#classificationofbusinesses #savemyexams

• 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.

• However, it does not capture the full complexity of the business world.

  >> Many businesses operate across multiple sectors or may not fit neatly into a single category

• The primary sector is concerned with the extraction of raw materials from land, sea or air.

  >> Examples include farming, mining or fishing.

• The secondary sector is concerned with the processing of raw materials and the manufacture of goods

  >> Examples include oil refinement and vehicle manufacture

• The tertiary sector is concerned with the provision of a wide range services for consumers and other businesses.

  >> Examples include leisure, banking or hospitality businesses.

The chain of production

• The chain of production is the series of steps taken to turn raw materials into finished products that can be marketed and sold

Changes in Sector Importance

• 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.

  >> Countries with large primary sectors include Ethiopia, Laos and Afghanistan.

• 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: employment in agriculture in a range of economies since 1991

Diagram analysis

• 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.

  >>There is an increasing focus on the quaternary sector, including the provision of knowledge-based services such as information technology.

  * 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 (wine production) and Norway (forestry and oil extraction) continue to have significant primary sectors

Diagram: employment in services in a range of economies since 1991

Diagram analysis

• The most developed countries, such as the US and Germany, have the highest proportion of their workforces employed in the service industry.

• Thailand's service sector employed twice as many employees in 2019 compared to 1991.

• Around half of Ecuador's workforce is now employed in service delivery.