Industry vs Sector

Publication Date :

16 Jan, 2019

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Table Of Contents

Difference Between Industry and Sector

A particular group of companies or businesses is known as an industry. In contrast, a huge segment of an economy has termed a sector. However, these terms one usually use interchangeably to point out the group of entities or companies that operate in similar segments of an economy or have the same type of business.

Most people think that the terms sector and industry resemble one another, as both indicate enterprises whose business type is identical or operates in a segment.

This difference or variance pertains to their scope. A sector will be a vast economic segment. At the same time, the term industry one can describe as a unique group of businesses or companies. In comparison, one can prescribe the term industry as an umbrella covering all the firms or organizations engaged in similar business functions or activities.

On the other hand, the sector refers to the broader classification of an economy into various segments. So, for example, multiple companies offer similar or substitute services or products. As against that, there could be many industries combined into one sector.

Difference Between Industry and Sector

Industry vs. Sector Infographics

Key Differences

The key differences are as follows:-

The cluster of firms involved in the processing or producing the same or similar kinds of services or products is called an industry. The segment of an economy into which one can classify various or different business segments is known as a sector.
Industries can be classified based on an activity or the process they perform. On the contrary side, the sector divides the whole economy into various other or different segments based on the companies or firms’ business activities.
As mentioned in the table below, the industry's scope is narrower than the sector's. Because, as we know, there can be hundreds or thousands of those industries in an economy. In contrast, there can only be a handful of those sectors. Further, a sector of the economy will consist of hundreds or thousands of those industries.
One can use the term industry to define firms operating in a specific segment. As opposed to this, the term sector is broad, including all those industries working in one particular segment.
As said earlier, the industry is a group of companies or firms, and the sector is a conglomerate of those industries.

Industry vs. Sector Comparative Table

Basis	Industry	Sector
Basic Definition	One can define organizations or firms producing 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 product the company or the firm deals with. It can be described as the division of the whole economy, consisting of the business groups engaged in related or similar services or products.	It can be described as the division of the whole economy, consisting of the business groups engaged in related or similar services or products. Further, we can say that it is the subset of the entire economy, wherein the entities or companies will share the same or similar features, such as the processes, product line, or operating activities.
Categorization basis	To categorize industry, the method to follow would be PROCESS.	The procedure for classifying the sector is BUSINESS ACTIVITIES.
Scope	Since it involves only a particular process, the size is narrow.	Since it relates to business activities, then its capacity becomes wider.
Form / Group	One can form the industry cluster through different firms.	Industries, when combined, form a sector.
Subtypes / 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	An industry example is a financial sector, which can be broken down into other industries like asset management, life insurance, or brokerage firms.	Let us take an example of the basic or raw materials sector, which is the segment of the economy in which the firms or the companies deal in the business activity of processing, exploration, and selling of those basic materials like silver, gold, or aluminum, used by the other sectors of that economy.

Conclusion

We can conclude that industry is a narrower term and a subset of the broader term known as the sector. Therefore, economists and investors study those sectors and industries to understand better which industry or sector will contribute to the growth and progress of the whole economy and which will prove to be highly profitable.

Further, one can also compare the firms or the companies operating in a particular industry to identify which firm or the company will provide or expect to generate the returns to the investors.

You should also note that you can find certain situations where both terms reverse. But the general idea will remain the same: one breaks the whole economy down into a few specific segments while the other further subdivides those into more particular businesses. For example, the generally accepted terminology – an industry – is more specific. A sector is a broader classification in the capital market.