Economic sectors

Primary, secondary and tertiary

Businesses are grouped by what stage of production they carry out, not by how big they are or how much they earn.

The test that settles almost every classification question is a single question about the product. Was it taken out of the ground or grown? Primary. Was it made or built from something else? Secondary. Is the customer buying an action rather than an object? Tertiary.

The cases that catch people out are worth learning individually.

• Construction is secondary, not tertiary. A house is a physical thing that gets built.
• A restaurant is tertiary, even though it cooks. Customers are buying the meal served to them, not a manufactured product to take away. A factory making frozen ready meals is secondary.
• A supermarket is tertiary. It sells goods it did not make. Selling a physical product does not make a business secondary; making it does.
• Electricity generation is secondary, because a raw fuel is converted into something else. Mining the coal that fuels it is primary.
• A bakery attached to a shop does both. It is secondary when it bakes and tertiary when it serves.

That last case matters more than it looks. Large businesses often operate in more than one sector, and questions like putting one in front of you. An oil company that drills wells (primary), refines the crude into fuel (secondary) and runs filling stations (tertiary) belongs in all three. If the stem describes a business doing two of these things, say so and name which activity sits in which sector, because a flat one-word answer cannot show that.

Sectors also depend on each other, which is what makes them useful in a data-response answer. A steel mill is a customer of a mine and a supplier to a car plant, so a strike at the mine reaches the car plant within days. When a question asks how an event affects a business, look one step up and one step down the chain.

Why the classification is worth marks

Naming the sector is a knowledge mark. The application and analysis marks come from what the sector tells you about how the business runs.

So a farm facing a bad harvest and a hairdresser facing a quiet January have genuinely different problems, and an answer that names the sector and then explains the problem it creates is doing what the mark scheme wants. "It is in the primary sector" earns the knowledge mark. "It is in the primary sector, so a poor rainy season cuts the volume it has to sell and it cannot raise its price to make up for it, because the world coffee price is not something one farm sets" carries the point through to a consequence.

Private sector and public sector

The second classification is about who owns the organisation, and it is a separate question from which sector of production it works in. A state-owned railway and a privately owned railway are both tertiary.

The useful distinction is not really ownership, it is what the organisation is trying to maximise. A private sector bus company will drop a route that loses money. A public sector bus service may keep the same route running because a village would otherwise be cut off, and it accepts the loss because its objective was never profit. When a question asks how a public sector organisation would decide something, that is the reasoning it wants, not a definition.

Be careful with the word "public". A public limited company is in the private sector, despite the name. It is called public because members of the public can buy its shares on the stock exchange, not because the government owns it. That trap appears regularly and it costs a whole answer when it is misread.

Many countries run a mixed arrangement, with some services provided by government and similar ones sold privately alongside them. Private schools and hospitals exist in the same country as state schools and hospitals. If a stem tells you which sector an organisation is in, use it: it tells you what the organisation is trying to achieve, and therefore what a sensible recommendation to it looks like.

Common mistakes

• Calling construction tertiary. Building produces a physical thing, so it is secondary.
• Calling a restaurant or a supermarket secondary. Cooking a meal to serve and selling goods someone else made are both services.
• Deciding the sector from the size of the business rather than from the stage of production.
• Giving one sector for a business the stem clearly shows operating in two or three.
• Saying a public limited company is in the public sector.
• Saying public sector organisations aim to make a profit. Their objective is the service, funded from taxation.
• Treating primary, secondary and tertiary as ranks, with tertiary somehow more advanced. They are stages, not levels.
• Naming the sector and stopping. The sector is worth a mark; what it means for this business is worth the rest.

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