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Finder is intuitively designed to help you find things on your Mac. In Finder Windows you can arrange icons or lists of files in all manner of ways: Name, Date last opened, Created, Modified etc, as well sort lists in Ascending or Descending order by clicking on the top column title.

How do you therefore go about arranging Applications by "Application Type" ie Productivity, Music, Video etc....... ?

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In Finder, you can Arrange By → Application Category:

This sorts your Applications folder by the category of the application.

Applications Folder

Applications without a category are listed under the Other section.

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This is a good place to use Labels. If you label each Application specifically, and then in Finder, sort by Label (Shift-Command-7), this will accomplish what you're trying to do essentially.

You can set Label names in the Finder preferences.

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