CLASSIFICATION OF BUSINESS

Learning Objectives:
1.List and explain the sector of industry
2.Explain how the business is classified as Primary, Secondary or Tertiary
3.State the reasons for changing the importance of business classification e.g. in
developed and developing economies
4. Classify business enterprises between private and public sectors in a mixed economy

Keywords: Industry, Primary, Secondary, Tertiary, Developing countries, Developed

countries, Mixed economy, Private sector, Public sector
An industrial sector or industry is a group of firms specializing in similar goods and services or using
similar production processes. For example, the automotive manufacturing industry consists of all firms
making and supplying vehicles and engines, tyres, body parts and components. Similarly, air transport
industry providing air passenger and airfreight transport services and facilities, including airports and
airlines.
Classification of Business
The goods and services produced by produced by businesses can be classified into three different sectors,
they are:
1. Primary sector
2. Secondary sector
3. Tertiary sector

4. Primary sector: these are firms who extract and use the natural resources of the earth to produce raw
material used by other businesses. Examples of primary sector business activity are
a. Farming f. Quarrying
b. Fishing
c. Forestry
d. Mining
e. Fuel extraction
Primary Sector
2. Secondary sector: these are firms that process raw materials or natural resources provided by the
primary sector into finished goods. Activities of the secondary sector include:
a. Refining
b.Manufacturing
c. Construction
d.Food and drink processing
e. Aircraft and car manufacturing
f. Chemical and artificial fibres
3. Tertiary sector: this provides services to the final consumer or businesses. Examples of tertiary sector
businesses include:
a. Banking and financial services
b.Insurance
c. Education
d.Health services
e. Transport
Quaternary sector: this involves the collection, processing and transmission of information- essentially
information technology(ICT). Examples are telecommunication, research development.
Class activity
Complete the table below

Business Primary Secondary Tertiary Quaternary

Insurance
Coal mining
Forestry
Refining
Travel agent
Car assembly
Telecommunication
Car showroom
Retailing
ICT
Bakery
 How the sectors depend on each other
Although the business activity sectors of the economy can be divided into primary, secondary and tertiary
sectors, they often depend on each other. This is known as chain of production. Chain of production is
the production and supply of goods to the final consumer which involves activities from primary,
secondary and tertiary sector businesses. For example, Oil is extracted from the underground- this is
primary sector activity. The oil is refined to produce other products like petrol or gas- this is secondary
sector activity. Finally, tertiary sector is needed to bring the petrol to the nearest petrol or gas station, for
sale to the final consumer

Oil drilling- primary sector Oil refining- secondary sector

Petrol or gas station
 Reasons for changing importance of business classification
Countries are often described as developing or developed. A developing country or less developed country
(LDC) often has a small industrial sector and lower standard of living compared to other countries while a
developed country or more developed country (MDC) has high levels of industrialization and its people
have average incomes and enjoy a higher standard of living compared to less developed countries. The
reasons for the change in importance of business classification are:
1. Industrialization: is the growing importance of secondary sector business activity and the reduced
importance of primary sector business activity. The emerging economies of both China and India are
good examples.
2. De-industrialization: is the growing importance of the tertiary sector of the tertiary sector and the
reduced importance of the secondary sector. The UK and USA are good examples.
3. A change in consumer behavior as result of both industrialization and de-industrialization.
Business enterprises between private and public sectors in mixed economy
Mixed economy: is an economy where the resources are owned and controlled by both the private and
public sectors. It has both private and public sectors organization.
Private sector: is the part of the economy owned and controlled by individuals and companies for profit.
Consumer choices help businesses to decide what they produce. Examples are sole trader, partnership, etc.
Public sector: is the part of the economy that is controlled by the state or government. The decisions
about what, how and for whom to produce in public sector are all made by government. Examples are
Government Departments, Public Corporation, Nationalized Industries