Unit 2: Classification of business
develop knowledge of the three sectors of industry
understand how business activity is classed as primary,
secondary or tertiary
be able to identify how businesses in each sector are
demonstrate knowledge of why the types of business
activity undertaken in a country are a key element in that
country’s national economy
Interdependent - relating to two or more people or things
dependent on each other
Classification of business
Everything you buy starts out as either:
A metal or mineral deposit in the earth
A growing plant
An animal living on land, in the air, or in a river, or in a sea
Changing it into a useful product and selling it can be a long
and complex process that involves businesses in different
Businesses are classified into three sectors depending on the type of
activity they carry out:
Primary Sector –
Secondary Sector –
extraction of raw materials from the earth – mining, quarrying,
fishing, agriculture, forestry, farming
Processing of raw materials into finished or semi-finished products
– manufacturing, refining and processing minerals, engineering,
textiles, footwear, clothing, food and drink processing, construction
Tertiary Sector –
Service industries – leisure, transport, finance, distribution,
retailing, wholesaling, communications, insurance, education,
public services, health services, tourism
Primary production: this involves acquiring raw materials.
For example, metals and coal have to be mined, oil drilled
from the ground, rubber tapped from trees, foodstuffs farmed
and fish trawled. This is sometimes known as extractive
Secondary production: this is the manufacturing and
assembly process. It involves converting raw materials into
components, for example, making plastics from oil. It also
involves assembling the product, eg building houses, bridges
Tertiary production: this refers to the commercial services
that support the production and distribution process, eg
insurance, transport, advertising, warehousing and other
services such as teaching and health care.
Putting the three sectors together:
chains of production
Making a product and supplying it to customers usually
involves businesses in all three industry sectors. For example,
producing a loaf of bread involves:
1. A farmer who grows wheat (primary)
2. A miller who turns the wheat into flour (secondary)
3. A baker who makes the flour into bread (secondary)
4. A baker’s shop that sells the bread to customers (tertiary)
5. Transport to get wheat from the farmer to the miller, the flour
from the miller to the baker, and the bread from the baker to
the bakery (tertiary)
Chain of production
Each business forms part of a chain production. The chain
begins with the raw materials and ends with getting the
finished product to the customer.
The chain of production shows interdependence: firms rely on
other businesses in different sectors for raw materials,
components or distribution.
You might think that the British School of Guangzhou which is in the
tertiary sector, has very little connection with either primary or
secondary production. Its purpose is to provide education for its
students. BSG does not:
However, it does depends on other people or firms who do. Firms in the
secondary sector have made the paper, the desks, the interactive white
board, the books and all the other goods we use.
Without electricity the lights and computers wouldn’t work. For this BSG
relies on mines that produce coal for electricity to be generated.
BSG is also dependent on other firms in tertiary production from the bus
company who transports students to the window cleaners.
Business in context
In unit 1 you read about Kuwait Petroleum Corporation. The Kuwait
Petroleum Corporation is one of the world’s largest oil companies
and makes petrol and diesel from crude oil.
Extracting crude oil from the earth is a primary sector activity.
The oil is then pumped through a pipeline to an oil refinery. Refining
the oil and turning it into petrol and diesel is a secondary sector
Road tankers then take the petrol and diesel to garages, which sell it
to the final customers. Road transport and garages are both services
in the tertiary sector.
Although the process of producing petrol and getting it to garages
uses business activities in all three sectors, often the oil rig, refinery,
road tankers and garages are all owned by one single company.
What determines how countries are
The mix of businesses in each sector is different in different
Primary sectors thrive in countries that are rich in raw
materials such as Zimbawe, Qatar and the United Arab
Other countries may have a larger labour force like China
where manufacturing (secondary) is the predominant sector
Countries like Singapore have a large tertiary sectorproviding services to other countries. This could be because
of the lack of natural resources of because of the skills and
expertise developed in certain services.
Summary of unit
1. Businesses owned by private individuals or groups are in
the private sector.
2. Businesses owned by the state are in the public sector.
3. All products go through many stages of production.
4. The different stages of production of a product are linked in
a ‘chain of production’.
5. Businesses may be in the primary sector, secondary sector
or tertiary sector, depending on where they are in the chain
Chain of production – the stages of production a product
goes through from raw materials to finally being sold to the
Primary sector – the sector of industry that produces
unrefined* raw materials
Secondary sector – the sector of industry that produced
finished or part-finished goods
Tertiary sector – the sector of industry that provides services
to businesses and individuals
*Unrefined – not processed/not usable