In sector analysis it is important to understand the different categories and functions of each part of the economy. Not only is this helpful for new businesses to understand their place in the market, but it is also important for policy makers, economic analysts, and investors. In fact, understanding how different sectors of the economy react with each other and are related can be lucrative when choosing businesses to purchase equity in.
Four Quadrants of the Economy
In order to better understand the way the primary sector fits into the economy, it is recommended that one is also familiar with the other three sectors. The primary sector deals mainly with the extraction, production and manufacturing of raw goods and materials. The Secondary Sector refines these materials and distribution. The tertiary sector is a service/labour intensive sector of the economy, meaning that it includes medicinal and law services. The quaternary sector encompasses that which is informational and technological, which can deal with anything from computer software to the researching of new satellite technologies.
The Primary Sector
The primary sector of an economy includes businesses that maintain processes that take natural resources and convert them into primary products which are most commonly known as in the form of raw materials for other industries. Agriculture, fishing, foresting, mining and agribusiness are all considered to be major primary sector businesses. The process of taking natural resources and turning them into product usually means that the raw item at hand must be manufactured to be considered suitable for sale. Usual raw materials will have to be in the same location that the business is so that transportation costs of materials can be maintained at a low, feasible level.
Businesses of the Primary Sector
Agriculture involves the raising of livestock and crop. All areas of farming and producing goods that can be grown usually entail agricultural businesses. Closely linked with agriculture is agribusiness, which includes businesses involved with the refinement of such agricultural products.
As opposed to agriculture, where products are grown, foresting is similar in that many businesses in lumber are today focused on becoming a sustainable entity. In other words, to preserve ecosystems, business involved in lumber are focused on how to make the growth of trees and cultivation of forests a self-continuing process which involves replanting.
Fishing is quite different from both agriculture and foresting, because a business has to catch the product from the wild. Farm fishing is also considered a part of this category, but the majority of crustaceans, shellfish, and other water bodied animals (excluding mammals) are caught in the wild.
Mining and quarrying includes that which cannot be grown or cultivated on a farm or land, but rather extracted from the earth. Products of mining include ore, coal, oil, minerals, and precious stones.