concentration ratios & herfindahl index

Concentration ratios

The degree by which an industry is dominated by a few large firms is measured

clearly oligopolis

4 firm concentration ratio close to 100

likely to be oligopolistic

Higher than 50 or 60 %

suggests as oligopoly

The four-firm concentration ratio considers the market share of the four largest firms in an industry. If this ratio exceeds 60%, it suggests this.

Herfindahl Index

-Given by the sum of the squared values of the market shares of all firms in the industry

True

The higher the Hefindhal Index, the greater is the degree of concentration in the industry

True

Herfindahl Index has become a great practical importance since 1982

Herfindahl index

Used also a basis for evaluating proposed merg

Firm architecture

refers to the way the firm is organized, operates , and responds to changes in the markets.

Ideal Firm

-Specializes in it score competencies and outsources all other activities

-Learning organization

-Operate extremely efficient factories or plants

-Seamlessly combines the physical and the virtual

-Real –time enterprise

Virtual corporation

-A temporary network of independent companies (suppliers, customers, and even rivals) coming together, with each contributing its core competence to quickly take advantage of the fast-changing opportunity.

-Best-of-everything organization

-The blueprint of the ideal firm

Relationship enterprises

-Networks of independent firms that form strategic alliances to build the capabilities and to have geographic presence needed to be global leaders in the field.

-Based fundamentally on a complementarity of capabilities and resources among the partner firms

-Create value by leveraging their complementarity.