Topic 1 – Role of Business in

Society

Higher Business Management

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Learning Intentions / Success Criteria

Learning

Intentions

Role of

business in

society

Success Criteria

Learners should be able to classify and describe

the following:

• sectors of industry,

• business activity in the primary sector,

secondary sector, tertiary sector and

quaternary sector,

• sectors of the economy,

• organisations in the public, private and third

sectors.

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Sectors of Industry

Businesses belong to different sectors of

industry:

• Primary

• Secondary

• Tertiary

• Quaternary

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Primary Sector

• Businesses in this sector

extract raw materials from

the natural habitat (earth or

oceans).

• These raw materials are then

passed to the next sector in

the production process.

• Examples of businesses

operating in the primary

sector are farming, oil

extraction, fishing and

quarrying.

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Secondary Sector

• Businesses in this sector

manufacture products by

taking raw materials and

making them into finished

products.

• Examples of business

operating in the secondary

sector are manufacturers of

products such as washing

machines, cars, food or

computers.

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Tertiary Sector

• Businesses in this sector

provide a service.

• Examples of business

operating in the tertiary

sector are hairdressers,

banks, travel agents,

schools, dentists, etc.

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Quaternary Sector

• Businesses in this sector

provide a knowledge-based

and information service.

• This includes scientific or

technological research and

development and education.

The quaternary sector is sometimes included with the tertiary

sector, as they are both service sectors. 7

Sectors of the Economy

As well as operating in a

particular sector of

industry, businesses and

organisations also operate

within a particular sector

of the economy:

• the private sector,

• the public sector or

• the third sector.

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Private Sector

This sector of the economy is owned and controlled by

private individuals and is made up of types of businesses

known as:

• Private limited companies (Ltd)

• Public limited companies (PLC)

• Multinational

• Franchise

They are funded by private individuals and shareholders.

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Limited Companies

• A private limited company (ltd)

A small business such as an

independent retailer in a market

town. Shares do not trade on the

stock exchange.

• A public limited company (plc)

A large, well-known business. This

could be a manufacturer or a chain of

retailers with branches in most city

centres. Shares trade on the stock

exchange.

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There are two main types of limited companies:

Private Limited Companies (Ltd)

• Typically, private limited companies are

owned by individuals, families or friends.

• The company name is usually followed by Ltd.

• The share ownership of the company is by

invitation only and the shares are not sold on

the stock exchange.

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Public Limited Companies (PLC)

• A public limited company (plc) is a company that is

owned by shareholders.

• Shareholders are people who have bought shares in

the company, perhaps through the London Stock

Exchange.

• The company is owned by shareholders and run by a

Board of Directors who have been appointed on

behalf of shareholders to control and manage the

company.

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Franchises

• A person who starts a business and

provides a product or service

supplied by another business (the

franchisor) is known as a

franchisee and operates a business

known as a franchise.

• In return the franchisor would get

a share of the franchisee’s annual

profits or an agreed annual royalty.

• The franchisee is allowed to use

the business name (eg

McDonalds), branding, publicity

materials, uniforms and sell its

products.

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Multinationals

• A multinational organisation is one that operates in more than

one country.

• It will normally have a headquarters based in one country; this

is known as the ‘home’ country.

• Because it operates in more than one country, it will be

globally recognised.

• A socially responsible multinational organisation may have a

positive impact on the local economy and community by

providing jobs and creating wealth for the local area.

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Public Sector

• Public sector organisations are

owned by the Government on behalf

of the taxpayer and aim to provide a

service to the general public.

• They are funded by taxes that

individuals and businesses have to

pay.

• Different types of taxes exist

including income tax, road tax and

council tax.

• Taxes goes towards schools,

hospitals, the armed forces and

social services.

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Third Sector

• This is made up of charities and

other community organisations

that aim to raise money for good

causes and to help people.

• The third sector also includes

social enterprises and co-

operatives.

• They are not ‘owned’ by

anyone: they raise money from

donations, fundraising activities

and grants from the lottery.

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Charities

• Non-profit making organisations such as charities and

voluntary organisations are set up to support specific causes.

• Charities are owned and controlled by a Board of Trustees.

• They are regulated by the Government, and the income they

make is put towards a specific cause.

• Charities will undertake fundraising activities to raise finance,

e.g. by asking for grants/donations through TV appeals, street

collections or by selling unwanted items in a charity shop.

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Social Enterprises

• Social enterprises trade in all markets, selling goods and services to

individual consumers, local authorities, government and private

businesses.

• Social enterprises have a social or environmental aim rather than to

make profit for owners or shareholders, but are run in a business-

like way.

• The business will let customers know what the social enterprise is

trying to do and who it is trying to help.

• All of the profit that it makes, through selling goods and services,

must be invested into meeting the aim of the social enterprise.

• Unlike some charities, they don’t rely on grants and donations, but

some social enterprises do become charities.

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Examples of Social Enterprises

• Aberdeen Foyer - a social enterprise set up to try and help

homeless youths in the Aberdeenshire area. As well as this,

they provide opportunities for young people to develop

employability and life skills. The opportunities they provide

range from construction and property maintenance to graphic

design and driving training.

• Active4AII - this social enterprise provides nearly 100 jobs by

collecting waste materials and unwanted furniture and then

selling them. It is based in Glasgow.

• Wooden Spoon Catering – a social enterprise based in Dundee

with the aim of providing job and education opportunities for

women who might be isolated or in a vulnerable position.

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