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Unlock This CourseThe tertiary sector is the part of the economy that provides services rather than goods. Think about your daily life - when you go to school, visit the doctor, use public transport, or stream music online, you're using tertiary sector services. This sector has become the largest part of most developed economies, including the UK.
Unlike primary businesses (farming, mining) that extract raw materials, or secondary businesses (manufacturing) that make products, tertiary businesses focus on helping people and other businesses with their needs.
Key Definitions:
Services are unique because they're intangible - you can't hold them in your hands. They're also perishable (can't be stored), variable (quality can differ) and inseparable (produced and consumed at the same time). When you get a haircut, the service happens as you receive it!
The tertiary sector includes a huge variety of businesses. From your local corner shop to global tech companies, they all share the common goal of providing services to meet people's needs.
These are profit-making businesses that sell services to customers who pay for them. They range from small local businesses to massive multinational corporations.
Shops, supermarkets, online stores like Amazon. They connect manufacturers with consumers, making products available when and where people want them.
Banks, insurance companies, building societies. They help people manage money, save for the future and protect against risks.
Airlines, bus companies, delivery services. They move people and goods from place to place, connecting communities and enabling trade.
These businesses focus on individual customers' personal needs and wants. They often require direct contact between the service provider and customer.
Hotels, restaurants, cafes. They provide food, drink and accommodation, often creating experiences and memories for customers.
Hairdressers, gyms, spas. They help people look and feel better, often building long-term relationships with regular clients.
Cinemas, theme parks, streaming services. They provide fun, relaxation and cultural experiences that enrich people's lives.
Netflix started in 1997 as a DVD-by-mail service, competing with traditional video rental shops. They spotted the potential of internet streaming early and transformed into a global entertainment service. Today, they serve over 230 million subscribers worldwide, creating original content and changing how we consume entertainment. Their success shows how service businesses can adapt and innovate to meet changing customer needs.
Not all services are provided by private businesses seeking profit. Governments provide many essential services that benefit society as a whole, funded through taxes rather than direct payment.
The NHS provides healthcare free at the point of use. Schools educate children regardless of their family's ability to pay. Police and fire services protect communities. These services exist because society believes everyone should have access to them, not just those who can afford to pay.
In the UK, over 80% of jobs are now in the service sector. This shift from manufacturing to services has happened for several reasons:
As people become wealthier, they spend more on services rather than just basic goods. Technology has created entirely new service industries - think about app developers, social media managers, or drone operators. These jobs didn't exist 20 years ago!
When people have more money, they buy services like holidays, eating out and personal training rather than just necessities.
Digital technology has created new services and made existing ones more efficient and accessible to more people.
Services can now be delivered across borders - you can get customer support from India or learn languages online from teachers worldwide.
Successful service businesses understand that they're not just providing a service - they're solving problems and meeting needs. The best ones anticipate what customers want before customers even realise it themselves.
Modern customers expect services to be fast, convenient, personalised and available 24/7. They want to book appointments online, track deliveries in real-time and get instant responses to queries.
Uber identified frustrations with traditional taxis - you couldn't track them, payment was awkward and quality was inconsistent. They created an app-based service that solved these problems: GPS tracking, cashless payment, driver ratings and transparent pricing. This disrupted the entire taxi industry and created a new business model copied worldwide. However, they've also faced challenges around worker rights and regulation, showing that innovation must balance different stakeholder needs.
Running a service business brings unique challenges that don't affect manufacturers in the same way.
Services depend heavily on people and people can have bad days. A rude waiter or unhelpful shop assistant can damage a business's reputation instantly. Training staff and maintaining consistent standards is crucial but difficult.
Services can't be stored for later use. If a restaurant has empty tables on Tuesday night, that lost revenue can never be recovered. But if they're fully booked on Saturday, they can't serve extra customers. Managing these fluctuations requires careful planning and creative solutions.
Restaurants are busy at meal times, transport services during rush hours. Businesses use pricing and promotions to spread demand more evenly.
Service businesses need the right number of staff at the right times. Too few and customers wait; too many and costs spiral.
Many services need to be close to customers. A hairdresser in the wrong location will struggle regardless of how good they are.
The service sector continues to evolve rapidly. Artificial intelligence is changing how services are delivered, with chatbots handling customer queries and algorithms personalising recommendations. The COVID-19 pandemic accelerated the shift to digital services, with more people working from home and shopping online.
Service businesses are increasingly focusing on sustainability. Hotels are reducing water usage, restaurants are cutting food waste and transport companies are investing in electric vehicles. Customers, especially younger ones, increasingly choose businesses that align with their environmental values. This creates both challenges and opportunities for service providers.
The tertiary sector will likely continue growing as technology creates new possibilities and customer expectations evolve. Understanding how to provide excellent service while managing costs and staying competitive remains the key challenge for businesses in this dynamic sector.