MARKET CONCENTRATION IN INDIAN MANUFACTURING INDUSTRY
Swati Verma
1321949
Market Concentration refers to the extent to which the production is concentrated amongst leading firms who are largely or exclusively engaged in that industry. Market concentration is indicative of the degree of market power of the firms. With high concentration levels the firms enjoy monopoly power and the resulting monopolistic prices affect their performance. Apte and Vaidyanathana (1982) advocated concentration significantly effects profitability where more concentrated industries show relatively high profitability. Some studies however claim that greater market concentration may not necessarily generate profits in the long run violating the conventional concentration-profit
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The industrial crisis of 1980’s led to the liberalisation of Indian Industries. The crucial determinants of the variation in concentration differ across industries. While in the manufacturing sector market concentration depends on the size of the market, advertising, innovation, marketing, distribution, export and import policy, return on capital employed (Mishra and Behera, 2007). The non-stationarity of the concentration necessitates the control over uncertain business customs as well as incorporation of intellectual property rights.
REFERENCE
• Mishra, P. (2008) “Concentration-Markup Relationship in Indian Manufacturing Sector”, Economic and Political Weekly, Vol. 43, No. 39, pp. 75-81.
• Athreye, S. and Kapur, S. (2006) “Industrial Concentration in a Liberalising economy: A study of Indian Manufacturing”, Journal of Development Studies, Vol. 42, pp. 981-999.
• Apte. P.G. and Vaidyanathan, R. (1982), “Concentration, Controls and Performance in Twenty-Nine Manufacturing Industries in India”, Indian Economic Review, Vol.17, pp. 241-262.
• Mishra, P. and Behera B. (2007) “Instabilities in Market Concentration: An Empirical Investigation in Indian Manufacturing Sector”, Journal of Indian School of Political Economy, Vol. 19, pp
This organization belongs to the oligopoly market structure. The oligopoly market structure involves a few sellers of a standardized or differentiated product, a homogenous oligopoly or a differentiated oligopoly (McConnell, 2004, p. 467). In an oligopolistic market each firm is affected by the decisions of the other firms in the industry in determining their price and output (McConnell, 2005, P.413). Another factor of an oligopolistic market is the conditions of entry. In an oligopoly, there are significant barriers to entry into the market. These barriers exist because in these industries, three or four firms may have sufficient sales to achieve economies of scale, making the smaller firms would not be able to survive against the larger companies that control the industry (McConnell, 2005, p.
The UK petroleum industry consists of 3 main retailing ownership models. The 3 models are oil company, independent dealers and supermarkets. The concentration ratio in the petrol retail market has gone through a couple of changes over the past 10 years. Since 2004, the market share of supermarkets has increased by 10%, from 29% to 39%. In the same period, the market shares of oil companies and independent dealers dropped by 8%, from 37% to 29% and 1.6%, from 34% to 32.4% respectively. (UK petrol and diesel sector, 2013: 44-45). Please refer to Appendix A for the graphs. If we look at the market by types of ownership, it seems like oligopoly as 3 types of ownership dominate the industry. However, if we break it down into individual companies, the statistics reflects the opposite. Using the Herfindahl – Hirschman Index where the market share of each firm is squared and added up, we can find the market concentration of the UK petrol retail. (Modern Analyst, 2013)
Market structure is classified according to the degree of competition firms encounter in their industry (Baker College, 2016). There are four main market structures: pure competition, monopolistic competition, oligopoly and a pure monopoly. Pure competition is where fir...
The market structure of an industry is the deciding force for how a business runs its operations. Strategies that would excel in a monopoly structure would surely fail in a perfect competition. Market structures vary from industry to industry and define what practices are acceptable. They determine the price of goods, availability of products, barriers to entry and number of firms in competition. To illustrate the effects of market structure on an industry, an analysis of The Ridge Tool Company and the tool manufacturing industry will be done.
Zachary, G.P. (1999). Many Industries are Congealing Into Lineup of Few Dominant Giants. Wall Street Journal. Retrieved November 7, 2003, from http://www.writght.edu/~tdung/oligopoly.htm .
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