Posted in Finance, Accounting and Economics Terms, Total Reads: 289
Definition: Industry Group
An industry group refers to a commonly used classification method wherein individual stocks or companies are grouped on the basis of the kind of business they do or what sector they belong to e.g. common product, line of business, sector etc. Industry groups, whether classified by the government or otherwise, provide information and insights for industry analysts. Companies can be grouped the products and services they offer, for instance, automobiles in the auto industry. Classifying firms by industry provides a method of examining trends and firm valuations. A main purpose behind formulating industry groups is so as to make comparisons of industries consistent across time and regions.
A real world example would be, the MEMS industry group as the industry group.
Government classifications of firms into industry groups is also prevalent, but the methodologies used by government providers in their compilation of industry groups differ from those used by commercial providers.
Advantages of the Industry Groups
• Useful in strategic analysis of an industry or business.
• Provides data for industry analysts such as valuation comparisons, peer groupings, etc.
• Grouping industries based upon similar business activities, demand drivers, provides a convenient view of the economy of the country.