The Concentration Ratio Essay by Master Researcher

The Concentration Ratio
This paper evaluates issues relating to concentration ratios in business practice.
# 83915 | 675 words | 3 sources | 2005 | US
Published on Dec 01, 2005 in Business (Management)

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This paper defines the concentration ratio as the "percentage of market share owned by the largest firms in an industry". The author points out that concentration ratios in business practice emphasize the importance of market competitiveness and the number of firms within a given industry. The paper relates that it is expected that firms will be affected by variables such as prices, brand recognition and product quality in their efforts to promote competition and market effectiveness.

From the Paper:

"In a business environment that incorporates the use of concentration ratios, it is necessary to understand the meaning of this term and its application to modern business principles. The concentration ratio is defined as the "percentage of market share owned by the largest firms in an industry" (QuickMBA, 2004). In the example given, it is necessary to consider that a given industry segment with a particular number of firms is typically very competitive, or it is not as relevant in the overall marketing mix (QuickMBA, 2004). Therefore, the example provides a concentration ratio of 30% for the top 20 firms, or CR20. This type of ratio demonstrates that these firms own 30% of the total market share within this industry, and in an analytical sense, this is a relatively low level of competition amongst these firms."

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