Firms differ by sector (primary, secondary, tertiary), by ownership (private or public), and by size.
Firms can be grouped by sector. Primary sector firms extract natural resources, such as farming, fishing and mining. Secondary sector firms make goods, such as factories and builders. Tertiary sector firms provide services, such as banks, shops and hospitals.
Firms can also be grouped by ownership. Private sector firms are owned by individuals or shareholders and usually aim for profit. Public sector organisations are owned or run by the government, such as public hospitals or a state-owned transport company.
Large firms can produce at lower cost per unit, raise money more easily and spread risk across many products. But they can become slow to decide and distant from customers.
Small firms offer a personal service, adapt quickly and can serve small, specialised markets. But they find it harder to borrow and cannot buy in bulk as cheaply.
- Primary sector
- Extracting natural resources: farming, fishing, mining.
- Secondary sector
- Manufacturing and construction.
- Tertiary sector
- Services: retail, banking, healthcare.
- Private vs public sector
- Owned by individuals/shareholders vs owned or run by government.
Worked example: Why small firms survive
Singapore has many small firms despite large rivals. Here is why.
- Personal service: a neighbourhood tailor knows each customer's needs.
- Small markets: a shop selling specialist model trains has too few customers to attract a large firm.
- Flexibility: a small cafe can change its menu in a day.
- Government help: grants and loans for small and medium enterprises.
Watch out for this
Public sector firms are firms that sell to the public.
Public sector means owned or run by the government. Most firms selling to the public, such as supermarkets, are in the private sector.
Check your understanding
A company that mines tin is in which sector?
- Primary
- Secondary
- Tertiary