Class 8Class 8

Concentration: Measurements and Concentration: Measurements and TrendsTrends

Analysis of a firm’s competitive Analysis of a firm’s competitive environment requires identifying the key environment requires identifying the key elements of industry structureelements of industry structure

Number and size distribution of firmsNumber and size distribution of firms

Seller concentrationSeller concentration

Number of firms, size of firmsNumber of firms, size of firms

Market and Industry DefinitionMarket and Industry Definition

Product dimensionProduct dimension

Geographic dimensionGeographic dimension

Cross price elasticity of demandCross price elasticity of demand

Cross price elasticity of supplyCross price elasticity of supply

Geographic Market DefinitionGeographic Market Definition

Determines whether an increase in the Determines whether an increase in the price of a product in one geographic price of a product in one geographic location significantly affects either demand location significantly affects either demand or suupy in another locationor suupy in another location

If so, both locations should be considered If so, both locations should be considered samesame

Regional marketRegional market

Market vs IndustryMarket vs Industry

Market:S&DMarket:S&D

Industry – all products or enterprises with Industry – all products or enterprises with large long run cross elasticities either large long run cross elasticities either supply and demand should be combined supply and demand should be combined into a single industry. into a single industry.

Official SchemesOfficial Schemes

ISIC classificationISIC classification

NACE classificationNACE classification

Measures of ConcentrationMeasures of Concentration

Seller concentration: An indicator of the Seller concentration: An indicator of the number and size distribution of firms can number and size distribution of firms can be measured at two levels:be measured at two levels:– For all firms that form part of an economy For all firms that form part of an economy

located within some specific geographic located within some specific geographic boundaryboundary

– For all firms classified as members of some For all firms classified as members of some industry or market again located within some industry or market again located within some specific geographic boundaryspecific geographic boundary

Most Common measures of seler Most Common measures of seler concentrationconcentration

N firm concentration ratioN firm concentration ratio

The Herfindahl-Hirschman indexThe Herfindahl-Hirschman index

The Hannah-Kay indexThe Hannah-Kay index

The entropy coefficientThe entropy coefficient

The variance of the log of firm sizesThe variance of the log of firm sizes

GINIGINI

Figure 6.1  The Lorenz curve

Trends in Industry ConcentrationTrends in Industry Concentration

Table 6.14 and 6.15: Specialization in Table 6.14 and 6.15: Specialization in European Manufacturing SectorEuropean Manufacturing Sector

Pattern of specialization across Pattern of specialization across industrialized world:industrialized world:– Europe: Specialize in traditional industries,Europe: Specialize in traditional industries,– Japan and US: Specialize in technology Japan and US: Specialize in technology

oriented industriesoriented industries

ClustersClusters

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

Industry cluster policies are a current trend Industry cluster policies are a current trend in planning for economic development.in planning for economic development.

The focus of cluster policies is based on The focus of cluster policies is based on the recognition that firms and industries the recognition that firms and industries are interrelated.are interrelated.

The idea is that ties among firms within The idea is that ties among firms within clusters might be turned into competitive clusters might be turned into competitive advantage for the region.advantage for the region.

Cluster Number of Firms (1996)

Change in Number of Firms (1996-2000)

Employment (1996)

Change in Employment (1996-2000)

Engineering 3195 8,4 288534 10,8

Production and Processing of Field Crops

1093 -3,1 127881 -3,6

Stone Based Industry 1165 6,3 104104 7,9

Packaged foods and beverages

1286 -5,6 114507 0,6

Textile 3668 6,1 400747 10,3

Media and Communication

709 8,2 87302 9,8

Furniture 618 12,6 44864 26,2

Total 11734 5,1 1167939 8,3

Source: Akgungor, S. (2006). Geographic Concentrations in Turkey’s Manufacturing Industry”. Europen Planning Studies, vol 14, no.2 (forthcoming).

Industries With Close I-O Relationships in Turkey (Cluster Templates)

Engineering ClusterEngineering Cluster

Primary IndustriesPrimary IndustriesMining of metal oresMining of metal oresManufacture of ceramic productsManufacture of ceramic productsManufacture of basic iron and steelManufacture of basic iron and steelManufacture of basic precious and non-ferrous metalsManufacture of basic precious and non-ferrous metalsCasting of metalsCasting of metalsManufacture of fabricated metal products, tanks, reservoirs and steam generatorsManufacture of fabricated metal products, tanks, reservoirs and steam generatorsManufacture of other fabricated metal products; metal working service activitiesManufacture of other fabricated metal products; metal working service activitiesManufacture of general purpose machineryManufacture of general purpose machineryManufacture of special purpose machineryManufacture of special purpose machineryManufacture of domestic appliances n.e.c.Manufacture of domestic appliances n.e.c.Manufacture of electrical machinery and apparatus n.e.c.Manufacture of electrical machinery and apparatus n.e.c.Manufacture of motor vehicles, trailers and semi-trailersManufacture of motor vehicles, trailers and semi-trailers

Secondary IndustriesSecondary IndustriesExtraction of crude petroleum and natural gasExtraction of crude petroleum and natural gasManufacture of medical, precision and optical instruments, watches and clocksManufacture of medical, precision and optical instruments, watches and clocksBuilding and repairing of ships, pleasure and sporting boatsBuilding and repairing of ships, pleasure and sporting boatsManufacture of transport equipment n.e.c.Manufacture of transport equipment n.e.c.Manufacturing n.e.c.Manufacturing n.e.c.

Production and Processing of Production and Processing of Field CropsField Crops

Primary IndustriesPrimary IndustriesGrowing of cereals and other crops n.e.c.Growing of cereals and other crops n.e.c.Farming of animalsFarming of animalsAgricultural and animal husbandry service activities, except veterinary activitiesAgricultural and animal husbandry service activities, except veterinary activitiesManufacture of vegetable and animal oils and fatsManufacture of vegetable and animal oils and fatsManufacture of grain mill products, starches and starch productsManufacture of grain mill products, starches and starch productsManufacture of preparad animal feedsManufacture of preparad animal feedsManufacture of sugarManufacture of sugarManufacture of cocoa, chocolate, sugar confertionery and other food products n.e.c.Manufacture of cocoa, chocolate, sugar confertionery and other food products n.e.c.Manufacture of tobacco productsManufacture of tobacco productsManufacture of fertilizers and nitrogen compoundsManufacture of fertilizers and nitrogen compounds

Secondary IndustriesSecondary IndustriesManufacture of alcoholic beveragesManufacture of alcoholic beveragesManufacture of pesticides, other agro-chemicals and paints, varnishesManufacture of pesticides, other agro-chemicals and paints, varnishesManufacture of rubber productsManufacture of rubber products

Stone-Based IndustryStone-Based IndustryPrimary Industries Primary Industries

Mining of coal and ligniteMining of coal and ligniteExtraction of crude petroleum and natural gasExtraction of crude petroleum and natural gasQuarrying of stone, sand and clayQuarrying of stone, sand and clayMining and quarrying n.e.c.Mining and quarrying n.e.c.Manufacture of pesticides, other agro-chemicals and paints, varnishesManufacture of pesticides, other agro-chemicals and paints, varnishesManufacture of glass and glass productsManufacture of glass and glass productsManufacture of ceramic productsManufacture of ceramic productsManufacture of cement, lime and plaster related articles these itemsManufacture of cement, lime and plaster related articles these itemsCutting and finishing of stone and man. of other non-metallic mineral products n.e.c.Cutting and finishing of stone and man. of other non-metallic mineral products n.e.c.

Secondary IndustriesSecondary IndustriesForestry, logging and related service activitiesForestry, logging and related service activitiesFishingFishingMining of metal oresMining of metal oresManufacture of basic chemicals, plastics in primary forms and os synthetics rubberManufacture of basic chemicals, plastics in primary forms and os synthetics rubberManufacture of rubber productsManufacture of rubber productsBuilding and repairing of ships, pleasure and sporting boatsBuilding and repairing of ships, pleasure and sporting boats

Packaged Food Products and Packaged Food Products and BeveragesBeverages

Primary IndustriesPrimary IndustriesFishingFishingProduction, processing and preserving of meat and meat productsProduction, processing and preserving of meat and meat productsProcessing and preserving of fruit and vegetablesProcessing and preserving of fruit and vegetablesManufacture of dairy productsManufacture of dairy productsManufacture of bakery productsManufacture of bakery productsManufacture of alcoholic beveragesManufacture of alcoholic beveragesManufacture of soft drinks; production of mineral watersManufacture of soft drinks; production of mineral waters

Secondary IndustriesSecondary IndustriesGrowing of vegetables, horticultural specialties and nursery productsGrowing of vegetables, horticultural specialties and nursery productsProcessing and preserving of fish and fish productsProcessing and preserving of fish and fish productsManufacture of cocoa, chocolate, sugar confertionery and other food Manufacture of cocoa, chocolate, sugar confertionery and other food products n.e.c.products n.e.c.PublishinPublishingg

TextileTextile

Primary IndustriesPrimary IndustriesManufacture of textilesManufacture of textilesManufacture of other textilesManufacture of other textilesManufacture of knitted and crocheted fabrics and articlesManufacture of knitted and crocheted fabrics and articlesManufacture of wearing apperel, except fur apparelManufacture of wearing apperel, except fur apparelManufacture of basic chemicals, plastics in primary forms and of Manufacture of basic chemicals, plastics in primary forms and of synthetic rubbersynthetic rubberManufacture of cleaning materials, cosmetics and other chemicals Manufacture of cleaning materials, cosmetics and other chemicals and man-made fibresand man-made fibres

Secondary IndustriesSecondary IndustriesAgricultural and animal husbandry service activities, except Agricultural and animal husbandry service activities, except veterinary activitiesveterinary activitiesManufacture of plastic productsManufacture of plastic productsManufacture of glass and glass productsManufacture of glass and glass products

FurnitureFurniture

Primary IndustriesPrimary IndustriesForestry, logging and related service activitiesForestry, logging and related service activitiesSawmilling and planing of woodSawmilling and planing of woodManufacture of wood and of products of wood and corkManufacture of wood and of products of wood and corkManufacture of furnitureManufacture of furniture

Secondary IndustriesSecondary IndustriesManufacture of cocoa, chocolate, sugar confertionery Manufacture of cocoa, chocolate, sugar confertionery and other food products n.e.c.and other food products n.e.c.Manufacture of coke, refined petroleum produtcsManufacture of coke, refined petroleum produtcsManufacture of rubber productsManufacture of rubber products

Regional SpecialisationsRegional Specialisationsİstanbul -

İzmir Stone-based industry

Çukurova Textile

Ankara and Kırıkkale

EngineeringFurniture

Ankara Region Production and processing of field cropsStone-based industry

Kayseri Furniture

Gaziantep Textile

Konya EngineeringProduction and processing of field crops

Samsun Production and processing of field crops

Eskişehir EngineeringStone-based industryPackaged food and beverages

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