Commerciale
Channels of distribution.
Goods and services pass from manufacturers to consumers through different channels of distribution. The four most popular
channels of distribution are:
1. Direct from the manufacturer to the consumer: this happens when people buy goods and services, using the Internet or mail-order,
directly from the producer.
2. From the manufacturer to the consumer through a wholesaler, a business which buys in large quantities from manufacturers.
3. From the manufacturer to the consumer through the wholesaler who sells the goods in smaller quantities to retailers such as shops,
supermarkets, department stores.
4. From the manufacturer, via the retailer, to the consumer..
The four factors of production.
The factors of production are the basic resources that are used to produce goods and services. These factors are: natural
resources, labour, capital and entrepreneurship.
Natural resources: these resources include mineral deposits, water, agricultural land, vegetation, natural forests, marine resources
and animal life.
Labour: Goods and services cannot be produced without human input. The quality of labour is described by the term “human capital”,
which refers to the skills, education, training and experience of workers.
Capital: to make their goods or to provide their services, firms need to invest money in machinery, equipment, buildings and vehicles. This
investment is called “capital”.
Entrepreneurship: natural resources, labour and capital have to be combined and organised to provide a product or a service. This
activity is called “entrepreneurship”. Entrepreneurs are people who see opportunities for making a profit and who are ready to take
risks by producing goods and services that they hope will sell.
The three sectors of production.
There are three main sectors of production: the primary, the secondary and the tertiary sector.
The primary sector involves the extraction and production of raw materials, such as coal, wood and iron ore. Types of industries in the
primary sector are:
farming: growing crops and rearing animals.
mining: mining metals and minerals.
fishing: catching food from seas, rivers and lakes.
forestry: growing and managing forests for second productions.
The secondary sector processes the raw materials from the primary sector. This means that they take the raw materials and
transform into goods and products. It includes manufacturing and construction.
Types of industries in the secondary sector are:
food and beverages, for example, making wheat into bread. textile, using cotton and making clothes.
car manufacturing.
building.
The tertiary sector involves the provision of services to final consumers and businesses.
Types of industries in the tertiary sector are:
retailing, the sale of goods from a store. banking and insurance.
education.
Types of economy.
There are three essential types of economic systems operating in the world today: the planned economy, the free market economy and
the mixed economy.
The planned economy.
In this type of economy the government or state makes the main decisions about what will be produced, how it will be produced and in
what quantities, at what price it will be sold and who will benefit from the sale of the products and services. Planned economies are
associated with communism and state ownership of the means of production (land, labour and capital). Several countries in Eastern
Europe followed this model in the past, and planned economies still exist in Cuba and North Korea, among others.
Free market economy.
This is also known as the “capitalist system”. The main decisions about production and prices are established by the economics of supply
and demand. Consumers choose who to buy from and how much they are willing to pay for a product or a service. Japan and the Usa are
examples of free market economy.
The mixed economy.
This type of economy combines elements of both free market and planned economy. Private companies are free to compete for most
goods and services, but the government provides other services, such as public transport, education and health care. Italy, France,
Germany and the UK are examples of mixed economies.
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