INDUSTRY DESCRIPTION Most library-sponsored sources of company information and quite a few free websites identify a company's industry affiliation by a government-defined SIC (standard industrial classification) code or government NAICS (North American Industry Classification System) code.
You will notice that diversified companies do business in different industries or industry sectors. Some available reports distinguish a company's primary industry codes from the secondary codes, which represent less-significant parts of its operations. Other resources and reports simply list the various lines of business in which the company engages without flagging the ones on which a company focuses most heavily.
When identifying competitors for a specific assignment requiring comparison of diversified companies, it usually makes sense to select competitors doing business in the specific market segment (e.g. clothing, telecommunications services, computer consumer goods) pertinent to your project rather than comparing of all facets of each company's operations.
Size doesn't always matter when identifying competitorsfor a specific market segment. For example, a relatively small company in terms of total annual sales such as Paychex can be a major competitor to the payroll services business segement of ADP's operations, although it may not be a major competitor to ADP's other business services.
INDUSTRY CLASSIFICATION EXAMPLES In-depth company reports by Hoover's from the Lexis Nexis Academic Database describe the industry class like this excerpt for Harley-Davidson (ticker: HOG) does.
Other resources use a verbal classification system. The S & P NetAdvantage database classifies HOG under the Autos and Auto Parts Industry and shows statistics for various sub-sectors of that industry including passenger cars, trucks by weight, and motorcycles. Revenue and other financial data are given for groups of prominent companies in parts of the industry such as Automobile Manufacturers, Auto Parts and Equipment Manufacturers, Motorcycle Manufacturers, Tires and Rubber, and Other Companies with significant Autos and Parts Operations.
If unsure of the industry, the quickest way to find an industry report in NetAdvantage is to get the company report and then click on a left side link to the pertinent industry report. This is a very current and comprehensive account of industry drivers, trends, innovations, and other important industry information. Check whether your teacher will accept revenue in lieu of annual sales.
Sometimes reports from different stock advisory companies within the same database will list a different industry classification and a different list of competitors for a given company. This is where you exercise judgment as to which companies from a peer list make a sensible basis for your comparison of industry competitors.
Example: From the Hoover's In-depth report for ADP in the Lexis Nexis Academic database:
Example: From the Lexis Nexis Academic database Company Snapshot for ADP: