The primary, secondary and tertiary sectors represent various business types and the goods they produce and sell. It's easiest to think of them as a chain of production, from extracting the raw materials (primary) through manufacturing (secondary) and finally to servicing the end consumers (tertiary). Each sector relies on the others to function properly and efficiently within the economy. Under the three-sector economic theory, every job, in every industry, falls into one or more of these sector types.
Primary Sector Extracts Raw Materials
The primary sector of the economy can be classified as the "extractive" industry. These include the industries that produce or extract raw materials. Farmers are an example of primary sector workers, as food items are collected as raw materials, such as wheat and milk, are taken from the farm and made into other products such as bread and cheese. Other industries include the mining industries, such as coal, iron ore or oil, which extract the raw materials from the ground that will be converted into other useful items. In traditional economies, the primary sector usually represents the largest sector of employment.
Secondary Sector Manufactures and Assembles Goods
The secondary sector of the economy is comprised of the manufacturing industries. The manufacturing industries take raw materials and produce products. For example, the steel can be used to manufacture cars. Carpenters take wood and make homes, furniture and cabinetry. Not all manufacturing companies manufacture a complete product. Semi-manufacturing companies produce parts to be used in other products that have several stages of production, such as automobiles. The secondary sector is usually strongest in so-called "transitional" economies that are changing from traditional to market economies.
Tertiary Sector Refers to Commercial Services
The tertiary sector of the economy is the service industry. Service companies do not provide a physical good like the primary or secondary sectors do, but they still provide value. For example, banks, insurance and the police all are examples of the service industry. Industries included in the primary or secondary sectors will typically have employees that provide tertiary services such as advertising, accountants and warehousing employees. The tertiary sector is usually strongest in advanced market economies.
Understanding the Chain of Production
The sectors all work together to create an economic chain of production. The primary sector gathers the raw materials, the secondary sectors puts the raw materials to use, and the tertiary sector sells and supports the activities of the other two. Many companies will have components of all three sectors, such as a diary farmer that makes cheese and ice cream and distributes the products to stores for sale. Other companies may strictly focus on one particular aspect, such as manufacturing a particular kind of product only. Together these sectors make up the backbone of the modern economy.