Types of Economic Sector (Cambridge (CIE) IGCSE Business): Revision Note

Primary sector

• Businesses can be classified according to the type of business sector in which they operate 

• This helps provide a means of making comparisons between firms in the same sector

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

  • Examples include farming, mining or fishing

• Less developed economies are primarily focused on the primary sector, with most people employed in agriculture and the production of food

  • This is partly as a result of lower participation rates in education and a lack of infrastructure to support manufacturing or service provision 

• Some developed economies, such as Australia (viticulture) and Norway (forestry and oil extraction), continue to have significant primary sectors

Employment in primary industries in some countries since 1991

• Malawi has the highest proportion of employment in the primary sector

• China has seen a significant decrease in primary sector activity since 1991

• Germany has a small primary sector with an economy that focused on manufacturing and services well before 1991

Secondary sector

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

  • Examples include oil refinement and the manufacture of goods such as vehicles

• In emerging economies, improved technology enables less labour to be needed in the primary sector and more workers to be employed in the secondary sector

  • The proportion of workers employed in manufacturing has risen over the last few decades

  • Many businesses have relocated production facilities to take advantage of the lower average wage rates in these economies

Employment in secondary industries in some countries since 1991

• China has the highest proportion of employment in the secondary sector, though it is declining

• Ghana and India saw a significant increases in secondary sector activity since 1991

• Brazil and Turkey's secondary sectors remained relatively stable between 1991 and 2019

Tertiary sector

• The tertiary sector is concerned with the provision of a wide range services for consumers and other businesses such as leisure, banking or hospitality

  • It includes a sub-sector called the quaternary sector

• Emerging economies have experienced growth in the tertiary sector in recent years, with many businesses now focused on the provision of consumer services

• The most developed economies have a very high proportion of the workforce employed in the provision of services in the quaternary sector

  • Developed economies use their wealth to fund advanced education and higher-level skills training, which further supports the growth of these industries

Employment in tertiary industries in some countries since 1991

• The US and Germany have the highest proportion of their workforces employed in the service industry

• Thailand's service sector employs twice as many employees in 2019 as it did in 1991

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

Private sector

• Private sector firms are owned and controlled by other firms and private individuals (entrepreneurs and shareholders)

• The main objective of many private sector firms is profit maximisation

  • This often causes the private sector to be more efficient than the public sector with higher levels of productivity 

• Types of private sector businesses include sole traders, partnerships and companies

Public sector

• Public sector firms are owned and controlled by the government

• Public firms exist to

  • Ensure public service provision of goods and services that are not profitable enough to be provided in the private sector

  • Protect strategic industries and national security, such as energy production or water supply

  • Create jobs

  • Encourage economic growth

• Public sector firms can operate on a local, regional or national government level

  • E.g. Transport for London (local);  Agricultural State Service in India (regional); Caribbean Airlines (national)

• Some government-owned firms have been privatised

  • The government retains a share in them so they can influence decision-making and receive a share of the profits

  • For example, Singapore Airlines shares are 55% government-owned and 45% privately-owned