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Classification of Business There are a number of different ways of classifying a business. Classification is a process of placing businesses in specific groups based on their characteristics. the reason for this is to increase our understanding of business, by studying the characteristics they have in common. By doing this, it will help us develop general principles on how they can be managed more effectively. Some of the most common classifications are:Size – Small to medium enterprises (SMEs), largeLocal, National and GlobalIndustry primary, Secondary, tertiary, quaternary and quinary
Size of a Business It can be helpful to group a business on the basis of size, but it can also affect the business at the same time. Large businesses for example, are more complex to manage and are often slower to respond to changes in the environment. Whilst smaller businesses have much greater flexibility which enables the managers of these businesses to respond more quickly to changes in the environment. E.g. Consumer tastes or technology. But on the other hand, smaller businesses might find it difficult to raise finance they need to grow the business.
SIZE Small Businesses employ more than 5 people, but less than 20 people. An example of a small business would be Mt Druitt Fruit Market. Medium Businesses employ 20 or more people, but less than 200. An example of a medium business would be Slater and Gordon. Large Businesses employ more than 200 or more people. An example of a large business would be Woolworths.
Local, National & Global Local – Are the businesses which are in your immediate environment. They are mainly small to medium businesses. They play a major role in satisfying the needs of a customer of that local environment. An example for this would be your local corner shop. National – A business which operates nationally, in this case, Australia. Prime examples for National businesses would include Qantas which is based in Australia
Global – Businesses that operate worldwide. Some of Australia’s most important global businesses are mining businesses and most common, BHP Billiton. However, increasing number of businesses are taking advantages of the opportunities the global market provides. E.g. Factories in China are manufacturing products to minimise expenses. Products like Bonds clothing are being distributed to other countries in the Asian region. China is now developing plans to export to Japan, Europe and USA.
Industry – primary, secondary, tertiary, quaternary and quinary It can be helpful to classify businesses on the basis of the industry in which they operate. This enables us to analyse which is the average business in that industry and the most effective. It can be helpful to look at what the most effective businesses are doing that has led to their success. It allows for easy recognition of which industries are expanding and which are contracting in the economy. Trying to define industries can be a complex process. The ABS uses 17 main classifications
However, trying to define industries can be a complex process. The ABS uses 17 main classifications: • Agriculture, Forestry and Fishing • Mining • Manufacturing • Electricity, gas and water supply • Construction • Wholesale trade • Retail trade • Accommodation, cafes and restaurants • Transport and storage • Communication services • Property and business services • Government Administration and Defence • Education • Health and community services • Cultural and recreational services • Personal and other services • Finance and insurance
Primary Industry Primary Industry refers to all the businesses based on the extraction of natural resources, including agricultural businesses. BHP Billiton and Rio Tinto are examples of global businesses that would be classified as a primary industry because they extract minerals. Small businesses based on fishing and the family farm are also examples of primary industry.
Secondary Industry Secondary industry involves manufacturing and construction. It is the industry that converts the output of the primary industry into finished and semi-finished goods, such as cars, breakfast cereals, steel and houses. Over the past 5 years there has been a 4.5% decrease in employment in the secondary industry and it is likely to rise over the next 5 years. An example of the decline in the manufacturing industry is the loss of 6800 jobs in furniture manufacturing during the past 5 years.
Tertiary Industry The tertiary industry is concerned with selling and distributing goods rather than making them. Tertiary industries provide essential services that allow primary and secondary industries to function. This industry includes businesses concerned with distribution and activities related to transportation, storage and retailing. Toll is an example of an Australian business in the tertiary sector. It is an integrated transport group of businesses that encompasses air, sea and land transport. It has revenues of $6.5 billion. The business is Australia's largest transport company.
Quaternary Industry The quaternary industry consists of businesses that, like the tertiary sector, provide services but with a focus on information processing. The quaternary sector defers from the tertiary sector because of its emphasis on technology, intellectual activities, processing of symbols or symbolic objects such as information, numbers, words or money. This industry has largely grown. Typical examples of quaternary businesses include banks, insurance business, media, researchers, politicians and real estate.
Quinary Industry The quinary industry, like the quaternary sector, provides services. But there is a difference. Businesses in the quinary industry provide services such as education, health care, and domestic work. Carers, hotels, motels, caterers and restaurants are included in this category, as well as non-profit organisations such as the Salvation Army and government organisations such as health, education and police.
