The terms sector, industry, and market have been used extensively in business communications and other materials or literatures such as reference books, academic and professional publications, and news articles, among others. Some materials have conveniently used these terms interchangeably, especially when referring to a specific group of similar economic activities.
However, there are slight but very significant differences among the definitions of the aforementioned terms. This article briefly explains the difference between sector and industry, as well as the difference among sector, industry, and market.
What is the difference between sector and industry?
A sector is essentially broader than an industry. Sectors are used to group different economic activities based on shared characteristics or similarities. Under this definition, a sector can consist of different but relatively similar industries. Thus, a sector is also considered as a segment of an economy.
However, it is also worth mentioning that the term “sector” can also be used to refer to four broad categories of economic activities—the primary sector which is involved in the gathering and processing of raw materials, the secondary sector which is involved in the transformation of raw material into goods through manufacturing, the tertiary sector which is involved in delivering services to businesses or consumers, and the quaternary sector which is involved in all intellectual activities such as education and research.
On the other hand, an industry is a more specific and narrow grouping. This term is usually used to group and cover all firms that are engaged in similar activities or the production or delivery of similar products or services.
To better illustrate the difference between sector and industry, take note of the healthcare sector as an example. The healthcare sector includes all activities related to the production or delivery of goods and services related to medicine and healthcare. Some of the industries under this sector are the healthcare industry, pharmaceutical industry, biotechnology industry, and health maintenance organizations industry, among others.
Another example is the financial sector which includes all activities related to the delivery of financial services to business and individual consumers. Examples of industries under this sector include the banking industry, insurance industry, and foreign exchange services industry, among others.
For a more formalized usage nonetheless, the term “sector” can be used when referring to a group of similar economic activities while “industry” can be used to refer to group of similar firms. However, these days, remember that these terms have been used analogously.
What is market? How is this term used differently?
The definition discussed herein is derived from the more specific economic definition of market. Under this economic definition, a market is a structure in which exchange transpires between sellers and buyers or in which different parties engage in exchange.
When used as a category, the term “market” represents the group of consumers and the similar goods or services that are targeted toward them. Conversely, a market also represents similar or closely related goods or services sold to consumers.
Typically, market is used to denote the entire group of consumers available for an industry. The characteristics of these consumers can vary and the only similarity among them is their affinity toward similar or closely related goods or services.
A market can be organized further through so-called market segments. This grouping can be based on different variables including demographics such as age and gender or psychographics such as lifestyle and interests, among others.
To illustrate further, an example of a market is a group of consumers for the banking industry. These consumers require banking services such as home mortgages, car loans, and business funding, among others. Another example is the market for smartphones that consequently belong to the consumer industry and to the greater technology sector or manufacturing sector.
Conclusion: Sector vs. industry vs. market
From the aforementioned discussion above, the difference between sector and industry boils down to hierarchy of grouping. A sector generally represents a group of similar industries and markets while an industry is a more specific grouping pertaining to a group of similar business activities.
While sometimes albeit erroneously used the term “market” refer to either a sector or an industry, it has a more distinctive definition. This term also has a more particular utility. To be specific, a market is a grouping of consumers or in other words, a category that represents similar or closely related goods or services sold to consumers. Thus, the term is used to refer to the cluster of consumers and similar goods and services.