Industry
Industry means producing or processing goods and materials.
Primary industries
- Extractive: take things out of nature: mining, fishing, hunting, lumbering.
- Genetic: raise and multiply plants and animals: nurseries, poultry, cattle breeding, fish hatcheries.
Secondary industries
- Manufacturing: turn raw materials into finished goods. Four kinds: analytical (break one material into many, like crude oil into petrol, diesel and kerosene), synthetical (join many materials into one, like cement), processing (pass through stages, like sugar or paper), assembling (join ready parts, like cars or computers).
- Construction: build roads, bridges, dams and buildings.
Tertiary or service industries
Give services that support primary and secondary industries, like transport, banking, insurance and warehousing. These are also the auxiliaries to trade.
Commerce and trade
Commerce = trade + auxiliaries to trade. It links producers and consumers.
Trade is the buying and selling of goods.
- Internal (home) trade: within one country. Wholesale = buying and selling in large quantities, usually to retailers. Retail = selling in small quantities to final consumers.
- External (foreign) trade: between countries. Import = buying from another country. Export = selling to another country. Entrepot = importing goods in order to export them again, often after small changes.
Auxiliaries to trade and the hindrances they remove
| Auxiliary | Hindrance removed | How |
|---|---|---|
| Transport | Place | Carries goods from where they are made to where they are needed. |
| Warehousing | Time | Stores goods until they are needed (like rice after harvest). |
| Banking and finance | Finance | Gives loans, overdrafts and payment services. |
| Insurance | Risk | Pays for loss from fire, theft or accidents in return for a premium. |
| Communication | Information | Phone, post, internet link buyers and sellers. |
| Advertising | Information | Tells people about products and persuades them to buy. |
Business risk
Business risk is the chance of making a loss, or earning less profit, because of things no one can fully foresee.
Nature of business risk
- It comes from uncertainty about the future.
- It is essential: no business can avoid it fully; it can only be reduced.
- Its degree depends on the nature and size of the business.
- Profit is the reward for taking risk: no risk, no gain.
Causes of business risk
- Natural: flood, earthquake, drought, heavy rain.
- Human: theft, fraud, carelessness, strikes, power cuts.
- Economic: fall in demand, rise in prices, competition, change in fashion, higher interest.
- Other: war, political change, new technology making a product old.
Try it
Pick any shop near your home. Write one risk from each of the four causes that it faces, and one way to reduce it (for example insurance for fire).
Key formulas and definitions
- Business activities = Industry + Commerce
- Commerce = Trade + Auxiliaries to trade
- Transport→place, Warehousing→time, Banking→finance, Insurance→risk, Communication & Advertising→information
Worked examples
1. Classify: (a) crude oil refinery, (b) cement plant, (c) car plant joining parts, (d) sugar mill.
(a) analytical, (b) synthetical, (c) assembling, (d) processing. All are secondary, manufacturing industries.
2. Mangoes are picked in May but people want mango pulp all year. Which auxiliary helps and which hindrance does it remove?
Warehousing (cold storage). It removes the hindrance of time.
3. Singapore imports rubber from Malaysia, grades and packs it, and sends it to Europe. What kind of trade is this for Singapore?
Entrepot trade: importing in order to re-export.
4. A toy shop loses sales when a new video game becomes popular. Name the cause of risk.
Economic cause: change in taste and fall in demand (new technology also plays a part).
Common mistakes
- Calling commerce the same as trade. Commerce = trade + auxiliaries.
- Putting poultry under extractive industry. Raising animals is genetic industry.
- Mixing analytical and synthetical: analytical splits one into many; synthetical joins many into one.
- Saying insurance removes risk completely. It shares and pays for the loss; the risk event can still happen.