1.2.1 Economic sectors in terms of primary, secondary and tertiary sectors:
- Basis of business classification, using examples to illustrate the classification
- Reasons for the changing importance of business classification, e.g. in developed and developing economies
To understand the classification of business, we need to understand what an economy is.
What is an economy?
Economy means the resources, riches and wealth of a country. the bigger the economy the better it is for the country. The economy may raise and fall at anytime. So that is why it is very important that the business and governments work together to ensure that economy is kept at a balanced level.
When we say economy, we mean that productions, distribution, trades and consumptions of goods and services of a country. all the things a country and businesses within that country produces.
All over the world, businesses are classified into three different sectors: Primary, Secondary and Tertiary.
Primary
Is where business deal with raw resources, of our planet earth. it is the extraction of natural resources, such as gas, oil, diamond and coal. Fishing and farming is also primary, it is the first process in making something into a product.
Secondary
This is where the businesses take raw materials from primary sector and produces an enhanced product. This sector processes the raw resources and turn them into products you see in supermarket shelf’s. it is also known as the production sector.
Examples: Refining, construction industry, Food industry, Glass industry, Electrical industry, Chemical industry and energy industry.
So the Primary sector extracts something from earth and secondary sector turns that into something we can use for example someone in primary sector will take extract diamond from earth, in the secondary sector that diamond is turn into a necklace or ring which is then sold in shops.
Tertiary
This sector focuses on providing services to consumers. They are not involved in extraction or production.
Examples: Sales people, repair services, Banking and insurance companies are all in this sector.
Remember that all three sectors depend on each other.
Watch this video lesson I have put together to understand this topic clearly.
Types of countries – Developed countries and developing countries
Developed countries – are those where manufacturing is imported or conducted with high standards, they have improved living standards, improved living standards, increased freedom/ self – esteem, most employed in tertiary sector, high level of productivity.
People in these economy have high income and investments with good standards of health care.
Developing countries – are the economy which has low incomes, lower investments compared to developed countries, low love expectancy, high population with high dependency ratio. They have low levels of education and care systems, reduced productivity and poor housing, high number workers of employed in primary sector
Some countries will be in between Developed and developing, they are known as the progressing countries.
Developed countries that works mainly in tertiary has some disadvantages as they will depend on the developing countries to provide them with basic needs of life; Clothes, food and so on. eventually these developing countries will progress which will have negative effect on developed countries as they will no longer have people working in primary sector of the economy.
Different economies
Countries are classified by size of different sectors of their business activity, this means which ever sector they depend on the most will place them in that sector of the economy.
Every country in the world is not the same, each have some specialities and has to work with other countries to import and export to meet the needs and wants of its citizens. Every country will focus on sector of the economy that they are good in and export to the rest of the world.
Example:
Lets compare England and Zimbabwe; their economies to get a better understanding of how they may work together to meet the needs of their citizens.
England is an economy with about 70% of its citizens working in Tertiary sector and less than 5% in primary sector.
Zimbabwe is an economy with 25% working in Tertiary and over 40% in primary.
So England may depend on Zimbabwe for their basic needs of life ( clothes and growing food, extraction of oil) and Zimbabwe may depend on England to provide them Tertiary sector services computing systems (software), banking systems and so on. Zimbabwe is an example of developing country.
To clearly understand this example watch my lesson below where I go into more details.
Industrialisation and De-industrialisation
De-industrialisation is when a country shifts from one sector of the economy to another for example from primary sector of the economy into secondary or tertiary.
This means that people worked in farms and oil extractions moves to work in offices and Production. It is the decline of a business activity which was once the main source of income for that country.
for example, England had over 50% people used to work in coal mines (Primary Sector) then De-industrialised into Tertiary because it was cheaper for them to import from emerging countries.
Disadvantages: The loss of jobs in rural area, break up of communities in rural areas as there will be no longer any jobs there, they have to move to town to find work.
Advantages: Less environmental pollution because extracting anything from earth causes pollution.
1.2.2 Classify business enterprises between private sector and public sector in a mixed economy
Private business are those that produces goods and services the consumers want and need. The business itself decides everything is controlled by the owner. profit is normally their main target.
Examples: Tesco, Asda, BP, your local corner shop
Public business are those that are owned by the government and are controlled by the local or national government department. They are main aim is to provide services to the public rather than making profit.
Examples: Schools, college and hospitals
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