What categories do the industries and businesses fall into

Which Business Model Is Best? Depends on the Industry

Kirsten Rohrs Schmitt is an accomplished professional editor, writer, proofreader, and fact-checker. She has expertise in finance, investing, real estate, and world history. Throughout her career, she has written and edited content for numerous consumer magazines and websites, crafted resumes and social media content for business owners, and created collateral for academia and nonprofits. Kirsten is also the founder and director of Your Best Edit; find her on LinkedIn and Facebook.

A company’s business model is an important representation of how a company does business. Despite the size of the business or the industry in which a business operates, a business model details how an organization creates and delivers products or services, specific business processes, infrastructure, customer acquisition strategies, and the intended customer base. Business models come in a variety of forms. Direct sales, franchise, freemium, and subscription models are among the common kinds.

Key Takeaways

Direct Sales

Under a direct sales business model, sales of products or services generate revenue through a network of salespeople, who sell directly to customers. Typically, no fixed retail location exists under a direct sales business model. Instead, individual salespeople are connected with a large parent company and given the tools to become individual entrepreneurs.

Direct sales take place through presentations or demonstrations of the product or service in a one-on-one setting or during a hosted party at a prospect’s home or business. Business owners in direct sales earn a portion of their sales, while the company providing the product retains the remaining revenue. Companies such as Avon, Arbonne, and Herbalife are examples of the direct sales business model.

Franchise Model

Under a franchise business model, business owners purchase another organization’s business strategy. Instead of creating a new product and the distribution chain to deliver that product to consumers, the franchisee purchases an ownership stake in a business model that has already been successfully developed. The company offering its proprietary product or service, its business processes and its brand is known as the franchisor, and it benefits from a reduction in capital output used to build new locations.

Franchise owners earn a portion of the revenue generated by their locations, and the franchisor collects licensing fees in addition to a percentage of sales revenue from the franchisee. Popular companies that depend on the franchise business model for growth include McDonald’s and Subway.

Freemium Model

For companies that offer personal or business services via the internet, the freemium business model is common. Under a freemium model, a business gives away a service at no cost to the consumer as a way to establish the foundation for future transactions. By offering basic-level services for free, companies build relationships with customers, eventually offering them advanced services, add-ons, or an ad-free user experience for an extra cost. The freemium model tends to work well for Internet-based businesses with small customer acquisition costs, but high lifetime value. Spotify and Skype both operate under a freemium business model.

Subscription Model

Businesses that operate in an industry with high customer acquisition costs may opt for a subscription or recurring revenue business model. The objective of a subscription business model is to retain customers under a long-term contract and secure recurring revenue from the repeat purchase of a product or service.

Online subscription business models usually require the customer to sign up for automatic payment plans. They may charge a cancellation fee for a contract that ends before the preset time frame. Credit monitoring organizations, such as Experian and Equifax, use a subscription business model, as do utility and phone companies.

The Bottom Line

There are as many types of business models as there are types of business. Direct sales, franchising, advertising-based, and brick-and-mortar stores are all examples of traditional business models. There are hybrids as well, such as businesses that combine internet retail with brick-and-mortar stores, or sporting organizations like the NBA.

But not every industry lends itself to all types of business models. Moreover, within these broad categories, each business plan is unique. Consider the shaving industry. Gillette is happy to sell its Mach3 razor handle at cost or lower in order to get steady customers for its more profitable razor blades. The business model rests on giving away the handle to get those blade sales. This twist on the broader freemium business model is now known as the razor-razorblade model; but it can also apply to companies in any business that sells a product at a deep discount in order to supply a dependent good at a considerably higher price. The bottom line is pick the business model that makes the most sense for the products or services that you offer.

Industry

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

What Is an Industry?

An industry is a group of companies that are related based on their primary business activities. In modern economies, there are dozens of industry classifications. Industry classifications are typically grouped into larger categories called sectors.

Individual companies are generally classified into 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.

Key Takeaways

Industry

Understanding an Industry

Similar businesses are grouped into industries based on the primary product produced or sold. This effectively creates industry groups, which can then be used to isolate businesses from those who participate in different activities. Investors and economists often study industries to better understand the factors and limitations of 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 of companies operating within the same industry tend to have similar stock price movements. This is due to call companies within a given industry facing the same headwinds, challenges, and broad triumphs.

Special Considerations

Stocks within the same industry often rise and fall as a group because the same macroeconomic factors impact all members of an industry. These macroeconomic factors can include changes in market sentiment on the part of investors—such as those based on a response to a particular event or piece of news—as well as changes directed specifically towards the specific industry, such as new regulations or increased raw material costs.

However, events relating to just one particular business can cause the associated stock to rise or fall separately from others within the same industry. This can be the result of certain events, including a differentiating product release, a corporate scandal in the news, or a change in leadership structures.

Industries vs. Sectors

While both sectors and industries are classification systems used to group similar types of business operations, sectors are broader than industries.

For example, retail trade is a sector within the North American Industry Classification System (NAICS), and within that sector are industries, such as health and personal care stores, clothing stores, and shoe stores. Rite Aid Corporation and Gap, Inc. are members of the same consumer goods sector, but each would be listed in a different industry based on the specifics of the products they produce or sell. Rite Aid Corporation is classified within the health and personal care stores (NAICS Code 44610), while Gap, Inc. is classified within both the clothing stores industry (NAICS Code 448130) and clothing accessories industry (NAICS 448150).

It’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 they develop photographs in addition to selling consumer goods, they are assigned multiple NAICS codes (NAICS Code 812921 for their photo department).

The North American Industry Classification System (NAICS), developed by the United States, Canada, and Mexico, is the standard upon 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.

The NAICS is reviewed and revised every five years, and the latest edition was released in 2022. This latest edition of industry codes best reflects company classifications, especially in industries that have undergone large changes since 2017.

Global Industry Classification Standard (GICS)

The Global Industry Classification Standard (GICS) is also a commonly referenced classification system. GICS assigns every public company to an economic sector and industry group that best defines 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.

The 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. For example, «materials» is an economic sector. Within materials, there are different industries: chemicals, construction materials, containers & packaging, metals & mining, and paper and forest products.

What Is an Example of an Industry?

The NAICS classified ‘Finance and Insurance’ as its own top-level sector. Within this sector, there are a variety of groups such as credit intermediaries, financial investment companies, insurance carriers, funds, trusts, and other financial vehicles. A specific NAICS industry is Commercial Banking, and it is assigned its own classification code (522110).

What Is the Difference Between an Industry and a Sector?

A sector is often a more broad term than industry. In the example above, the sector for both companies was the consumer goods sector. However, this sector can be broken into many different consumables such as clothes or personal health. Therefore, sectors are often further divided into industries that further group similar companies based on an even lower level of detail regarding their products and operations.

What Is the Difference Between an Industry and a Business?

An industry is a more broad term than often compasses multiple businesses. A single business can operate in any industry. When a collection of individual businesses operate in a similar manner and produce similar output, they may be grouped together and classified within the same industry.

How Many Different Industries Are There?

Different classification systems will group and report industries differently. The NAICS has historically grouped companies into roughly 20 sectors, roughly 100 subsectors, and over 1,000 six-digit NAICS industry codes.

The production side of business activity is referred as industry. It is a business activity, which is related to the raising, producing, processing or manufacturing of products.

The products are consumer’s goods as well as producer’s goods. Consumer goods are goods, which are used finally by consumers. E.g. Food grains, textiles, cosmetics, VCR, etc. Producer’s goods are the goods used by manufacturers for producing some other goods. E.g. Machinery, tools, equipments, etc.

Expansion of trade and commerce depends on industrial growth. It represents the supply side of market.

Classification / Types of Industries ↓

There are various types of industries. These are mentioned as follows :-

1. Primary Industry

Primary industry is concerned with production of goods with the help of nature. It is a nature-oriented industry, which requires very little human effort. E.g. Agriculture, farming, forestry, fishing, horticulture, etc.

2. Genetic Industry

Genetic industries are engaged in re-production and multiplication of certain spices of plants and animals with the object of sale. The main aim is to earn profit from such sale. E.g. plant nurseries, cattle rearing, poultry, cattle breeding, etc.

3. Extractive Industry

Extractive industry is concerned with extraction or drawing out goods from the soil, air or water. Generally products of extractive industries come in raw form and they are used by manufacturing and construction industries for producing finished products. E.g. mining industry, coal mineral, oil industry, iron ore, extraction of timber and rubber from forests, etc.

4. Manufacturing Industry

Manufacturing industries are engaged in transforming raw material into finished product with the help of machines and manpower. The finished goods can be either consumer goods or producer goods. E.g. textiles, chemicals, sugar industry, paper industry, etc.

5. Construction Industry

Construction industries take up the work of construction of buildings, bridges, roads, dams, canals, etc. This industry is different from all other types of industry because in case of other industries goods can be produced at one place and sold at another place. But goods produced and sold by constructive industry are erected at one place.

6. Service Industry

In modern times service sector plays an important role in the development of the nation and therefore it is named as service industry. The main industries, which fall under this category, include hotel industry, tourism industry, entertainment industry, etc.

19 Types of Business Industries – Different types of Industry

May 11, 2020 By Hitesh Bhasin Tagged With: Business

Every business is classified into different industries based on the products they make and the markets they cater to. These industries are classified on their specialties which are based on goods and services they provide. While there are companies which belong to only one industry and provide industry-specific goods or services, there are also conglomerates which cater to multiple industries at a time.

Table of Contents

Following are different kinds and types of Business industries or industrial

1) Aerospace Industry

The aerospace industry is one of the highest technology industries. The aviation industry deals with manufacturing aircraft which take flights within and beyond the earth’s atmospheric area. The process of manufacturing consists of various parts such as designing, building, testing, selling and maintaining. An aviation company also produces aircraft’s parts to maintain the existing aircraft.

There are about 50 countries which own one or more than one aerospace company. These types of industry show the economic strength of a particular country. The United States of America is the leading country in these types of industry. The USA has many large and small companies dedicated to aviation business.

America’s military and civil aviation industries have world’s dominance to export military as well domestic aircraft and their parts. Aerospace Industries Association of America (AIA) is an organization for aviation companies in America. It is an organization that provides solutions to technical and policy issues. There is a similar organization in Europe named European Association of Aerospace Industries (AECMA).

2) Transport Industry

The transport industry is one of the largest types of business industries. This industry deals with the movement of humans, things and animals by various modes of transportation. The main modes of transportation are air, land (Road and Rail) and water. The transportation industry makes the largest part of any country’s economy.

A strong Transportation is essential for a country’s growth. Transportation industry makes approximately 17% of USA’s GDP. Leading transportation company for airway is Singapore airlines which banged Skytrax World Airline Award in 2018. USA’s railway network is the world’s largest railway network with a route length of 2,50,000 KM followed by China’s railway network of route length of 1,25,000 KM. India’s railway network is world’s fourth largest railway network with route area of 68,525KM.

Other than these transportations, water transportation is one of the elite ways to commute and transport goods from one place to another. Alexander & Baldwin is Hawaii Based company is the leading water transportation company followed by America’s American Commercial Lines Inc. Indian railway is the world’s only monopolistic organization in the railway sector.

3) Computer Industry

The computer industry has boomed drastically in the 21st century. Computer Industry has taken over almost every other industry. Computer industry or also known as Information Technology (IT) Industry. It includes businesses of computer hardware, developing and maintaining computer software and computer networking. One major area which has been growing proliferatively is service sector.

The service sector has gone online in almost every sector such as health, education, retail, bank, beauty. There are hundreds of websites and apps for every single service. For example, Airbnb is a leading online service company which helps travelers to find places to stay while traveling and also help people to earn extra money by putting their extra space on rent.

4) Telecommunication industry

Telecommunication industry consists of companies which makes communication possible worldwide through mobile phones, internet, cable or wirelessly. It allows people to communicate using words, audio or video from any part of the world to any part of the world. Smartphones can send information thousands of miles away within seconds. The leading companies in the telecommunication industry are satellite companies, internet service providers, wireless operator. Wireless internet has helped other industries to generate great revenue.

This industry includes various sub-sectors such as communication equipment, wireless communication, ad-hoc network, mobile ad-hoc network, domestic telecommunication services, foreign telecommunication services, processing products, and systems. Mobile Ad-hoc network is the fastest growing sector in the telecommunication industry. There will soon be cars on the road without human drivers.

It will also reduce the cases of accidents on the road because roads will be able to sense the presence of other cars on the road using Mobile ad- hoc networks and sensor installed on the road.

5) Agriculture industry

The agriculture industry is one of the oldest types of business industry. Agriculture industry consists of cultivating land, plants and breeding animals to produce foods and other survival things. This industry is an integral part of every country’s economy. The modernization in the agriculture industry took place in the late 20th century, which is known as “Green Revolution”.

After that, the agriculture industry has been growing exponentially. The agriculture industry is an important industry of countries like India, Africa and other countries having a good ecosystem. This industry consists of producing, providing, selling and exporting agricultural goods. This industry provides employment to researchers, scientists, biotechnicians, veterinarians, farm labors and development technicians.

Latest agronomy, genetically modified plants, chemical-like Pesticides, and fertilizers have sped-up and increased production. It seems a boon from a farmer’s point of view, but it is causing deadly diseases such as Cancer to the people who consume it. Cargill, a Minneapolis based company is one of the renowned companies in the Agricultural industry.

6) Construction Industry

The construction sector is indulged in designing, building, constructing and maintaining the infrastructure. The construction industry can be sub-divided into three categories such as heavy construction, general construction, and specialized construction. Heavy construction includes the construction of bridges and roads etc. General construction includes the building of residential places and commercial real estate. Specialized construction includes making electric and wood things required to construct a building.

This era has witnessed the modernization in the way of constructing building and houses. Construction and related types of business industries have benefitted from the advancement of technology. It has given us skyscrapers, which provides a place for everyone even with population growth. Recently, one technology named Building Information Modeling (BIM) has revolutionized the construction industry.

Usually, more than hundred people work on a single project and it becomes very difficult to keep in touch with everyone and communicate ideas. BIM eliminates this problem and provides a platform to work together and share ideas and cultivate a better plan.

7) Education Industry

Education industry or education system is a group of school, colleges, universities, institutes to provide learning, knowledge, skills, and a degree in various fields. Educational institutes can broadly be divided into two categories public and private. Public institutes are funded by government whereas private institutes run by a single person or by a group of people.

Private institutes can be “For- Profit” or “Non – Profit” institutes. According to a recent survey, 18.2 million students are getting an education in the USA and out of 18.2 million 16.8 million are getting an education from “Non- Profitable” institutes. Enrollment of students is increasing every year in both traditional as well as in online courses.

Online courses are most preferred by working people or people above the age of 30 years, whereas regular students prefer to enroll in traditional courses. Every country keeps a large portion of the annual budget for this sector to update the education system to provide better skills to students.

8) Pharmaceutical Industry

The pharmaceutical company is a licensed firm to research, discover, develop, market and sell the drugs. It is an important industry worldwide. It is clearly research and development (R&D) based industry. Constant research is an important aspect of the pharmaceutical industry. These companies research and produce drugs to cure diseases of humans and animals. There are some drugs that also treat symptoms.

Pharmaceutical companies are highly regularized companies. The United States’ pharmaceutical industry comprises 45% of the Global Pharmaceutical Market. Johnson & Johnson and Pfizer and Merck &co. are the world’s leading pharmaceutical companies. The United States pharmaceutical industry together with Canada and Mexico make the world’s largest pharmaceutical market.

Medical device industry is another aspect of the pharmaceutical industry which deals with surgical equipment’s, medical devices and implants. Companies like Medtronic, Boston Scientific, Carl Zeiss, etc are leaders in medical device industries.

9) Food Industry

Food Industry comprises processing, preservation, conversion, and preservation of eatable items. The raw material for the food industry is obtained from the agriculture industry. Therefore, the food industry is dependent on the agriculture industry. After processing food various chemicals and color are added to food items to preserve them for a long time with maintaining their taste. The food industry has grown exponentially in the past decade because in the fast-paced life people demand “ready – to – go” food.

The high demand for processed and packed food gave birth to many companies and almost every kind of food from instant noodles to curry is available in packets. Other than that food service, as known as catering and food technology are also an integral part of this enormous food industry.

Food technology comprises Research and development to make more readymade food. Tyson Food Inc and PepsiCo are the two world’s leading food processing companies.

10) Health care Industry

Health care industry provides remedial, diagnostic, curative, preventive, rehabilitative, therapeutic services to patients and to people in their old age. The main goal of this industry is to revive and maintain the health of peoples. It is one of the fastest growing industry. This type of business industry has great potential for investors and entrepreneurs. Every country’s government spends a handsome amount of money to this sector.

There are both private and public companies to provide services. There are also many voluntary organizations which provide services to needy people free of cost. United Health group holds 5th rank in the 64th annual list of fortune 500 out of 40 health care companies selected from the USA.

11) Hospitality Industry

The hospitality industry is vast types of business industries. It provides uncountable services to customers, so this industry is highly customer- oriented industry. Customer satisfaction is the main objective of this industry. This industry is exceptional, because the hospitality industry solely survives on “the want” of people, not need like health care industry.

There are three main broad categories of this type of industry such as accommodations, food and beverage, and travel and tourism. Airbnb is one of the most famous online hospitality services of providing cost-effective accommodation in any country. It can be accessed via mobile apps as well as the website.

Eleven Madison Park, New York, USA is one of the world’s most luxurious restaurants which have universal appreciation and acceptance. This restaurant is famous for its ambiance and view and also the luxurious treatment to its guests.

12) Entertainment Industry

The entertainment industry is a huge business industry. It includes innumerable sub-sectors of entertainment. This industry runs on both entertainer and viewers. Entertainment has been an integral part of human society since ages, but recently it has become commercialized. This industry has grown by leaps and bounds in the past century. These types of business industries such as entertainment and hospitality industries make a great part of the Gross Domestic Product (GDP) of any country.

For example, football teams such as Belgium, France, and Brazil. These teams generate great revenue for their respective countries. Entertainment industry provides employment to a great number of people. There are many entertainers which are among the richest people in the world. These days the methods of entertaining people have changed.

People don’t have to put a lot of efforts to get into the limelight as they used to have. They can entertain people by sharing their stuff on YouTube and other similar platforms. Digital platform has helped to grow entertainment industry exponentially. Also with the availability of online video streaming companies like Netflix and Amazon prime has changed the way users interact with movies.

13) News Media Industry

News Media industry is an important industry. The target of this industry is to provide news to the people. It makes people aware of the happenings in the world. There are various media platform for example newspaper, Television, Radio, online blogs, websites, podcasts. Printed NEWS letters were first circulated in Europe during World War, since then NEWS media has developed drastically.

The New York Times and Washington posts are among the most famous Newspapers. Nowadays, social media has taken the NEWS Media industry to another level. People come to know about the happenings of the world instantly. Some famous social media platforms are Facebook, Twitter, Instagram, YouTube etc. Getting information has become handy for the people of 21st century. People can also read News online by installing the apps of various NEWS channels.

14) Energy Industry

These types of business industries are important because of their wide applications in various sectors. Energy industry can be sub-divided into two categories renewable energy industry and non- renewable business industry. One important source of the renewable energy industry is petroleum. There are different operations take places such as extraction, refining, manufacturing, and sales.

Other than that, there is coal energy industry, nuclear power industry electric power industry. These types of business industries play an important role in the development of the nation. These source of energy sources are limited and they are diminishing soon. Therefore, a lot of research is devoted to alternative energy sectors.

The alternate energies are solar energy, wind energy, and hydroelectric energy. These days countries are spending a huge amount of money to maximize the use of alternate energy sources.

15) Manufacturing Industry

Manufacturing is the process of converting raw material and components into the final product to sell in the marketplace for public consumption. Manufacture industry has many categories, for example, food industry, petroleum industry, paper industry, wood industry, leather industry, textile mill industry, apparel industry, transportation equipment industry, electrical equipment industry etc.

Goods can be prepared in the mill, factories or plants for example fabric and goods can also be prepared by hands to sell in the market. Manufacturing industries provide employment to educated as well as labor class population of any country. In America, approximately 12 million people are employed in the manufacturing industry.

16) Music Industry

Music industry one among the many types of business industries that run on the passion of people who works in it. This industry is made of Musicians, Composers, Lyrics writers, singers, instrument players. This industry is highly affected by technology. Old are the days when people used to buy CDs and DVDs. The United States of America observed the notable downfall in the CD sales.

However, the internet has taken over the other media. People can listen to music online anywhere and any part of the world. Music is available on various online platforms such as Soundcloud, Pandora, Spotify etc. The new term that has been given to this industry is Digital Music Industry.

17) Mining Industry

The mining industry is dedicated to locating and extracting metals from the surface of the earth all around the world. These metals are used for commercial purposes and jewelry making. This industry also deals with production and trading of metals also.

Every country spends a lot for the exploration of a feasible place to extract metals. These types of business industries cause environmental problems, which is a matter of concern globally. This industry requires strict regulations for environmental protection reasons.

18) Worldwide web

Worldwide web also is known as web, is a network designed using HyperText Markup Language (HTML) and can be accessed using Hyper Text Transfer Protocol (HTTP). Worldwide web is invented in 1991 by Tim Berners-Lee. It was the revolutionary invention of that time. However, it became popular a decade later. A web page contains text, images, videos, audio, and links. Similar kinds of websites have the same domain name.

For example, an educational website has the domain name “edu”. People are running various websites such as education, entertainment, travel, food related. Worldwide web has provided various opportunity to people. People run their business online with very few technical skills. Ace example of this type of websites is “Amazon”.

Other than that people can interact with other people virtually using world wide web. It also assists us to send emails, make video and audio calls and share image with one another. Since 1991 the features on world wide web has been emerging and it has no signs of stopping any soon.

19) Electronics Industry

The electronics industry is one of the huge industries. This is the type of industry that produces electronics devices for commercial as well as domestic use, for example, smartphones, switches, circuit board, refrigerators, washing machines, and other AI-based goods. Electronic companies produce, market and sell electronic units. Global electronic industry has observed growth by average 5% from the year 2016 to 2018.

This industry has the responsibility to produce all technically advanced electronic equipment for the future. At present, the goal of the electronics industry is to mobile ad-hoc networks, smart cars, and wireless charging.

Industry

The production of different types of goods and services

What is an Industry?

An industry – or sector – is the whole of all economic activities by companies, people, and organizations involved in the production of goods and services for a particular field. Industries are usually categorized by the goods and services they produce.

For example, the pizza industry is made up of all producers who produce and sell pizza in the market. It is important to note that for a pizza maker to belong to the pizza industry, he or she must sell the product they make in the market. A person cooking pizza at home for their children would not fit under this description as they are not selling any products or services.

Interactions Between Industries

All industries use material inputs from other sectors and factor inputs from the general economy and convert them into a finished product using the production process. Using the previous pizza example, a pizza producer uses material inputs from producers of other sectors. It includes cheese from dairy producers or vegetables from farmers. They would also use factor inputs from the general economy – pizza makers from the labor market – to create the finished product, pizza.

Categorizations

Industries are organized under different categories. The categories are grouped as to whether they are heavy or light, domestic or foreign, durable or non-durable, or manufacturing or construction industries.

1. Heavy vs Light

This category describes how much capital is required to set up a business in the industry.

The heavy industry includes businesses that often employ a capital-intensive production process that requires a large initial investment, such as for operating equipment and machinery. Examples that fall under the heavy category would be most natural resource harvesting sectors, such as steel, coal, and other mining-related sectors. Other sectors that are considered heavy are the aviation sector or the automobile sector.

Conversely, a light industry sector would have much lower capital requirements for a business to set up. However, these sectors usually have labor-intensive production processes. For example, the restaurant sector would be light because most of its operating processes require labor as opposed to machinery.

For a more detailed look into modeling for mining-related sectors that have heavy capital requirements, check out CFI’s Mining Valuation Course!

2. Domestic vs Foreign

This category describes whether the sector operates and produces goods and services within a certain country’s borders. This classification is from the perspective of that country.

A country’s domestic industries are those that are located within its borders. For example, the United States of America maintains a domestic coal sector that is composed of all coal-related production activities within the US.

In contrast, foreign sectors are those that are not located within a country’s borders. Using the same example, all coal-related production activities that are outside the United States constitute the foreign coal sector.

3. Durable vs Non-durable

This category describes whether the sector produces goods that last a significant amount of time and amortize over long periods.

A durable industry is one that produces goods that last a long time. For example, the automobile and aviation sectors both produce goods (cars and planes) that will be used regularly and maintained over many years.

Alternatively, a non-durable sector produces goods that usually do not last very long, require immediate consumption, and are perishable. The agricultural industry would be a good example of a non-durable sector, as they produce food that easily perishes if it is not stored appropriately.

4. Manufacturing vs Construction

This category describes whether the sector produces a final product or raw materials and intermediate goods that are used in other sectors’ production processes.

Manufacturing industries are those that produce final consumption goods. These are the products that end up in the customers’ hands for consumption. Using two previous examples, both the pizza sector and the automobile sector would be classified as manufacturing sectors, despite being very different.

Conversely, companies that produce intermediate goods – goods to be used by other companies to produce final consumption goods – would be considered a “construction” industry. Note that, in this context, construction industry is not about companies that build houses or other buildings.

Examples of Industry Categorizations

Industrial Production

A country’s level of industrial production is a key indicator of economic performance.

Related Readings

Thank you for reading CFI’s guide to Industry. To keep learning and advancing your career, the following CFI resources will be helpful: