What Is an Industry?

An industry is a group of companies that produce a particular product or service. These businesses can be divided into different segments to understand how they are operating. Some people also use the term sector to refer to the same group of companies.

In most countries, industries and sectors are defined using the International Standard Industrial Classification (ISIC). It is sponsored by the UNO Statistics Division and is considered the most complete classification of economic activities.

Industries are grouped together based on the activities of the firms and the production processes used to make a product. Sectors, on the other hand, are further subdivided into distinct businesses.

Large-scale industries involve heavy investment and specialized labor force. Examples include motor vehicle and heavy machinery manufacture, metal manufacturing, construction, and oil refining. A small-scale industry, on the other hand, may include manufacturing non-standard products or having a low-skilled workforce.

Organizing businesses into specific sectors can help investors, economists, and other professionals better understand the level of activity. Businesses in one sector may share a business focus. They may also offer similar services. The information provided by these businesses can help the investor or professional determine the returns in the industry.

Sectors include hundreds or thousands of industries. Economists study them to understand how different businesses are performing. Understanding the difference between industries helps the professional monitor the competition and stay ahead of trends.

A large-scale industry generates a high volume of output. On the other hand, a small-scale industry may require a lower amount of capital in plant.

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