Tertiary sector of the economy
For the part of the economy sometimes referred to as the "third sector", see Voluntary sector
The tertiary sector of industry involves the provision of services to other businesses as well as final consumers. Services may involve the transport
and sale of goods from producer to a consumer, as may happen in wholesaling
, pest control
. The goods may be transformed in the process of providing the service, as happens in the restaurant
industry. However, the focus is on people by interacting with people and serving the customer rather than transforming the physical goods.
Difficulty of definition
It is sometimes hard to define whether a given company is part and parcel of the secondary or tertiary sector. And it is not only companies that have been classified as part of that sector in some schemes; government and its services such as police or military, and non-profit organizations such as charities and research associations can also be seen as part of that sector.
For purposes of finance
and market research
-based classification systems such as the Global Industry Classification Standard
and the Industry Classification Benchmark
are used to classify businesses that participate in the service sector. Unlike governmental classification systems, the first level of market-based classification systems divides the economy into functionally related markets or industries. The second or third level of these hierarchies then reflects whether goods or services are produced.
Theory of progression
For the last 100 years, there has been a substantial shift from the primary and secondary sectors to the tertiary sector in industrialized countries. This shift is called tertiarisation
The tertiary sector is now the largest sector of the economy in the Western world
, and is also the fastest-growing sector. In examining the growth of the service sector in the early Nineties, the globalist Kenichi Ohmae
In the United States 70 percent of the workforce works in the service sector; in Japan, 60 percent, and in Taiwan, 50 percent. These are not necessarily busboys and live-in maids. Many of them are in the professional category. They are earning as much as manufacturing workers, and often more.
Economies tend to follow a developmental progression that takes them from a heavy reliance on agriculture and mining, toward the development of manufacturing
(e.g. automobiles, textiles, shipbuilding, steel) and finally toward a more service-based structure. The first economy to follow this path in the modern world was the United Kingdom
. The speed at which other economies have made the transition to service-based (or "post-industrial
") economies has increased over time.
Historically, manufacturing tended to be more open to international trade
and competition than services. However, with dramatic cost reduction and speed and reliability improvements in the transportation of people and the communication of information, the service sector now includes some of the most intensive international competition, despite residual protectionism
Issues for service providers
Surgery team at work
Testing telephone lines in London
Service providers face obstacles selling services that goods-sellers rarely face. Services are intangible, making it difficult for potential customers to understand what they will receive and what value it will hold for them. Indeed, some, such as consultants
and providers of investment
services, offer no guarantees of the value for price paid.
Since the quality of most services depends largely on the quality of the individuals providing the services, "people costs" are usually a high fraction of service costs. Whereas a manufacturer may use technology, simplification, and other techniques to lower the cost of goods sold, the service provider often faces an unrelenting pattern of increasing costs.
Examples of tertiary sector industries
Examples of tertiary industries may include:
List of countries by tertiary output
Service output as a percentage of the top producer (USA) as of 2005
Below is a list of countries by service output at market exchange rates in 2016:
- ^ R.P. Mohanty & R.R. Lakhe (1 January 2001). TQM in the Service Sector. Jaico Publishing House. pp. 32–33. ISBN 978-81-7224-953-3. Retrieved 1 May 2013.
- ^ Definition by the European Foundation for the Improvement of Living and Working ConditionsArchived July 20, 2014, at the Wayback Machine
- ^ The Borderless World: Power and Strategy in the Interlinked Economy.
- ^ De Soto, Glenn (2006). Fragmented: the Demise of Unionized Construction. Lulu.com. p. 64. ISBN 9781847285775.[self-published source]
Last edited on 25 April 2021, at 14:51
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