Types of Businesses
Businesses can be divided into three main categories: trading, manufacturing,
and service. Each type of business plays a unique role in the economy, offering a
diverse range of products and services to consumers and other businesses.
Trading Businesses
Formal Trading
Informal Trading
Examples
Formal trading businesses, also
Informal trading businesses can
Examples of trading businesses
known as retailers, sell products
sell from market stalls, home-
include CNA, Fruit & Veg City,
made by other companies
based setups, or other temporary
Toys-R-Us, furniture stores, and
directly to consumers. They buy
goods from suppliers at a certain
locations. They follow a similar
model of buying and reselling
spaza shops.
price and sell them at a higher
products, but often operate on a
price to make a profit. These
businesses typically operate from
smaller scale or in more flexible,
mobile environments.
dedicated shop premises.
Manufacturing Businesses
Raw Materials
Distribution
Manufacturing businesses take raw materials or
semi-finished products and transform them into
finished goods that people or other businesses
Manufacturers can sell their products directly to
the public or in large quantities to retail or trading
need or want.
businesses, who then sell the goods to customers.
1
2
Production
Formal manufacturing businesses typically
operate from well-equipped factories, while
informal manufacturers may work from home or
smaller facilities. The production process involves
turning the raw materials into the final product.
3
Service Businesses
1
3
Formal Services
2
Informal Services
Formal service businesses often operate
Informal service businesses may
from dedicated business premises, but
can also work from home. They provide
operate from home, temporary
structures, or mobile setups, offering a
a service and charge a fee for their
range of personal and professional
expertise and time.
services.
Examples
Examples of service businesses include hairdressers, doctors, mechanics, plumbers, airlines,
banks, architects, and travel agents.
Formal vs. Informal Businesses
Formal Businesses
Informal Businesses
Formal businesses typically operate from
Informal businesses may operate from
dedicated, well-equipped premises and
follow established regulations and
temporary or home-based setups, with a
more flexible and adaptable approach.
procedures. They often have a larger scale
They often have a smaller scale of
of operations and a more structured
approach to their activities.
operations and may not adhere to the
same level of regulations as formal
businesses.
Coexistence
Both formal and informal businesses play important roles in the economy, catering to different
needs and serving diverse communities. The two types of businesses can often coexist and
complement each other.
Service Businesses
Formal Services
Operate from dedicated business premises or can
work from home, providing a service and charging
a fee for their expertise and time.
Informal Services
May operate from home, temporary structures, or
mobile setups, offering a range of personal and
professional services.
Examples
Hairdressers, doctors, mechanics, plumbers,
airlines, banks, architects, and travel agents.