Classification Using the Economic Sector (CIE IGCSE Business)

The Three Main Business Sectors

• Businesses can be classified according to the type of business sector in which they operate 
• Classification into these sectors is a simplified way of categorising industries
  • It helps to provide a means of making comparisons between firms in the same sector
  • It does not capture the full complexity and interconnectedness of the business world
  • Many businesses operate across multiple sectors or may not fit neatly into a single category
     

Diagram to Show Examples of Roles in the Primary, Secondary and Tertiary Sector

Farming in the primary sector, manufacturing in the secondary sector and hairdressing in the service sector
  

• The primary sector is concerned with the extraction of raw materials from land, sea or air such as farming, mining or fishing
  The secondary sector is concerned with the processing of raw materials such as oil refinement, and the manufacture of goods such as vehicles
  The tertiary sector is concerned with the provision of a wide range services for consumers and other businesses such as leisure, banking or hospitality
   

The chain of production

• The three sectors are linked in the chain of production which is the series of steps taken to turn raw materials into a finished product that can be marketed and sold
   

Diagram to show the Chain of Production in two Different Industries

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)
• Generally speaking, their 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

• A less developed economy will primarily be 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 
     

Diagram to Show Employment in Agriculture in a Range of Economies since 1991

(Source: WorldBank)
The graph shows a comparison of levels of employment in the primary sector between countries at varying stages of development

 

Diagram Analysis

• From these countries, Malawi still retains the highest proportion of employment in the primary sector
• China has seen a significant decrease in primary sector activity
• Germany has had very low primary sector and will have likely been in manufacturing and services well before 1991
  
  

Emerging Economies

• In emerging economies improved technology enables less labour to be needed in the primary sector and more workers are incoved 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

 

Diagram Showing Secondary Sector Employment Since 1991

(Source: WorldBank)

The graph shows a comparison of levels of employment in industry between countries at varying stages of development
 

Diagram Analysis

• From these countries, China has the highest proportion of employment in the secondary sector
• Ghana and India have seen significant increases in secondary sector activity
• Brazil and Turkey's secondary sectors have remained relatively stable over the period 1991 to 2019

Developed Economies

• The most developed economies have a very high proportion of the workforce employed in the provision of services, increasing focused on the quaternary sector
  • Developed economies use their wealth to fund advanced education and higher-level skills training which further supports the growth of these industries
  • Some exceptions such as Australia (viticulture, or wine production) and Norway (forestry and oil extraction) continue to have significant primary sectors
     

Diagram to show Employment in Services in a Range of Economies since 1991

(Source: WorldBank)

The graph shows a comparison of levels of employment in services between countries at varying stages of development
 

Diagram Analysis

• The most developed countries have the highest proportion of their workforces employed in the service industry
• Thailand's service sector employees twice the number of employees in 2019 as it employed in 1991
• Around half of Ecuador's workforce is now employed in service delivery