1.3 Classification of businesses

Learning objectives

1.3.1Business activity sectorsPrimary, secondary and tertiary activities:• primary sector – extracting raw materials from the earth• secondary sector – converting raw materials into finished or semi-finished goods• tertiary sector – provision of a wide variety of services.

Economic sectors classify a business by its main activity: obtaining raw materials, transforming them, or providing services.

Sector	Main activity	Output and examples	Recognition test
primary	extracts or obtains raw materials from the earth/natural environment	crops, timber or minerals; farming and mining	is the activity obtaining a natural resource?
secondary	converts raw materials into semi-finished or finished goods	components, buildings or manufactured products; engineering and manufacturing	is the activity processing, assembling or constructing a physical product?
tertiary	provides services to consumers or other businesses/sectors	retail, transport, banking, insurance or repair	is the main output an action, access or expertise rather than a physical good?

The sectors can form one value chain: primary supplies raw material → secondary transforms it → tertiary transports, finances, markets or sells the output. Each stage adds value in a different way.

Classify the activity named in the context, not merely the final product. A retailer selling manufactured goods is tertiary because retail is a service; an engineering manufacturer is secondary because it transforms inputs.

Sector classification is different from ownership. A state-owned, sole-trader or limited-company business could operate in any sector, and one diversified business may perform activities in more than one sector.

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