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Researching U.S. Industries

Defining the Industry

There are several systems used to classify business entities for industry research. Many of the resources used for industry information may define an industry based on broader criteria, such as Standard Industrial Classification (SIC) or North American Industry Classification System (NAICS) codes. Understanding how these systems work can make researching easier because they are used by many databases, print sources, and the U.S. government in their indexing, charts, graphs, and lists.

Beginning in the 1930s, the industry coding system used to assign industry codes was the SIC, which groups establishments by the types of products or services they produce. Due to changes in economic conditions and the need to better track new and expanding industries, the NAICS system was established in 1997 through a cooperative effort between the United States, Mexico and Canada to replace the SIC system.

The NAICS system groups establishments according to similar production processes rather than by the types of products or services actually produced. NAICS uses a six digit hierarchical coding system to classify all economic activity into twenty industry sectors. Five sectors are mainly goods-producing sectors and fifteen are entirely services-producing sectors. This six digit hierarchical structure allows greater coding flexibility than the four digit structure of the SIC system. NAICS allows for the identification of 1,170 industries compared to the 1,004 found in the SIC. For example, see the chart below for a comparison of the NAICS and SIC hierarchies for peanut butter manufacturing.

 

NAICS 

SIC 
Letter  

N/A

Division:
D Manufacturing
2 Digit  
Sector:
31 Manufacturing
Major Group:
20 Food and Kindred Products
3 Digit  
Subsector:
311 Food Manufacturing
Industry Group:
209 Miscellaneous Food Preparations and Kindred
4 Digit  
Industry Group:
3119 Other Food Manufacturing
SIC Industry:
2099 Food Preparations, Not Elsewhere Classified
5 Digit  
NAICS Industry:
31191 Snack Food Manufacturing
N/A
6 Digit
National Industry:
311911 Roasred Nuts and Peanut Butter Manufacturing
N/A

 

As you can see from the chart above, NAICS 311911 is very specific -it groups together only the manufacturers of roasted nuts and peanut butter. Using NAICS 311911 in your research will provide much more relevant information about the peanut butter manufacturing industry than the more general SIC 2099, “Food Preparations, Not Elsewhere Classified” which groups together manufacturers of peanut butter with manufacturers of shredded coconut, bouillon cubes, tofu, tortillas and more.

While NAICS is the standard used by Federal agencies in classifying businesses for the purpose of collecting, analyzing and publishing statistical data related to the U.S. business economy, many other databases and print resources still refer only to the SIC system. It is a good research practice to be familiar with both the NAICS and SIC codes applicable to the industry you are researching.

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