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.