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Chapter 20

Categories of Industry

Chapter Objectives
1. To identify and illustrate the 4 Factors of Production 2. To identify and explain the main Categories of Industry in Ireland 3. To illustrate the types of business within each category 4. To evaluate the contribution made by each sector to our economy. 5. To investigate recent trends in these industry categories

Factors of Production
1. Land This refers to all the natural materials used in production such as land itself, mineral wealth, water, timber, coal, natural gas. Extractive industries mine, fish, grow and harvest the output of the land to produce basic raw materials that are sold to consumers and manufacturers

2. Labour This is the human element in the production process. It is vital for business to have sufficient personnel with the correct level of skills in all departments.

3. Capital This is anything man made that helps to produce goods and services Capital investment refers to the purchase of new machinery, equipment and the building of new premises. Businesses finance their capital investment by using retained earnings, bank borrowings or selling shares

4. Enterprise An entrepreneur taking initiative and risk in setting up a new business to make profit Regarded as the most important factor of production because without it there can be no business start-up. Each entrepreneur tries to use as few factors as possible to produce as much as possible. In this way costs are kept low and prices competitive.

Sectors of the Economy


1. Primary Industries This sector deals with extractive industries These take natures resources (Land) and prepare them for passing to consumers or firms for processing.
Agriculture Fishing Mining Forestry

i Agriculture
Produces meat, milk, cereals and horticultural output. Employment in farming has been in decline for many years now. Small farms are no longer viable to run. Unpredictable climate Good weather can result in surplus production - fines Bad weather destroys crops Disease: BSE Bird Flu etc CAP: Farmers forced to dump their surpluses resulting in a drop in incomes.

Problems with Agriculture


1. 2. 3 4

ii Fishing
Small industry and is centred on a small number of fishing ports round the country. eg.: Killybegs, Dunmore East, Kilmore Quay. Employment in this sector is small.

Problems with Fishing


1. Dangerous 2. Unpredictable 3. The EU Common Fisheries Policy puts a limit on the amount of fish that can be caught in EU waters. Some countries, with large fishing fleets ignore these rules and fish illegally in our waters

iii Mining
Irelands mining industry is small. A large gas reserve off the coast of Kinsale supplies much of the country with natural gas through a pipeline network. There are large areas of bog, particularly in the midlands, harvested by Bord na Mona.

Problems with Mining


1. Mining is seen as a dirty industry and can damage the environment in a number of ways. 2. Mining sometimes encounters community objections.

iv Forestry
The forestry industry is run by the state agency, Coillte. The government provides grants for the planting of trees in order to develop the industry in Ireland. This sector has been increasing steadily in recent years.

Problems with Forestry


1. 2. Drains nearby soil of vital nutrients Trees are sown on land which can be used for rearing animals.

Trends in the Primary Sector


1. 2. Employment in agriculture is declining due to small farms becoming less viable to run. There have been changes in the nature of farming. Organic farm produce is becoming increasingly popular with customers due to health scares with traditional farm produce. Employment in the fishing industry is declining, as EU regulations have put limits on the number of days per month fishermen can fish.

3.

2. Secondary Sector: Manufacturing/Construction


1. 2. 3. 4. Takes the output of the primary industries and produces goods and services for sale to consumers. Indigenous Firms Transnationals Agribusiness Construction

i Indigenous Firms These are firms that are set up, owned and run by Irish people.
Benefits of Indigenous Firms They have a loyalty to the area and the country They provide employment in the local area Creates spin-off business for suppliers etc They reinvest their profits in Ireland. Employees spending supports other business

1. 2. 3. 4. 5.

1. 2. 3. 4.

Problems of Indigenous Firms Exposed to transnationals Harder to attract employees Harder to advertise When they export they are exposed to competition from larger and more efficient manufacturing units abroad.

ii) Transnationals These are firms with headquarters in one country and branches in many other countries. They may even send their profits back to that office They set up branches in other countries because it is profitable for them to do so. Example Sony, Shell, Coca Cola and Microsoft IDA Ireland (Industrial Development Authority) is responsible for attracting such companies to Ireland.

iii Agribusiness These are firms that are connected with agriculture. The range of goods produced includes cheese, butter, yoghurt, ice cream, meat etc Glanbia, Kerry Group and Golden Vale This is an important sector in the Irish economy and produces output for both the Irish and export markets.

Problems of the Agri-Business Sector Small market


The Irish market is very small. New markets need to be continually sought out in which to sell Irish produce

Supermarket Multiples
These firms have enormous buying power and dictate their terms to manufacturers. They try to drive down prices and have the power to do so.

Manufacturers in the agribusiness sector face tough competition from foreign agencies due to the open nature of the EU market.

iv Construction Traditionally provides a lot of employment. Most construction firms are indigenous which results in their profits being retained in Ireland. Problems Created economic bubble Huge downturn - unemployment Poor image

Trends in the Secondary Sector Many of the traditional manufacturing firms have closed due to competition from low-wage economies. Eg DELL Employment has fallen dramatically as a result. Irish exports increasing as world economy recovers Example Intel is a major employer in Leixlip, Co. Kildare

3. Tertiary Sector: Service Industries


This is the fastest-growing sector in the economy. This sector provides a variety of services to customers in agriculture, industry and the home. Examples Banking, Insurance, Transport, Tourism and Leisure, Catering, Retailing, Communications, This sector is the last to develop in an economy but once it starts to grow it eventually outstrips the other sectors in job opportunities. This is because of the range of services it offers and the increasing use of technology in all forms of industry

Reasons for the Growth of the Tertiary Sector


Due to the Celtic Tiger, Irish people had a higher standard of living and more disposable income to spend on service Eg.: many families had two holidays a year Due to inward migration of returning Irish people and an influx of non-nationals, Irelands population is currently at its highest since the Famine. This has ed to a huge increase in the demand for services In many families, both parents are now working outside the home, This has led to a greater demand for child care services Service sector growth has been driven by the growth of the ICT sector. It is vital for businesses to have up-to-date technology. Longer life expectancy due to better medical has in turn led to further need for medical and health care facilities for the elderly Current downturn has seriously affected services sector leading to high unemployment in this sector

The Importance of the Tertiary Sector to the Economy Between 60 and 70 per cent of the Irish labour force were employed in the tertiary sector. More than 80 per cent of small businesses in Ireland are in the services sector. This contributes huge amounts of tax revenue to the government. Example: PAYE of workers, VAT and corporation tax Irish service companies now deal in export markets as well as home markets. Example: Irish firms can now tender for contracts in other EU countries

Development of the Economy 1. Technology improves yields, jobs in agriculture decline. 2. Population migrates to urban areas and works in the construction/manufacturing industries 3. As the Construction/Manufacturing Industry develops, the service sector provides services in urban areas. 4. Developments in I.T. result in the globalisation of services.

Contribution of the Three Sectors to the Economy Goods and services are produced to sell at home and abroad. Employment is created both directly and indirectly They generate tax revenue The primary sector provides the materials for agribusiness The secondary sector encourages the development of indigenous firms The tertiary sector encourages new developments in I.T. and telecommunications and provides vital supports to businesses.

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