CandleFocus Glossary Editor
Sector is a term used to classify companies, consumers, and economic activities into groupings of related activity. It is a way to organize and compare the performance of businesses that operate in the same industry or share similar business characteristics. There are four primary sectors, each of which provides different goods, and sometimes different services, to the economy.
The primary sector of the economy includes activities that directly utilize natural resources. This includes businesses in the mining, farming, forestry, and fishing industries. These businesses are involved in the extraction, production, and conversion of natural resources into finished products. For example, a mining company would be involved in extracting metals, minerals, and other raw materials from the earth and then refining or processing them into items of use to the industry and general public.
The secondary sector of the economy includes activities that create manufactured goods. Companies within this sector are involved in such activities as manufacturing, production, and product transportation. Many large companies within this sector include automobile and aircraft manufactures, shipbuilders, and electronics manufacturers. These businesses purchase raw materials from the primary sector and then create their finished products for domestic and international markets.
The tertiary sector of the economy directs its activity towards the things that a consumer purchases. This sector encompasses activities related to retail, tourism, and the service industry. This sector includes companies that provide services such as airlines, hotels, restaurants, and banks. Companies in this sector may still use raw materials and products obtained from the primary and secondary sectors, but their service-oriented approach makes them unique.
Finally, quaternary sector activities involve the development and research of new technology and ideas. This sector includes companies involved in biotechnology, software development, consulting, research, and management. Companies within this sector are usually more knowledge-based, brainstorming and developing new products, services and ideas for future growth.
When looking at the financial side of sectors, investors may further categorize each sector into divisions and sub-sectors known as investment sectors. These are used to compare the performance and financial strength of similar businesses within each sector. For example, within the automobile sector, investors may classify businesses into sub-sectors such as luxury vehicles, economy cars, pickup trucks, etc. This allows for a more in-depth comparison between similar companies, allowing investors to make more informed decisions.
Overall, sectors provide essential ways to divide and compare the various types of activities, both economic and financial, within a given economy. By further dividing between primary, secondary, tertiary, and quaternary sectors, investors can better understand the market and determine what investments are best suited for their goals.
The primary sector of the economy includes activities that directly utilize natural resources. This includes businesses in the mining, farming, forestry, and fishing industries. These businesses are involved in the extraction, production, and conversion of natural resources into finished products. For example, a mining company would be involved in extracting metals, minerals, and other raw materials from the earth and then refining or processing them into items of use to the industry and general public.
The secondary sector of the economy includes activities that create manufactured goods. Companies within this sector are involved in such activities as manufacturing, production, and product transportation. Many large companies within this sector include automobile and aircraft manufactures, shipbuilders, and electronics manufacturers. These businesses purchase raw materials from the primary sector and then create their finished products for domestic and international markets.
The tertiary sector of the economy directs its activity towards the things that a consumer purchases. This sector encompasses activities related to retail, tourism, and the service industry. This sector includes companies that provide services such as airlines, hotels, restaurants, and banks. Companies in this sector may still use raw materials and products obtained from the primary and secondary sectors, but their service-oriented approach makes them unique.
Finally, quaternary sector activities involve the development and research of new technology and ideas. This sector includes companies involved in biotechnology, software development, consulting, research, and management. Companies within this sector are usually more knowledge-based, brainstorming and developing new products, services and ideas for future growth.
When looking at the financial side of sectors, investors may further categorize each sector into divisions and sub-sectors known as investment sectors. These are used to compare the performance and financial strength of similar businesses within each sector. For example, within the automobile sector, investors may classify businesses into sub-sectors such as luxury vehicles, economy cars, pickup trucks, etc. This allows for a more in-depth comparison between similar companies, allowing investors to make more informed decisions.
Overall, sectors provide essential ways to divide and compare the various types of activities, both economic and financial, within a given economy. By further dividing between primary, secondary, tertiary, and quaternary sectors, investors can better understand the market and determine what investments are best suited for their goals.