Unit 6 Primary Secondary Tertiary Factors of Production 1 Ms Marshall 6th Year Business

Ms Marshall 6th Year Business 1

CATEGORIES OF INDUSTRY

Unit 6

Primary

Secondary

Tertiary

Factors of Production


Primary

Agriculture

Fishing

Forestry

Mining


PRIMARY SECTOR OF THE ECOMONY The primary sector (extractive) is a

category of industry based on the natural resources of a country such as agriculture, forestry, fishing, mining, energy.

Some extracted material is used in its raw state, but generally the output of these industries is passed on to secondary or tertiary sectors for use in goods and services.

Some resources are non-renewable, e.g. oil and gas. Others are renewable, e.g. wind and solar energy.


PRIMARY SECTOR Agriculture: Accounts

for 4% of total employment in the country and 6% of all exports.

Ireland exports almost 90% of its beef output, making it the largest beef exporter in the world.

The seafood industry employs 11,000 people and contributes €700 million annually to national income.

Coillte is the commercial state company which owns more than half the forests in Ireland. It employs 1,100 people and generates income from commercial forestry and renewable energy. The value of Irish forest sector exports is close to €350 million p.a.

Tara Mines is the largest zinc mine in Europe and employs 700 people.


IMPORTANCE OF… Employment: Many people in Ireland work in

agriculture, fishing, forestry and mining. They pay taxes on their wages and this gives the government more money, so it can improve Ireland’s economy by reducing taxes, increasing grants and improving infrastructure.

Consumer of Irish products: Primary industries are a major consumer of Irish products, so they pump money into the ecomony. Farmers use farm machinery, fertilisers, chemicals, animal feed, vets etc. This has a spin off effect for these businesses, increasing their profits.


IMPORTANCE OF… High level of exports: the primary

industry exports a huge amount of raw materials abroad, thus improving our Balance of Payments. This brings money into the country and creates wealth. E.g. forest sector exports value €350 million p.a.

Provides food: Much of the primary industry is concerned with providing food here in Ireland. This makes us less dependent on foreign imports, thus improving our balance of payments.


PRIMARY SECTOR Current Trends Commodities such as beef and milk are commanding

higher prices on world markets as demand increases due to global population growth.

Cóillte the state agency operating in forestry, land based businesses, renewable energy and panel products may be privatised along with other businesses such as Electric Ireland.

Restriction on turf cutting due to EU environmental directive. The EU have designated some bogs “Special Areas of Conservation”. Owners of these bogs are no longer allowed to cut off them or plant them. Owners who had recently used these bogs will be compensated financially. The restrictions are seen by many as an attack on rural Irish culture and lifestyle.


TRENDS Farm numbers in Ireland declined

continuously over recent decades. Over half of all farmers are over 55 years old. Demographic and lifestyle changes make it more difficult to attract young people to agricultural careers.

The CAP has provided farmers with a Single Farm Payment. The process of separating that from productivity is called decoupling.


TRENDS Some fish stocks have been depleted due to

overfishing. The CFP sets out very strict rules and quotas designed to prevent overfihing and preserve fish stocks. A quota is a limit on the quantity of fish which can be caught. Since quotas are based on historical fishing trends, Ireland’s small fleet means our quota is relatively low.

The Kinsale gas field currently only provides a fraction of our energy needs and this will decline in the coming years. Much hope had been placed on the exploration of Corrib gas field, but this has been surrounded by controversy.


TRENDS Fracking: Gas deposits discovered in the

Fermanagh/Leitrim border may be mined using ‘fracking’ a controversial mining technique involving taking gas from shale.

Wind energy is being explored with the planned development of 450 wind turbines across the midlands. An environmental impact study has to be carried out as health concerns have been raised by those living in the area.

Continued growth in organic food production capitalises on Ireland’s green image worldwide.


SECONDARY SECTOR The secondary sector includes:

Manufacturing, Agribusiness and Construction businesses.

This sector takes raw materials, processes raw materials and produces finished goods.

They add value to the raw materials, making them more appealing to consumers.

Example: Kerry Group – Food Products.


Manufacturing

Agribusiness

Construction

Secondary


IMPORTANCE OF… Manufacturing industry: High Level of Exports: New high tech

manufacturing have set up in Ireland including chemicals, pharmaceuticals, medical supplies, electronics and computer equipment. Most of these are foreign owned and export from Ireland. These therefore improve our balance of payments.

Employment: Manufacturing creates direct and indirect employment. These people pay taxes on income earned and spend their disposable income.


IMPORTANCE OF… Consumer of Raw Materials:

Manufacturing companies buy the output of the primary industry and turn it into finished goods. This provides income to those in the primary industry and raises the standard of living. E.g. Ribena buys 95% of Irelands blackcurrants.


SECONDARY SECTOR Current Trends: (i) Decline in employment in Secondary

Sector – downsizing and closures have resulted in an increase in unemployment, particularly in relation to Manufacturing and Construction

(iii) Increased wage rates in Ireland over the past few years has resulted in loss of competitiveness – relocation of some manufacturing businesses to low cost economies. Traditional manufacturing industries such as clothing and footwear have declined.


AGRIBUSINESS A term used to describe a broad range

of agricultural activities, not just farming but the processing and marketing of farm produce.

The sector directly employs 50,000 people and supports a further 60,000 indirect jobs. This is close to 7% of all employment.


TRENDS Agribusiness: The sector is dominated by

indigenous producers which are small by international standards. To improve their access to capital several of these firms have changed their structure from cooperatives to PLCs, e.g. Glanbia and Kerry Plc.

Many Irish producers benefit from Ireland’s green image and protecting this image and reputation will be a major challenge for the industry.

Increased competition- challenge faced by Agribusiness Sector in food market from foreign retailers i.e... Lidl and Aldi


CONSTRUCTION The construction industry provides Ireland with

housing, commercial property and infrastructure. It is a very labour intensive industry. Employment in construction rose by 40% between

2002 and 2008. over 300,000 people were employed in construction in 2007 (13% of employment).

The economic slowdown led to massive unemployment in the industry. By 2011 total employment had fallen to 100,000.

The recession has put on hold major infrastructural projects such as Metro North. This results in a loss of potential jobs in this sector.


TERTIARY SECTOR The services sector is the largest sector in

Ireland. Its aim is to provide a range of services to businesses and consumers. E.g. financial services, medical services, transport services, leisure services.

Labour intensive. The IFSC was built to attract and support

companies who engage in internationally traded services such as finance, insurance, consulting and communications.

Tourism is one of the most significant service sectors.


TERTIARY SECTOR Importance of: Biggest Employer: this sector is the biggest

employer of Irish people. People employed in this sector pay taxes on their income and spend disposable income, which are beneficial to the economy.

Exports: Ireland exports financial services thus improving our Balance of Payments. This brings money into the country.

Attractive to TNCs: A well developed service sector is attractive to TNCs that are looking for a country to locate in, e.g. telecommunications and transport services.


TERTIARY SECTOR TRENDS Taxes such as the household charge, property tax and

cuts in government expenditure on social welfare have led to a fall in the disposable income of consumers. As consumers’ spending power is reduced the demand for the goods and services that businesses sell in the retail services sector has fallen.

Closures/examinerships/insolvencies of retailers. Recession hitting the small and medium enterprises

e.g. suppliers to construction industry. The Gathering 2013 and its impact on services

(Hotels, travel etc). The growth of e-business, a method of buying and

selling goods and services over the internet, is changing the dynamic of the services sector. Retailers moving to on-line operations include Tesco and Next.


TERTIARY SECTOR TRENDS Businesses in the services sector are facing a decrease in footfall because

of the challenges facing town centres due to competition from large suburban shopping centres and the restrictive parking regimes in operation. Expensive parking tickets, fines and the threat of clamping are driving people out of town centres where many service sector businesses operate.

VAT increases lead to more expensive goods and services for the consumer which in turn causes demand to fall, thereby affecting business. For example the volume of sales in department stores fell by 18.4%, and electrical goods fell by 12.0% as a consequence of the negative impact of the VAT rise to 23%.

Increases in excises duties on tobacco products have led to an increase in tobacco smuggling. Excise duties on cigarettes continue to rise, increasing the incentive for customers to choose cut price illegal products sold on the black market. In 2010, Ireland’s retailers lost €896 million in turnover to the Black market.

The growth of the ICT sector has led to employment opportunities. At a recent Intel Forum on Education, the CEO of Fujitsu Ireland said that 75% of ICT employers in Ireland have job vacancies. There has been growing concern at the rising skills shortage in the ICT sector, a situation made worse by the low number of students opting for technology courses at third level.


FACTORS OF PRODUCTION

Land

Labour

Capital

Enterprise

Factory workers, mechanic

e.g. Crops, Forests, Sea,

Oil

Provided by Nature

Human effort

Man made goods

Combining the others and taking

the risk

Rent

Joe Murphy set up Tayto

Machinery, infrastructur

e

Profit

Interest

Wages


FACTORS OF PRODUCTION Land is anything provided by nature, used in the

creation of wealth. E.g. Forests, Sea. It earns rent.

Labour is any human effort, both physical and mental, used in the creation of wealth. E.g. factory workers. It earns wages.

Capital is anything man made used in the creation of wealth, i.e. used in the production process, e.g. machinery. It earns interest.

Enterprise brings the other three factors of production together and organises them in order to create wealth. The entrepreneur uses their initiative and takes the risk to make a product/service. E.g. Joe Murphy set up Tayto.


RECENT EXAM QUESTIONS 2013 Q2 (c) Discuss current trends affecting

businesses in the services sector of the Irish economy. Provide examples to support your answer (20 marks).

2012 Define the primary sector. Outline two

current trends affecting this sector in Ireland. (10 marks)

2009/2003 Define the secondary sector and outline two

current trends affecting this sector in Ireland (10 marks).


RECENT EXAM QUESTIONS 2007 Discuss the importance of the

categories of industry to the current Irish economy (20 marks).

2006 Outline the categories of industry in the

Irish economy. In the case of one of these, describe its contribution to the economy (20 marks).

Documents

Unit 6 Primary Secondary Tertiary Factors of Production 1 Ms Marshall 6th Year Business