Industries, Sectors, and Competition
How companies are grouped into sectors and industries, how to measure a company's market share, and the five forces that decide how much profit an industry leaves for the companies in it.
The short version
Investors group companies into sectors and industries so they can compare like with like. The most widely used system, GICS, sorts companies into 11 sectors based mainly on where their revenue comes from. Within an industry, market share shows how much of the total a company wins, and whether it's gaining or losing ground. How much profit an industry offers depends on competition from five directions: rivals, new entrants, customers, suppliers, and substitutes.
By the end of this lesson, you'll be able to
- Explain how sectors and industries are defined and why they matter
- Calculate market share and interpret a change in it
- Use the five competitive forces to describe the pressure on a company's profits
Why this matters
Costs, Margins, and Profitability ended with a warning: margins only make sense compared with similar companies. That raises two questions. Which companies count as similar? And why are some industries so much more profitable than others? This lesson answers both, using the market STU Corp sells into.
Sectors and industries
The most widely used way to group companies is the Global Industry Classification Standard, or GICS, developed in 1999 by MSCI with S&P Dow Jones Indices.1 It has four levels, from broad to narrow: sectors, industry groups, industries, and sub-industries. There are 11 Sector. A broad group of companies in related lines of business, such as energy, health care, or financials. Glossary:2
- Energy, Materials, Industrials, and Utilities
- Consumer Discretionary and Consumer Staples
- Health Care, Financials, and Real Estate
- Information Technology and Communication Services
Each company gets one classification at each level, based on its principal business activity, and revenue is a key factor in deciding what that is.2 Under the GICS rules, a company is generally placed in the sub-industry that describes the business producing more than 60% of its revenue.1
Grouping matters because companies in the same Industry. A narrower group of companies that make similar products or services and compete for the same customers. Glossary tend to share customers, costs, and rules, so their results often rise and fall together. It's also how index providers build the sector funds described in Types of ETFs.
Market share
is the portion of all the sales in a market that one company wins:
Market share = Company's sales ÷ Total sales in the market
Suppose US households spent $2.5 billion on home water filters and cartridges this year, up 5% from $2.38 billion last year. The market and the rivals are fictional.
| This year | Sales ($ millions) | Market share |
|---|---|---|
| Rival A | 600 | 24% |
| STU Corp | 400 | 16% |
| Rival B | 300 | 12% |
| Rival C | 200 | 8% |
| Dozens of smaller brands | 1,000 | 40% |
| Total market | 2,500 | 100% |
Last year STU Corp's $350 million was 14.7% of a $2.38 billion market. This year it's 16%. STU Corp grew 14% while the market grew 5%, so it gained share: it's winning customers from competitors, not just riding a growing market. If a company grows more slowly than its market, it's losing share, even if its own sales are rising.
The rest of this lesson is for members
Still to come in this lesson: The five competitive forces, the key takeaways, and 2 quiz questions with explanations.
Membership opens every lesson in the curriculum, the capstone projects, the interactive tools, and the members-only channels in the Hyperion Entities Discord. The first lesson of every module stays free.
Go deeper
- Competition and Market StructureEconomics for Investors (depth track)
- Supply and DemandEconomics for Investors (depth track)
- Industry and Competitors coming soonResearch Workshop (depth track)
Notes and sources
- MSCI and S&P Dow Jones Indices. Global Industry Classification Standard (GICS) Methodology, April 2026. Checked 2026-09-30. Back to text
- MSCI. The Global Industry Classification Standard (GICS). Checked 2026-09-30. Back to text
- Harvard Business Review. Michael E. Porter, The Five Competitive Forces That Shape Strategy (January 2008). Checked 2026-09-30.
- U.S. Securities and Exchange Commission, Office of Investor Education and Advocacy. Investor Bulletin: How to Read a 10-K. Checked 2026-10-11.