Industry Definition in Business and Investing

Industry Definition in Business and Investing

What Is an Industry?

An Industry is a bunch of corporations which might be associated based mostly on their major Industry activities. In fashionable economies, there are dozens of Industry classifications. Industry classifications are usually grouped into bigger classes referred to as sectors.

Particular person corporations are usually categorised into an Industry based mostly on their largest sources of income. For instance, whereas an car producer may need a financing division that contributes 10% to the agency’s general revenues, the corporate could be categorised within the automaker Industry by most classification techniques.


  • Comparable corporations are grouped collectively into industries, and there are a variety of various industries, akin to shops and shoemakers.
  • Industry grouping relies on the first product that an organization makes or sells. In the meantime, industries are grouped collectively into sectors.
  • The North American Industry Classification System is the usual classification system utilized by authorities businesses to arrange corporations into sectors or industries.1
  • Alternatively, the World Industry Classification Customary assigned each firm an financial sector and Industry group.
  • Corporations inside an analogous Industry will usually carry out equally as a consequence of macroeconomic situations serving to or hurting all corporations the identical throughout the Industry.

Understanding an Industry

Comparable companies are grouped into industries based mostly on the first product produced or offered. This successfully creates Industry teams, which may then be used to isolate companies from those that take part in numerous actions. Buyers and economists usually research industries to raised perceive the elements and limitations of company revenue development. Corporations working in the identical Industry may also be in contrast to one another to judge the relative attractiveness of an organization inside that Industry.

Shares of corporations working throughout the identical Industry are likely to have comparable inventory value actions. This is because of name corporations inside a given Industry dealing with the identical headwinds, challenges, and broad triumphs.


Particular Concerns

Shares throughout the identical Industry usually rise and fall as a bunch as a result of the identical macroeconomic factors affect all members of an Industry. These macroeconomic elements can embody adjustments in market sentiment on the a part of buyers—akin to these based mostly on a response to a selected occasion or piece of stories—in addition to adjustments directed particularly in direction of the precise Industry, akin to new rules or elevated uncooked materials prices.

Nonetheless, occasions regarding only one explicit enterprise could cause the related inventory to rise or fall individually from others throughout the identical Industry. This may be the results of sure occasions, together with a differentiating product launch, a company scandal within the information, or a change in management buildings.

Industries vs. Sectors

Whereas each sectors and industries are classification techniques used to group comparable varieties of enterprise operations, sectors are broader than industries.

For instance, retail commerce is a sector throughout the North American Industry Classification System (NAICS), and inside that sector are industries, akin to well being and private care shops, clothes shops, and shoe shops. Ceremony Support Company and Hole, Inc. are members of the identical client items sector, however every could be listed in a unique Industry based mostly on the specifics of the merchandise they produce or promote. Ceremony Support Company is assessed throughout the well being and private care shops (NAICS Code 44610), whereas Hole, Inc. is assessed inside each the clothes shops Industry (NAICS Code 448130) and clothes equipment Industry (NAICS 448150).23

It is necessary to notice {that a} single firm can reside in two completely different industries or two completely different sectors. Along with being throughout the client items sector, Ceremony Support is taken into account a part of the non-public companies sector as nicely throughout the photofinishing laboratories Industry. As a result of they develop pictures along with promoting client items, they’re assigned a number of NAICS codes (NAICS Code 812921 for his or her picture division).

The North American Industry Classification System (NAICS), developed by america, Canada, and Mexico, is the usual upon which authorities businesses classify companies when compiling statistical knowledge. Within the NAICS hierarchy, corporations that use comparable manufacturing processes are categorized in the identical Industry.4

The NAICS is reviewed and revised each 5 years, and the most recent version was launched in 2022. This newest version of Industry codes finest displays firm classifications, particularly in industries which have undergone massive adjustments since 2017.5


World Industry Classification Customary (GICS)

The Global Industry Classification Standard (GICS) can be a generally referenced classification system. GICS assigns each public firm to an financial sector and Industry group that finest defines its enterprise. The GICS was developed collectively by Morgan Stanley Capital International (MSCI) and Customary & Poor’s (S&P) in 1999. It was created to be an environment friendly funding software to seize the breadth, depth, and evolution of Industry sectors. The GICS methodology is utilized by the MSCI indexes, buyers, analysts, and economists to match and distinction competing corporations.6

The GICS is a four-tiered, hierarchical Industry classification system. In keeping with the GICS hierarchy, there are 11 financial sectors. These sectors are additional divided into 24 Industry teams, 69 industries, and 158 sub-industries. Every inventory has a code to determine it in any respect 4 of those ranges. For instance, “supplies” is an financial sector. Inside supplies, there are completely different industries: chemical substances, building supplies, containers & packaging, metals & mining, and paper and forest merchandise.7


What Is an Instance of an Industry?

The NAICS categorised ‘Finance and Insurance coverage’ as its personal top-level sector. Inside this sector, there are a number of teams akin to credit score intermediaries, monetary funding corporations, insurance coverage carriers, funds, trusts, and different monetary automobiles. A selected NAICS Industry is Industrial Banking, and it’s assigned its personal classification code (522110).1

What Is the Distinction Between an Industry and a Sector?

A sector is commonly a extra broad time period than Industry. Within the instance above, the sector for each corporations was the patron items sector. Nonetheless, this sector will be damaged into many various consumables akin to garments or private well being. Due to this fact, sectors are sometimes additional divided into industries that additional group comparable corporations based mostly on a good decrease stage of element concerning their merchandise and operations.

What Is the Distinction Between an Industry and a Enterprise?

An Industry is a extra broad time period than usually compasses a number of companies. A single enterprise can function in any Industry. When a group of particular person companies function in an analogous method and produce comparable output, they could be grouped collectively and categorised throughout the identical Industry.

How Many Totally different Industries Are There?

Totally different classification techniques will group and report industries otherwise. The NAICS has traditionally grouped corporations into roughly 20 sectors, roughly 100 subsectors, and over 1,000 six-digit NAICS Industry codes.1


Liberty Magazine requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. The United States Census Bureau. “North American Industry Classification System.”
  2. National Association of Insurance Commissioners. “NAICS Profile Page: Gap Inc.”
  3. National Association of Insurance Commissioners. “NAICS Profile Page: Rite Aid Corporation.”
  4. United States Census Bureau. “North American Industry Classification System.”
  5. Office of Management and Budget. “North American Industry Classification System.”
  6. Global Industry Classification Standard. “MSCI Barra: Frequently Asked Questions About GICS,” Page 1.
  7. MSCI Inc. “The Global Industry Classification Standard (GICS®).”


Prepare and write by:

Author: Mohammed A Bazzoun

If you have any more specific questions, feel free to ask in comments.


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