2.4: Business Sectors and Industries

Businesses are often categorized into specific groupings called sectors, which can be based on business activities, how profits are managed, or the industry in which the business operates.

The Public Business Sector

The public sector includes goods and services produced, delivered, and allocated by the government and public sector organizations (publicly controlled business enterprises). The government sector includes all federal, provincial, municipal, and territorial government ministries and departments. It also includes public school boards, public universities and colleges, and public health and social service institutions. Public sector organizations operate in the marketplace, often in competition with privately owned organizations. The government may have direct or indirect control over public sector organizations, which are also referred to as Crown corporations. The aim of the public sector is to provide services that benefit the public as a whole, either because it would be difficult to charge people for the goods and services concerned or because people may not be able to afford them. The government can provide these goods and services at a lower price than if they were provided by a for-profit company.  Examples include public utilities, such as water and sewage, electricity, and gas, as well as nationalized industries such as coal and steel.

The Private Business Sector

The private sector includes goods and services produced and delivered by private individuals or groups as a means of enterprise for profit. The sector is not controlled by the government. These businesses can be small firms owned by just one person or large multinational businesses that operate globally. Large businesses may have many owners. A public (or publicly traded) company within the private business sector is not part of the public sector (government-provided services and government owned organizations); it is a particular kind of private sector company that can offer its shares for sale to the general public (i.e., Microsoft, Apple, Proctor & Gamble).

The Non-Profit or Voluntary Sector

The non-profit or voluntary sector includes non-governmental, non-profit organizations that receive support from individual citizens, government, and businesses. Non-profit organizations (NPOs) are also referred to as private voluntary organizations (PVOs), not-for-profit organizations (NFPOs), or non-profit making, non-governmental organizations (NGOs). In the global business world, there is inconsistency in how these terms are defined. A non-profit organization could be a not-for-profit corporation or an unincorporated association. A not-for-profit corporation is usually created with a specific purpose in mind and could be a foundation, charity, or other type of non-profit organization. A private voluntary association is a group of volunteers who enter into an agreement to form an organized body to accomplish a purpose. For the purposes of this book, not-for-profit corporations, private voluntary organizations, and non-governmental organizations are classified in the non-profit and voluntary sector as non-profit organizations.

Non-profit organizations have the ability to respond to issues more quickly than the government and are usually formed or expanded in reaction to a community need that is not being met by the government. The Canadian government recognizes the importance of the non-profit sector as a key partner in building a stronger Canada, and it supports the sector in a number of ways, such as partnering, streamlining funding practices and accountability, and developing knowledge about the non-profit sector.^[1]

Non-profit organizations operate in a variety of areas, including sports, religion, arts, culture, fundraising, and housing. Various organizations include hospitals, universities and colleges, research organizations, business and professional associations, and unions. Non-profit organizations experience problems with planning for the future, recruiting the types of volunteers needed, and obtaining board members and funding. People who work in non-profit organizations may be paid employees or unpaid volunteers.

There can be confusion around which sector a business is in. Is a hospital in the public or private sector? Are all hospitals non-profit organizations? Is a private sector university a non-profit or a for-profit organization? This confusion exists because some types of organizations typically thought of as belonging to the non-profit sector can cross sectors.  Public sector hospitals are owned by the government and receive government funding. Most hospitals across Canada are publicly funded organizations, although they also raise additional funds through donations. Private sector hospitals are privately owned, often by a for-profit company or a non-profit organization, and are funded through patient payments, insurers, grants, and donations. Private hospitals and health care clinics are classified as being in either the private, for-profit or private, non-profit sectors and are quite common in the United States and Australia.

Similarly, Canada has private sector, for-profit and private sector, and non-profit colleges and universities in addition to its many public, non-profit colleges and universities. Private colleges and universities are not operated by the government, although many have received public subsidies, and depending on the province in which they are based, they may be subject to government regulations. Some of the world’s most renowned universities, such as Harvard University, Stanford University, and Massachusetts Institute of Technology (MIT), are private sector, non-profit universities.

Business Industries

Across the three sectors, businesses may be classified by industry, such as service-producing industries and goods-producing industries, using the North American Industry Classification System (NAICS).

Goods-Producing Industries

• Agriculture, forestry, fishing, and hunting
• Mining, oil and gas extraction
• Utilities
• Construction
• Manufacturing

Service-Producing Industries

• Wholesale trade
• Retail trade
• Transportation and warehousing
• Information and cultural industries
• Finance and insurance
• Real estate, rental and leasing
• Professional, scientific, and technical services
• Management of companies
• Administrative and support, waste management, and remediation services
• Educational services
• Health care and social assistance
• Arts, entertainment, and recreation
• Accommodation and food services
• Other services, except public administration
• Public administration