The North American Industry Classification System (NAICS) groups establishments into industries based on the similarity of their production processes. The system was introduced in 1997 to replace the Standard Industrial Classification (SIC) and is used in Canada, the United States, and Mexico. There are 20 sectors and 1,065 industries in the 2012 NAICS United States.
NAICS uses a six-digit coding system to identify particular industries. Industries are placed in a hierarchy of sector, subsector, industry group, NAICS industry, and national industry.
32 Manufacturing (sector)
325 Chemical Manufacturing
32541 Pharmaceutical and Medicine Manufacturing
325412 Pharmaceutical Preparation Manufacturing
Because of its hierarchical nature, researching industries using the NAICS codes makes it easier to understand how industries are related and how they can be broken down. When you are researching industries this hierarchy helps you to understand what you are searching for.
Many government and business databases offer the option to search by NAICS code. This is a good way to research competitors by ensuring you are finding all of the relevant businesses for the industry you are researching.