Where did the loaf come from?: Before Lena's bakery could sell a loaf, a farm grew the wheat, a mill ground it into flour, a lorry brought it to the bakery, and somebody, somewhere, worked out the recipe.
Four very different kinds of business touched that loaf. Each one belongs to a different sector: a group of businesses doing the same kind of work.
Businesses are sorted into four sectors by what they do, not by what they sell or how big they are. Ask one question of any business: does it take from nature, make something, provide a service, or work with knowledge?
Primary
takes from nature
- The farm that grows the wheat
- Also: fishing, mining, forestry, oil
Secondary
makes things
- The mill that turns wheat into flour
- The bakery that turns flour into bread
- Also: factories, construction
Tertiary
provides services
- The haulier that delivers the flour
- The café that serves the bread with coffee
- Also: shops, banks, hotels, transport
Quaternary
works with knowledge
- The food lab that designed the flour blend
- The software firm behind the bakery's ordering app
- Also: research, consultancy, IT
Four words to hold them: Take, make, serve, know. Primary takes, secondary makes, tertiary serves, quaternary knows.
The bakery is a secondary business even though it has a shop counter: its main work is turning flour into bread.
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The first two sectors deal with physical things. One takes them out of the ground or the sea; the other changes them into something new.
Primary: taking from nature
- What it does. Takes raw materials directly from nature.
- Examples. Growing wheat, fishing, cutting timber, mining copper, drilling for oil, keeping bees.
- The test. Nothing has been made yet. The product is as nature produced it, just collected.
Secondary: making things
- What it does. Turns raw materials into finished or part-finished goods.
- Examples. Milling flour, baking bread, building houses, assembling cars, brewing beer, making phones.
- The test. Something that did not exist before now exists. Wheat went in, flour came out.
Same olive, two sectors: A farm that grows olives is primary: it takes the fruit from the tree. A press that turns those olives into bottled oil is secondary: it makes a product out of them.
The press works with a farm product every day and is still not a farm. Classify the business by what it does, not by what its suppliers do.
Sort these
- A salmon farm: primary. It raises the fish; nothing is made from them yet.
- A cannery that tins the salmon: secondary. A new product exists.
- A quarry: primary. Stone comes out of the ground as it is.
- A builder who turns the stone into a wall: secondary.
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The last two sectors sell nothing you can hold. One does things for people; the other produces ideas and information.
Tertiary: providing services
- What it does. Provides services to customers and to other businesses.
- Examples. Shops, banks, insurers, hotels, restaurants, transport, hairdressers, hospitals.
- The test. The customer gets something done for them, not something made for them.
Quaternary: working with knowledge
- What it does. Creates and handles knowledge and information.
- Examples. Research labs, software developers, consultancies, universities, data and IT services.
- The test. The product is an idea, a design, a finding or a piece of code.
The trap: quaternary is a kind of service: A software company provides a service, so students file it under tertiary. The four-sector model splits knowledge work off on its own because it behaves differently: it needs highly educated people and it grows fastest in the richest economies.
Ask: is the product knowledge itself? A courier is tertiary. A lab designing a battery is quaternary.
In rich economies most people work in the tertiary sector, and the quaternary sector is where the growth is. That is the next section.
Two countries, two shapes: In one country six workers in ten are on farms and in mines. In another, seven in ten work in shops, offices, hospitals and software firms.
The first is a developing economy. The second is a developed one. The balance between the sectors is one of the clearest signs of how far a country has developed.
| Developing economy | Developed economy | |
|---|---|---|
| Largest sector | Primary: farming, mining, fishing | Tertiary: services of every kind |
| Fastest growing | Secondary, as factories open | Quaternary, as knowledge work expands |
| Why | Land and labour are plentiful; machinery and skills are scarce | Machines do the farming and making; educated workers do the serving and knowing |
| A business sees | Cheap materials and labour; small markets for services | Expensive labour; large markets for services and ideas |
As a country develops, work moves along the chain: out of the primary sector into factories, then out of factories into services and knowledge. This shift is called sectoral change. It happens because machines replace people in farming and manufacturing, while richer customers spend more on services, and because education creates workers who can do knowledge work.
What it means for a business: A government builds universities and fast internet. Ten years on, the country has more software firms and research labs, fewer people on the land, and a larger share of workers in the quaternary sector.
For a business, that is a new pool of skilled staff to hire and a new set of customers with money to spend on services. For a farm, it is a labour shortage.
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How this comes up: Three shapes. Name businesses or activities in a sector, for two marks. Define a sector, for two. And the four-marker: explain the difference between two sectors with reference to two businesses in the case.
Where marks go missing: The four-marker is where marks go missing. The explanation is worth two; the other two are only there if you tie each sector to the business named.
The four-mark pattern
- Say what the first sector does. Secondary businesses make finished goods from raw materials.
- Show the first business doing it. Ardent makes sofas in its factory, so it is secondary.
- Say what the second sector does. Tertiary businesses provide services.
- Show the second business doing it. Swift moves people's furniture for a fee and makes nothing, so it is tertiary.
The trap: explaining without the businesses: A perfect explanation of the two sectors that never mentions the businesses in the case stops at half marks. So does an answer that names the businesses without saying what each sector does.
Two sentences per sector: what it does, then which business does it.
With reference to Ardent Furniture and Swift Removals, explain the difference between the secondary sector and the tertiary sector.
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