Industry

AAA

DEFINITION of 'Industry'

A classification that refers to a group of companies that are related in terms of their primary business activities. In modern economies, there are dozens of different industry classifications, which are typically grouped into larger categories called sectors.

Individual companies are generally classified into industries based on their largest sources of revenue. For example, an automobile manufacturer might have a small financing division that contributes 10% to overall revenues, but the company will still be universally classified as an auto maker for attribution purposes.

INVESTOPEDIA EXPLAINS 'Industry'

Industries are often studied by investors and economists to better understand the factors and limitations to corporate profit growth. Companies operating in the same industry can also be compared to each other to evaluate the relative attractiveness of a company within that industry. Stocks within the same industry often rise and fall as a group because the same overlying factors exist for all members.

The North American Industry Classification System (NAICS) (developed by the United States, Canada and Mexico) is widely used by investors to classify companies. In the NAICS hierarchy, companies that use similar production processes are categorized in the same industry.

RELATED TERMS
  1. Demographic Dividend

    The freeing up of resources for a country's economic development ...
  2. Business

    1. An organization or enterprising entity engaged in commercial, ...
  3. Sector

    1. An area of the economy in which businesses share the same ...
  4. Standard Industrial Classification ...

    A standard series of four-digit codes created by the U.S. government ...
  5. North American Industry Classification ...

    A new business classification system developed through a partnership ...
  6. Franchise

    A type of license that a party (franchisee) acquires to allow ...
Related Articles
  1. Investing Basics

    Industry Handbook

    In this feature, we take an in-depth look at the various techniques that determine the value and investment quality of companies from an industry perspective.
  2. Active Trading Fundamentals

    Giants of Finance: Charles Dow

    Find out how this financial visionary helped everyday people enter the world of finance.
  3. Mutual Funds & ETFs

    ETFs For Sector Rotation Strategies

    Find out how exchange-traded funds can take the bumps out of your investing style.
  4. Mutual Funds & ETFs

    GICS Vs. ICB: Competing Systems For Classifying Stocks

    Global Industry Classification Standards and the Industrial Classification Benchmark separate stocks into sectors.
  5. Investing

    What is the difference between an industry and a sector?

    The terms industry and sector are often used interchangeably to describe a group of companies that operate in the same segment of the economy or share a similar business type. Although the terms ...
  6. Retirement

    Where Top Down Meets Bottoms Up

    Find the investing "sweet spot" by combining these two styles.
  7. Markets

    Introduction To Fundamental Analysis

    Learn this easy-to-understand technique of analyzing a company's financial statements and reports.
  8. Active Trading

    Fundamental Analysis For Traders

    Find out how this method can be applied strategically to increase profit.
  9. Fundamental Analysis

    What is the first day of the first quarter?

    The first day of companies' fiscal years varies based on industry cycles. The timing is especially important because annual reports can have unexpected effects.
  10. Fundamental Analysis

    What is the first day of the fourth quarter?

    Learn about different financial years used by various companies. Explore when the fourth quarter begins on October 1st and when it does not.

You May Also Like

Hot Definitions
  1. Christmas Island Dollar

    The former currency of Christmas Island, an Australian island in the Indian Ocean that was discovered on December 25, 1643. ...
  2. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  3. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  4. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  5. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  6. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
Trading Center