What is industry concentration?
The concentration of the industry is an economic measurement of how the market share is divided among the companies operating in it. If one or several companies are dominated in most of the market, this industry is reported to be highly concentrated. If the industry has a large number of smaller companies that contain a small percentage of the total market share, the industry concentration is low. This information can be useful for investors who are most likely looking for companies that command a large part of the market share in a highly concentrated industry. Although this hierarchy may change over time, it is likely that the main players in the established industry will remain unchanged. Newer industries can be fragmented at the beginning before settling to the point where the main player is to absorb large parts of the market. A study on the market share is divided among companies in the industry is known as the concentration of industry.
One way to study is the use of what is called the "concentration of industry". The ratio is calculated by accepting a certain group of companies, usually the first four on the market and adding up all the market share they have. The low ratio indicates a market that is extremely fragmented. If the ratio is approaching 100, this means that the market is highly concentrated and that most of the market is dominated by a small number of companies.
The company that is one of the best artists on the highly concentrated market has a clear advantage over society that fights it in the fragmented market. Any company that owns a high concentration of Industrynergies to increase profit range. On the other hand, companies on a fragmented market must maintain low prices to remain competitive and thus damage profits.
Investors pay attention to data about industry concentration. Companies on top of a concentrated industry are often the aim of investors for their consistencyI and reliability. On the other hand, the company in the industry, which is still relatively young, may have greater potential. Shares for such a company can be at a low price, but has great potential, if both the industry and the company rise to higher heights.