What Is the Tertiary Industry?

The tertiary industry is a technical name for the service sector of the economy, which encompasses a wide range of businesses, including financial institutions (FIs), schools, hotels, and restaurants.

The tertiary industry is one of three primary industrial types in a developed economy, the other two being the primary (i.e. raw materials), and secondary (i.e. goods production) industries. As an economy becomes more developed, it tends to shift its focus from primary to secondary and tertiary industries.

Key Takeaways

  • The tertiary industry is the services sector of an economy, encompassing medical providers, educators, financial services, haircuts, and personal trainers, among many others.
  • The tertiary sector can be subdivided broadly into for-profit and nonprofit segments.
  • Economists have found that as a nation's economy grows and develops, the tertiary sector becomes larger while the primary sector that produces raw materials shrinks.
  • The service sector is now the largest sector of the global economy in terms of value-added and is especially important in more advanced economies.
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Tertiary Industry

Understanding the Tertiary Industry

The tertiary industry is split into two main categories. The first is made up of companies in the business of making money, such as those in the financial industry. The second comprises the nonprofit segment, which includes services such as state education.

The tertiary industry sector makes up the vast majority of employment opportunities and is solely focused on providing services, not goods, to consumers and other organizations. For this reason, it is also known as the service sector.

This is in contrast to the primary industry, which produces raw materials, and the secondary industry, which takes raw materials and uses them to produce salable consumer goods.

The term tertiary industry can be used to describe a single service-oriented organization or the industry segment as a whole.

Examples of Tertiary Industry Organizations

The tertiary industry provides services, as well as operational frameworks for business operations. This can include organizations involved in the shipping and transportation industry, such as railroad or trucking, where the sole focus is on the process of moving goods. It could also include the transportation of people, such as taxi services, city bus systems, and subways.

Traditional hospitality industries, such as hotels and resorts, are a part of the tertiary industry, too, as are food service providers, such as restaurants. All services received from financial institutions (FIs), such as banks, and investment brokers, are tertiary in nature, as well.

Personal services, including everything from haircutting to tattooing, also fit into this category, along with services to animals, such as pet groomers, animal breeders, and stray animal care facilities. Hospitals, clinics, veterinarians, and other medical service facilities may qualify, too.

Pricing Challenges in the Tertiary Industry 

Selling services can often be challenging compared to selling a specific product. Since goods are tangible, it’s easy to peg a price to them. Conversely, being intangible, it can be difficult to put a value on a specific service.

In these cases, the quality of service depends on the quality of the person providing it, and that can vary given people’s skills and personalities. For instance, when two different brokers provide seemingly identical services, how can a consumer choose between them? 

Transition From Tertiary to Quaternary

Certain technological services were previously considered tertiary, though some have determined that it is appropriate to have them categorized into a new segment due to industry growth. These technological services include telecommunications providers, cable companies, and internet providers.

Businesses in this sector are rapidly placing more focus on what is becoming known as the knowledge economy, or the ability to surpass competitors by understanding what target customers want and need, and operate in a way that meets those wants and needs quickly with minimal cost. Even though they are all service-oriented, like the tertiary sector, these services have been separated and classified into the quaternary industry sector.

Who Has the Highest Output of Tertiary Services?

According to the International Monetary Fund (IMF) and the CIA World Factbook, the following countries are considered to be the largest by service or tertiary output as of 2016: 

  1. United States: $14.76 billion
  2. China: $5.7 billion
  3. Japan: $3.5 billion
  4. Germany: $2.4 billion
  5. United Kingdom: $2.1 billion
  6. France: $1.9 billion
  7. Italy: $1.4 billion
  8. Brazil: $1.3 billion
  9. Canada: $1.1 billion
  10. India: $1.0 billion