Page 21 - Case Lab Assignment

Case studies are generally based within an industry and

within any industry there are only a few dominant players.
Numerically there are likely to be four or less who control

80% or more of the market. It is against this that the target

company is measured.

Industry structure is often measured by computing the

Four-Firm Concentration Ratio. The concentration ratio of an

industry is used as an indicator of the relative size of firms in

relation to the industry as a whole. This may also assist in
determining the market form of the industry. One

commonly used concentration ratio is the four-firm

concentration ratio, which consists of the market share, as a
percentage, of the four largest firms in the industry.

There are four major types of market structures: Perfect

competition, with a very low concentration ratio, is a market

structure with many firms, each selling an identical product
to many buyers. There are no restrictions on entry of new

firms to the industry. With thousands of firms having a

market share there is little power amongst any few firms.

Monopolistic competition, below 40% for the four-firm
measurement, is a market structure with many firms; each

firm produces similar but slightly different products. Each

firm possesses an element of market power with no
restrictions on entry of new firms to the industry markets in

which numerous firms supply products which are each

slightly different. Oligopoly, above 40% for the four-firm
measurement, is a market structure in which a small

number of firms compete. The firms might produce almost

identical products. The barriers limiting entry into the

market the market power lies within 4 top producing firms.

Monopoly, with a near-100% four-firm measurement