What is a business?

Added value is the difference between the selling price of a product and the cost of the bought-in materials and components used to make it. For example, if a sandwich sells for $4.00 and the bought-in ingredients cost$1.20, the added value is $2.80.

The primary sector extracts or harvests raw materials directly from the earth (for example farming or mining), whereas the tertiary sector provides intangible services to consumers and other businesses (for example retail, banking or transport). The primary sector deals in raw materials; the tertiary sector deals in services.

A coffee-shop chain such as Costa Coffee adds value in two main ways. First, through branding: bought-in beans and milk are cheap, but Costa's recognised, trusted brand allows it to charge a premium price, widening the gap between selling price and input cost and so increasing added value. Second, through convenience and service: comfortable stores, fast service and thousands of accessible locations mean customers pay for the experience and convenience, not just the drink — so they willingly pay a price well above the cost of the raw ingredients. Together, branding and convenience mean the finished cup is worth far more to the customer than the inputs cost Costa.

Firms in the tertiary sector provide intangible services rather than manufacturing goods, and this shapes their costs in two important ways. First, services are labour-intensive: a consultancy or a hair salon relies mainly on the skills and time of its staff, so wages are the dominant cost while bought-in materials are minor. This means most of the cost base is variable and rises with output, and the firm is highly exposed to wage increases and staff turnover, which squeeze margins. Second, service firms usually require little expensive machinery, so fixed costs and the capital needed to start up are relatively low compared with a secondary-sector manufacturer that must invest in factories and equipment. Low fixed costs make entry easier and reduce financial risk, but they also lower barriers to entry, encouraging competitors and putting downward pressure on prices. Overall, a tertiary-sector firm typically operates with a labour-heavy, low-fixed-cost structure — the mirror image of a capital-intensive manufacturer — which makes it flexible but vulnerable to wage pressure and price competition.

As economies develop, activity typically shifts from the primary sector towards secondary and then tertiary and quaternary activity, so the government's choice is really about where on that path to push.

Prioritising the secondary (manufacturing) sector has strong attractions for a developing economy. Manufacturing creates large numbers of jobs, including for lower-skilled workers moving out of agriculture, and it can drive rapid export-led growth — the route China followed from the 1980s. Building a manufacturing base also develops infrastructure and supplier networks (the chain of production), because factories demand inputs from primary firms and services from tertiary firms, spreading benefits through the economy via interdependence. However, manufacturing is capital-intensive and needs heavy upfront investment in factories, machinery and energy, which a developing economy may struggle to finance, and it can be environmentally damaging, raising sustainability concerns.

Prioritising the tertiary (service) sector — tourism, finance, IT-enabled services — needs less physical capital and can add high value per worker, and services are increasingly tradable across borders. But service growth often depends on a skilled, educated workforce that a developing economy may not yet have, and premium services may benefit only a narrow, already-wealthy group, worsening inequality.

Judgement: for a developing economy with a large, lower-skilled workforce moving off the land, prioritising the secondary sector is more appropriate in the short-to-medium term, because it absorbs that labour, builds the infrastructure and supplier links that later enable service growth, and follows the well-trodden development path. The decision is not permanent — as incomes and skills rise, the economy should deliberately shift emphasis toward tertiary and quaternary activity. The right answer is therefore sequencing: manufacturing first to build capacity and jobs, then services, rather than an either/or choice — provided the government manages the environmental cost of industrialisation to keep growth sustainable.

Marisol's choice is between two very different ways of using her inputs. A mass-market approach keeps bought-in costs and prices low, aiming for high volume and thin margins. A premium artisan approach adds far more value per loaf — higher-quality ingredients, craft skill and attractive branding widen the gap between selling price and bought-in cost — but at a higher price and lower volume.

The artisan route has clear advantages. Added value per loaf is much greater, so Marisol earns more from each sale and can build a distinctive brand and USP that differentiates her from supermarkets, whose scale she could never match on price. As a small independent, competing on price against mass producers would be very difficult, so competing on quality and value plays to her strengths. It also lets her use the creativity key concept — a memorable product and story — to attract loyal customers. On the other hand, artisan production has higher costs and a smaller market: premium loaves sell in lower volumes and depend on there being enough local customers willing and able to pay the higher price. If Marisol's location is a lower-income area, demand for premium bread may be too thin to sustain the bakery.

The mass-market route offers a larger potential market and simpler operations, but pits a tiny start-up directly against supermarkets' economies of scale — a battle she is likely to lose on cost.

Recommendation: Marisol should take the premium artisan approach, provided she has first checked that her local market contains enough customers willing and able to pay premium prices. It plays to a small firm's core advantage — adding value and differentiating rather than competing on price — and generates the higher margin per loaf a small bakery needs to survive. If local research shows insufficient premium demand, a hybrid (a core artisan range plus a few everyday loaves) would hedge the risk. The recommendation rests on the specific reality that a small independent cannot out-scale supermarkets, so it must out-value them.

An entrepreneur is an individual who identifies a business opportunity, organises the factors of production (land, labour and capital) and takes the financial risk of the venture in return for any resulting profit. For example, the founder who sets up and runs a food-truck business, investing their own money and bearing the risk of failure, is an entrepreneur.

The sectors are interdependent because each stage of the chain of production relies on the others, adding value as the product passes along it. Take a Cadbury Dairy Milk chocolate bar. In the PRIMARY sector, cocoa farmers in Ghana and dairy farmers supply the raw cocoa beans and milk — without this stage there is nothing to process. In the SECONDARY sector, Cadbury's factories transform those raw materials into moulded, wrapped chocolate bars, adding significant value; this stage depends entirely on the primary sector for a reliable, good-quality supply of beans and milk. In the TERTIARY sector, logistics firms transport the bars and retailers such as supermarkets sell them to consumers, while marketing and payment services support the sale; this stage depends on the secondary sector producing the bars, and in turn generates the demand and revenue that flow back to pay the farmers and the factory. Because a disruption at any stage — a poor cocoa harvest, a factory strike or a retail collapse — would damage the others, the three sectors are mutually dependent, each adding value and passing the product on until it reaches the final consumer.

Amara's decision is really about how much entrepreneurial risk to bear. Taking on the full risk — quitting her job and investing her savings — could be the making of the venture. Committing full-time means she can devote all her energy, creativity and time to developing the product, responding quickly to customers and building the brand, which a rushed part-time effort cannot match; enterprise as a factor of production is precisely the willingness to bear risk in pursuit of profit, and first-mover advantage in a new product like reusable food wrap can be decisive. Full commitment also signals seriousness to suppliers, retailers and any future investors. However, the downside of concentrating the risk is severe for an individual: quitting removes her steady income and invests her personal savings, so if demand is weaker than hoped she could lose both her livelihood and her cushion. Many start-ups fail, and a single unproven product is a fragile basis on which to stake everything.

Running it part-time greatly reduces this personal risk — her salary continues to cover living costs while she tests whether real customers are willing and able to buy — but at the cost of slower growth, divided attention and the chance that a faster-moving competitor copies the idea first.

Judgement: Amara should NOT immediately take on the full risk; she should keep her job and run the venture part-time FIRST, using that lower-risk phase to test demand, refine the product and build initial sales, and then commit full-time once there is genuine evidence (orders, repeat customers, a viable margin) that the venture can replace her income. This staged approach is justified by her specific position — a single, unproven product and reliance on personal savings make an all-or-nothing bet reckless, whereas a proven concept would make full commitment the right risk to take. Bearing risk is essential to enterprise, but the skill lies in taking calculated, evidence-based risk rather than maximum risk; for Amara, the calculated route is to prove the concept before she leaps.