what is an industry 
the term industry is a classification for a group of companies that have similar business activities in modern economies there are dozens of industry classifications industries typically are grouped into larger categories called sectors individual companies are generally assigned to an industry based on their largest sources of revenue for example while an automobile manufacturer might have a financing division that contributes 10 to the firm s overall revenues the company would be classified in the automaker industry by most classification systems rather than in the financial services industry zoe hansen investopediaunderstanding an industrysimilar businesses are grouped into industries based on the primary business activities or the primary product that they produce or sell this creates industry groups which can then be used to separate businesses from those that participate in different activities investors and economists often study industries to better understand the factors and limitations of corporate profit growth investors often compare companies operating in the same industry to evaluate their relative attractiveness as an investment investors seeking better performing stocks and etfs often study the best performing industries as well as watch industry rankings for changes for example investors might see a red flag where an investment is concerned when they see an industry that s declined in rank stocks of companies operating within the same industry tend to have similar stock price movements this is because companies within a given industry face the same headwinds challenges and broad triumphs special considerationsstocks within the same industry often rise and fall as a group because the same macroeconomic factors are likely to impact all members of an industry these macroeconomic factors can be changes in market sentiment on the part of investors such as a response to a particular event or piece of news they can also be changes involving the industry itself such as new regulations or increased raw material costs however events related to one business in particular can cause the associated stock to rise or fall separately from others within the same industry this can be the result of events such as a differentiating product release a corporate scandal in the news or a change in leadership structures industries vs sectorssectors and industries are classifications used to group similar types of business operations however sectors are broader than industries for example retail trade is a sector as defined by the north american industry classification system naics within that sector are industries such as health and personal care stores clothing stores and shoe stores rite aid corp and gap inc are members of the same consumer goods sector but each is listed in a different industry based on the products that they produce or sell rite aid corp is classified within the health and personal care stores industry naics code 44610 while gap inc is classified within both the clothing stores industry naics code 448130 and clothing accessories industry naics 448150 12it s important to note that a single company can reside in two different industries or two different sectors in addition to being within the consumer goods sector rite aid is considered part of the personal services sector as well within the photofinishing laboratories industry because this business develops photographs in addition to selling consumer goods it is assigned multiple naics codes naics code 812921 for its photo department the naics developed by the united states canada and mexico is the standard by which government agencies classify businesses when compiling statistical data in the naics hierarchy companies that use similar production processes are categorized in the same industry 3the naics is reviewed and revised every five years and the latest edition of the system was released in 2022 this updated version of industry codes best reflects company classifications especially in industries that have undergone large changes since 2017 4the global industry classification standard gics is also a commonly referenced classification system the gics assigns every public company to an industry group and economic sector that best define its business the gics was developed jointly by morgan stanley capital international msci and standard poor s s p in 1999 it was created to be an efficient investment tool to capture the breadth depth and evolution of industry sectors the gics methodology is used by the msci indexes investors analysts and economists to compare and contrast competing companies 5the gics is a four tiered hierarchical industry classification system according to the gics hierarchy there are 11 economic sectors these sectors are further divided into 24 industry groups 69 industries and 158 sub industries each stock has a code to identify it at all four of these levels 6for example materials is an economic sector within materials there are different industries chemicals construction materials containers and packaging metals and mining and paper and forest products 6