INLS 227 Spring 2005

DEFINITON: INDUSTRY

A group of productive or profit-making enterprises or organizations that have a similar technological structure of production and that produce or supply technically substitutable goods, services, or sources of income. (poultry…, the automobile… retail…)

*OL = Indu,endo – within; struus – structure

INDUSTRY INFORMATION

INDUSTRY

•Government creates Industry Sectors

•Government creates SIC/NAICS codes

•Industries fall in between the sectors and codes and are made up of:

companies with product or service in commonSIC, NAICS numbers ( which companies assign)

•Each financial service has own list of industries: Mergent, Value Line, S&P, D&B, LexisNexis

Industry Sectors“Information”

51511Radio broadcasting 51512

Television broadcastingNAICS or SIC’s

“Broadcasting Industry”

Companies

NAICS hierarchic structure

NAICS LevelExample

NAICS Code Description

Sector 51 Information

Subsector 515 Broadcasting (except Internet)

Industry Group 5151Radio and Television

Broadcasting

Industry 51511 Radio Broadcasting

U.S. Industry 515112 Radio Stations

1. Find what you think is your Industry Sector http://www.census.gov/epcd/ec02/guide.html

2. Open window to Economic Census thru www.census.gov

1. Go to NAICS listing and find one or two 2002 NAIC’s codes for your industry.

2. Find corresponding SIC number.

3. Have there been changes in your particular NAICS codes from 1997 to 2002?

PRACTICE…

What do you do with Industry Information?

Can’t buy stock in Industry

Can’t start an Industry

Can’t buy products from an Industry

What can you do with Industry Information?

Analyze economy – an indicator of developmentAnalyze key operating ratios between, within industriesCompare company ratios to industry ratio for norms and benchmarksTarget salesUse for business to business marketing Monitor business activityDiscover market share

ratio One value divided by another. The result is representative of the value of one quantity in terms of the other.

Financial ratios or indexes are used to evaluate a firm's or an industry's financial condition. Often they are used to judge the investment suitability of a particular company. One firm's ratios can be compared to its own past performance and/or to the performance of the industry as a whole. Financial ratios are calculated from the figures given in the firm's annual financial statement.

price/earnings ratio, quick ratio, loan-value ratio, advertising sales ratio, asset/equity ratio, bid-to-cover ratio, book-to-bill ratio, cash ratio, cash asset ratio, common stock ratio, conversion ratio, coverage ratio, current ratio, debt ratio, debt/equity ratio, exercise ratio, expense ratio, fixed-charge coverage ratio, forward P/E, trailing P/E, PEG ratio, income replacement ratio, members' short sale ratio, mint ratio, net capital ratio, odd lot buy/sell ratio, operating ratio, payout ratio, price to book ratio, price to cash flow ratio, price to sales ratio, put/call ratio, short interest ratio, theta, turnover, constant ratio plan, high-ratio mortgage, multiple, relative volatility, variable ratio write, exclusion ratio

FINANCIAL RATIOS

Ratios

Operating and Financial ratiosInvestment – analyze for buying into stocks, etcSmall Business – analyze company or industryIndustry Operating Ratios -gov– Income Norms

Performance Indicators – Norms – Benchmarks

Questions about Industry

Basic– Size of industry, $ volume, key companies in the industry– What are the SIC or NAICS codes (These help classify and

describe industry)Sources:Statistical Abstract of the United States Standard Industrial Classification Manual (SIC)North American Industrial Classification System Manual (NAICS)Market Share Reporter (print) TableBase database

Practice ExerciseStatistical Abstract of the United States

1. Using “Business Enterprise”– (one chart) What are the business receipts for your

industry sector? Net Income? Estimated number of tax returns?

– Find number of establishments by NAICS, using closest classification #.

– Based on the SIC sectors, how does your industry stack up for women, black and Asian & Pacific-Islander ownership?

2. Using Individual Chapters– Find one really interesting statistic about your industry

3. Using Labor chapter, for your industry: – What are the employment projections for 2008?

Questions about Industry

Current and future state of industry• News • Trends and forecasts• Market Share – Who are the dominant

players? Why? What size of the market do they own or influence?

• What are the key financials that dominate the industry?

• Trade issues

Industry Search Strategy

1. Determine Subject Headings / Keywords/Industry Terminology

– Consult Dictionaries, Encyclopedias, glossaries, journal articles

Example:– You are asked to find information about the

automobile industry and upcoming regulatory issues which might impact the industry

Try finding words…

Example

– “automobile industry”= automotive, automobiles, motor vehicles, cars, sport utility vehicles, trucks,

– “regulatory issues” = regulation, legal, laws– “impact” = effect, influence

2. Combine with boolean operators:(automobile industry OR automobiles OR motor vehicles OR cars) and (regulation OR legal OR laws)

Practice…

1.1. Wall Street Journal Wall Street Journal Find one article that discusses latest news in your industry - list

citation2.2. ABI/IFORMABI/IFORM

Using the “Classification Codes” (advanced search) find an article about planning & strategy or some labor issue for your industry. List subject descriptors

3.3. Business & Company Resource CenterBusiness & Company Resource CenterFind your industry’s “Overview.” Notice, rankings and

associations…4.4. TableBaseTableBase

Find a market share table with companies listed….

Industry Search Strategy

3. Match Questions to Sources– Looking for trade information (automobiles, issues,

products)• Business Source Elite contains more trade journals than ABI-INFORM so

maybe start here. But ABI/INFORM lets you narrow to trade journals.

– Looking for new technologies• Trade associations provide industries with valuable information about new

trends affecting them

– Looking for regulatory issues in government sources

• Code of Federal Regulations • Federal Register • State Regulations• News Sources – WSJ, Business Newspapers (Triangle Business Journal)

Industry Search Strategy

– Looking for Industry Overviews• Standard & Poor’s Net Advantage• Value Line Investment Services• Business Source Elite, ABI/INFORM• Encyclopedia of American Industries• Encyclopedia of Emerging Industries• U.S. Industry and Trade Outlook (coming online

some day)

Industry Search Strategy

– Looking for News Sources• LexisNexis Academic – business news• Wall Street Journal• Wall Street Transcript• Global News Bank• News and Observer or local paper• Reuters• Factiva

Industry Search Strategy

– Looking for Industry Financial and Operating Ratios

• Industry Norms and Key Business Ratios• RMA Annual Statement Studies• Statements of Income (SOI) – Corporation Tax Records• Trade Associations (especially in retail and wholesale)• Within trade and other journal articles• Market Research Reports• US Gov – US Census, Econ Census, Dept of Commerce

Industry Search Strategy

INDUSTRY DATA – production, trade, value of shipments, business activity

Look at the Economic Census --Grouped by Business Activity:18 CORE INDUSTRY SECTORS

Each has 3 subtitle reports:1. geographical by state by industry2. detailed industry by NAICS (SIC) – national

totals3. subject series-specific topics (CIR, Mdse Lines, Commodity Line Sales, Travel Habits)

Industry Quick Reports, Product Quick Reports and Geography Quick Reports Zip Code Statistics

Industry Search Strategy

INDUSTRY DATA• Bureau of Economic Analysis national data by industry• Economic Census • County Business Patterns economic activity by county

level• Bureau of Labor Statistics • International Trade Administration• STAT-USA

Practice…

STAT-USA – Using your industry and your country, find a report in

GLOBUS/NTDB. If you can’t find both, try one.

BEA www.bea.doc.gov– Find GDP for your industry– Using your birth state, find GSP for your industry.

Industry Search Strategy

Looking for industry/market reports. overviews– Commercial marketing reports - some free

• Business.com• Yahoo! Finance

– Fee Based marketing research• Frost and Sullivan• Mintel • Datamonitor

Industry Search Strategy

– Looking for trendsIndustry can change so quickly. One event can affect industry and economy: Airline Industry and 9/11…

• S&P Industry Surveys print and Net Advantage• S&P Outlook – print and Net Advantage • S&P Monthly Investment Review - print and Net Advantage• D&B Industry Norms and Key Business Ratios - print• US Industry and Trade Outlook - print• Value Line Industry Overview• News Sources including journals and magazines• Association Reports