In macroeconomics, an industry is a group of productive organizations and businesses that produce or supply raw materials, goods, services, or sources of income.
Since the industry is tied to certain processes, products, and consumer markets, it can evolve over time. It is important to note that a single company doesn’t have to belong to one industry: a large enterprise (often referred to as a conglomerate) is diversified across multiple industries.
Sometimes, new industries branch off from older ones once the consumer market becomes apparent. For example, the semiconductor industry was formed in the early 1960s from the wider electronics industry.
Today, industries can be classified into different levels and categories. While many textbooks list only three categories, some advanced books classify industry into five levels.
Let’s dig deeper and find out all the different types of industries in the world and how do they contribute to the economy.
1. Primary Industry
The primary industry involves the extraction and production of raw materials, such as mining, logging, hunting, and farming. The extraction of core materials from the land and sea plays an important role in reaching overall sustainability. It utilizes various resources on Earth, ensuring the survival of humankind.
Typically, the primary industry makes up a large portion of the economy in developing countries. For example, forestry, farming, and fishing account for over 15% of the GDP in Sub-Saharan Africa but only 0.9% of GDP in North America.
In the last few decades, the role of the primary industries has transformed a lot, especially in developed countries. The agricultural sector, for instance, has become more technology-focused than conventional ways of planting or picking. For example, today, insecticides play a crucial role in ensuring higher production.
Developed nations, like European Union, aim to use the primary sectors to improve their wealth system. They try to align the infraction rates with the production of agricultural products to keep the market healthy and competitive.
Agriculture is a significant sector of the economy that includes a large number of small businesses. Its major products can be grouped into raw materials, food, and fiber.
In the second half of the 20th century, the Third Agricultural Revolution (also referred to as the Green Revolution) took place. It involved a set of research technology transfer initiatives that significantly increased agricultural production in parts of the world.
Research shows that the Third Agricultural Revolution played an important role in eradicating poverty, raising incomes, reducing land use for agriculture, and decreasing greenhouse gas emissions.
More than 33% of the world’s workers are employed in agriculture. However, since the last decade, the number has been decreasing continuously, especially in developing countries where small-scale agricultural businesses are being overtaken by industrial mechanization and big corporations.
Today, the agriculture industry is regulated by strict policies and guidelines. It is necessary for every farming professionals to keep themselves updated on all legislation affecting their products and laborers.
The mining sector is involved in the extraction of precious minerals and other geological substances. In a wider sense, mining is the extraction of ores (such as metals, limestone, gravel, rock salt, and clay) and non-renewable resources (such as natural gas, petroleum, and even water).
Mining is necessary to obtain substances that cannot be produced through agricultural processes or synthesized artificially in a lab.
Mining techniques can be divided into two groups: surface mining and underground mining. The former is much more common, and it produces more than 80% of minerals (excluding natural gas and petroleum) in the United States. In fact, the US mining industry is dominated by the extraction of coal and various nonmetal minerals like sand and rock.
Forestry is the science and technique of creating, planting, utilizing, conserving, and repairing woodlands and forests for human benefit. Forest and associated resources are of major economic importance to rural livelihoods.
It may include generating revenue from government-sponsored conservation programs, hunting lease sales, food production, educational activities, and other strategies.
The US has about 750 million acres of forested land, and 60% of that land is privately owned. These privately owned land supply more than 90% of the wood harvested in the US for constructing homes and manufacturing papers, furniture, and other wood products.
2. Secondary Industry
Secondary industries take raw materials produced by the primary sectors and process them into manufactured goods and products. They require manufacturing plants, factories, energy, and machinery to efficiently convert raw materials into usable products.
The secondary sector is often referred to production sector with small- and large-scale units. Examples of small-scale units include shoe factories, printing, glass making, textile units, etc. Large-scale manufacturing industries include aluminum, steel, automobile, etc.
These industries generate a significant portion of GDP. In fact, they are the engine of economic growth and crucial for all developed nations.
Manufacturing is the production of goods through the use of tools, machinery, labor, and chemical or biological processing or formulation. It can either mean converting raw substances into finished goods on a large scale or creating complex parts for other manufacturers that produce finished items such as ships, automobiles, digital devices, or household appliances.
Manufacturing is closely connected to the engineering and industrial process design sectors. Although most modern processes use advanced equipment, some products, such as baked goods and handcrafted jewelry, are made by hand.
At present, the manufacturing industry is going through some radical changes. For example, nanotech is revolutionizing electronics production while lighter materials, such as carbon fiber and graphene, have drastically improved automotive design.
With advances in artificial intelligence systems and robotics, the number of manual jobs in this sector is expected to decline. However, those that remain are likely to be more skilled and highly paid.
As per the US Department of Labor, the construction industry is engaged in constructing residential and non-residential buildings and engineering projects like roads and bridges.
In a wider context, this industry covers all operations that involve delivering infrastructure, buildings, and industrial facilities. It usually begins with planning, financing, designing, and continues until the structure is completed. The industry also covers maintenance and repairs, demolition or decommissioning of old/unwanted structures.
Construction projects can be divided into three categories. Each requires a unique team to plan, design, build, and maintain the project.
- Residential and non-residential buildings.
- Infrastructure such as railways, dams, tunnels, airports, sewerage systems, etc.
- Industrial construction includes power stations, steel mills, factories, and other processing plants.
On a global scale, the construction industry accounts for over 10% of GDP (7-8% in developed nations). It employs nearly 5% of the global workflow, which is equivalent to over 400 million people.
As of today, China is the world’s largest single construction market, followed by the United States, with an output of $934 and $839 billion, respectively.
2.3 Food Processing
The food processing industry transforms agricultural products into food. It utilizes numerous kinds of processing techniques, from home cooking and grinding grain (to make raw flour) to sophisticated industrial practices (used to produce convenience foods).
Food processing techniques can be categorized into three groups:
- Primary food processing is used to make most foods edible
- Secondary food processing converts ingredients into common foods like bread and butter
- Tertiary food processing involves the large-scale manufacturing of ready-to-eat foods. It often promotes overnutrition. The processed item contains too much salt and sugar, and too little fiber.
In 2020, the food processing market size was valued at $143 billion, and it is estimated to reach $236 billion by 2028, growing at a CAGR of 6.6% during the forecast period. The ever-growing demand for processed food, innovation in food processing technology, and rising R&D in food processing equipment will be the key factors driving the market over the predicted years.
3. Tertiary Industry
The tertiary industry encompasses various businesses, ranging from healthcare and financial institutions to hotels and real estate. It is also known as the services sector of the economy, which focuses on the production of services instead of end products.
Services (also called intangible goods) include access, advice, attention, affective labor. The wholesaling and retailing, for example, involves transportation, distribution, and sales of goods from producer to consumers. In some industries, like restaurants, the goods are transformed in the process of providing service. However, the focus is on serving people instead of transforming physical goods.
As the country’s economy grows and develops, the tertiary sector becomes larger while the primary and secondary industries shrink. This sector can be broadly categorized into profitable and non-profitable segments.
3.1 Financial Services
Financial services are the primary driver of a country’s economy. They provide liquidity and free flow of capital in the marketplace. When the financial sector performs well, the economy grows, and businesses are better able to manage risk.
This segment of the economy is made up of various financial firms such as banks, credit-card companies, insurance companies, investments funds, stock brokerages, accountancy companies, and government-backed enterprises.
Financial services make up a significant portion of the S&P 500. The largest companies within the sector are some of the world’s most trustable banking institutions, such as JPMorgan Chase, Bank of America, and Wells Fargo.
According to the World Bank Research and Development Center, the United States is the leading financial exporter of financial services, with $106 billion in receipts in 2017.
The telecommunication industry is made up of four key entities: telephone companies, internet services providers, cable companies, and satellite companies. With advances in electronic and communication technology, affordable equipment and services have become more readily available to individuals and businesses worldwide.
In 1996, the first major overhaul of telecommunications law was passed, which abolished several restrictions that prevented businesses from operating in certain markets.
Since then, hundreds of players have emerged, making their way into homes and businesses across the world. Today, telecom is growing less about voice and more about text, data, and video.
Major telecom companies are focusing on delivering broadband information services, interactive entertainment, and smartphone-based applications. While their success mostly depends on retail users, a significant chunk of revenue comes from multinational corporations that require premium services such as high-security private networks and videoconferencing.
AT&T, Verizon Communications, Deutsche Telekom, and China Mobile are the four largest telecom companies with combined revenue of more than $550 billion.
3.3 Healthcare and Pharmacy
The healthcare sector is made up of companies that offer clinical services, manufacture drugs and medical equipment, and support services like medical finances.
In other words, the healthcare industry provides preventive, remedial, and therapeutic services to patients. It contains a wide range of businesses, with activities ranging from research and development to facilities management.
In this industry, there exist major barrier barriers to entry in the form of regulation, specialized expertise, professional licensure, R&D costs, intellectual property protections, and natural economies of scale.
Pharmaceutical firms and labs are an essential part of healthcare. They deal in generic or brand medication and medical machines. They are subject to many strict laws and guidelines that govern the safety, testing, efficacy, patenting, and marketing of final products.
From patients to policy and everything in-between, the industry is growing at an impressive rate. In fact, it accounts for more than 10% of the GDP of most developed countries.
4. Quaternary Industry
The quaternary sector is associated with either the intellectual or knowledge-based economy. More specifically, quaternary industries are based on new technologies and require a high degree of education. In this field, people do not rely on their ability to process raw materials or convert them into a product; instead, they rely on their skills and education to create and operate advanced systems.
The informational activities and information industry have been long regarded as a service, but some economists now attribute it to a fourth sector — the quaternary sector. Like the tertiary sector, it contains both private and government endeavors.
Most of the quaternary industries in the US are directly associated with computer and information technologies. IT specialists, programmers, app developers, professional bloggers, and information sharing experts are all part of the quaternary sector. It also includes financial planners, digital stockbrokers, and educators.
This sector grows in well-developed countries where the primary and secondary industries are a minority of the economy. For example, the largest part of the United Kingdom economy contains tertiary and quaternary industries, which employ 75% of the workforce.
4.1 Information Technology
In the past three decades, the IT industry has witnessed tremendous growth throughout the globe. Both the developing and developed economies have shown technological advancement.
The definition of Information Technology consists of three categories:
- Processing techniques
- The application of mathematical and statistical methods
- The simulation of higher-order thinking through computer programs
The IT sector is comprised of companies that develop software, hardware, semiconductor equipment, or electronics, or companies that provide e-commerce and computer services. For example, Apple, Alphabet, Microsoft, Amazon, Samsung Electronics, and Foxconn are some of the most recognizable IT giants globally.
The quick rise of the digital age and IT industries has shaped almost all contours of the US economy, helping to fuel the growth in employment and productivity.
According to the World Economic Forum’s Global Competitive Index, the US leads the global landscape in technology innovation. The nation’s competitive edge is due to its strong institutional pillars, business dynamics, financing systems, and vibrant innovation ecosystem.
With advances in technologies like big data, machine learning, cloud services, and blockchain, the global IT sector is expected to flourish further.
From pre-school to universities, there are hundreds of thousands of organizations and institutions directly involved in learning. These establishments can be public, for-profit, or non-profit entities.
Plus, there are eLearning organizations, technology companies, and governmental and policy roles. They all play a crucial role in reducing poverty and inequality and laying a foundation for sustained economic growth.
According to the United States Department of Education, post-secondary education is provided to more than 18.5 million students. Of those students, about 1.4 million receive education through for-profit schools.
As per the estimations, the global education and training expenditure will reach $10 trillion by 2030. The next decade will witness an additional 800 million K12 graduates and 350 million more post-secondary graduates than today. Africa and Asia will be the driving force behind this expansion.
Furthermore, the global online education market will reach more than $320 billion by 2025. Advances in the Internet of Things, cloud computing, and artificial intelligence will continue to enhance the user experience on these online education platforms.
4.3 Research and Development
Research and Development (R&D) is a set of innovative activities undertaken by companies and governments in order to develop new products or services or improve existing ones.
These activities differ from corporates to corporates. They are not supposed to yield quick profit and usually carry higher risk and uncertain return on investment. However, they are crucial for companies to survive and thrive in competitive markets.
According to National Center for Science and Engineering Statistics, the federal government spent $656 billion and local governments spent more than $1 billion on research and development projects in 2019.
Big technology giants also spend billions every year to withstand competition, waves of disruption, and obsolescence.
Amazon was among the top R&D spenders in 2020. Amazon’s SEC filing reveals that the company spent $42.74 billion in the fiscal year 2020. It was granted 2,244 patents in the same year, the majority of which were related to artificial intelligence and machine learning.
Furthermore, in the fiscal year of 2020, Alphabet, Huawei, Microsoft, and Apple spent $27.5 billion, $22 billion, $19.2 billion, and $18.7 billion on R&D.
5. Quinary Industry
The definition of the quinary industry is not fixed. Some economists define it as merely non-profit work such as for NGOs and charitable organizations. Others define it as the industry that focuses on human services, such as charities, as well as information and new technologies, linking slightly with the quaternary industry.
The quinary sector is also often referred to as gold collar professions, which include highly skilled and knowledgeable people such as research scientists, senior business executives, policymakers, and financial and legal consultants, etc.
5.1 Charitable Organization
Charitable organizations and NGOs (non-government organizations) are usually non-profit entities whose primary objectives are philanthropy and social well-being.
These organizations can be religious, educational, or based on public interest activities. They can also be lobby groups for firms, such as the World Economic Forum.
Private foundations are under the control of a select group of people. They raise funds through significant sources such as a wealthy family or a corporation. Public foundations, on the other hand, may seek broad public financial support. They typically rely on and donations and fundings from many sources.
The charity’s laws and regulations vary according to the country or the region where it has been founded and operated. Surveys show that charitable organizations have a high degree of public trust compared to global and national businesses, governments, and the media.
Frequently Asked Questions
What is the sunrise industry?
The sunrise industry is characterized by high growth rates, several startups, and a wealth of venture capital funding. It creates a lot of “buzz” as investors take an interest in the long-term growth prospects.
Examples of sunrise industries include cloud computing, cryptocurrency, electric vehicle, space tourism, and hydrogen fuel production.
What is the largest company by revenue?
Walmart is currently the largest company in the world, with annual revenue of more than $550 billion and a net income of $13.7 billion.
However, in terms of profit, Apple is the world’s most valuable and biggest technology company, with an annual net income of $57.4 billion.
Which industry has produced the most number of billionaires?
Most of the billionaires come from the finance and investment industry. In 2020, 371 billionaires (13% of the worldwide total) devoted most of their time to activities in finance in investments. Furthermore, the technology industry has created 365 billionaires and the manufacturing industry has 331 billionaires.