The three sectors of industry
Business activity is grouped into three sectors that show the stage of production a firm is in.
- Primary sector: extracts and uses natural resources, such as farming, fishing, mining and forestry.
- Secondary sector: manufactures and processes raw materials into finished or semi-finished goods, such as car making and baking.
- Tertiary sector: provides services rather than goods, such as banking, retailing, transport and tourism.
Example
A cotton farm (primary) sells cotton to a factory that weaves cloth and sews shirts (secondary). A shop then sells the shirts to customers (tertiary).
The chain of production
These sectors are linked in a chain of production. Output from one sector becomes the input for the next. As a country develops, employment usually shifts from the primary sector towards the secondary and then the tertiary sector. In many lower-income countries a large share of workers remains in the primary sector, while in higher-income countries most jobs are in services. Some large firms operate in more than one sector at once, for example an oil company that both extracts crude oil and runs petrol stations.
Public and private sectors
Businesses are also classified by who owns them. The private sector is owned by individuals and firms that usually aim to make a profit. The public sector is owned and run by the government to provide services such as state schools and public hospitals.
Remember
- Primary = extract, Secondary = make, Tertiary = serve.
- Developed economies have large tertiary sectors.
- Private sector aims for profit; public sector provides services.