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Class 8

Class 8. Concentration: Measurements and Trends. Analysis of a firm’s competitive environment requires identifying the key elements of industry structure Number and size distribution of firms Seller concentration Number of firms, size of firms. Market and Industry Definition.

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Class 8

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  1. Class 8

  2. Concentration: Measurements and Trends • Analysis of a firm’s competitive environment requires identifying the key elements of industry structure • Number and size distribution of firms • Seller concentration • Number of firms, size of firms

  3. Market and Industry Definition • Product dimension • Geographic dimension • Cross price elasticity of demand • Cross price elasticity of supply

  4. Geographic Market Definition • Determines whether an increase in the price of a product in one geographic location significantly affects either demand or suupy in another location • If so, both locations should be considered same • Regional market

  5. Market vs Industry • Market:S&D • Industry – all products or enterprises with large long run cross elasticities either supply and demand should be combined into a single industry.

  6. Official Schemes • ISIC classification • NACE classification

  7. Measures of Concentration • Seller concentration: An indicator of the number and size distribution of firms can be measured at two levels: • For all firms that form part of an economy located within some specific geographic boundary • For all firms classified as members of some industry or market again located within some specific geographic boundary

  8. Most Common measures of seler concentration • N firm concentration ratio • The Herfindahl-Hirschman index • The Hannah-Kay index • The entropy coefficient • The variance of the log of firm sizes • GINI

  9. Figure 6.1The Lorenz curve

  10. Trends in Industry Concentration • Table 6.14 and 6.15: Specialization in European Manufacturing Sector • Pattern of specialization across industrialized world: • Europe: Specialize in traditional industries, • Japan and US: Specialize in technology oriented industries

  11. Clusters • Table 6.15 • Industry cluster policies are a current trend in planning for economic development. • The focus of cluster policies is based on the recognition that firms and industries are interrelated. • The idea is that ties among firms within clusters might be turned into competitive advantage for the region.

  12. Industry cluster policies are a current trend in planning for economic development. • The focus of cluster policies is based on the recognition that firms and industries are interrelated. • The idea is that ties among firms within clusters might be turned into competitive advantage for the region.

  13. Industries With Close I-O Relationships in Turkey (Cluster Templates) Source: Akgungor, S. (2006). Geographic Concentrations in Turkey’s Manufacturing Industry”. Europen Planning Studies, vol 14, no.2 (forthcoming).

  14. Engineering Cluster Primary Industries • Mining of metal ores • Manufacture of ceramic products • Manufacture of basic iron and steel • Manufacture of basic precious and non-ferrous metals • Casting of metals • Manufacture of fabricated metal products, tanks, reservoirs and steam generators • Manufacture of other fabricated metal products; metal working service activities • Manufacture of general purpose machinery • Manufacture of special purpose machinery • Manufacture of domestic appliances n.e.c. • Manufacture of electrical machinery and apparatus n.e.c. • Manufacture of motor vehicles, trailers and semi-trailers Secondary Industries • Extraction of crude petroleum and natural gas • Manufacture of medical, precision and optical instruments, watches and clocks • Building and repairing of ships, pleasure and sporting boats • Manufacture of transport equipment n.e.c. • Manufacturing n.e.c.

  15. Production and Processing of Field Crops Primary Industries • Growing of cereals and other crops n.e.c. • Farming of animals • Agricultural and animal husbandry service activities, except veterinary activities • Manufacture of vegetable and animal oils and fats • Manufacture of grain mill products, starches and starch products • Manufacture of preparad animal feeds • Manufacture of sugar • Manufacture of cocoa, chocolate, sugar confertionery and other food products n.e.c. • Manufacture of tobacco products • Manufacture of fertilizers and nitrogen compounds Secondary Industries • Manufacture of alcoholic beverages • Manufacture of pesticides, other agro-chemicals and paints, varnishes • Manufacture of rubber products

  16. Stone-Based Industry Primary Industries • Mining of coal and lignite • Extraction of crude petroleum and natural gas • Quarrying of stone, sand and clay • Mining and quarrying n.e.c. • Manufacture of pesticides, other agro-chemicals and paints, varnishes • Manufacture of glass and glass products • Manufacture of ceramic products • Manufacture of cement, lime and plaster related articles these items • Cutting and finishing of stone and man. of other non-metallic mineral products n.e.c. Secondary Industries • Forestry, logging and related service activities • Fishing • Mining of metal ores • Manufacture of basic chemicals, plastics in primary forms and os synthetics rubber • Manufacture of rubber products • Building and repairing of ships, pleasure and sporting boats

  17. Packaged Food Products and Beverages Primary Industries • Fishing • Production, processing and preserving of meat and meat products • Processing and preserving of fruit and vegetables • Manufacture of dairy products • Manufacture of bakery products • Manufacture of alcoholic beverages • Manufacture of soft drinks; production of mineral waters Secondary Industries • Growing of vegetables, horticultural specialties and nursery products • Processing and preserving of fish and fish products • Manufacture of cocoa, chocolate, sugar confertionery and other food products n.e.c. • Publishing

  18. Textile Primary Industries • Manufacture of textiles • Manufacture of other textiles • Manufacture of knitted and crocheted fabrics and articles • Manufacture of wearing apperel, except fur apparel • Manufacture of basic chemicals, plastics in primary forms and of synthetic rubber • Manufacture of cleaning materials, cosmetics and other chemicals and man-made fibres Secondary Industries • Agricultural and animal husbandry service activities, except veterinary activities • Manufacture of plastic products • Manufacture of glass and glass products

  19. Furniture Primary Industries • Forestry, logging and related service activities • Sawmilling and planing of wood • Manufacture of wood and of products of wood and cork • Manufacture of furniture Secondary Industries • Manufacture of cocoa, chocolate, sugar confertionery and other food products n.e.c. • Manufacture of coke, refined petroleum produtcs • Manufacture of rubber products

  20. İstanbul - İzmir Stone-based industry Çukurova Textile Ankara and Kırıkkale Engineering Furniture Ankara Region Production and processing of field crops Stone-based industry Kayseri Furniture Gaziantep Textile Konya Engineering Production and processing of field crops Samsun Production and processing of field crops Eskişehir Engineering Stone-based industry Packaged food and beverages Regional Specialisations

  21. Figure 6.2Diamond framework of competitive advantage Source: Adapted from Porter (1990), figure 3.1, p. 72.

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