Business_Studies_Relationships

Business Sector

Summary

• Primary sector : All natural or primary products. Extraction of raw materials.
• Secondary sector: This is the manufacturing or production sector where

primary goods ( raw materials) are made into finished products/ goods.

• Tertiary sector: This is known as service/ industry sector, where all finished

products are sold. This sector includes all businesses, health services, etc…

Relationship

• The primary sector sells raw materials to secondary sector. Sells raw

materials like pears to the tertiary sector to sell as fresh produce.

• The secondary sector buys raw materials from the primary sector to

manufacture. The secondary sector sells the manufactured/ finished goods
to tertiary sector to sell to consumer.

• The tertiary sector sells machinery to primary and secondary sectors to use

to manufacture or extract raw materials.

• The three sectors work together to create an economic chain of production.

Examples

Examples continue

• Both the primary and secondary sectors depend on the tertiary sector for

services such as insurance and the transportation of goods. Below is an
illustration:

Challenges sectors face

• Dumping : Dumping is the practice of a country selling goods to another

country at a lower cost ( less money ) then its domestic cost. ( exporting)

• A result of this would be that the importing country gets goods at an

affordable price.

Challenges continue…

• Load-shedding : Occurs when controlled power cuts are put in place to

secure that South Africa’s power grid remains stable. This is done to prevent
a national blackout.

• This causes a delay in business and the businesses production process.

Challenges continue…

• Strikes: Legal action taken by employees against their employer over disputes

such as wage increases. There are different types of strikes. A strike can also
be defined as action taken by organization's for unmet needs/ demands.

• Strikes affect the production of a business as employees may stay away

leading to no production taking place.

Integration

• When businesses sell goods or services to businesses in the same sector or

to businesses in another sector, we call this the forward link.

• When businesses buy good or services from businesses in the same sector or

from other businesses in another sector, we call it the backward link.

• It is important to know the above as businesses are interdependent, which

means they need each other to carry out their own responsibilities.

• When businesses in different sectors combine we call this vertical

integration.

• When businesses in the same sector are combined or acquired we call this

horizontal integration.

Integration continues

• Forward integration is a strategy used by businesses to gain control or

ownership over their previous customers.

• Vertical integration is a strategy used by businesses to gain control over

suppliers to increase its power in the market place.

• Backward integration is a strategy used by businesses to gain control or

ownership over their suppliers. All of these are management control
strategies.

Examples

• A business column is an example of vertical integration.
• When a fruit farm buys the canning factory forward integration occurs.
• When the canning farm buys the fruit farm backward integration occurs.
• When Shoprite and Checkers combined horizontal integration occurred.

• There are a series of stages that products and services have to go through

before reaching the final consumer.

• The manufacturing of a product can involve and usually involves more then

one industry.

• When we look at a business column it shows the various stages:

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