books from libraries and schools and sells them to customers at a low price. SEP provides training for its 10 part-time employees. SEP’s manager wants to know how the introduction of a legal minimum wage might affect a business.

a) Identify two services provided by businesses in the tertiary sector. [2]

Ramon is an entrepreneur. He plans to start up a home tutoring service to provide students with extra help to learn maths. Ramon is considering buying a franchise. He has prepared a business plan but is concerned about how an increase in the rate of inflation might affect his business. Ramon wants to know whether crowdfunding is the best source of finance for a start-up business to use.

d) Explain one advantage and one disadvantage to Ramon of buying a franchise. [6]

Avtar owns a car repair business which operates in the private sector. It is a small business with 2 full-time employees. Avtar wants to find out the best way for a business to increase added value. Avtar’s business needs finance for many reasons. Avtar wants to know how an economic recession might affect his business.

a) Identify two features of a private sector business. [2]

TCH is a small bakery producing pastries and cakes. It operates in the secondary sector. The added value of TCH’s products has increased since it opened 3 years ago. TCH uses non-financial methods to motivate its 6 employees. TCH’s business objectives have changed since it started up. One of its new objectives is to expand. Many businesses use external recruitment when they expand.

b) Define ‘secondary sector’. [2]

GTB is a business which operates in the tertiary sector. It owns 5 cafés selling food and drinks. The business uses social media as its method of promotion. The Finance Manager, Moeen, is analysing GTB’s financial statements. An extract is shown in Table 2.1. He is considering ways to improve GTB’s profit margin. Moeen knows there are other users that are interested in the accounts of a business.

a) Define ‘tertiary sector’. [2]