Industry vs. Sector: What's the Difference?
Industry and Sector are often used synonymously, but both envisage different meanings. The Industry is a narrower concept that includes methods, whereas Sector is a broader concept that subsumes all business activities in a wider sense. A country's economy is based on the functioning of these industries and sectors, where both are different but co-relate.
Meaning of Industry
The industry is a group of businesses or companies engaged in similar business activities. It is generally based on the primary goods that the business is dealing with. The performance of companies in the same Industry shows identical responses to a particular economic event due to the same macroeconomic conditions. Examples of Industries are:
- Healthcare Industry
- Entertainment Industry
- Information Technology Industry
- Engineering Industry
- Cosmetics Industry
- Film Industry
Meaning of Sector
A sector is a part of an economy in which all businesses' similar business activities are grouped. It is a broader concept that includes a large number of companies engaged in similar kinds of economic activity. Economies are divided into different sectors that help a country analyze which business activity the country is moving successfully and where it is lagging behind. Some examples of Sectors are:
- Primary Sector- It includes all the agricultural and allied activities like fishing, mining, etc.
- Secondary Sector It includes all the business activities related to manufacturing goods, from the raw material received from the primary sector.
- Tertiary Sector- This sector of an economy includes all the business activities related to rendering services by professionals.
- Quaternary Sector- This sector includes economic activities that are information-based and knowledge-based. It provides information technology, media, R&D, financial planning, blogging, consultation, and design.
Most developing and under-developed economies depend on the primary sector. As the economy develops, it gradually shifts towards the secondary sector, while the tertiary sector most flourished in those nations whose economy has performed well. The quaternary sector is entirely knowledge-based and comes into the role only after fulfilling basic necessities.
Difference between Industry and Sector
The difference between Industry and Sector is based on different ways like:
||An industry is a group of businesses or producers that manufacture or provide similar goods and services. Like in the textile industry, the methods or processes like design, fabrication, weaving, selling, etc., are different business activities, but all these activities come under the purview of a standard umbrella called the Textile Industry. The same goes for the healthcare industry and tourism industry as well.
||The Sector is a broader form of Industry in which the economic activities are categorized based on the type of activity performed, like the Primary Sector, Secondary Sector, and Tertiary Sector.
||The industry is considered narrower than Sector because it includes just a certain number of business firms or companies engaged in businesses of similar nature. Sometimes it has regional limitations due to geographical locations. For instance, the tourism industry flourishes only in those locations with tourist importance, not everywhere.
||The scope of the Sector is much more comprehensive than Industry because it is based on the division of economic activities, which is constant everywhere. The activities under the primary Sector remain the same everywhere in an economy. It is composed of many industries, and no matter what type of goods a business firm produces, it will always come under the secondary sector.
||The industry is formed by grouping different business firms engaged in producing similar goods or rendering similar services, like all the health and medicine-related product manufacturing firms, including the Healthcare industry. It takes relatively less time to form Industry than Sector.
||In contrast, the Sector is formed by the collection of multiple industries, which is a comparatively more time taking process than an Industry.
||The industry is classified mainly based on goods and services. Like all types of apparel manufacturing companies are classified as the textile industry, all the medicine-producing firms are categorized as the pharma industry, and all the footwear-producing companies come under the footwear industry.
||The Sector has been classified based on routine business activities between different industries; all the manufacturing activities of sectors, like the production of shoes, medicine, apparel, and furniture, come under the secondary sector. It categorizes activities common to all industries.
||Industries are more dynamic than sectors. It is more prone to change as per the prevailing economic conditions and time. It is seen that some industries have entirely disappeared with time due to advancements in technology and a decrease in demand in the handicraft industry.
||Sectors are more resistant to change than Industry and are considered stable due to significantly less or no change over time. All the sectors' activities remain constant, like with every technological advancement to increase production activity.
||Industry analysis provides information about the economic condition of some specific category of an economy. It showcases the performances, statistical data, and future opportunities of business activity based on information gathered through several companies. Industrial analysis provides narrower information concerning a particular method or business process. It only gives the full economic details of the economy of a country. For example, the textile industry analysis will provide analytical information about only the textile industry, not the whole Indian economy.
||The analysis of the Sector in an economy gives an overall view of an economy because the Sector is composed of industries. The sectoral analysis is the culmination of all industrial research. Thus, it provides more extensive analytical information on the Sector in an economy.
||The industry is at the unit level in the hierarchy of an economy because it is one of the specific elements of an economy. The Industry is like a brick in the wall that joins together to form a wall.
||Sectors rank second because they are the group of all economic activities comprised of small businesses or industries. It organizes all the financial practices under different categories.
||Industries are more prone to face strict policies and regulatory norms because they are product specific. These norms are imposed to encourage proper economic practices and to improve financial performance. Industrial procedures are more complex than sectoral policies because industrial policies are formed based on products or methods, which are large in number and very versatile.
||Sectoral policies are more flexible than industrial policies. They are also relatively less complex than industrial policies. Sector policies are comparatively less problematic because they include multiple industries whose policies are already framed under industrial policies. Sector policies are somewhat a group of industrial policies.
||The industry comprises companies or businesses that are relatively simple to manage due to similar products or services. Industry accounts for a limited number of activities, which makes it controllable.
||The management of the Sector in an economy becomes more challenging due to the many different industries. Industries of multiple kinds make the administration a job to be managed by experts who have ample experience.
The Bottom Line
A Sector is a comprehensive form formed by the collection of industries, whereas an Industry is narrower than a Sector. The Sector is composed of different business activities common to all business firms. At the same time, an Industry is a collection of companies or business firms engaged in producing or rendering similar products or services.
A sector is more generic, while an Industry is more particular. The Sector has been classified into four groups, namely primary, secondary, tertiary, and quaternary Sectors. In contrast, there is no specific classification in Industry due to many heterogenous products and methods.
For evaluation, companies in the same industry need to be evaluated individually, which somewhat differs from the Sector. In the assessment of the Sector, there is no need for individual evaluation of companies; just the judgment of the performance of a particular Industry is enough. For example, a review is required for all the different types of food companies in assessing the food industry. At the same time, the evaluated data is used to analyze the performance of various activities performed in the food industry.
Thus, the crux of the difference between Industry and Sector is that different companies form industries, multiple industries form a sector and all the sectors as a whole form a country's economy.