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Secondary Sector
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The primary sector, whose goods are sold in commodity markets, forms the basis of many developing economies (such as Kenya in Africa or Vietnam in South East Asia). As economies develop the primary sector becomes less important and the secondary and tertiary sectors take over. Having said this, if a business is operating in the primary sector it needs to take into account some of the key problems present in commodity markets:

• Fluctuating prices: prices in commodity markets are not very stable and frequently change. This makes it difficult to plan ahead.
• Low general price level: as the Global Economy becomes richer and richer, a smaller proportion of income is spent on primary sector products and a greater proportion is spent on secondary and tertiary sector products. This makes it difficult to increase prices.
• High degree of competition: most countries produce primary sector products and the market contains many businesses. It’s very difficult for one single business to control the market and set a price.
• Agriculture, one of the main products within the primary sector, faces constant changes in the environment so that it’s very difficult for a farmer to predict how much will be produced at the end of each season.
• Many primary products are “non-renewable”: metals and minerals (like copper and stone) are limited in supply and will eventually be completely used up. As years go by, finding new sources of these non-renewable primary products becomes increasingly difficult and more expensive.

As you can see, working in the primary sector provides plenty of challenges for a business: how might these businesses try to reduce the impact of these problems?

Click here to look at a real example of a Primary Sector market.