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The tertiary sector of the economy, generally known as the service sector, is the third of the three
economic sector One classical breakdown of economic activity distinguishes three sectors: * Primary: involves the retrieval and production of raw-material commodities, such as corn, coal, wood or iron. Miners, farmers and fishermen are all workers in the p ...
s in the
three-sector model The three-sector model in economics divides Economy, economies into three Economic sector, sectors of activity: extraction of raw materials (Primary sector of the economy, primary), manufacturing (Secondary sector of the economy, secondary), ...
(also known as the economic cycle). The others are the primary sector ( raw materials) and the secondary sector (
manufacturing Manufacturing is the creation or production of goods with the help of equipment, labor, machines, tools, and chemical or biological processing or formulation. It is the essence of secondary sector of the economy. The term may refer to a ...
). The tertiary sector consists of the provision of services instead of end products. Services (also known as "
intangible goods An intangible good is claimed to be a type of good that does not have a physical nature, as opposed to a physical good (an object). Digital goods such as downloadable music, mobile apps or virtual goods used in virtual economies are proposed ...
") include attention, advice, access, experience and affective labor. The production of information has been long regarded as a service, but some economists now attribute it to a fourth sector, called the quaternary sector. The tertiary sector involves the provision of services to other businesses as well as to final consumers. Services may involve the
transport Transport (in British English), or transportation (in American English), is the intentional movement of humans, animals, and goods from one location to another. Modes of transport include air, land ( rail and road), water, cable, pipel ...
,
distribution Distribution may refer to: Mathematics *Distribution (mathematics), generalized functions used to formulate solutions of partial differential equations *Probability distribution, the probability of a particular value or value range of a varia ...
and sale of goods from a producer to a consumer, as may happen in wholesaling and
retailing Retail is the sale of goods and services to consumers, in contrast to wholesaling, which is sale to business or institutional customers. A retailer purchases goods in large quantities from manufacturers, directly or through a wholesaler, and ...
, pest control or
entertainment Entertainment is a form of activity that holds the attention and interest of an audience or gives pleasure and delight. It can be an idea or a task, but is more likely to be one of the activities or events that have developed over thousan ...
. 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 them and serving the customers rather than transforming the physical goods.


Difficulty of definition

It is sometimes hard to determine whether a given company is part of the secondary or the tertiary sector. It is not only companies that have been classified as part of a sector in some schemes, since governments and their services (such as the police or military), as well as
nonprofit organization A nonprofit organization (NPO) or non-profit organisation, also known as a non-business entity, not-for-profit organization, or nonprofit institution, is a legal entity organized and operated for a collective, public or social benefit, in co ...
s (such as charities or research associations), can also be seen as part of that sector. In order to classify a business as a service, one can use classification systems such as the
United Nations The United Nations (UN) is an intergovernmental organization whose stated purposes are to maintain international peace and security, develop friendly relations among nations, achieve international cooperation, and be a centre for harmonizi ...
'
International Standard Industrial Classification The International Standard Industrial Classification of All Economic Activities (ISIC) is a United Nations industry classification system. Wide use has been made of ISIC in classifying data according to kind of economic activity in the fields of em ...
standard, the
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., federal district, five ma ...
' Standard Industrial Classification (SIC) code system and its new replacement, the North American Industrial Classification System (NAICS), the Statistical Classification of Economic Activities in the European Community (NACE) in the EU and similar systems elsewhere. These governmental classification systems have a first-level of hierarchy that reflects whether the economic goods are tangible or intangible. For purposes of finance and
market research Market research is an organized effort to gather information about target markets and customers: know about them, starting with who they are. It is an important component of business strategy and a major factor in maintaining competitiveness. Ma ...
, market-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.Definition by the European Foundation for the Improvement of Living and Working Conditions
The tertiary sector is now the largest sector of the economy in the
Western world The Western world, also known as the West, primarily refers to the various nations and states in the regions of Europe, North America, and Oceania.
, and is also the fastest-growing sector. In examining the growth of the service sector in the early nineties, the globalist Kenichi Ohmae noted that: Economies tend to follow a developmental progression that takes them from heavy reliance on agriculture and mining, toward the development of
manufacturing Manufacturing is the creation or production of goods with the help of equipment, labor, machines, tools, and chemical or biological processing or formulation. It is the essence of secondary sector of the economy. The term may refer to a ...
(e.g. automobiles, textiles,
shipbuilding Shipbuilding is the construction of ships and other Watercraft, floating vessels. It normally takes place in a specialized facility known as a shipyard. Shipbuilders, also called shipwrights, follow a specialized occupation that traces its roo ...
, 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 United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the European mainland, continental mainland. It comprises England, Scotlan ...
. 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 International trade is the exchange of capital, goods, and services across international borders or territories because there is a need or want of goods or services. (see: World economy) In most countries, such trade represents a significan ...
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 Protectionism, sometimes referred to as trade protectionism, is the economic policy of restricting imports from other countries through methods such as tariffs on imported goods, import quotas, and a variety of other government regulation ...
.


Issues for service providers

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.
Product differentiation In economics and marketing, product differentiation (or simply differentiation) is the process of distinguishing a product or service from others to make it more attractive to a particular target market. This involves differentiating it from co ...
is often difficult. For example, how does one choose one investment adviser over another, since they are often seen to provide identical services? Charging a premium for services is usually an option only for the most established firms, who charge extra based upon brand recognition.


Examples of tertiary sector industries

Examples of tertiary industries may include: *
Telecommunication Telecommunication is the transmission of information by various types of technologies over wire, radio, optical, or other electromagnetic systems. It has its origin in the desire of humans for communication over a distance greater than tha ...
*
Hospitality industry The hospitality industry is a broad category of fields within the service industry that includes lodging, food and drink service, event planning, theme parks, travel and tourism. It includes hotels, tourism agencies, restaurants and bars. S ...
/
tourism Tourism is travel for pleasure or business; also the theory and practice of touring, the business of attracting, accommodating, and entertaining tourists, and the business of operating tours. The World Tourism Organization defines tourism ...
*
Mass media Mass media refers to a diverse array of media technologies that reach a large audience via mass communication. The technologies through which this communication takes place include a variety of outlets. Broadcast media transmit informatio ...
* Healthcare/
hospitals A hospital is a health care institution providing patient treatment with specialized health science and auxiliary healthcare staff and medical equipment. The best-known type of hospital is the general hospital, which typically has an emergenc ...
*
Public health Public health is "the science and art of preventing disease, prolonging life and promoting health through the organized efforts and informed choices of society, organizations, public and private, communities and individuals". Analyzing the det ...
*
Pharmacy Pharmacy is the science and practice of discovering, producing, preparing, dispensing, reviewing and monitoring medications, aiming to ensure the safe, effective, and affordable use of medication, medicines. It is a miscellaneous science as it ...
*
Information technology Information technology (IT) is the use of computers to create, process, store, retrieve, and exchange all kinds of data . and information. IT forms part of information and communications technology (ICT). An information technology system ...
* Waste disposal * Consulting *
Gambling Gambling (also known as betting or gaming) is the wagering of something of Value (economics), value ("the stakes") on a Event (probability theory), random event with the intent of winning something else of value, where instances of strategy (ga ...
*
Retail Retail is the sale of goods and services to consumers, in contrast to wholesaling, which is sale to business or institutional customers. A retailer purchases goods in large quantities from manufacturers, directly or through a wholesaler, and th ...
sales ** Fast-moving consumer goods (FMCG) *
Franchising Franchising is based on a marketing concept which can be adopted by an organization as a strategy for business expansion. Where implemented, a franchisor licenses some or all of its know-how, procedures, intellectual property, use of its busine ...
*
Real estate Real estate is property consisting of land and the buildings on it, along with its natural resources such as crops, minerals or water; immovable property of this nature; an interest vested in this (also) an item of real property, (more genera ...
*
Education Education is a purposeful activity directed at achieving certain aims, such as transmitting knowledge or fostering skills and character traits. These aims may include the development of understanding, rationality, kindness, and honesty. ...
*
Financial services Financial services are the economic services provided by the finance industry, which encompasses a broad range of businesses that manage money, including credit unions, banks, credit-card companies, insurance companies, accountancy companie ...
**
Banking A bank is a financial institution that accepts Deposit account, deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital m ...
**
Insurance Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge ...
**
Investment management Investment management is the professional asset management of various securities, including shareholdings, bonds, and other assets, such as real estate, to meet specified investment goals for the benefit of investors. Investors may be instit ...
*
Professional services Professional services are occupations in the service sector requiring special training in the arts or sciences. Some professional services, such as architects, accountants, engineers, doctors, and lawyers require the practitioner to hold profes ...
** Legal services **
Management consulting Management consulting is the practice of providing consulting services to organizations to improve their performance or in any way to assist in achieving organizational objectives. Organizations may draw upon the services of management consultant ...
*
Transportation Transport (in British English), or transportation (in American English), is the intentional movement of humans, animals, and goods from one location to another. Modes of transport include air, land ( rail and road), water, cable, pipel ...


List of countries by tertiary output

Below is a list of countries by service output at market exchange rates in 2016:


See also

*
Economic sector One classical breakdown of economic activity distinguishes three sectors: * Primary: involves the retrieval and production of raw-material commodities, such as corn, coal, wood or iron. Miners, farmers and fishermen are all workers in the p ...
*
Indigo Era The Indigo Era (or Indigo economies) is a concept publicized by businessman Mikhail Fridman, describing what he views as an emerging new era of economies and economics based on ideas, innovation, and creativity, replacing those based on the possess ...
* Post-industrial society *
Quaternary sector of the economy The quaternary sector of the economy is based upon the economic activity that is associated with either the intellectual or knowledge-based economy. This consists of information technology; media; research and development; information-based serv ...
*
Voluntary sector The voluntary sector, independent sector, or civic sector is the realm of social activity undertaken by organizations that are non-governmental nonprofit organizations. This sector is also called the third sector, community sector, and nonprofit ...


References


External links

* {{DEFAULTSORT:Tertiary Sector Of The Economy +3 +3 de:Wirtschaftssektor#Terti.C3.A4rsektor_.28Dienstleistungssektor.29