Title: "Guidelines for Correctly Filling in Industry Classification"
Industry classification is a crucial aspect in various fields such as business research, government statistics, and market analysis. Correctly filling in the industry classification not only helps in organizing and categorizing data effectively but also provides valuable insights for decision - making processes. Here are some comprehensive guidelines on how to do it correctly:
I. Understanding the Basics of Industry Classification Systems
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1、Standard Classification Frameworks
- There are several well - known industry classification systems, such as the North American Industry Classification System (NAICS) in North America and the International Standard Industrial Classification of All Economic Activities (ISIC) used globally. Familiarize yourself with the general structure and hierarchy of these systems. For example, NAICS is a hierarchical system that classifies industries into sectors, sub - sectors, industry groups, and specific industries. It has a six - digit code structure, where the first two digits represent the broad economic sector.
- ISIC also has a hierarchical structure with different levels of classification. Understanding the broad categories like agriculture, industry, and services at the top - level and the more detailed breakdowns at lower levels is essential. This knowledge forms the foundation for accurate classification.
2、Industry Definitions
- Each industry within the classification system has a specific definition. For instance, in the manufacturing sector, the definition of the automotive manufacturing industry may include activities related to the production of automobiles, including assembling parts, engine manufacturing, and bodywork construction. It is crucial to carefully read and understand these definitions to ensure that the entity being classified falls within the correct category. A company that mainly focuses on automotive parts distribution may not be classified as an automotive manufacturing company but rather as a part of the wholesale trade in automotive parts.
**II. Analyzing the Company's Core Activities
1、Revenue - Generating Activities
- The primary source of a company's revenue is a significant factor in determining its industry classification. If a company earns the majority of its income from software development and sales, it should be classified in the software industry. However, if a company has multiple revenue streams, it is necessary to identify the dominant one. For example, a technology company that also offers consulting services but generates 70% of its revenue from software sales should be classified in the software industry rather than the consulting industry.
- Consider long - term trends in revenue generation. A company that is gradually shifting its focus from traditional manufacturing to service - based activities related to its products (such as maintenance and after - sales services) may need to be re - classified over time as the service - related revenue becomes a more significant portion of its total income.
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2、Value - Added Activities
- Identify the activities that add the most value to the company's products or services. In the food industry, a food processing company that specializes in adding unique flavors and nutritional enhancements to its products through in - house R & D processes is adding value in a different way compared to a company that simply packages and distributes pre - processed food. The former may be classified as a more specialized food processing company, while the latter may be closer to the warehousing and distribution segment of the food industry.
- Value - added activities can also be related to intellectual property. A pharmaceutical company that invests heavily in drug discovery and holds numerous patents for new drugs has a different value - added profile compared to a generic drug manufacturer. This difference in activities should be reflected in the correct industry classification.
III. Considering the Entire Value Chain
1、Upstream and Downstream Activities
- In some industries, a company may be involved in multiple stages of the value chain. For example, in the oil and gas industry, an integrated energy company may be involved in exploration (upstream activity), refining (mid - stream activity), and retail sales of petroleum products (downstream activity). When classifying such a company, it is important to consider the overall scope of its activities. If the company's main strategic focus and a significant portion of its resources are dedicated to exploration, it may be more appropriate to classify it in the upstream oil and gas exploration category. However, if it has a more balanced presence across all stages, it may be classified as an integrated oil and gas company.
- In the textile industry, a company that is involved in both cotton farming (upstream) and garment manufacturing (downstream) needs to be classified based on its dominant activity. If the majority of its revenue and resources are tied to garment manufacturing, it should be classified in the apparel manufacturing industry, while also noting its upstream activities if relevant for a more detailed analysis.
2、Supply Chain Dependencies
- Analyze the company's supply chain relationships. A company that is highly dependent on a particular type of raw material supply may be related to the industry associated with that raw material. For example, a furniture manufacturer that sources a large percentage of its wood from sustainable forestry operations may have a closer relationship with the forestry industry in terms of its supply chain. However, it should still be classified in the furniture manufacturing industry based on its core activity of transforming wood into furniture. But understanding these supply chain dependencies can provide additional context and may be relevant for more in - depth industry analysis.
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IV. Keeping Up with Industry Changes and Emerging Sectors
1、Technological Advancements
- In today's rapidly evolving technological landscape, new industries are emerging constantly. For example, the rise of fintech has blurred the lines between traditional financial institutions and technology companies. A fintech startup that offers mobile payment solutions may not fit neatly into the traditional banking industry classification. It may require a new sub - category within the financial services industry or even a new industry classification altogether in some cases.
- Similarly, the development of artificial intelligence has led to new applications in various industries. A company that uses AI - based algorithms for predictive maintenance in the manufacturing industry may be at the forefront of a new hybrid industry that combines elements of manufacturing and AI technology. Keeping abreast of these technological changes is essential for accurate industry classification.
2、Market and Regulatory Changes
- Changes in market trends and regulatory environments can also impact industry classification. For example, the increasing focus on environmental sustainability has led to the emergence of a green energy market. A company that was previously classified as a general energy provider may now need to be re - classified as a green energy company if it has significantly shifted its operations towards renewable energy sources such as solar or wind power. Regulatory requirements, such as new emissions standards or data protection laws, can also influence the boundaries and definitions of industries.
In conclusion, correctly filling in the industry classification requires a comprehensive understanding of classification systems, a detailed analysis of the company's core activities, consideration of the entire value chain, and awareness of industry changes. By following these guidelines, one can ensure that industry classification is accurate, which in turn is beneficial for various business, research, and policy - related purposes.
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