The three sectors of production
Definition
Primary sector: businesses that extract raw materials from the earth or the sea.
Secondary sector: businesses that turn raw materials into finished or part-finished goods.
Tertiary sector: businesses that provide services to customers or to other businesses.
- Primary businesses take raw materials out of nature, and nothing else can happen until they do.
- UK examples include farming in Lincolnshire, fishing off the Cornish coast, quarrying, forestry, and North Sea oil and gas extraction.
- Secondary businesses process those raw materials into a finished product or a component another manufacturer uses.
- UK examples include Nissan building cars in Sunderland, JCB making diggers in Staffordshire, Warburtons baking bread, and firms making steel, cement and packaging.
- Tertiary businesses do not make anything physical, but provide a service to customers or to other firms.
- UK examples include Tesco, the NHS, Barclays, Deliveroo, hairdressers, hotels, insurance brokers and Netflix.
- Together the three form a chain of production, so a product usually passes through all three before it reaches you.
Example
- Follow a loaf of bread from field to breakfast table.
- Primary: a Lincolnshire farm grows and harvests the wheat.
- Secondary: a mill turns the wheat into flour, and a bakery turns the flour into loaves.
- Tertiary: a haulage firm delivers the loaves and a Tesco store sells one to you.
- Each stage does something to the product the stage before it could not, which is why the loaf is worth more than the wheat that went into it.
Classifying a business by its main activity
- Most real businesses do more than one thing, so classify them by the activity that earns most of their revenue.
- A bakery that bakes bread and sells it over the counter is doing secondary work in the kitchen and tertiary work at the till.
- A few firms own more than one stage, so a Yorkshire farm that grows vegetables, makes chutney and sells both in its own farm shop operates in all three sectors.
Common Mistake
- Do not put a shop in the secondary sector because it sells physical goods.
- Selling a product is a service, so retail is always tertiary even when the product is tangible.
- The secondary sector is about making or processing, not about handing over.
Exam technique
- Sectors are asked as identify one sector of production, as multiple choice, and as explain, using one business example, the meaning of the tertiary sector.
- Settle the sector on the verb, because extract is primary, process is secondary and provide a service is tertiary, whatever the business calls itself.
Self review
- Name the three sectors and give one UK example of each.
- Which sector does a fishing boat belong to, and which does the fishmonger belong to?
- Why is a supermarket tertiary even though it sells physical goods?
- What is the chain of production?
- How do you decide the sector of a business that both bakes and sells bread?
