March 19, 2012
Manufacturing Industry Evaluation
According to Case, Fair & Oster (2009), “An oligopoly is an industry dominated by a few firms that, by virtue of their individual sizes, are large enough to influence market price. The behavior of a single oligopolistic firm depends on the reactions it expects of all the other firms in the industry. Industrial strategies usually are very complicated and difficult to generalize about.” (p. 301).
Firms can be measured by different means to document production/output. One unit of measure is by implementing and documenting concentration ratios. Concentration ratios are used to measure the share of industry output in sales or employment accounted for by the top firms. The focus of this paper is the fluid milk industry, women’s and girl’s cut and sew dresses, envelopes and electronic computers and to analyze if they met the criteria of oligopoly.
The fluid milk industry (311511) produces products such as milk, cheese and other dairy products. According to the 2007 census report, the fluid milk industry is made up of 280 companies. Based on the information provided and the amount of companies list in the census report the fluid milk industry has four large firms in this industry which are responsible for 46 percent of the total value of distribution throughout this industry. Thus, the fluid milk industry couldn’t be an oligopoly because the industry is not dominated by a select number of manufactures which could influence the market price of the product.
Women’s and girls’ cut and sew dresses (315233) produces women’s and girls’ dresses such as formal attire. According to the 2007 census, the industry is saturated with over 356 companies producing these products throughout the United States. The top four companies in this industry are responsible for 28 percent of the total value of shipments. The concentration ratio is small compared to the remaining 352 companies that make up the remaining 72 percent of shipment value, thus the four shipment leaders would not have enough influence to influence market prices of the remaining three hundred plus companies. The women’s and girls’ cut and sew dresses industry would not be considered an oligopoly.
Envelopes (322223) are for mailing/shipping etc... According to the census, the four largest companies for the envelope manufacturing companies make up a shipment value of 55 percent of the market. According to the 2007 census, there are a total of 149 companies in the envelope manufacturing business. Based on the concentration ratio of the four companies with valued shipping above 50 percent, the envelope manufacturing industry, because of this it would be considered an oligopoly. These four companies that are responsible for 55 percent of the value can influence market pricing either in a positive or negative way based on the fact that they control over 50 percent of the market value.
According to the census, the electronic computers (334111) industry is made of over 413 companies. The top four companies in the industry control 86 percent of the value products being shipped. The remaining companies make up the difference in product shipment value. The four companies would be considered in oligopoly because there manufacturing and products control most of the premier value and products. If they change the way they operate and what products they…