A company’s line of business refers to the activity or business that develops it. These activities are classified into different categories, according to the purpose and importance of the company.
There are three main categories that group the lines of business according to their activity: industrial, commercial and services. However, within these three large groups, there is a great diversity of possible activities.
A company can have multiple lines of business at the same time. According to the importance and income they generate for the company, they can be classified as main, secondary and auxiliary.
Classification of lines of business (types)
Lines of business can be very diverse and changeable. As new technologies develop, new possibilities and needs appear. In addition, human beings are in a constant process of innovation.
Therefore, it is not possible to build a defined and stable classification of the lines of business. However, there are different classifications that allow a better understanding of the activities of companies.
According to the most frequent classification, lines of business are classified as industrial, commercial and service. Which, in turn, are subdivided into other types.
industrial companies
Industry refers to the manufacture of goods. An industrial company is one that exploits natural resources or changes the shape of products at any of the stages between raw material and finished product.
There are companies dedicated to taking a raw material to manufacture a material that will later be transformed by other companies. These types of products are known as “production goods”.
Within this category are materials and machines used in the industry.
Therefore, a company is considered to produce “production goods” when manufacturing fabrics for apparel companies, in the same way as in manufacturing industrial sewing machines.
On the other hand, there are companies whose business is to produce goods intended for direct consumption by users. This type of product is known as “consumer goods”.
You may be interested in The Industrial Market: Characteristics, Segments and Strategies.
commercial companies
Trade refers to all activities that bring the goods from the producer to the user. Its purpose is to make it easier for customers to access products, regardless of where they are manufactured.
These companies are classified into wholesalers or retailers according to the way they sell the products.
Wholesalers are those who sell large quantities, usually destined for other companies. Retailers are those who sell by the unit, usually aimed at users.
Within this category are all stores and supermarkets where you can buy everyday consumer products.
They also include large merchants such as import companies or new merchants such as e-sales companies.
You might be interested in the top 22 market types.
service companies
Services refer to intangible assets. This turn, therefore, includes all companies that deal with the provision of services to the population.
It is another form of commercial enterprise, the fundamental difference is that it works exclusively with intangible assets.
Sometimes the provision of a service may require a specific product to be developed. These assets are considered added value only and do not change the line of business.
For example, a company that provides home Internet service must necessarily install a modem in its customers’ homes.
However, this does not mean that the company sells modems, it is simply understood that this device is necessary for the provision of the service offered.
The line of business includes companies that offer:
- Public services: includes energy, water, telephony and Internet.
- Private services: includes administrative, accounting and legal services.
- Transport: includes the transport of people and goods.
- tourism
- Education
- Health
- culture and entertainment
Main, secondary and auxiliary activities
A company may focus on more than one line of business. In this case, business activities are classified into primary, secondary and auxiliary.
the main activity
Refers to the most important commercial activity carried out by the company. This activity is characterized by generating more than 50% of the company’s total revenue and influencing the development of the company’s other activities.
Secondary activity
It refers to a productive activity that eventually generates income, but is not the heart of business. By eliminating this activity, the company would still exist.
However, most companies produce some sort of secondary product or service.
auxiliary activities
Refers to commercial activities necessary for the company’s operation, but which do not generate any product or service for public consumption.
Tech companies are a great example of businesses with multiple lines of business.
A company that manufactures educational hardware, such as interactive whiteboards, is primarily engaged in manufacturing its products.
However, these products often also require training in their use. Therefore, the company may have a secondary objective, which is to provide training in the use of its technology in the classroom.
Finally, this same company can also carry out auxiliary activities, for example, the manufacture of tools for its own use.
The latter, although it is also an economic activity, is not considered in the company’s business because it is not sold to the consumer.
Example of commercial payment orders
Industrial business: mining
This sector is dedicated to the extraction of natural resources, as it generates products from raw materials. In turn, this extractive type company requires personnel and machinery for the transformation of the product.
Company: Walmart
This chain of stores is the largest retailer in the world. Among the services offered are hypermarkets, clothing and footwear markets, factories or entertainment. Therefore, they work with consumer goods to satisfy human needs.
Business Services Company: Harvard University
The private university offers education as a line of business in order to discover some knowledge and greater possibilities of job placement.
Emerging lines of business
The development of information and communication technologies has generated new needs in the population. Thanks to this, new lines of business have been formed in recent years.
These new approaches are related in different ways to technology. There are companies oriented towards the maintenance of technological devices, training in technological skills or the provision of virtual services.
One of the prime examples of new lines of business is businesses related to digital marketing. Social media is a relatively new phenomenon, however, there is a whole market around it.
Digital marketing agencies are just one example of possible business activity. There are also several gyms designed that provide training on social networks and even virtual platforms to find professionals who offer their services.
