Difference Between Industry and Sector
A particular group of the companies or the businesses is termed as an industry whereas a very huge segment of an economy is termed as a sector and both these terms are usually used interchangeably to point out the group of entities or companies which operate in similar segments of an economy or they have the same type of business.
Most of the people think that the terms sector and industry resemble one another, as both terms are used to indicate those enterprises that either their business type are identical or operates in a segment.
This difference or say the variance pertains to their individual scope; a sector will be referred to a vast segment of the economy, while the term industry can be described as a much more unique group of businesses or companies. In comparison, the term industry can be prescribed as an umbrella that covers all the firms or organizations that are engaged in a similar line of business functions or activities.
On the other hand, the sector will be referred to the broader classification of an economy and into various segments. In industry, multiple companies are offering similar kinds of or also substitute services or products. As against that, there could be many industries combined into one sector.
Industry vs. Sector Infographics
The key differences are as follows –
- The cluster of firms that are involved in the processing or production of the same or similar kind of services or products is called an industry. Whereas the segment of an economy, into which various or different business segments that can be classified, is known as a sector.
- The classification of industries can be done based on an activity or the process performed by them. On the contrary side, the sector divides the whole economy into various other or different segments based on the business activities that are undertaken by the companies or the firms.
- The scope of the industry, as mentioned in the below table, is narrower than that of the sector because, as we know, there can be hundreds or thousands of those industries in an economy. In contrast, there can only be a say handful of those sectors. Further, a sector of the whole economy will consist of hundreds or thousands of those industries.
- The term industry can be used to define firms that are operating in a specific or particular segment. As opposed to this, the term sector is a broad term, which will include all those industries that are working in one particular or specific segment.
- As said earlier, the industry is a group of companies or firms, and the sector is a conglomerateConglomerateA conglomerate is a company or corporation made up of different businesses that operate in various industries or sectors, often unrelated. It holds a stake in multiple smaller companies that choose to manage their business separately to avoid the risk of being in a single market, thus, taking advantage of diversification. of those industries.
Industry vs. Sector Comparative Table
|Basic Definition||It can be used to define the group of organizations or firms that are engaged in the production of related or similar products or goods.|
It is also a grouping of several manufacturing companies or enterprises of an economy on the grounds of the business activities that they are involved in. The industry’s name will rely on the service or the product in which the company or the firm deals.
|It can be described as the division of the whole economy, which can consist of the business groups which are engaged in related or similar services or products.|
Further, it can be said that it is the subset of the whole economy, wherein the entities or the companies will share the same or similar features, such as the processes or the product line or the operating activitiesOperating ActivitiesOperating activities generate the majority of the company's cash flows since they are directly linked to the company's core business activities such as sales, distribution, and production. that are identical.
|Categorization basis||To categorize industry, the method to follow would be PROCESS.||The method for categorizing Sector is the BUSINESS ACTIVITIES.|
|Scope||Since it involves only a particular process, the scope is narrow.||Since it relates to business activities, then its scope becomes wider.|
|Form / Group||The cluster of the industry can be formed through different firms.||Industries, when combined forms sector.|
|Sub-types / Classification||1) Manufacturing Industry|
2) Extractive Industry
3) Construction Industry
4) Service Industry
5) Genetic Industry
|1) Primary Sector – includes agriculture, forestry, etc.|
2) Secondary Sector – This consists of all manufacturing industries.
3) Tertiary Sector – Support services like Banking, transportation, etc.
4) Quaternary Sector – Education, Research, etc.
|Examples||Industry example is like the financial sector that can be broken down into various other industries like asset management companiesAsset Management CompaniesAsset Management Company is a company that takes the financial assets of a person, company or another asset management company (generally this will be high net worth individuals) and use the assets to invest in companies that use those as a operational investment, financial investment or any other investment in order to grow the investment. or life insurance companies, or brokerage firms.||Let’s take an example of the basic or raw materials sector, which is the segment of the economy in which the firms or the companies deals in the business activity of processing, exploration, and selling of those basic materials like silver, gold, or aluminum, which are used by the other sectors of that economy.|
It can be concluded that industry is a narrower term and is a subset of the broader term, which is known as the sector. Economists and the Investors study those sectors and industries with an objective of understanding it better, which industry or sector will contribute to the growth and progress of the whole economy and which among them will prove to be highly profitable.
Further stating, a comparison can also be made between the firms or the companies that are operating in a particular or specific industry to identify which firm or the company will provide or is expected to generate the returns to the investors.
It should be further noted that you can find certain situations in which both terms are reversed. But, the general idea will remain the same: one breaks the whole economy down into a few specific segments while the other one further sub-divides those into the more specific businesses. In the capital marketThe Capital MarketA capital market is a place where buyers and sellers interact and trade financial securities such as debentures, stocks, debt instruments, bonds, and derivative instruments such as futures, options, swaps, and exchange-traded funds (ETFs). There are two kinds of markets: primary markets and secondary markets., the generally accepted terminology – an industry – more specific one and a sector as a broader classification.
This article has been a guide to the Industry vs. Sector. Here we discuss the top differences between industry and sector along with infographics and comparison table. You may also have a look at the following articles –