1.

01: The Nature of Business

Activity…Cont’d
Today’s objectives:
– Explain the functions of different business
departments
– Explain business activity in the primary,
secondary & tertiary sectors
Review: Factors of Production
• Resources used to produce a good or
provide a service are called factors of
production.
• To produce any good or service, there are
four vital factors:
– Land
– Labor
– Capital
– Enterprise
Business Functions
• Functions are carried out by departments that
work together to achieve the objectives of
the organization.
• Four functional areas:
– Production
– Marketing
– Finance
– Human Resources
Business Functions: Production
• Also known as operations
• Responsible for the process of converting
raw materials into finished goods
• Production department decisions:
– How will a good/service be
manufactured/produced?
– What resources are needed?
– How long will it take?
– How will we control quality?
– How will it be delivered?
 Business Functions: Marketing
• Responsible for identifying and satisfying
consumer wants and needs
• Ensure that the firm’s products sell
• Marketing department decisions:
– What products will we offer?
– How will the product be priced?
– Where will the product be placed?
– How will the product be promoted?
 4 Ps of Marketing
• Product: ensure goods and services meet
customer’s requirements
• Price: decide on best pricing methods to sell
product and generate profit
• Place: ensure goods and services are available
for purchase in convenient locations
• Promotion: inform
customers about
product & its strengths
 Business Functions: Finance
• Responsible for managing the firm’s
money
Business Functions: Human Resources
• Responsible for managing the personnel
(labor) of the organization
• Make decisions relating to training,
recruitment, pay and benefits
Business Sectors
• Businesses are classified according to the
stage of production in which they are
engaged.

Raw Materials Manufacturing

Service
Business Sectors: Primary
• Primary sector businesses are involved in the
extraction, harvesting and conversion of land
(natural) resources as a factor of production

• Usually the dominant sector in

nations with less developed
economies
• Examples: agriculture, fishing,
mining, forestry, oil extraction
Business Sectors: Secondary
• Secondary sector businesses use raw materials
and other resources for the production of
finished & usable goods
• Usually the dominant sector in
developing nations
• Helps nations produce wealth
since finished goods can be
exported
• Examples: construction firms, clothes
manufacturers, publishing firms
Business Sectors: Tertiary
• Tertiary sector businesses provide services to
private and corporate customers
• Usually the dominant sector in
developed nations
• Examples: retail, banking, healthcare,
education, entertainment
Chain of Production
• The three sectors are linked through the chain
of production.
• This tracks the stages of production for an item
or service from extraction of the raw material
until delivery of the finished product to the
final customer.
Chain of Production
Chain of Production
Example: House
• Primary: miners & timber workers cut trees for
wood, extract sand, clay, stone
• Secondary: engineers & manufacturers use
machinery to create doors, bricks, windows.
Architects & builders use materials to design
and construct house
• Tertiary: real estate agent sells house, loan
officer approves financing, inspector checks
condition