Categories of industry

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What are the factors of production?

Primary, Secondary and Tertiary sectors

Changes and Trends in these sectors

Learning Targets

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You can’t have it all!

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Factors of production

Land Labour

Capital Enterprise

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Land• Anything provided by nature that helps us produce G&S

• E.G. Sea

Soil

Gas

• Payment: Rent

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Labour• Any human effort that helps to produce G&S

• E.G. Doctor

Accountant

Factory worker

• Payment: Wages

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Capital• Anything that is made by humans that is used to help produce G&S

• E.G. Machinery

Computers

• Payment: Interest

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Enterprise• Organises land labour and capital by setting up a business and bears the risk of success or failure

• E.G.

• Payment: Profits

Entrepreneur

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The Primary Sector

Also known as the ‘Extractive Industry’

Based on natural resources

Non- Renewable: Limited supply. They must be used sparingly

e.g. Oil / Gas

Renewable: If carefully managed they can last indefinitely e.g. Solar power/ crops/ Wind power

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Agriculture

Facts:

It accounts for 7.7% employment in Ireland

It makes up 10.5% of Ireland’s total exports

80% of agriculture produce is exported

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Composition of Employment in the Agri-Food sector, 2011

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Problems:

Decline in EU Grants/payments:

Instead of receiving many different grants and payments farmers just receive one single farm payment regardless of how much output is produced in a year

Consumer confidence:

Has declined in recent years due to excessive use of pesticides/ development of diseases e.g. Mad cow disease. We need to protect ‘Green’ image.

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Weather:

The IFA estimated that the bad weather this year cost farmers about €160m in extra animal farm feed and lost output.

Competition:

Small farmers find it difficult to remain competitive and need to cease opportunities of taking over new farms or diversifying their product range.

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Trends:

Beef & milk are increasing in price as demand is increasing due global population growth

Continued growth in organic food production. Positive effect on Ireland’s ‘Green’ image

Food product traceability is necessary to reassure customers of quality

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Fishing Small industry in Ireland contributes to €700 million annually to national income

Provides employment for coastal communities, 11,000 people.

As part of the EU other EU countries fish here – Increased competition

Intro of quotas limits amount that can be caught

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Problems/ Trends:

Restrictions: EU has imposed fishing quotas on the size of fish catches which restricts development in the industry

Size of boats: Most of the fishing fleet in Ireland is comprised of small boats. They are not equipped to travel long distances to find big catches

Overfishing: Stocks of some fish species is very low

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Forestry Small industry in Ireland

Ideal climate conditions for the production of trees

Grants provided to farmers to develop forests

Slow return on investment

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Problems/ Trends

Slow return on investment

Grants available to farmers to plant forests

Coillte, state company own and run most of the forests in Ireland

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The Secondary SectorConstruction

• Involved in building houses factories, offices & infrastructure e.g. roads

• Uses a high % of home produced raw materials

• Is labour intensive – creates employment 2007 Employment: 300,000

Output = €40 billion. 2011 Employment: 100,000

Output = €10 billion.

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• Economic fluctuations: Low economic activity resulting in decrease in demand for construction industry – decrease in employment

• Regulations: New laws have been introduced which places increased responsibility on the construction industry with regards to their builds

Problems/ Trends:

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Manufacturing

• Converts raw materials into finished goods

• Important industry creating direct and indirect employment

• E.G. Manufacturing industries:

1.Agri – businesses

2.TNCs

3. Indigenous businesses

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Problems/ Trends:

• Employment: Decreasing significantly in this industry. Cheaper labour abroad.

• Knowledge economy: Increased focus on marketing Ireland as a knowledge based highly technical workforce to encourage foreign investment

• New Technology: Move towards ICT and robotics for production

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1. Agribusiness• Supply products to farmers & manufacture farm produce into saleable products

Problems

• Competition: These businesses are small. Difficult to compete with larger foreign companies

• R&D: Low investment in research and development. Lack of new product development

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Trends:

•.Mergers: Agribusinesses have merged which allows them to compete more effectively. e.g. Glanbia

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TNCs:

• Multinational company

• Head office in one country but operate in a number of countries (subsidiary)

• Employs over 100,000 in Ireland

• IDA responsible for attracting TNCs to Ireland

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What attracts TNCs to Ireland?

Educated workforce

Location within the EU – Access to EU markets

Grants provided by IDA

Low corporation tax

High levels of productivity achieved by Irish businesses

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Benefits:

• Employment: Large amount of job creation due to establishment in Ireland

• Corporation Tax: Contribute to National budget as they pay 12.5% tax on profits

• Training: Employees get world class training and skill development

• Spin off industries: These are created locally which contributes to indirect employment

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Problems:

•Loyalty: As they are developed in another country if the economy is doing badly they have no issue with leaving and moving their subsidiary to another country.

•Profits: The profits made by the TNC are sent back to the headquarters.

•Closure: As an economy we are over reliant on TNCs. If they close it has a huge negative impact on local communities as jobs are lost and spin off industries lose business.

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Indigenous Firms:

•Businesses that are Irish owned and produce G&S in Ireland

•Enterprise Ireland* government agency that supports and encourages development of Irish businesses

•Most indigenous firms are SMEs – Small medium Enterprises

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• They provide assistance and capital to firms at start up stage

• They provide advice & support to start up businesses

• They assist firms with product and process development

• Support and encourage firms to export their G&S

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Benefits:

•Loyalty: Irish firms are loyal, unlikely to relocate somewhere else. E.G. Group opening new science & innovation centre in Kildare. This will create 900 jobs. •Support: Purchase raw materials and supplies from local businesses

•Profits: Reinvested back into Ireland & contribute to revenue for the government

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Problems:

•Export market: Only a small no. of Irish brands are recognised abroad reducing their selling power in foreign markets

•Wages: High wages expectations in Ireland result in some manufacturing firms to locate abroad to avail of lower costs of production

•R&D: Not enough investment compared to competitors

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Trends:

• World class manufacturing: Has developed in Ireland as valuable training is provided.

• R&D: Investment is growing. Required for growth and expansion of product range of business

• Technology: Big emphasis on technological based industries in the future

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Tertiary Sector

The largest and fastest growing sector in the Irish economy.

Examples include: Financial services - Medical services - Transport services

- Leisure services.Most service industries are labour-intensive and this

has a very positive impact on job creation. Improvements in IT have also led to growth.Tourism is a significant service sector in Ireland.

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Trends:

• ICT: Increase in investment in broadband and social media

• Telecentres: Opened to deal with after sales services

• Childcare: Increase in childcare services in line with population growth

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Question:

Explain using examples the impact of TNCs in Ireland. (20 Marks)

Solution:

1.Explain acronym. Define TNC2.Name: Employment Explain: Explain Name: Spin off industries Explain: Name: Government Revenue Explain Name: WCM – Training Explain:

Link E.G.S