40. Introduction to Industry and Company analysis

Question 1

Global Industry Classification Standard (GICS)

Answer 1

The GICS was designed for global comparisons of industries. It classifies companies in both developed and developing economies according to their primary business activity (as measured by revenue). The four levels (from broadest to narrowest) are sectors, industry groups, industries, and sub-industries.

Question 2

Russell Global Sectors (RGS)

Answer 2

The RGS system classifies companies globally based on their products and/or services. Three tiers are used: sectors, subsectors, and industries. This system has only nine sectors (vs. 10 for the GICS).

Question 3

Industry Classification Benchmark (ICB)

Answer 3

The ICB classifies companies based on the source of the majority of their revenues. Importantly, the ICB uses different terminology than the GICS and RGS systems. In the ICB classification scheme, the broadest groupings are called industries, supersectors, sectors, and subsectors at the most granular level.

Question 4

Description of Representative Sectors

Answer 4

Despite differences in classification criteria and terminology used by the three systems, the following list is a representative description of the broadest groupings in the GICS, RGS, and ICB:

Basic Materials
Consumer Discretionary
Consumer Staples
Energy
Financial Services
Health Care
Industrial/Producer Durables
Technology
Telecommunications
Utilities

Question 5

International Standard Industrial Classification of All Economic Activities (ISIC)

Answer 5

ISIC categories are based on principal type of economic activity. Its five levels (from broadest to narrowest) are categories, sections, divisions, groups, and classes. It is used by major international bodies, such as the UN, IMF, and the World Bank.

Question 6

Statistical Classification of Economic Activities in the European Community (NACE)

Answer 6

NACE is referred to as the European version of ISIC. It is composed of four levels: sections, divisions, groups, and classes.

Question 7

Australian and New Zealand Standard Industrial Classification (ANZSIC)

Answer 7

ANZSIC was designed to be consistent with ISIC. It has five levels: divisions, subdivisions, groups, classes, and subclasses.

Question 8

North American Industry Classification System (NAICS)

Answer 8

NAICS replaced the Standard Industrial Classification system. It categorizes into five levels based on primary business activity and distinguishes between establishments and enterprises. A single enterprise (company) can have multiple establishments, each with its own six-digit NAICS code.