Methodology of Business Studies

Methodology of Business Studies

Introduction:-
    Before a person starts practicing medicine and surgery, he has to acquire sufficient knowledge about the structure of the body, functions of different organs etc. Likewise, a person can hope to understand and tackle problems of business properly only if he has some knowledge of the business world, business activity and its organisation and the relationship of business with the world around it. As we all know, we are all striving for achievement of a work. Our life is built around work, and the work is an essential part of life. This work activity is divided into two broad segments economic and non-economic. So business is an economic activity.
    Business is viewed as an organized economic activity aiming at the production and sale of goods and services needed by the individuals in a society, so the business system cannot be studied without reference to the economic system in which it has to function.
Economic Systems:-
    An economic system consists of people and institutions through which economic resources   are utilized for satisfying needs of individuals in a society. Every society adopts certain institutions through which it attempts to utilize its resources in the best possible manner for satisfaction of human wants. These institutions together constitute an economic system. So simply it refers to the management or the organization pattern formed by various institutions governing economic activities in a society.
Definition of Economic System:-
    An economic system may be defined as the system of production, distribution   and consumption of goods and services in a country. In other words, it is the set of principles and techniques by which problems of economics are addressed, such as problem of society, poverty, unemployment etc.
Central Problems/Basic questions to be addressed by an Economic System:-
a) What commodities shall be produced and in what quantities?
b) How shall the goods be produced? In other words, by whom and with what resources and by what technology are these to be produced?
c) For whom shall goods be produced?
In other words, whose needs are to be catered to by the production and distribution of goods and services?
    In addition to these, modern economies are facing difficulties in relation to maintaining accelerated rate of growth of the economy and in the optimum utilization of resources.
    These questions are answered differently by various economic systems. Business activity and its organization will naturally depend upon the decision made by the society regarding what goods and services should receive priority, which types of consumers should be addressed for making goods and services available to these consumers. This necessitates the study of different economic systems.
Different Economic Systems:-  The basic economic systems fall under four categories: Capitalism, Socialism, Communism and Mixed Economy.
Capitalism:-
    It is an economic system in which individuals are relatively free to determine how goods and services shall be produced and allocated. Here, Capital is owned and invested by individuals and private-owned institutions to earn profit. The investors ultimately benefit by profit and are having the right to own tangible and intangible private property. The system is marked by little or no interference by the Government in business run by private institutions or individuals. This enables individuals to choose what to produce, in what quantity and in which markets to sell.
Socialism:-
    The basic philosophy of socialism is the provision of certain goods and services to all individuals in the nation. It seeks to create more opportunity for the under privileged classes and to end inequality based on birth. So that society can be rebuilt on the foundation of co-operation instead of competition, incentive or profit. Under this economic system, the Government determines what goods shall be produced, how they shall be produced etc. The ultimate goal of this economy is to replace the private ownership of means of production by social ownership and control.
Communism:-
    This system emerged in the twentieth century in countries like Russia and China. Under communism all control of economic power vests in the State. Means of production are socialized and private property is abolished with the object of ending the exploitation of the poor by the rich. The Government owns all economic resources and decided what to produce, how to produce, how to distribute etc. Individuals in such as economy work not for private gain but for the good of society. Here State is the only employer and private freedom of choice and action is getting eliminated.
Mixed Economy:-
    It is a combination of State ownership and control of business and private enterprise. Here the private enterprise is permitted to function and flourish subject to the control and restrictions   by the Government. It aims at blending together the best of control, socialists or communist economy with the best of free enterprise in a capitalist economy.
Division of Labour:-
    The allocation of different jobs to different people is known as specialization or division of labour. It allows individuals to specialize in the types of work in which they have a comparative advantage. It allows the workers to acquire specialized skills, both through training and by learning from experience on the job.
    F.W. Taylor   through scientific management initiated division of labour. The emergence of scientific management in business and planning in national economic systems made the social system of division of labour the key for attaining faster economic growth and better standard of living for people around the world.
    Division of labour was used as a social system in older days to categorize different jobs, and divide labour force to skilled members of a society. An increasingly complex division of labour is closely associated with the growth of total output and trade, the rise of capitalism and of the complexity of industrialization process. Due to globalization, it reaches its maximum scope through business process out sourcing and so on. The WTO supports it through its policy to expand world trade based on comparative advantage.
    It is widely accepted that the division of labour is to a great extent inevitable, simply because no one can do all tasks at once. Some   time critics of extreme division of labour argue that over specialization is bad for intellectual and emotional development and leads to narrow mindedness and feelings of alienation.
Innovation:-
    The term innovation refers to anew way of doing something. It may refer to incremental, radical and revolutionary changes in thinking, products, processes, or organizations. Innovation refers to the commercial application of invention and is the result of attempts to satisfy some feeling of a ‘gap’ somewhere the person is working at. Innovation now a day determines the fate of an industry and paves the way for new allied industries.
    Innovations are of three types: neutral, labour-saving and capital saving. Labour saving innovation enables production of a given output with less labour relative to capital and capital saving innovation enables production of a given output with less capital relative to labour. All other innovations are called neutral innovations.
    The innovation is simply defined as, “the successful introduction of a new thing or method”. Joseph Schumpeter provided an economic conception which includes:
1. The introduction of new good, which is new to consumers, or of a new quality.
2. The introduction of a new method of production.
3. The opening of a new market.
4. The conquest of a new source of supply of raw materials.
5. The carrying out of the new organization of only industry.
Thus the systematic programs of organizational innovations are most frequently driven by:
1. Improved quality
2. Creation of new markets
3. Extension of the product range
4. Reduced labour costs
5. Improved production processes
6. Reduced materials
7. Reduced environmental damages
8. Replacement of products/services
9. Reduced energy consumption
10. Conformance to regulations
    The causes of failure in innovation of a firm may be external or internal. Common causes of failure with in the innovation process in most organizations can be distilled into 5 types, such as:
1. Poor goal definition
2. Poor alignment of actions to goals
3. Poor participation in teams
4. Poor monitoring of results and
5. Poor communication and access to information
Flow of Goods and Services : Accumulation of wealth    Flow of goods and services simply means trade. In this global economy, the flow of goods and services across borders is a critical factor to the health and growth of a country’s economy.
    The accumulation of capital simply refers to the gathering or amassment of objects of value, the increase in wealth; or the creation of wealth. It refers to net addition to existing wealth, or to a redistribution of wealth. If more wealth is produced than there was before, a society becomes richer, the total stock of wealth increases. But if some   accumulate wealth only at the expense of others, wealth is merely shifted from A to B.
Under Capitalism:-
    Since Capitalism is based on economic individualism, it does not guarantee that each individual will share equally in the benefits arising out of the working of the economy. Individuals commanding more wealth will have the advantage over the less wealthy. Capitalism was based on the assumption that competition would automatically eliminate inefficiency in individuals and institutions.
    The flow of goods and services and the accumulation of wealth and income distributions under capitalism are decided on the basis of prices and cost calculations of privately owned, independent business firms. Members of the capitalist economy are free to save part of their income and accumulate wealth. Savings results in investment, which permits the production of capital goods that, contribute to the growth of the economy.
The main features of capitalism include:-
(1)The upper hand of price mechanism
(2)The consumer’s sovereignty
(3)Absence of a central plan
(4)Freedom of enterprise
(5)Property rights
(6)Competition
Merits of Capitalism:-
1. Economic Freedom
2. Efficient use of resources
3. Economic development and prosperity
4. Rise in standard of living
5. Flexibility
Demerits of capitalism are:-
(1) Class Struggles
(2) Wasteful Competition
(3) Emergence of monopoles and concentration of economic power
(4) Economic instability
(5) Ignoring human rights
Under Socialism:-
    Socialism or Common economy believes in social ownership of property and productive resources, central planning and government control, and social welfare activities. Socialists believe in the abolition of private ownership of the instruments of production. It is an economic and political theory based on public or common ownership and cooperative management of the means of production and allocation of resources.
    Socialist economies are centrally planned. The entire economic life of the people and the country is directed and controlled by the State. So the central planning authority decides the organization of production and distribution of goods and services. Here the profit motive has no role to play.
The merits of Socialism are:-
(1) End of exploitation
(2) Check on trade cycles
(3) Prevention of competitive waste
(4) Class Less society
(5) Better allocation of resources.
Demerits of socialism are:-
(1)Bureaucracy and red tapism
(2) Not successful in business
(3) Lack of   incentives
(4) Loss of   liberty
(5)Absence of price mechanism and mis allocation of resources
Under Communism:-
    Communism is a social structure in which classes are abolished and property is commonly controlled, as well as a political philosophy and social movement that advocates and aims to create such a society. ‘Pure Communism’ refers to a classless, stateless society, one where decisions on what to produce and what policies to pursue are made in the best interest of the collective society with the interests of every member of society given equal weight in the practical decision – making process in both political and economic spheres of life.
Features:-
1. It is the extreme form of Socialism
2. Absence of private property
3. Society produces every thing needed by it. It is a stage of abundance.
4. People will work willingly and efficiently without wages.
5. It is based in the principle ‘to each according to need, from each according to ability.’
Merits of Communism:-
1. No scarcity, No classes and No exploitation, so there will be no need for a state.
2. No differences between occupations and towns and villages.
3. Dignity of all citizens.
Demerits:-
1. Not successful in business
2. Lack of incentives
3. Loss of Liberty
4. Absence of price mechanism, Individual freedom etc.
5. In practice, Authoritarian govts with ownership of all means of modes.
Under Mixed Economy:-
    As its name indicates it is a mixture of capitalism and socialism. There is co-existence of private sector and public sector. Govt dissects and control same key areas of the economy and the rest are left to price mechanism. Decisions regarding what to produce, how to produce and how much to invest etc. are taken by govt. At the same time private sector is allowed to operate freely except in same key areas. There are two types of mixed economics. In the first, the means of production are owned by private entrepreneurs, while the govt directly controls and regulates the working of the economy through monetary and   fiscal policies.
    Here the govt. producer only defence equipments and taken care of public utility services like water, gas, electricity & transport. So this system is also called mixed capitalism or controlled capitalism.
    In the second, govt. Plays a vital role in the production of commodities and also directs and controls private enterprises. Here the strategic sectors like mining, metals, steel, oil, defence etc are under the control of state and the rest are owned by private entrepreneurs.
Features:-
1. Co-existence of public & private Sector.
2. Centralized economic planning.
3. Depends on both price mechanism and govt. directives.
4. Blending of profit motive with social interest.
5. Consumer’s sovereignty is protected.
Forms of business organizations:-
    Business is an organized economic activity deals with production and sale of goods and services needed by the society. It includes both industrial and commercial activities aiming at profit.
The major characters of business are:
1. Sale, transfer or exchange of goods and services for the satisfaction of human beings.
2. It deals in goods and services
3. Recurrence of Transactions
4. Profit Motive, and
5. The presence of the element of risk
     Every business needs some resources like men, money, materials etc. If these resources are put together to work systematically, that is referred to as organization. Therefore, a business organization is an economic institution which combines and coordinates all the required resources required for carrying out the production and distribution activity with an objective of earning profit.
    The first question to be addressed in organizing the business is that of the ownership of organization. In a mixed economy there are three broad categories of business organizations. They are:
(1) Private Sector Organizations,
(2) Public Sector Organizations, and
(3) Joint Sector Organizations
    The modern day Business Organizations are also classified in to three broad categories on the basis of their ultimate aim. They include:
1. Business for Profit
2. Business not for Profit, and
3. Business for Non-Profit
I.Private Sector Enterprises:-
    An organisation which is owned, managed and controlled by private individuals are called Private sector enterprise.
Eg: TELCO,TISCO,TATA POWER etc of TATA Century, Birla Yamaha, Grasium Industries etc. of Birla, Reliance Industries, Reliance Capital etc. of Ambanies. The various forms of organisation under private sector includes- Sole proprietorship, partnership, HUF, joint stock companies, MNC’S, and Co-operative Societies.
Features:-
1. Private ownership
2. Private management
3. Profit objective
4. private – accountability
5. Private Financing
    Industrial Policy Act 1956 demarcated the areas for the Public and Private sector in India. However, since the introduction of economic reforms in 1991, the government has sought to transform itself from being a provider of probable services to a purchaser on behalf of user. Thus emerged a new paradigm of public-private-partnership (PPP)
Business for Profit/ Private Sector Enterprises:-
1. Sole Proprietorship:-
     Sole Proprietorship is a form of business organization in which an individual introduces his own capital, uses his own skill and intelligence in the management of its affairs and is solely responsible for the results of its operations. The major features of this form of organization are single ownership, one-man control, undivided risk, unlimited liability, minimum or no government intervention and absence of separate legal entity.
Merits:
1. Ease of formation and dissolution
2. Direct Motivation
3. Facility of Co-ordination
4. Promptness in decision – making
5. Flexibility in management
6. High Secrecy
7. Credit Standing
8. Freedom from Govt. Regulations.
Limitations:
1. Limited Finances
2. Limited Managerial skill
3. Unlimited Liability
4. Lack of Continuity
5. Not suited for large scale business operations.
6. Greater risks.
2. Joint Hindu Family Firm / Hindu Undivided Family Business (HUF):-
     Business organization owned by all the male members of an HUF and managed by the head of the family. The members are called coparceners and the head is called Karta. There is no contractual relationship among coparceners, so it is not a partnership. The liability of Karta is unlimited whereas the liabilities of all other members are limited. HUF is a family consists of all male persons lineally descended from a common ancestor and includes their wives and unmarried daughters. The property of an HUF is inherited by a Hindu from his ancestors.
Under Hindu Law, there are two systems of inheritance:
1. Dayabhaga-
    Under this system, male as well as female members of a family can become coparceners.  This system prevails in West Bengal.
2. Mitakashara:-
    Under this system, only male heirs can become coparceners in the family business. The three successive male generations, ie., sons, grandsons and great – grandsons become joint owners of ancestral property.
    In Kerala, the concept of coparceny was abolished and according to the Kerala Joint Family System (Abolition) Act, 1975, the heirs, both male and female do not acquire property by birth but only hold it as tenants as if a partition has taken place.
Features of HUF business:
1. Membership is by virtue of birth in the family as per Hindu Succession Act, 1956.
2. Managed by eldest male member of family called Karta.
3. Liability of Karta is unlimited.
4. Liabilities of coparceners are limited.
5. Right to the accounts vested with the Karta alone.
6. Continuity of business
7. Implied authority of Karta to enter in to contracts and to pledge the business.
3. Partnership Firm:-
    A partnership is a form of business in which two or more people operate for the common goal which is often making profit. They are individually known by the name partners and collectively by the name firm. The name in which they operate business is the firm name. According to sector 4 of Indian Partnership Act 1932, 'Partnership is the relation between two or more persons who have agreed to share the profits of a business carried on by all or any of them acting for all.'
Feature of Partnership:-
1. Partnership is the result of an agreement called Partnership deed, which may be either oral or written. Written agreement should be duly stamped as per Indian Stamp Act 1889.
2. Minimum number of persons required to form a partnership is 2 as per Indian Partnership Act.
3. Maximum number of members for a banking business is 10 and for a non-banking business is 20 as per Section 11 Indian Companies Act.
4. Funds/Capital for the business is usually contributed by all the partners
5. Control/Management vest with all the partners.
6. Incomeof partnership is taxed under slab system.
 Types of Partners:-
(a)Active Partners –Those who carry on the business on behalf of all other partners.
(b)Sleeping or dormant partners –Those who invest capital, shares profit, shares liability but not participating in management.
(c)Nominal Partners -Those who do not invest, do not share profit, do not participate in management but only lend their name to the firm. They are liable to third parties.
(d)Partner by estoppel –Persons behave in such a fashion that he is mistaken to be a partner by third partner and he will be held liable to those third partner who extend credit to the firm on the reputation of his being a partner.
(e)Partner by holding out –If a person is declared by word or deed to be a partner by another, the person concerned should deny it immediately on coming to know of such a declaration.  If he does not, he will be held liable to third partner. Such partners are known as partner by holding out.
(f)Minor partners –As the partnership is formed by an agreement, a minor cannot enter in to a partnership. But with the consent of all the partners, a minor may be admitted to the benefits of partnership and his liability will be limited to the extent of his share in the firm.
 Types of Partnership:-
    Based on the type of agreement, partnership may be a general partnership and special partnership. General partnership may be partnership at will and particular Partnership. When there is no provision in partnership agreement for the duration of partnership, it is called partnership at will. A particular partnership is formed for a specific purpose or for a particular period. A special partnership may be limited partnership where the liability of one more partners is limited and unlimited partnership.
4. Joint Stock Companies:-
    Company form of business organization emerged due to the limitations of earlier forms of organizations on the one hand, and the highly increased needs of large-scale industry in the era following the industrial revolution on the other.
    According to US Supreme Court Justice John Marshall, a company is an artificial being, invisible, intangible and existing only in contemplation of law.
    Sec.3 (1) of the Companies Act 1956, Company means a company formed and registered under this Act or an existing company. An existing company means a company formed and registered under any of the previous Acts.
Characteristics -
1. Separate legal entity
2. Limited liability of members
3. Perpetual existence
4. Common seal as a substitute for signature.
    The process of company formation may be divided into two stages such as promotion and incorporation.
    Promotion is the process of exploration, investigation, and the organization of necessary resources with the object of initiating business under corporate ownership. The persons who take this kind of an initiative to start a business are known as promoters.
    Incorporation is the legal process through which the separate corporate entity of a company is given recognition by law. To secure incorporation, the promoters prepare and file with Registrar of Joint Stock Companies the documents like. Memorandum of Association-Charter of the company contains, name, location, objectives, capital etc. of company.
    Articles of Association- contains rules and regulations of the company
If the registrar is satisfied with these documents , he will issue a certificate of Incorporation.
Types of Companies –
A. On the basis of Incorporation
1. Chartered Companies
2. Statutory Company
3. Registered Company
(a) Public Limited Companies- Minimum 7 members and no restriction towards maximum number of members. The word limited is used at the end of its name. Free transferability of shares. Invites public to accept shares. Minimum paid up capital 5, 00,000. Minimum number of directors required is 3.
(b) Private Limited Companies- Minimum 2 members is enough. Maximum is restricted up to 50. Minimum paid up capital is 1, 00,000/-cannot issue prospectus. Restricts right to transfer shares. The word 'Private- Limited' is used at the end. Minimum number of directors required is 2.
B. On the basis of Liability:-
1. Company limited by shares
2. Company limited by guarantee
3. Unlimited Companies
C. On the basis of area of functioning:-
1. National Company
2. Multinational or transnational Company

5. Cooperative Organizations:-
    A co-operative society is essentially an association of persons who join together on a voluntary basis for the promoting their common economic interest. It functions on the principle of self help through mutual help. The primary motto of cooperative sector is “ll for each and each for all.'
    According to Sec.4 of Indian Cooperative Societies Act, 1912, a cooperative organisation is a ' Society which has as its objectives the promotion of the interests of its members in accordance with cooperative principles'
Features:-
1. Voluntary association
2. Democratic Control
3. Service motive
4. Distribution of surplus to members
5. Separate legal entity
6. Government control and support
7. Contribution of share capital by members
Types of Cooperative Societies:-
1. Consumer cooperative societies- Retail  stores owned and organized by people of small means to make available to themselves their daily requirements of goods at moderate prices.
2. Producer's Cooperative Societies – Voluntary organisation of producers formed with the object of eliminating the capitalist class from the system of industrial production. Producer's cooperative society may be of two types:
(a) Society will supply the necessary inputs and guidance to members, and the members are only expected to produce individually and sell the same to society.
(b) Cooperatives in which members are rapid wages by the society for the work done by them.
3. Cooperative Credit Societies- Credit societies are set up to pool savings of members and to make them available as loans to those members who need credit at cheaper rates.
4. Marketing Co-operatives- Societies for sitting manufactured and agricultural products, for enabling members to get fair prices for their products. They may be of agricultural marketing cooperatives and industrial marketing cooperatives.
5. Cooperative farming societies- The agricultural cooperatives pool the fragmented land holdings of small land owners and farm on a collective basis.
6. Housing cooperative Societies-Societies formed to provide housing to their members either on an ownership basis or at a fair rent.
II. Public Sector Enterprises:-
    An organisation which is owned, managed and controlled by the central government or any State government or local authority is known as PSU. Various forms of PSU’S are
1. Departmental Undertakings:-
    A PSU is organised, controlled and financed by the government in the same way as any other government department. Railways, Civil Aviation, Post and Telegraph, Public Works etc. are examples.
2. Statutory Cooporations:-
    It is an autonomous organisation that is established and governed by a special act of parliament or assembly. LIC, Air India, ONGC, FCI are examples for the same.
3. Government Company:-
    Any company in which at least 51% of the paid up share capital is held by Central Government, or by any State Government or Governments, or partly by Central Government and partly by one or more State Governments and includes a company which is a subsidiary of a government company. Examples SAIL (Steel Authority of India Limited, Coal India Limited and HMT.)

III. Joint Venture:  Joint Venture is a legal entity formed between two or more parties to undertake an economic activity together.  It is the pooling of resources and expertise by two or more businesses to achieve a particular goal.  The organizations involved may be private, government owned, or foreign, and working on the basis of a Memorandum of Understanding (MOU) signed by all parties.
Merits:
1.Creates a base for growth and innovation
2.Enhances resources and capacity
3.Improves access to technology
4.Lowers cost of production
5.Lowers risk, and
6.Establishes brand name.
Demerits:
1.Slow decision making
2.Lack of full disclosure from partnering companies
3.Level of technology to be adopted in not fully disclosed.
Examples are Maruti – Suzuki, Hero – Honda, Ford – Escort etc.
Business Not for Profit/ Non-Profit Organizations:
A non profit or not for profit organization is an organization that does not distribute its surplus funds to owners or shareholders, but instead uses them to help pursue its goals.  Usually they do not seek profits as a goal.  Examples of NPOs include charitable organizations, trade unions, arts organizations and NGOs.  They fill certain needs of society that are not provided by Government and business.
In India, NPOs are commonly known as Non Governmental Organizations (NGOs) and they can be registered as Trusts, Societies, Section 25 Companies or by Special Licensing.  NGOs in India are governed by Articles 19(1) and 30 of the Constitution of India, Indian Income Tax Act 1961, Societies Registration Act 1860, Section 25 of the Indian Companies Act 1956, Foreign Contribution (Regulation) Act 1976 and by the Public Trusts Acts of various States.  The main sources of receipts for NPOs in India are self generated funds, loans, grants and donations.
Examples are Bill Gates Foundation, Amnesty International, Rotary Internationsl, Red Cross, UNESCO, World Wide Fund for Nature, Scout, Helpage India, Save the Children fund etc.
Problems faced by NPOs
1.Difficult to measure the performance of employees and managers when the goal is providing public service rather than increasing sales and profits.
2.Rely on external funding to maintain their operations and changes in these sources may influence the reliability or predictability with which organizations can hire and retain staff, sustain facilities, create programs or maintain tax-exempt status.
3.Unreliable funding, long hours of work and low pay can lead to employee burnout and high labour turnover.
4.Resource mismanagement is high because the employees are not accountable to anybody.
5.Dynamic founders with strong vision try to retain control over the organization, even as new employees or volunteers want to expand the projects' scope and try new things (Founder's Syndrome)
Multi Nationals – Trans Nationals
A MNC or TNC is also  called Multi National Enterprise (MNE).  It is a corporation or enterprise that manages production or delivers services in more than one country.  It can also be referred to as an international corporation.
An MNC is defined as, a corporation that has its management headquarters in one country, known as home country, and operates in several other countries, known as host countries.
The first modern MNC is generally thought to be the East India Company. MNCs can have a powerful influence in local economies, and even the world economy and also play an important role in international relations.
Public-private-partnership
Public-private-partnership describes a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies.  These schemes are sometimes referred to as PPP, P3, or P .
PPP involves a contract between a public sector authority and a private party, in which the private party provides a public service or project and assumes substantial financial, technical and operational risk in the project.  In some types, the cost of using the services is borne by the users of the service and in other types capital investment is made by the private sector on the strength of a contract with government to provide agreed services and the cost of providing the service is borne wholly or in part by the government.
Typically, a private sector consortium forms a Special Company called a Special Purpose Vehicle (SPV) to develop, build, maintain and operate the asset for the contracted period.  In cases where the government has invested in the project, it is typically alloted an equity share in SPV.
Example- KGS Aranmula Airport Limited of Pathanamthitta.
Sectors of the Economy:
A nation’s economy can be divided into various sectors to define the proportion of the population engaged in the activity sector. This categorization is seen as a continuum of distance from the natural environment. The continuum starts with the primary sector, which concerns itself with the utilization of raw materials from the earth such as agriculture and mining. From there, the distance from the raw materials of the earth increases.
Primary Sector
The primary sector of the economy extracts or harvests products from the earth. The primary sector includes the production of raw material and basic foods. Activities associated with the primary sector include agriculture (both subsistence and commercial), mining, forestry, farming, grazing, hunting and gathering, fishing, and quarrying. The packaging and processing of the raw material associated with this sector is also considered to be part of this sector.
In developed and developing countries, a decreasing proportion of workers are involved in the primary sector. About 3% of the U.S. labor force is engaged in primary sector activity today, while more than two-thirds of the labor force were primary sector workers in the mid-nineteenth century.
Whereas agriculture dominates the Indian economy to such an extent that about two-thirds of India's workforce is directly engaged in agriculture for their livelihood.
Secondary Sector
The secondary sector of the economy manufactures finished goods. All of manufacturing, processing, and construction lies within the secondary sector. Activities associated with the secondary sector include metal working and smelting, automobile production, textile production, chemical and engineering industries, aerospace manufacturing, energy utilities, engineering, breweries and bottlers, construction, and shipbuilding.
Tertiary Sector
The tertiary sector of the economy is the service industry. This sector provides services to the general population and to businesses. Activities associated with this sector include retail and wholesale sales, transportation and distribution, entertainment (movies, television, radio, music, theater, etc.), restaurants, clerical services, media, tourism, insurance, banking, healthcare, and law.
In most developed and developing countries, a growing proportion of workers are devoted to the tertiary sector. In the U.S., more than 80% of the labor force are tertiary workers.
Quaternary Sector
The quaternary sector of the economy consists of intellectual activities. Activities associated with this sector include government, culture, libraries, scientific research, education, and information technology.
Quinary Sector
Some consider there to be a branch of the quaternary sector called the quinary sector, which includes the highest levels of decision making in a society or economy. This sector would include the top executives or officials in such fields as government, science, universities, nonprofit, healthcare, culture, and the media.

Hospitality Industry
The hospitality industry consists of broad category of fields within the service industry that includes lodging, restaurants, event planning, theme parks, transportation, cruise line, and additional fields within the tourism industry. The hospitality industry is a several billion dollar industry that mostly depends on the availability of leisure time and disposable income. A hospitality unit such as a restaurant, hotel, or even an amusement park consists of multiple groups such as facility maintenance, direct operations (servers, housekeepers, porters, kitchen workers, bartenders, etc.), management, marketing, and human resources.
The hospitality industry covers a wide range of organizations offering food service and accommodation. The hospitality industry is divided into sectors according to the skill-sets required for the work involved. Sectors include accommodation, food and beverage, meeting and events, gaming, entertainment and recreation, tourism services, and visitor information.
Health Care Industry
Health care or healthcare is the treatment and prevention of illness. Health care is delivered by professionals in medicine, dentistry, nursing, pharmacy and allied health. The health-care industry incorporates several sectors that are dedicated to providing health care services and products. According to industry and market classifications, such as the Global Industry Classification Standard and the Industry Classification Benchmark, the health-care industry includes health care equipment and services as well as pharmaceuticals, biotechnology and life sciences. The particular sectors associated with these groups are: biotechnology, diagnostic substances, drug delivery, drug manufacturers, hospitals, medical equipment and instruments, diagnostic laboratories, nursing homes, providers of health care plans and home health care.
According to government industry classifications, which are mostly based on the United Nations system, the International Standard Industrial Classification, health care generally consists of hospital activities, medical and dental practice activities, and other human health activities. The last class consists of all activities for human health not performed by hospitals, physicians or dentists. This involves activities of, or under the supervision of, nurses, midwives, physiotherapists, scientific or diagnostic laboratiories, pathology clinics, home, or other para-medical practitioners in the field of optometry, hydrotherapy, medical massage, music therapy, occupational therapy, speech therapy, chiropody, homeopathy, chiropractics, acupuncture, etc.
Business Process Outsourcing
Business process outsourcing (BPO) is a subset of outsourcing that involves the contracting of the operations and responsibilities of specific business functions (or processes) to a third-party service provider. Originally, this was associated with manufacturing firms, such as Coca Cola that outsourced large segments of its supply chain. In the contemporary context, it is primarily used to refer to the outsourcing of services.
BPO is typically categorized into back office outsourcing - which includes internal business functions such as human resources or finance and accounting, and front office outsourcing - which includes customer-related services such as contact center services.
BPO that is contracted outside a company's country is called offshore outsourcing. BPO that is contracted to a company's neighboring (or nearby) country is called nearshore outsourcing.
Given the proximity of BPO to the information technology industry, it is also categorized as an information technology enabled service or ITES. Knowledge process outsourcing (KPO) and legal process outsourcing (LPO) are some of the sub-segments of business process outsourcing industry.