Classification of business

• Primary sector


  Concerned with the extraction of raw materials from land, sea or air such as farming, mining or fishing
• Secondary sector


  Concerned with the processing of raw materials such as oil refinement, and the manufacture of goods such as vehicles
• Tertiary sector


  Concerned with the provision of a wide range services for consumers and other businesses such as leisure, banking or hospitality
• Chain of production


  1. Raw materials

  2. Processing

  3. Finished products
• Firms can often add value to their products throughout the chain of production
• As economies grow and develop


  Many of the firms within that economy will change their sector of operation (sectoral change)
• There are successively higher levels of profits to be made in each subsequent sector
• The reason for this is that each sector adds more value than the previous sector
• Higher added value equates to higher profits
• Less developed economies


  • Primarily focused on the primary sector, with most people employed in agriculture and the production of food
  • There has been a global trend away from employment in primary sector industries over the last two decades
  • Only in the least developed nations is the proportion of the workforce employed in the primary sector consistently high
  • This is partly as a result of lower participation rates in education and a lack of infrastructure to support manufacturing or service provision
• Emerging economies


  • Improved technology enables less labour to be needed in the primary sector and more workers are involved in manufacturing
  • The proportion of workers employed in manufacturing has risen over the last few decades
  • Many businesses have relocated production facilities to take advantage of the lower average wage rates in these economies
  • Emerging economies have experienced growth in the tertiary and quaternary sectors in recent years, with many businesses now focused on the provision of consumer services
• Developed economies


  • Have a very high proportion of the workforce employed in the provision of services, increasing focused on the quaternary sector
  • Use their wealth to fund advanced education and higher-level skills training which further supports the growth of these industries
• Public sector firms


  Owned and controlled by the Government
• Private sector firms


  Owned and controlled by other firms and private individuals (entrepreneurs and shareholders)
• Privatisation


  When government-owned firms are sold to the private sector
• Public sector firms


  • Their main goal is usually to provide a service
  • Can operate on a local, regional or national government level
• Private sector firms


  • The objective of most private sector organisations is profit maximisation
  • Often more efficient than the public sector with higher levels of productivity
  • Types of business ownership vary from sole trader to partnerships to company shareholders
• Public firms are government-owned and are often referred to as state-owned enterprises (SOEs) or government corporations
• Reasons why public firms exist

  • To ensure public service provision
  • Protect strategic industries and national security
  • Create jobs
  • Provide economic growth
• Public service provision


  • Government-owned firms are often established to provide essential public services such as transportation, healthcare, education, and utilities
  • These entities are tasked with ensuring that critical services are accessible to the public, and their operations may prioritise social welfare over profit maximisation
• Strategic industries and national security

  • Governments may own firms operating in strategic industries, such as defense, energy, telecommunications, and natural resources
  • This ownership allows the government to exert control over sectors vital to national security, economic stability, and long-term development
• Employment and economic development

  • Government-owned firms can play a role in promoting employment and economic development
  • By investing in and owning enterprises, governments can stimulate economic activity, create jobs, and support industries that contribute to the overall growth and stability of the economy
• Quaternary sector


  Focuses on information-knowledge activities, such as research and development, information technology, and education. Emphasizes high-value services and advanced skills training.
• Secondary sector


  Involves the physical transformation of raw materials into finished or semi-finished goods. Includes manufacturing, construction, and energy production.