- 28th Mar, 2016
An industrial classification system in America is called Standard Industrial classification. This classification system came into vogue from the late part of the thirties. It is based on collecting information on different business activities. Organizations across different industrial segments use the SIC codes. The codes are also used by the Securities and Exchange Commission in order to provide the same in their publications and for referring to different industries in common discussions.
How they were formed?
The manufacturing sector was booming in the US in the thirties. The government then realized the need to track the different industries in order to keep track of the progress and growth of companies in this sector. Categorization was then extended to different industries in America. It included looking into economic performances of the different sectors like quality assurance software, emergence of different sectors as well as trends in industrial growth. Click this link http://www.coretec.com.au/complaintspro for further information regarding quality assurance software.
How classification is done?
The SIC system is done by four digits. Two digits represent the industrial category, while the second two digits refer to a sub category. Or instance, in the forestry department or category, there would be sub categories like laboratory apparatus, book publishing and others. Hence, in the broad category of software companies a sub category would be quality assurance software. These codes helped to create industrial directories that were helpful for tracking company statistics by the different regulatory bodies.
The SIC system spawned other standards later on. For instance, NAICS is used widely in North America. Here the codes are used not only for industrial classification, but lead to other categorizations as well. Hence, the coding standards are used in different ways. The lists of these codes are made available to different government bodies. Often older coding systems are replaced by newer ones. Cross referencing guides are used in this context. This is necessary when information is published with SIC codes. In order to understand which company or industrial segment is being referred to within NAICS framework, the cross referencing guides come of use.
The industrial coding system is in vogue in many countries. These are beneficial at the central regulatory levels where economic progress needs to be tracked and measured. Information pertaining to industrial performance, trends in the growth of different sectors and other statistical information is published country wide or as per regions based on these codes. Without the coding system, there would be a disparity in how companies are listed in different categories. That would also remove uniformity of comparison of companies in similar sectors across regions. Industrial data on different statistical parameters are also published based on a uniform coding system that is followed in every country. However, such codes tend to vary from one country to another.