Page 12 - Portfolio Analysis
P. 12
a)
Company share
----------------
share of largest competitor
30
= ---- = 1.5
20
b)
Company share
-----------------
share of largest three largest competitors
30
= ---- = 0.75
40
The former measure is more applicable where only one or two firms have
a significant market share and where experience curve gains are more
evident. The latter measure is better suited to a highly concentrated
industry, where, for example, the four-firm concentration ratio is greater
than 80 per cent.
Regardless of which measure is used it is often the case that the dominant
firm has to be at least 1.5 times as large as the next biggest competitor in
order to maintain profitability.
