How to measure industry
concentration (approfondire)
This is an important dimension to analyze:
Concentration reduces competition among existing companies, making them
more powerful in dealing with suppliers and buyers (relativ concentration)
How to measure concentration
Markets shares of companies MS are commonly used for measurement
Two meatrics are crucial:
Concentration ratio:
Whatʼs the total market share of the largest n companies? The higher, the
more concentrated the industry. Usually n 4
Henrfindhal Index
n represents all the companies (as many as you have)
Market shares are squared before being summed to give additional weight to
firms with larger size
How to measure industry concentration (approfondire) 1
, Which industry is more concentrated?
The more concentrated industry is the one of Mobile phones
A sixth force: Complementors
How to measure industry concentration (approfondire) 2
, A complement is a product, service, or skill that adds value to the original product
offering when they are used together
Complements increase the demand for the primary product, which enhances the
profit potential for the industry and the firm
Ex: phone and apps
Is the airline industry profitable?
This graph shows what increase rivalry
Entrants
How to measure industry concentration (approfondire) 3
concentration (approfondire)
This is an important dimension to analyze:
Concentration reduces competition among existing companies, making them
more powerful in dealing with suppliers and buyers (relativ concentration)
How to measure concentration
Markets shares of companies MS are commonly used for measurement
Two meatrics are crucial:
Concentration ratio:
Whatʼs the total market share of the largest n companies? The higher, the
more concentrated the industry. Usually n 4
Henrfindhal Index
n represents all the companies (as many as you have)
Market shares are squared before being summed to give additional weight to
firms with larger size
How to measure industry concentration (approfondire) 1
, Which industry is more concentrated?
The more concentrated industry is the one of Mobile phones
A sixth force: Complementors
How to measure industry concentration (approfondire) 2
, A complement is a product, service, or skill that adds value to the original product
offering when they are used together
Complements increase the demand for the primary product, which enhances the
profit potential for the industry and the firm
Ex: phone and apps
Is the airline industry profitable?
This graph shows what increase rivalry
Entrants
How to measure industry concentration (approfondire) 3
