A business sector meaning pertains to the distinctions made between businesses. These distinctions are made according to industry or sector. There are multiple ways to classify businesses by sector. Some economists like to divide businesses according to corporate, nonprofit, and government organizations.

More often, the economy is divided into three sectors: the primary, secondary, and tertiary sectors. The only problem with this classification system is that it precludes the fourth sector, including government agencies and agencies that are government-controlled.

The Primary Sector

The primary sector acts as a foundation for all other businesses. It creates the raw materials that go on to support every other sector. Industries that fall within the primary sector include:

In developing countries, the primary sector constitutes a large part of their economy. In the United States, the economy continues to see a gradual shift from the primary sector to the secondary and tertiary sectors, due to advancements in technology.

The Secondary Sector

Once the primary sector produces the raw materials, the secondary sector transforms them into various products. The secondary sector includes the manufacturing industry, comprising a significant portion of the United States workforce. However, the Bureau of Labor Statistics expects employment in manufacturing to continue to decline.

Similar to the primary sector, technology is a major factor in the secondary sector's decline. Technology allows manufacturers to get more done with fewer resources.

The Tertiary Sector

Most of the workers in the United States are members of the tertiary sector. This is the segment that provides a service to the public. Examples include:

  • hotels
  • retail industry
  • restaurants
  • sales

Each of these sectors relies on the products produced in the secondary and primary sectors. The tertiary sector also encompasses the transportation industry that goes on to deliver the secondary sector's manufactured products to tertiary businesses.

Technology has created a subcategory within the tertiary sector known as the quaternary sector. This category includes phone, cable, and internet providers.

The Public Sector

Even though government agencies also provide a service to the public, this section is different from the tertiary sector. In fact, it requires completely separate consideration.

Examples of the public sector include:

  • libraries
  • schools

The public sector includes any organization owned or operated by a government agency. Unlike the private sector, these organizations rely on taxpayer dollars instead of revenue from customers who are paying for goods or services.

These agencies may outsource work to private contractors which will then perform the work for private and public sector clients.

Why Are There Business Sectors?

It's important to distinguish between business sectors because there's are major differenced between a business that operates in the primary sector and a business that provides a service. There are also major differences between businesses within the same sector.

For example, a coal mine and a farm are both in the primary sector but are very different. Also, a business that produces chocolate is different from a business that produces car tires, but you'll find them in the same sector.

Business sectors comprise a variety of different firms. Some are small; others are large. Some may be set up as corporations, partnerships, or proprietorships. Some may be home-based, while others operate in dozens of factories across the country.

Business Sectors and Production

Business sectors are responsible for production. In fact, it's not so much a sector as a process that creates resources for production.

Production is the underlying process that combines resources and creates a valuable commodity or service. Usually, production involves a physical transformation of materials. For example, bauxite ore, iron ore, petroleum, and silicate sand are all used to create a high-powered automobile.

Typically, production requires spatial relocation of commodities. When a car is shipped to a dealership, that is an act of production that will enhance the value of the product. Although the business sector mainly produces and supplies goods or services, they also do some purchasing of their own.

Business expenditure plays a significant role in short-term business cycles and long-term economic growth. Investments that take place within the business sector connect two key notions: investment expenditures and investments.

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