Industry vs Sector
The difference between industry and sector has its base on the scope of the economy covered by each term. Industry and sector are words that are commonly used to refer to companies involved in same or similar business in the economy of a country. However, these are words that denote different entities and must not be used interchangeably. The sector is a broader part of the economy while the industry is a sub-group of a sector. In other words, the sector is a large group that consists of industries having a particular type of companies doing the same business. There are other differences between the two, which will be discussed in this article.
In the stock exchange of a country, all large industries are listed, but there is a broader grouping of those industries under different sectors. Thus, we see around a dozen of sectors in any stock exchange with many numbers of industries under each of these sectors. To a casual observer, it is like an unnatural conglomerate containing many industries, but this classification serves a purpose in any stock exchange and helps in the management of portfolios of any investor.
What is Sector?
A sector is one of the few general parts an economy is made of. The specialty of a sector is that a number of companies are included in one sector. It is said that an economy can be broken down into about a dozen sectors such as basic materials, finance, healthcare, consumer goods, conglomerates, services, etc. If you take the consumer goods sector, this includes all the companies that provide consumer goods. These consumer goods can be food, beverages, clothes and many more products.
What is Industry?
The term industry refers to a group of companies that produce the same product. This is a sub-category that comes under sectors. As we discussed earlier, sectors divide companies that produce products that belong to the same field. That does not say that all companies under a sector provide the same product. In order to classify companies that produce the same products, we divide each of the sectors into industries.
For example, think of the sector of consumer goods. There are scores of industries such as cooking appliances, health drinks, and oils, cleaning and washing products, bakery products, and so on under this sector. If you take the industry of cooking appliances, all the companies in that industry produce cooking appliances. Similarly, the finance sector is a very broad classification that comprises banking, insurance, and loan industry, etc. Even the insurance in itself is a very broad category with health, life, accident, and home being subcategories under insurance industry. Again, the utility is a very broad and generalized grouping containing water, electricity, gas, etc. Thus, finance, which is a sector, indicates a general activity in the economy while the industries under finance are further subdivided into groups that are involved in a particular business.
There is another way of classifying industries in an economy. Under this system, there is a primary sector that includes all industries and companies exploiting natural resources to produce goods for the consumption of the end consumers. Thus, agriculture, mining, fishing, oil, gas, etc. are considered to belong to the primary sector of the economy. The secondary sector is the industrial sector that is involved in production and construction. Mostly, the primary sector output is taken as input for the secondary sector, to produce finished goods. For example, potato chips making company is said to belong to the secondary sector utilizing potatoes that come from farming. The tertiary sector is that sector which comprises services such as banking, education, software, transport and distribution of goods, etc.
What is the difference between Industry and Sector?
• Focus:
• Sector is a generalized division in an economy.
• The industry is a specific division that indicates a particular business activity.
• Connection between Industry and Sector:
• Industry is a sub-grouping under a sector.
• Number:
• There are only a small number of sectors in an economy.
• There are hundreds of industries under these few sectors in an economy.
• Example:
• Finance is a one of the sectors in the economy.
• Under the finance sector, there exists a number of industries such as asset management, saving, and loans, etc.
Images Courtesy: GDP sector and Kitchen utensils via Wikicommons (Public Domain)
