Chapter 1.
Classification of businesses
Objectives:
• Primary, secondary and tertiary sector business
activity
• The changing importance of the classification of
business activity by sector for developing and
developed economies
• How business enterprises are classified in the
private sector and the public sector
1.2.1 Business classification:
• Primary
• Secondary
• Tertiary
Primary Sector
• involves the use / extraction or
harvesting natural resources
from the land and sea.
• Examples: agricultural
activities,mining, fising, wood-
cutting, oil drilling etc.
Primary Sector
• Primary sector business
activity often provides raw
materials for secondary sector
business activity.
• For example: extraction of oil
used to produce petrol or
plastics.
• But some primary
sector business activity
produces final
products, for example
consumers can buy raw
vegetables, fruits and
fish
Secondary sector
• involves the manufacture of
goods using the resources from
the primary sector and turns
these raw materials into
finished goods.
• Examples include auto-mobile
manufacturing, steel industries,
cloth production, furniture
making and etc.
Tertiary Sector
• Firms that supply a service to
consumers and other
businesses
• this consist of all the services
provided in an economy.
• this includes hotels, travel
agencies, hair salons, banks
etc.
Information :
• Up until the mid 18th century, the primary
sector was the largest sector in the world, as
agriculture was the main profession
• After industrial revolution, more countries began
to become more industrialized and urban,
leadiing to rapid increase in the manufacturing
sector = industrialization
• As countries becoming more developed, tertiary
sector becomes more important while the
primary sector is diminishing.
• The secondary sector is reducing (de-
industrialization) compared to tertiary sector.
• This is due to growing incomes and consumers
demand more services like travel, entertaiment,
hotels etc.
• Industrialization: the growing importance of
secondary sector business activity and the
reduced importance of primary sector business
activity.
• De-industrialization: the growing importance of
the tertiary sector and the reduced importance
of the secondary sector.
How the sectors depend on each
other:
• Chain of production: the production and supply
of goods to the final consumer involves activities
from primary, secondary and tertiary sector
business.
• For example: Oil is extracted (primary), it needs
to be refined to produce petrol or gas
(secondary), then it is sold as petrol or gas in the
petrol station for final consumer (tertiary).
1.2.2 Business enterprises in the
private and public sectors
• Most countries have mixed economies. These
are economies that have both private sector and
public sector organisations.
• Mixed economy: an economy where the
resources are owned and controlled by both the
private and the public sectors
• Private sector: the part of the economy that is
owned and controlled by individuals and
companies for profit
• Public sector: the part of the economy that is
controlled by the state of government
• In the private sector, businesses are owned and
controlled by individuals or groups.
• In the public sector, organisations are owned by
the country and controlled by the state or
government.
Private Sector Public Sector
What to produce Consumer Government
choices decides
How to produce Firms want to Government
make profit decides
For whom to Customers’ Government
produce buying power decides
Revision checklist:
• Business in every country can be classified, according to
their activities, into primary, secondary and tertiary.
• The primary, ,secondary and tertiary sector businesses are
linked because one provides the resources required by
another.
• The classification of businesses by activity is often used to
classify the economies of countries into developing or
developed.
• Most economies have a private sector and a public sector.
Activity:
2.1 page 20
2.2 page 21
2.3 page 22
Case study page 23
2.4 page 24
