The three sectors of production
Definition
Primary sector
Businesses that extract or grow raw materials from the land or the sea, such as farming, fishing and mining.
Definition
Secondary sector
Businesses that turn raw materials into finished or part-finished products, such as manufacturing and construction.
Definition
Tertiary sector
Businesses that supply services to customers or to other businesses, such as shops, banks and transport.
- 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
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?
