Chapter – 7
Classification of Business
Definitions
1. Primary sector (industry) – production involving the extraction of raw
materials from the earth.
2. Secondary sector (industry) – production involving the conversion of raw
materials into finished and semi-finished goods.
3. Assembly plant – factory where parts are put together to make a finished
product.
4. Tertiary sector – production of services in the economy
5. De-industrialisation – decline in manufacturing
Primary Sector
Business activity is classified into three sectors. In the primary sector business
activity involves extracting raw materials from the earth. Here are some examples.
Agriculture involves a range of farming activities. It is probably the most
important primary sector activity for most countries. Most agriculture is
concerned with food production. However, other examples include
decorative or exotic products such as cut flowers, nursery plants and tropical
fish.
Fishing involves netting, trapping, angling and trawling for fish. It also
includes catching or gathering other types of seafood, such as mussels,
prawns, lobsters, crabs, scallops and oysters.
Forestry involves managing forests to provide timber for wood products.
Modern forestry also involves protecting the natural environment, providing
access and facilities to the public and managing areas for wildlife.
Mining and quarrying is the extraction of raw materials such as coal, iron
ore, copper, tin, salt and limestone from the ground. This sector also includes
the extraction of oil and gas.
Secondary Sector
In the secondary sector, business activity involves converting raw materials into
finished or semi-finished goods. All of manufacturing, processing and construction
lie within this sector. Secondary sector business activities include metalworking,
car production, textile production, chemical and engineering industries, aerospace
manufacturing, energy utilities, engineering, food processing, construction and
shipbuilding.
Some businesses focus on the production of semi-finished goods (sometimes called
intermediate goods or producer goods). These goods are sold to other businesses
and used as inputs for the production of final goods, which are then sold to
consumers. Examples of semi-finished goods might include the parts used in
assembly plants to make motor cars, such as steering wheels, car seats, brakes,
light fittings, engines, electric cables, switching mechanisms and exhaust systems.
A single car may use around 30000 different parts in assembly.
In many developed countries the secondary sector has declined in recent years.
Tertiary Sector
The tertiary sector involves the provision of a wide variety of services, such as:
commercial services: freight delivery, debt collection, printing and
employment agencies
financial services: banking, insurance, investment advice and pensions
household services: plumbing, decorating, gardening and house maintenance
leisure services: television, tourism, hotels and libraries
Interdependence
Businesses in each of the three sectors above are likely to be interdependent. This
means that they rely on each other. The transport industry in the tertiary sector
relies on the oil industry in the primary sector to provide fuel for its vehicles.
Workers in both the secondary and tertiary sectors rely on the primary sector for
their food. In modern developed economies, this interdependence is huge. The
number of people employed in each sector does not stay the same. Different sectors
grow and decline over time. However, in the last 60 years the tertiary sector has
started to expand at the expense of both agriculture and manufacturing. The decline
in manufacturing is called de-industrialisation.