✦ 1.2 Paper 1 · 0450 Difficulty: Easy–Medium

Unit 1: Business and its Environment
Classification of Businesses

Practise how businesses are classified by sector, ownership and purpose — including private sector, tertiary sector, secondary sector, social enterprise and franchise contexts.

6Papers

2–6Marks per Q

FreeAlways

💡

Examiner tip — use the exact classification words

For definition questions, give the key idea clearly and add a precise example where useful. For sector questions, identify the activity first: extraction is primary, manufacturing is secondary, and services are tertiary. For private sector questions, mention private ownership and profit motive.

Key Concepts to Revise

Private Sector

Businesses owned by private individuals or groups, not the government.

Often aim to make profit, grow, survive and satisfy customers.

Public Sector

Organisations owned or controlled by the government.

Main aim is usually to provide services to the public.

Primary Sector

Extracts or collects natural resources.

Examples: farming, fishing, mining, forestry.

Secondary Sector

Manufactures or processes raw materials into finished or semi-finished goods.

Examples: bakery, car factory, furniture manufacturer.

Tertiary Sector

Provides services to consumers and businesses.

Examples: cafés, tutoring, hairdressing, transport, banking.

Social Enterprise

A business with social or environmental objectives as well as financial aims.

Often reinvests profit to support its mission.

Past Paper Questions

6 papers

Select Paper

0450/12/M/J/2025

Unit 1.2 · Classification of Businesses

Case Study

Hal wants to be a successful entrepreneur. He plans to leave his job to start up a bakery. The bakery will operate in the private sector. The business will have many stakeholder groups. Hal has been told it is important for a new business to select an appropriate source of start-up capital. He also knows new businesses are at a greater risk of failure.

(a)

Define ‘private sector’.

[2]

0450/12/F/M/2025

Unit 1.2 · Classification of Businesses

Case Study

SEP operates in the tertiary sector. As a social enterprise, SEP has many objectives. It collects old books from libraries and schools and sells them to customers at a low price. SEP provides training for its 10 part-time employees. SEP’s manager wants to know how the introduction of a legal minimum wage might affect a business.

(a)

Identify two services provided by businesses in the tertiary sector.

[2]

Service 1:

Service 2:

0450/13/O/N/2024

Unit 1.2 · Classification of Businesses

Case Study

Ramon is an entrepreneur. He plans to start up a home tutoring service to provide students with extra help to learn maths. Ramon is considering buying a franchise. He has prepared a business plan but is concerned about how an increase in the rate of inflation might affect his business. Ramon wants to know whether crowdfunding is the best source of finance for a start-up business to use.

(d)

Explain one advantage and one disadvantage to Ramon of buying a franchise.

[6]

Advantage:

Explanation:

Disadvantage:

Explanation:

0450/12/O/N/2024

Unit 1.2 · Classification of Businesses

Case Study

Avtar owns a car repair business which operates in the private sector. It is a small business with 2 full-time employees. Avtar wants to find out the best way for a business to increase added value. Avtar’s business needs finance for many reasons. Avtar wants to know how an economic recession might affect his business.

(a)

Identify two features of a private sector business.

[2]

Feature 1:

Feature 2:

0450/12/M/J/2024

Unit 1.2 · Classification of Businesses

Case Study

GTB is a business which operates in the tertiary sector. It owns 5 cafés selling food and drinks. The business uses social media as its method of promotion. The Finance Manager, Moeen, is analysing GTB’s financial statements. An extract is shown in Table 2.1. He is considering ways to improve GTB’s profit margin. Moeen knows there are other users that are interested in the accounts of a business.

Extract from GTB’s financial statements 2023
Revenue	$600 000
Profit	$150 000
Capital employed	$750 000
Profit margin	25%

Table 2.1

(a)

Define ‘tertiary sector’.

[2]

0450/12/M/J/2024

Unit 1.2 · Classification of Businesses

Case Study 2

TCH is a small bakery producing pastries and cakes. It operates in the secondary sector. The added value of TCH’s products has increased since it opened 3 years ago. TCH uses non-financial methods to motivate its 6 employees. TCH’s business objectives have changed since it started up. One of its new objectives is to expand. Many businesses use external recruitment when they expand.

(b)

Define ‘secondary sector’.

[2]