Chapter 7 Tertiary And Quaternary Activities

Trade And Commerce

Economic activities are categorized into primary, secondary, tertiary, and quaternary sectors, all focused on obtaining and using resources.

Tertiary activities are fundamentally different from primary and secondary activities because they involve the provision of services rather than the production of tangible goods.

These services require specialized skills, training, and knowledge. Examples include healthcare (doctors), education (teachers), legal services (lawyers), governance, and recreation.

Manpower is a crucial element in the service sector, as tertiary activities rely heavily on skilled labour, trained professionals, and consultants.

Historically, a larger portion of the workforce was in the primary sector. In developed economies today, the majority of employment is in the tertiary sector, with a smaller proportion in the secondary sector.

Tertiary activities encompass both production and exchange.

• Production involves providing services that are 'consumed' directly. The value of this production is often measured indirectly through wages and salaries earned by service providers.
• Exchange includes activities like trade, transport, and communication, which facilitate overcoming geographical distance and connecting producers with consumers.

Unlike secondary activities that process physical raw materials, tertiary activities focus on the commercial output of services. The expertise in services is based more on the provider's specialized skills, experience, and knowledge than on manufacturing techniques or machinery.

Common examples of tertiary workers include plumbers, electricians, technicians, launderers, barbers, shopkeepers, drivers, cashiers, teachers, doctors, lawyers, and publishers.

Key types of tertiary activities include:

• Trade and Commerce
• Transport
• Communication
• Services (various types)

Retail Trading

Trade is the activity of buying and selling goods. Trade and commerce involve all services related to trading for profit.

Towns and cities where significant trading takes place are known as trading centres, acting as points for collection and distribution.

Trading centres can be broadly categorized into rural and urban marketing centres.

Rural marketing centres:

• Serve the immediate surrounding rural settlements.
• Function as quasi-urban centres, offering basic trading services.
• Personal and professional services are usually not highly developed here.
• They serve as local collection and distribution hubs, often featuring 'mandis' (wholesale markets) and retail areas.
• While not full urban centres, they are crucial for providing goods and services frequently needed by rural populations.

Periodic markets:

• Occur in rural areas that lack regular daily markets.
• Organized at fixed intervals (e.g., weekly, bi-weekly).
• Serve as meeting points for people from surrounding areas to buy goods for their accumulated demand.
• They move from one location to another on specified days, allowing shopkeepers to operate in different places throughout the week and serve a wider geographic area.

Urban marketing centres:

• Offer a wider variety of highly specialized urban services.
• Provide both everyday goods and services as well as specialized ones.
• Often see the development of specialized markets (e.g., for labour, housing, specific manufactured goods).
• Professional services like educational institutions and professionals (teachers, lawyers, doctors, consultants) are readily available.

Retail trading involves selling goods directly to the final consumer.

Most retail trade occurs in dedicated shops or stores (fixed establishments).

Examples of non-store retail trading methods include street vending, handcarts, mobile trucks, door-to-door sales, mail-order catalogs, telephone sales, automatic vending machines, and online shopping via the internet.

Various retail formats have evolved:

• Consumer cooperatives: Early large-scale retail innovation where consumers jointly own the business.
• Departmental stores: Large stores selling a wide variety of goods organized into departments. Department heads are responsible for purchasing and sales in their sections.
• Chain stores: Networks of identical stores under common ownership. They benefit from bulk purchasing (economies of scale) and can even dictate manufacturing specifications. They employ specialists for various tasks and can test strategies in one store before implementing them across the chain.

Wholesale Trading

Wholesale trading involves buying goods in bulk, often from manufacturers or producers, and selling them in smaller quantities to retailers or other businesses, rather than directly to consumers.

This business is conducted through intermediary merchants and supply houses.

While some large retailers or chain stores may purchase directly from manufacturers, most smaller retail stores obtain their supplies from wholesalers.

Wholesalers often play a crucial role in the financial flow by extending credit to retail stores, enabling retailers to operate significantly using the wholesaler's capital.

Transport

Transport is a fundamental tertiary service that facilitates the physical movement of people, raw materials, and finished goods from one location to another.

It is an organized industry essential for satisfying the basic human need for mobility and connectivity.

Efficient and rapid transport systems are vital for the functioning of modern society, supporting the processes of production, distribution, and consumption of goods.

Transportation significantly increases the value of materials by making them available where they are needed.

Transport distance can be measured in different ways:

• Kilometre distance: The actual length of the route.
• Time distance: The time taken to travel the route.
• Cost distance: The expense involved in travelling the route.

When choosing a mode of transport, distance measured in terms of time or cost is often the most decisive factor.

Isochrone lines are lines drawn on a map connecting places that are equally distant from a central point in terms of travel time.

As transport systems develop, they create interconnected networks linking different places.

• A network consists of nodes (points where routes meet, or significant towns/cities) and links (the routes connecting the nodes).
• A well-developed transport network features numerous links, indicating high levels of connectivity between locations.

Several factors influence the demand for transport and the layout of transport routes:

• Demand: Directly influenced by population size; larger populations generate higher demand for transport.
• Routes: Determined by the locations of cities, towns, villages, industrial centres, and raw material sources, as well as the patterns of trade between them. Geographical factors like the nature of the landscape (mountains, plains) and climate also affect route planning and construction. The availability of funds is necessary to overcome physical obstacles and build the routes.

Communication

Communication services are concerned with transmitting information, including words, messages, facts, and ideas.

The invention of writing allowed messages to be stored, but their dissemination initially depended entirely on means of transport (carried by hand, animals, boats, vehicles).

For this reason, all forms of transport were historically referred to as lines of communication, as efficient transport networks facilitated the spread of information.

Modern technological advancements, particularly in mobile telephony and satellite technology, have enabled some forms of communication to become largely independent of physical transport.

However, older, cheaper systems still exist, and large volumes of mail continue to be handled by post offices globally, demonstrating that the link is not entirely broken.

Key communication services include:

• Telecommunications: Revolutionized by modern technology, allowing messages to be sent with immense speed (from weeks to minutes). Mobile telephony provides direct and instantaneous communication anywhere, anytime. Older technologies like telegraph, Morse code, and telex are now largely obsolete.
• Mass Media: Includes radio and television, which broadcast news, images, and entertainment to large global audiences. They are also vital for advertising. Newspapers continue to report on events worldwide.
• Satellite Communication: Relays information about the Earth and from space, enabling global connectivity.
• The Internet: Has fundamentally transformed the global communication system, providing unprecedented access to information and connectivity.

Services

Services exist at various levels of complexity and reach, catering to industry, individuals, or both (like transport).

Low-order services, such as local grocery shops or laundries, are common and widely available to meet frequent, basic needs.

High-order services are more specialized, less common, and found in fewer locations. Examples include services provided by accountants, consultants, or physicians.

Services are typically provided to individual consumers who are able to pay for them.

The nature of work in the service sector can involve:

• Primarily Physical Labour: Examples include gardeners, launderers, barbers.
• Primarily Mental Labour: Examples include teachers, lawyers, physicians, musicians.

Many services are now subject to regulation, or are directly provided or supervised by governments or large companies. This includes maintaining public infrastructure (highways, bridges), emergency services (fire fighting), and supervising education and essential utilities (energy, water supply).

Government legislation often establishes corporations to oversee and control the provision and marketing of regulated services like transport and telecommunication.

Professional services specifically refer to specialized fields such as healthcare, engineering, law, and management.

The location of certain services, particularly recreational and entertainment ones, is highly dependent on the market and land costs.

• Multiplex cinemas and restaurants might locate within or near the Central Business District (CBD) to be accessible to a large customer base.
• Activities requiring large land areas, like a golf course, are typically located where land costs are lower, outside the CBD.

Personal services help individuals with their daily tasks. This often involves unskilled labour, frequently migrants from rural areas, employed in roles like housekeepers, cooks, and gardeners. This segment of the workforce is often less formally organized.

An example of a unique personal service in India is Mumbai's 'dabbawala' system, providing lunchbox delivery to a large number of customers across the city.

People Engaged In Tertiary Activities

In modern economies, particularly developed countries, a significant majority of the population is employed in the service sector (tertiary activities).

Services are provided in all societies, but the proportion of workers in the service sector is notably higher in more developed nations compared to less developed ones.

Globally, there has been a consistent trend of increasing employment in the tertiary sector, while employment proportions in the primary and secondary sectors have generally remained stable or decreased.

Tourism

Tourism is defined as travel undertaken for recreational purposes, as opposed to business.

It has grown into the world's largest single tertiary activity in terms of both employment (approximately 250 million registered jobs globally) and total revenue (contributing around 40% of the total Gross Domestic Product globally).

Beyond direct employment in hotels, restaurants, and transport, tourism also supports many local jobs in entertainment and specialized shops catering to tourists. It stimulates the growth of related industries, including infrastructure development, retail, and craft industries (producing souvenirs).

While tourism can be seasonal in some areas depending on weather patterns, many regions attract visitors throughout the year.

Tourist Regions

Popular tourist destinations include:

• Warm coastal areas like the Mediterranean Coast and the West Coast of India.
• Winter sports destinations, mainly found in mountainous regions.
• Areas with scenic landscapes and national parks.
• Historic towns, valued for their monuments, heritage sites, and cultural activities.

Factors Affecting Tourism

The growth of tourism is influenced by several factors:

• Demand: The demand for recreational travel and holidays has increased substantially, especially over the last century. Improvements in living standards and more leisure time allow more people to afford and take holidays.
• Transport: Better transport infrastructure has opened up many tourist areas. Improvements in road systems facilitate car travel. More significantly, the expansion and reduced cost of air transport (including package holidays) have made distant destinations accessible within hours, vastly expanding the possibilities for international tourism.

Tourist Attractions

What attracts tourists to a destination?

• Climate: Tourists from colder regions often seek warm, sunny weather for beach holidays (e.g., Southern Europe, Mediterranean lands, known for consistent high temperatures and sunshine during peak season). Winter holidays might require either warmer climates or sufficient snow cover for activities like skiing.
• Landscape: Attractive natural environments such as mountains, lakes, spectacular coastlines, or landscapes that retain their natural character appeal to tourists.
• History and Art: Regions rich in history and art are major draws. Tourists visit ancient towns, archaeological sites, castles, palaces, and churches.
• Culture and Economy: Opportunities to experience local customs and ethnic traditions are attractive. Destinations that offer services and cater to tourist needs at an affordable cost tend to become popular. The trend of 'home-stay' (renting rooms in private homes), like heritage homes in Goa or Karnataka (Madikere, Coorg), has become a profitable business in some areas.

Medical Services For Overseas Patients In India

Beyond traditional tourism, some countries have become significant destinations for individuals seeking medical treatment. India is a leading example in this area.

In 2005, around 55,000 patients from the U.S. visited India for medical treatment, highlighting a growing trend. India, Thailand, Singapore, and Malaysia are prominent countries benefiting from this sector due to their world-class hospitals and relatively lower costs.

Beyond treatment, there is also a trend of outsourcing medical tests and data interpretation. Hospitals in countries like India, Switzerland, and Australia are providing services such as reading radiology images (X-rays), MRIs, and ultrasound tests for patients located in other countries.

Outsourcing of medical services can be advantageous for patients, particularly if it leads to improved quality of care or access to specialized expertise.

Medical Tourism

The practice of traveling internationally specifically to obtain medical treatment while also engaging in tourist activities is known as medical tourism.

Quaternary Activities

Quaternary activities represent a knowledge-based segment of the service sector, distinct from general tertiary services.

These activities involve the collection, production, and dissemination of information. More broadly, they are centered around research and development (R&D).

Quaternary activities are considered an advanced form of services, demanding specialized theoretical knowledge and technical skills.

The Quaternary Sector

Along with the tertiary sector, the quaternary sector has become a primary driver of economic growth, particularly in developed economies, replacing the historical dominance of primary and secondary sectors in terms of employment.

In developed countries, over half of the workforce is now employed in the 'Knowledge Sector', which includes both quaternary and sometimes aspects of tertiary activities requiring high skill.

There is high demand and consumption of information-based services, from financial services (mutual fund managers, tax consultants) to technology roles (software developers, statisticians).

Workers in various professional settings like office buildings, educational institutions (schools, universities), healthcare facilities (hospitals, doctors' offices), theatres, accounting firms, and brokerage firms often belong to this category of services.

Similar to some specialized tertiary functions, quaternary activities can also be outsourced.

A key characteristic is that they are generally not tied to the location of specific raw materials, are not heavily influenced by the physical environment, and are not necessarily localized by market proximity in the same way retail services might be.

Quinary Activities

Quinary activities represent the highest level within the service sector. They involve individuals holding senior decision-making and policy-making roles.

This sector focuses on the creation, re-arrangement, and interpretation of new and existing ideas, sophisticated data analysis, and the evaluation and application of new technologies.

Professionals in this sector are sometimes referred to as 'gold collar' professions, signifying their highly specialized and often well-compensated skills.

This group includes senior business executives, top government officials, leading research scientists, and expert financial and legal consultants.

Although relatively small in number, their influence and importance in advanced economies are disproportionately high due to their roles in innovation and strategic decision-making.

Outsourcing

Outsourcing is a business practice where a company contracts out a function or service to an external agency to improve efficiency and reduce costs.

When outsourcing involves relocating the work to a company in a foreign country, it is often called offshoring, although the terms are frequently used together.

Activities commonly outsourced include Information Technology (IT) services, Human Resources functions, Customer Support, Call Centre services, and sometimes even specific manufacturing and engineering tasks.

Data processing, an IT-related service, is frequently outsourced to countries in Asia, Eastern Europe, and Africa.

This is primarily driven by the availability of skilled staff with good English language proficiency in these regions, who can be employed at significantly lower wages compared to developed countries.

For example, a company in India or the Philippines might undertake complex GIS (Geographic Information Systems) project work for clients in the U.S.A. or Japan.

Lower overhead costs in the outsourcing destinations also contribute to profitability, making it attractive for companies to get work done overseas, including in countries like China or Botswana.

Outsourcing has led to the creation of numerous jobs, particularly in call centres, in countries like India, China, Eastern Europe, Israel, the Philippines, and Costa Rica.

However, it can also lead to dissatisfaction among job seekers in the countries that are outsourcing the work, as it can reduce domestic employment opportunities in those sectors.

The primary driver behind the continuation of outsourcing is the comparative advantage offered by the destination countries (e.g., lower labour costs, available skills).

Recent trends in quinary services and outsourcing include:

• Knowledge Processing Outsourcing (KPO): This is a more advanced form than standard Business Process Outsourcing (BPO). KPO involves tasks that require highly skilled workers and advanced analytical and technical capabilities. It is focused on information-driven knowledge processes. KPO helps companies gain specialized expertise and create new business opportunities. Examples include outsourced Research and Development (R&D), e-learning content creation, business research, Intellectual Property (IP) research, and specialized tasks in the legal and banking sectors.
• 'Home shoring' (or 'homesourcing'): This is an alternative to offshoring where work is outsourced to individuals who work from their homes within the same country.

Understanding the nature of work based on categories sometimes referred to by "collar colours":

The Digital Divide

The opportunities created by advancements in Information and Communication Technology (ICT) are not equally distributed across the world.

Significant economic, political, and social disparities between countries contribute to this uneven distribution.

A key factor determining who benefits from ICT is how quickly and effectively countries can provide their citizens with access to ICT and its benefits.

Generally, developed countries have moved ahead rapidly in ICT adoption and access, while developing countries have lagged behind. This disparity is known as the digital divide.

The digital divide also exists within countries. In large nations like India or Russia, there are inevitable differences in connectivity and access to the digital world between major metropolitan centres and more remote rural or peripheral areas.

Exercises

This section contains exercises intended for students to reinforce their understanding of the concepts discussed in the chapter on tertiary and quaternary activities.

Choose The Right Answer From The Four Alternatives Given Below

Multiple-choice questions designed to assess comprehension of key definitions and examples related to different economic activities.

Answer The Following Questions In About 30 Words

Short answer questions requiring brief explanations of specific terms or concepts covered, such as retail trading, quaternary services, leading medical tourism countries, and the digital divide.

Answer The Following Questions In Not More Than 150 Words

More detailed questions prompting discussion and explanation of the significance and characteristics of the service sector, transport and communication services, the location factors for high-tech industries, and the reasons behind industrial backwardness in regions like Africa.

Project/Activity

Suggestions for practical activities and projects, such as researching the activities of Business Process Outsourcing (BPO) firms or investigating international travel requirements, to provide real-world context to the concepts discussed.