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.

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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.

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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

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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.

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