Topic 3. Classifications of Business Activities

Classifications of Business Activities

Introduction

  • Overview of business classifications and their significance in the economy.

  • Facilitator: Ms. Julia Baea

Objectives

  • Types of Business Classification: Identify various classifications of businesses.

  • Industry vs. Commerce: Define and differentiate between industry and commerce.

  • Electronic Commerce: Discuss e-commerce and how it differs from e-business.

  • Outsourcing Services: Analyze the reasons behind outsourcing in business.

Business Classification

Definition

  • Business classification refers to the structure or category used to organize businesses based on common characteristics.

  • Categories are established based on foundational characteristics known as bases.

Categories of Classification

  • Businesses can be classified based on:

    • Size

    • Nature

    • Ownership

    • Legal Structure

    • Function

Classification by Size

  • Micro Enterprise: Few than 5 employees, turnover under K200,000, asset value under K200,000.

  • Small Enterprise: Fewer than 40 employees, turnover under K5 million, asset value under K5 million.

  • Medium Enterprise: Fewer than 100 employees, turnover under K10 million, asset value under K10 million.

  • Large Enterprise: Over 100 employees, turnover over K10 million, large capital investments.

Measurement Criteria

  • Size measured by capital investment, employee count, transaction volume, operational area, and market share.

Classification by Nature

  • Definition: Classification of businesses based on their purpose.

  • Types of Nature:

    1. Trading: Buying and selling finished goods for profit.

    2. Manufacturing: Production of goods for profit.

    3. Services: Providing services to customers for profit.

    4. Charities: Providing services without expecting returns.

    5. NGOs: Organizations promoting community development and social justice (e.g., UNICEF, UNDP).

Classification by Ownership

  • Definition of Ownership: Legal rights to own a business or assets.

  • Types of Ownership:

    • Public Sector: Owned by the government (e.g., public schools, utilities).

    • Private Sector: Owned by private individuals/entities.

      • Types:

        • Sole Proprietorship: Owned by one person.

        • Partnership: Owned by two or more individuals sharing profits.

        • Companies (Private or Public).

        • Cooperatives: Owned for mutual benefit.

Classification by Legal Structure

  • Legal structures define how a business is organized from a legal standpoint and include:

    • Sole Proprietorship

    • Partnership

    • Corporation

    • Limited Liability Company (LLC)

    • Cooperative

  • Each structure affects organization, taxes, and liability.

Classification by Function

  • Definition: Classification based on business operations.

  • Core Functions:

    1. Industry (Production): Conversion of raw materials to products.

    2. Commerce: Activities related to trade and exchanges.

Industry and Commerce

  • Focus on the distinction between Industry (producing goods) and Commerce (facilitating trade).

Types of Industries

Overview of Industries

  • Primary Industry: Engaged in extracting and processing natural resources.

    • Types: Extractive (resource extraction) and Genetic (breeding).

Secondary Industry

  • Engaged in manufacturing products from raw materials.

    • Types: Manufacturing (conversion to finished goods) and Construction (building infrastructure).

Tertiary Industry

  • Involves services and sales of goods.

    • Types: Commercial (selling goods) and Personal Services (services related to consumers).

Industrial Development in PNG

  • Industrial estates established to support business growth:

    • Locations include Malahang, East New Britain, Port Moresby, and Highlands.

  • Focus on manufacturing diversification, service maintenance, infrastructure improvement, and transport services.

Mining and Petroleum Industries in PNG

  • Mining: Major exporter (gold, copper, silver); provides significant revenue.

  • Petroleum: Oil and gas contributions crucial to GDP; includes various current and proposed projects.

    • Regulatory oversight by the Mineral Resource Authority (MRA).

Commerce Overview

Definition

  • Commerce encompasses activities that facilitate the transfer of goods and services.

  • Core Activities:

    • Trading and auxiliary services that support industry.

Domestic Trade

  • Involves buying and selling within a country.

    • Includes wholesaling, retailing, agricultural trade, manufacturing trade.

International Trade

  • Involves cross-border trading of goods and services.

    • Includes: Imports (buying) and Exports (selling).

Auxiliary Services to Trade

  • Activities providing support to trade include:

    • Transport and communication

    • Banking and finance

    • Insurance

    • Warehousing

    • Advertising

Electronic Commerce

  • E-commerce utilizes electronic devices and internet for business transactions.

  • Distinctions between e-commerce and e-business.

  • Importance of outsourcing processes to focus on core business operations.

Conclusion

  • Business classifications offer various perspectives to understand business operations.

  • Importance of industrial development and emerging trends like e-commerce in enhancing economic growth.