Standard Industrial Classification (SIC) System
Definition
The Standard Industrial Classification (SIC) System is a numerical coding system developed by the United States government to classify industries by a four-digit code. This system categorizes enterprises based on the type of business activities they engage in. Each code corresponds to a specific industry, allowing for easy identification and research.
The SIC system has traditionally been used by market researchers, securities analysts, and various regulatory agencies to organize information, facilitate data comparison, and develop regulatory policies. However, it is being gradually phased out and replaced by the North American Industry Classification System (NAICS).
Examples
- SIC Code 1311: This code is designated for companies involved in Crude Petroleum and Natural Gas Extraction.
- SIC Code 5812: This code covers businesses operating as Eating Places, such as restaurants and cafes.
- SIC Code 5411: Grocery Stores fall under this particular SIC code.
Frequently Asked Questions (FAQs)
Q1: What is the purpose of the SIC code system?
A1: The SIC code system organizes industries using a numerical code structure, facilitating easier identification, research, comparison of businesses, and policy-making based on industry-specific data.
Q2: How are SIC codes structured?
A2: SIC codes are four-digit numerical codes. The first two digits represent the major industry group, the third digit designates a specific industry, and the fourth digit further refines the type of business.
Q3: Why is the SIC system being replaced?
A3: The SIC system is being replaced by the NAICS to provide a more detailed and updated framework for industry classification, reflecting changes in business activities and economic conditions in the United States, Canada, and Mexico.
Q4: Can SIC codes still be used?
A4: Yes, while the SIC system is being phased out, it is still used by some researchers and organizations for historical data analysis and comparison.
Related Terms and Definitions
- North American Industry Classification System (NAICS): NAICS is a classification system used by the United States, Canada, and Mexico to replace SIC. It uses a six-digit code to provide a more thorough classification of industries and allows for better comparability in the international trade sector.
- Industry Code: A numerical system used to classify business activities into standardized categories for various purposes, such as statistical analysis, regulatory compliance, and economic research.
- Market Research: The process of gathering, analyzing, and interpreting information about a market, including information about potential customers and competitors. SIC codes help streamline market research by providing standardized industry segmentation.
Online References
Suggested Books for Further Studies
- “Industry Classification Benchmark (ICB): Theory and Practice” by John Mellett - This book provides an in-depth understanding of various industry classification systems, including SIC and NAICS.
- “Practical Guide to Industry Analytics” by James D. Oldham - Offers insights into how industry classification systems are used for market research and business analysis.
- “Market Research in Practice” by Paul N. Hague et al. - Explores different aspects of market research, including the application of SIC and NAICS codes.
Fundamentals of Standard Industrial Classification: Business Classification Basics Quiz
Thank you for exploring the intricacies of the Standard Industrial Classification (SIC) system and taking on our quiz. Your understanding of these concepts is essential in the realms of business analysis and market research. Happy learning!
