Classification of business

Classification of Businesses

Introduction to Business Sectors

  • Businesses can be classified into three main sectors based on their operations: primary, secondary, and tertiary.

  • This classification helps in comparing firms within the same sector; however, many businesses operate across multiple sectors.

    • Example: Large oil companies like Shell operate in the primary sector (extraction), secondary sector (refinement), and tertiary sector (selling).

The Primary Sector

  • Definition: The primary sector involves the extraction of raw materials from natural resources such as land, sea, or air.

  • Examples of Primary Industries:

    • Farming

    • Mining

    • Forestry

    • Fishing

  • Global Trends:

    • Developing economies often have a higher employment rate in the primary sector, focusing largely on agriculture and food production.

    • Over the last two decades, there has been a decline in employment within the primary sector, except in the least developed countries.

    • Factors influencing this trend include lower education participation and inadequate infrastructure for manufacturing services.

  • Observations from Graphs:

    • Malawi: Highest proportion of employment in the primary sector.

    • China: Significant decline in primary sector activity since 1991.

    • Germany: Small primary sector, focusing more on manufacturing and services.

The Secondary Sector

  • Definition: The secondary sector involves processing raw materials into finished goods.

  • Examples of Secondary Industries:

    • Oil refinement

    • Manufacture of goods (e.g., vehicles)

  • Economic Trends:

    • With advancements in technology, fewer laborers are needed in the primary sector, leading to increased employment in secondary industries.

    • Businesses have relocated production to take advantage of lower wage rates in emerging economies.

  • Graph Analysis:

    • China: Highest proportion of employment in the secondary sector, though rates are declining.

    • Ghana & India: Experienced significant increases in secondary sector growth since 1991.

    • Brazil & Turkey: Secondary sectors have remained stable from 1991 to 2019.

The Tertiary Sector

  • Definition: The tertiary sector focuses on providing services to consumers and businesses.

  • Examples of Tertiary Industries:

    • Leisure services

    • Banking

    • Hospitality

  • Quaternary Sector:

    • A sub-sector of tertiary focused on knowledge-based services (IT, consultancy, research).

  • Trends in Development:

    • Emerging economies are witnessing growth in tertiary and quaternary sectors, with a shift towards consumer service provision.

    • Developed economies show high employment in service sectors, particularly in quaternary industries due to increased education and skills training.

  • Employment Observations:

    • USA & Germany: Highest employment proportions in service industries.

    • Thailand: Service sector employment doubled from 1991 to 2019.

    • Ecuador: Nearly half of the workforce employed in services.

Exam Tips

  • Be familiar with examples of businesses in the primary, secondary, and tertiary sectors, as this topic frequently appears in multiple-choice questions.

Classification of Businesses

Introduction to Business Sectors

Businesses are classified into three sectors: primary, secondary, and tertiary. This classification aids in comparing firms within similar sectors; many businesses operate across multiple sectors.

The Primary Sector

  • Definition: Involves extraction of raw materials from natural resources.

  • Examples: Farming, Mining, Forestry, Fishing.

  • Global Trends: Higher employment in developing economies, decline in the primary sector in most countries over the last two decades, except in least developed ones.

The Secondary Sector

  • Definition: Focuses on processing raw materials into finished goods.

  • Examples: Oil refinement, Manufacturing (e.g., vehicles).

  • Economic Trends: Technological advances reduce labor needs in the primary sector, leading to growth in secondary industries.

The Tertiary Sector

  • Definition: Involves providing services to consumers and businesses.

  • Examples: Leisure services, Banking, Hospitality.

  • Trends: Growth in service sectors, especially quaternary services in developed economies due to education and skills training.

Exam Tips

  • Know examples of businesses in each sector; commonly appears in multiple-choice questions.