Classification Of Business

Businesses can be classified into three categories:

  • Primary
  • Secondary
  • Tertiary

Primary Sector Business:

  • Focuses on the extraction of natural resources. E.g. mining, fishing, oil-drilling, etc.

Secondary Sector Business:

  • Focuses on using the goods provided by the primary sector and manufacturing it. E.g. textile industries, automobile manufacturing, etc.

  Tertiary Sector Business

  • Focuses on the provision of services in an economy. E.g. schools, hospitals, banks, etc.

Changes in the Sectors

  •    Primary sector was largest sector till the mid-18th century.
  •    Industrialization: Rapid increase in the secondary or manufacturing sector.
  •   Manufacturing sector gained importance after the industrial revolution.
  •   Today, tertiary sector is gaining importance rapidly.
  •    As countries are developing, consumers’ incomes are rising and thus the demand and importance of services are increasing along with it.
  •    De-industrialization (reduction in the size of secondary sector) is occurring.
  •    Primary sector is also diminishing.

Private and Public Sector

Private Sector:

  •   Private individuals, groups or business entities own, manage and run the business.
  • No intervention of the government.
  •   Aim is profit maximization.
  • All costs and risks are borne by the private owner.
  • E.g. KFC, Gucci, L’Oréal

Public Sector:

  •   Firms are owned and run by the government.
  •     Aim is welfare of the economy/society.
  •   Three major concerns are social, environmental and lastly economical.
  • Any profit earned is re-invested back into the business.
  •   Funded by the taxpaying citizens’ money.
  •    E.g. public schools, public hospitals.