Tip Top is a secondary sector firm that manufactures ice cream and is owned by a New Zealand brand; Fonterra. They have an interdependent relationship with two mutual reliances. The reliances include a primary sector firm and a tertiary sector firm. The interdependent firms mentioned below are, Dairy Farmers (primary) and Delivery Trucks (tertiary). The Secondary Sector is: “The portion of an economy that includes light and heavy industrial manufacturers of finished goods and products from raw materials. Businesses that make up the secondary sector of industry often require substantial machinery to operate, and they create waste that can contribute to environmental pollution.”
” Interdependence is the mutual reliance between two or more groups.” Without interdependence Tip Top wouldn’t be able to produce and sell their goods and services. Tip Top has an interdependent relationship with a primary industry. ” The primary sector which is, industries engaged in production or extraction of natural resources such as crops, oil, and ores.” Dairy Farmers would be apart of the primary sector as Tip Top rely on them to provide them with their goods and services which are fresh milk and cream. Dairy Farmers in return rely on Tip Top to provide them with income so they can keep providing them with fresh milk and cream. During the recent summer months Tip Top received 35,000 litres of fresh milk and 20,000 litres of fresh cream a day as their quantity demand for ice cream in summer had increased by a very large amount. Tip Top needs these resources (fresh milk and cream) to make their ice cream, if they did not have a relationship with the Dairy Farmers,Tip Top would not be able to produce their goods and services as they wouldn’t have a reliable source to purchase fresh milk and fresh cream. As a result, it would lead them into closing down their company as they wouldn’t have proper resources. The income made by selling their goods makes Tip Top more capable to cover costs and would make them more profitable as a company. The interdependent relationship between Tip Top and Dairy Farmers is illustrated in the diagram above. The red arrow in the diagram shows a real flow ( fresh milk and cream ) moving from Dairy Farmers to Tip Top because Tip Top is receiving fresh milk and cream from Dairy Farmers.
As mentioned above, Tip Top relies on Dairy Farmers to provide them with fresh milk and cream, and Dairy Farmers rely on Tip Top to provide them with income which they need to cover the cost of production. Cost of production includes wages for workers, food for animals, purchasing new equipment/ better machinery to increase their provision of fresh milk and fresh cream for many companies. If Dairy Farmers were not capable of providing food for their animals, the animals would be undernourished due to the lack of food. The “undernourishment” will mean that they will not be able to produce fresh milk and cream. If this may happen both Tip Top and the Dairy Farmers will be affected. Tip Top won’t have their suppliers for fresh milk and cream and the Dairy Farmers will have no way of earning income because they aren’t able to provide specific resources. Not being capable to provide fresh milk and cream, the Dairy Farmers will need to lay off many workers/farmers as they wouldn’t have “sufficient” revenue to employ many workers/farmers. This concept is also illustrated in the diagram above. The green arrow in the diagram shows a money flow (income) from Tip Top to Dairy farmers because Tip Top needs to pay Dairy Farmers income for their services. This income is required as this is how Dairy Farmers will pay their workers wages and electricity, etc.
Tip Tip also has another interdependent relationship with a tertiary industry. “The tertiary sector consists of industries which provide a service, such as transport and finance.” Delivery Trucks would be apart of the tertiary sector as Tip Top rely on them to “deliver raw materials and other manufactured goods (inclusions and packaging) to Tip Top for them to use in the production of their ice cream” and in return Delivery Trucks relies on Tip Top for income. If Tip Top didn’t have an interdependent relationship with Delivery Trucks, they wouldn’t be able to deliver or receive their goods. This wouldn’t benefit their company because they won’t have any raw materials and other manufactured goods for them to use in the production of their ice cream, Meaning they make less profit because the amount of resources received would have decreased and they couldn’t sell as many products. The shortage of the resources needed in the production may mean they would have to shutdown the company because they won’t have any other resources to continue making and selling their products, if they do not shut down their company will face a loss as they wouldn’t be capable enough to pay wages to workers and electricity for the whole building, etc. This concept is illustrated in the diagram above. The red arrow in the diagram shows a real flow (transportation services) from Tip Top to Delivery Trucks, because Tip Top receive the resources delivered by Delivery Trucks.
As it is mentioned above, Delivery Trucks rely on Tip Tip to provide them with income because in return Tip Top relies on Delivery Trucks to deliver raw materials and other manufactured goods. Delivery Trucks rely on Tip Top to provide them with income because from the income received they will be able to pay for petrol, worker’s wages, and payments for the shipment etc. This flow from Tip Top to Dairy Farmers is called a money flow (green arrow) as Delivery Trucks are receiving money; income. Delivery Trucks is a tertiary sector firm because they deliver many companies their materials needed and also other manufactured goods. In return for the services, Delivery Trucks depend on Tip Top to always hire them for transportation services so they can gain an income. If Tip Top fails to provide the Delivery Trucks with an income, the Delivery Trucks will face a loss. If this may happen, Deliver Trucks will not be capable enough to employ many workers, payment for the building and deliver Tip Top with what they need, because they wouldn’t have received enough income. So if any of the businesses’ fail to provide the other business with what they need, both of the business will face a loss. So the mutual reliance between Delivery Trucks and Tip Top is important for both firms to maintain their business.
The sectors that have a mutual reliance with Tip Top are: Households, Finance and Government. “All persons living under one roof or occupying a separate housing unit, having either direct access to the outside (or to a public area) or a separate cooking facility. Where the members of a household are related by blood or law, they constitute a family.” “The Financial sector includes banks and other financial institutions. They act as intermediaries (go betweens) between households who have savings and producers who require money for investment.” The Government sector includes: subsidies which are payments paid to a producer because the government believes their product should be produced more, transfer payments which are paid to households, and indirect taxes which are paid by all wages or salary earners.
Tip Top is interdependent on the financial sector for loans so they can make investments for better productivity, such as buying new or better machinery, expansion and other things that are beneficial for their firm. The financial sector relies on Tip Top for interest on loan, savings which is shown in a pink box with interest on loan, so they can earn their income and provide other people money in the form of loans. These are both money flows because Tip Top is giving money to the financial sector in the form of savings and interest on loans and Tip Top is gaining money from the financial sector in the form of loans to make investments for improved productivity. If any of the firms fail to provide each other with what they need, both the business’ will face a loss. If this may happen, Tip Top won’t be able to make any new investments and buy new/better equipment for the benefit of their company, this may affect their sales or production process. If they were to have older machinery/ equipment, they won’t have the benefit of improving their products, newer equipment could be more time efficient. As for the bank it wouldn’t result in a good way either because the bank won’t be capable enough to provide people with loans and they won’t be earning an income either.
Households rely on Tip Top for goods; ice cream. This is a real flow because households are getting ice cream; this is not money, it is a real product. Households also depend on Tip Top for an income if they work at Tip Top. Tip Top relies on households (consumers) to purchase their ice cream, this is consumer spending; consumers spending money on their product which will be the sales of Tip Tops product and then become the profit of their product and then Tip Top can cover the cost of production of the ice cream and then earn their revenue. The income and purchase of the ice cream are both money flows because Tip Top is giving money to households in return for working at their firm and households buy Tip Tops ice cream with money and the money goes to Tip Top and the place which is most likely a supermarket the consumers bought the ice cream from.Tip Top relies on households for labour and make the product. This is a real flow because humans are involved in this flow, humans from households go work for Tip Top. They do get paid for this but that is a separate flow; money flow, income, which has been mentioned above.
The interdependence between Tip Top and the overseas sector is import and exports. Tip Top exports their finished product; ice cream to the overseas sector and gets export receipts. The overseas sector gives import goods to Tip Top and Tip Top then pays for the goods; this is called import payments. The goods being given and received is a real flow and export receipts and import payments is a money flow because money is involved, not a good or service.
The pink box which shows savings and interest on loan show that between the financial sector and Tip Top there is a money flow and that the financial sector relies on Tip Top for their savings and interest on loan and Tip Top relies on the financial sector for loans to make investments in their company. This is shown by the blue arrow from the financial sector to Tip Top and the pink box around “Loans for Investments” showing this is a money flow.
The blue arrow from Tip Top to households and the black box “Goods (ice cream)” shows households rely on Tip Top for their ice cream and that the ice cream; a real product going from Tip Top to households is a real flow. The green arrow from Tip Top to households and the pink box show the money flow of income. The blue arrow from households to Tip Top and the pink box shows the money flow of consumer spending. The blue arrow from households and the pink box “Labour” to Tip Top is a real flow as households are providing Tip Top with a service; labour, working for their company.
In the pink box is Exports (Ice Cream)”, a good is mentioned; ice cream. The blue arrow from Tip Top to the overseas sector shows that the ice cream is going from Tip Top to overseas. This is the export, which means this is a real flow because a good is involved. In return for this export a export receipt is given to Tip Top. This is shown with the pink box “Export Receipt” and the black arrow showing this is a money flow from the overseas sector to Tip Top. Tip Top also buys good from the overseas sector, the good coming into New Zealand is called an import, this is shown in the diagram by the black box “imports” and the blue arrow from the overseas sector to Tip Top. This means this is a real flow; a real product is involved. The product will be whatever Tip Top wants, eg; Tip Top buys chocolate from Singapore, so the chocolate is the real good and Tip Tops payment for the chocolate is an import payment. Import payment is shown on the diagram in a pink box with a blue arrow from Tip Top to the overseas sector because money going from Tip Top to the overseas sector. This is a money flow in return of the real flow (“chocolate”). The interdependent relationship between Tip Top and the overseas sector is good (ice cream) for money (export receipt) and money (import payment) for good(“chocolate”).
The increase in China’s demand for Tip Top’s ice cream will directly affect the overseas sector as there will be an increase in exports to China which also means an increase in export receipts that Tip Top will get. Chinese market will get more goods (ice cream) because Tmall is able to supply more, Tmall will receive more consumer spending from the sales of ice cream and be able to pay for the export of ice cream to Tip Top.
The increase in export receipts happened because China’s demand for Tip Tops ice cream increased so Tip Top will be supplying more ice cream to China so China will pay more money = money flow to Tip Top in return for the export of goods (ice cream) = real flow and therefore Tip Top will receive more export receipts. China may have demanded more ice cream because the season may have changed to summer in China and as consumers demand more ice cream in summer because of the hot weather the Chinese market needs to make sure they have enough Tip Top ice cream to sell.The Chinese market would want Tip Top ice cream because Tip Top holds 70% of the ice cream market share. China’s demand may have also increased because Tip Top is trialling an online sale of it’s ice cream to China through a leading Chinese e-commerce provider; Tmall and the sales from this increased by 90% between 2008-2014 because the Chinese market may have liked Tip Top’s ice cream and the sales are probably still increasing. From the increase in demand, Tip Top will have to increase production which means producing more goods and requiring more resources and ingredients. Tip Top gets ingredients from secondary producers in the overseas sector, eg; Chocolate from Singapore, Cones from Germany and Fruit from Philippines, China and Australia, etc. So this will mean there will be an increase in imports from the overseas sector to Tip Top and in return there will be an increase in import payments from Tip Top to the overseas sector.
The pink arrow show an increase in the real flows of exports, imports and goods to Tmall and Chinese markets from the purple line, which shows he export, import and goods flow before the increase in Tip Tops ice cream demand from China. The black arrow shows the increase in money flows; export receipts, import payments and consumer spending from the green line which was the money flow before the increase in China’s demand for Tip Top ice cream. These lines and arrows just show the before and after of the money flows from China’s demand of Tip Top ice cream.
A flow on effect could be that as there is an increase in demand for Tip Top ice cream there will be an increase in demand for labour from households and income paid to households from Tip Top because they will need more workers to produce more ice cream. This means households will receive more income from increased employment. A flow on effect from this could be that households will have increased consumer spending from their wages and increase in cost of production, they then spend their consumer spending on Tip Top even more and Tip Top will have more revenue and profit from the increase in sales.
The flow on effect happened from the increase in demand for Tip Tops ice cream from China which caused an increase in sales, profit, revenue, cost of production; labour for Tip Top and increase in income, consumer spending for households
In the diagram above you can see that the purple line shows the labour Tip Top had from households before the increase in China’s demand and the pink arrow shows that labour has increased because of China’s increased demand. You can also see on the right of the diagram that this is a real flow.
The green line shows the income Tip Top gave to households and how much consumer spending Tip Top received from households before the increase in China’s demand. The black arrows show the increase in income and consumer spending after the increase in China’s demand and the key on the right shows this is a money flow.