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Business Activity

Unit 2: Classification of business

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Learning outcomes

■ To develop knowledge of the three sectors of industry

■ To understand how business activity is classed as primary, secondary

or tertiary

■ To be able to identify how businesses in each sector are

interdependent *

■ To 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
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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 industrial sectors.
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Industrial Sectors

Businesses are classified into three sectors depending on the type of activity
they carry out:
■ Primary Sector –
■ extraction of raw materials from the earth – mining, quarrying, fishing,
agriculture, forestry, farming
■ Secondary Sector –
■ 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
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Primary sector

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 production.
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Secondary sector

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 and roads.
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Tertiary sector

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.
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Activity 2 and 2.1

■ See worksheet
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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)
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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.
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Interdependence
The chain of production shows interdependence: firms rely on other
businesses in different sectors for raw materials, components or
distribution.
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Interdependence

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:

■ Grow anything

■ Manufacture goods

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.
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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 activity.

■ 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.
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What determines how countries are
organised?
The mix of businesses in each sector is different in different countries.

Primary sectors thrive in countries that are rich in raw materials such as
Zimbawe, Qatar and the United Arab Emirates,

Other countries may have a larger labour force like China where
manufacturing (secondary) is the predominant sector

Countries like Singapore have a large tertiary sector- providing 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.
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Activity 2.2 & 2.3

■ See worksheet
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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 of
production.
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Key terms
Chain of production – the stages of production a product goes through
from raw materials to finally being sold to the customer

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