Class 8

Concentration: Measurements and Trends Analysis of a firm’s competitive environment requires identifying the key elements of industry structure Number and size distribution of firms Seller concentration Number of firms, size of firms

Market and Industry Definition Product dimension Geographic dimension Cross price elasticity of demand Cross price elasticity of supply

Geographic Market Definition Determines whether an increase in the price of a product in one geographic location significantly affects either demand or suupy in another location If so, both locations should be considered same Regional market

Market vs Industry Market:S&D Industry – all products or enterprises with large long run cross elasticities either supply and demand should be combined into a single industry.

Official Schemes ISIC classification NACE classification

Measures of Concentration Seller concentration: An indicator of the number and size distribution of firms can be measured at two levels: –For all firms that form part of an economy located within some specific geographic boundary –For all firms classified as members of some industry or market again located within some specific geographic boundary

Most Common measures of seler concentration N firm concentration ratio The Herfindahl-Hirschman index The Hannah-Kay index The entropy coefficient The variance of the log of firm sizes GINI

Figure 6.1 The Lorenz curve

Trends in Industry Concentration Table 6.14 and 6.15: Specialization in European Manufacturing Sector Pattern of specialization across industrialized world: –Europe: Specialize in traditional industries, –Japan and US: Specialize in technology oriented industries

Clusters Table 6.15 Industry cluster policies are a current trend in planning for economic development. The focus of cluster policies is based on the recognition that firms and industries are interrelated. The idea is that ties among firms within clusters might be turned into competitive advantage for the region.

Industry cluster policies are a current trend in planning for economic development. The focus of cluster policies is based on the recognition that firms and industries are interrelated. The idea is that ties among firms within clusters might be turned into competitive advantage for the region.

ClusterNumber of Firms (1996) Change in Number of Firms ( ) Employment (1996) Change in Employment ( ) Engineering31958, ,8 Production and Processing of Field Crops , ,6 Stone Based Industry11656, ,9 Packaged foods and beverages , ,6 Textile36686, ,3 Media and Communication 7098, ,8 Furniture61812, ,2 Total117345, ,3 Source: Akgungor, S. (2006). Geographic Concentrations in Turkey’s Manufacturing Industry”. Europen Planning Studies, vol 14, no.2 (forthcoming). Industries With Close I-O Relationships in Turkey (Cluster Templates)

Engineering Cluster Primary Industries Mining of metal ores Manufacture of ceramic products Manufacture of basic iron and steel Manufacture of basic precious and non-ferrous metals Casting of metals Manufacture of fabricated metal products, tanks, reservoirs and steam generators Manufacture of other fabricated metal products; metal working service activities Manufacture of general purpose machinery Manufacture of special purpose machinery Manufacture of domestic appliances n.e.c. Manufacture of electrical machinery and apparatus n.e.c. Manufacture of motor vehicles, trailers and semi-trailers Secondary Industries Extraction of crude petroleum and natural gas Manufacture of medical, precision and optical instruments, watches and clocks Building and repairing of ships, pleasure and sporting boats Manufacture of transport equipment n.e.c. Manufacturing n.e.c.

Production and Processing of Field Crops Primary Industries Growing of cereals and other crops n.e.c. Farming of animals Agricultural and animal husbandry service activities, except veterinary activities Manufacture of vegetable and animal oils and fats Manufacture of grain mill products, starches and starch products Manufacture of preparad animal feeds Manufacture of sugar Manufacture of cocoa, chocolate, sugar confertionery and other food products n.e.c. Manufacture of tobacco products Manufacture of fertilizers and nitrogen compounds Secondary Industries Manufacture of alcoholic beverages Manufacture of pesticides, other agro-chemicals and paints, varnishes Manufacture of rubber products

Stone-Based Industry Primary Industries Mining of coal and lignite Extraction of crude petroleum and natural gas Quarrying of stone, sand and clay Mining and quarrying n.e.c. Manufacture of pesticides, other agro-chemicals and paints, varnishes Manufacture of glass and glass products Manufacture of ceramic products Manufacture of cement, lime and plaster related articles these items Cutting and finishing of stone and man. of other non-metallic mineral products n.e.c. Secondary Industries Forestry, logging and related service activities Fishing Mining of metal ores Manufacture of basic chemicals, plastics in primary forms and os synthetics rubber Manufacture of rubber products Building and repairing of ships, pleasure and sporting boats

Packaged Food Products and Beverages Primary Industries Fishing Production, processing and preserving of meat and meat products Processing and preserving of fruit and vegetables Manufacture of dairy products Manufacture of bakery products Manufacture of alcoholic beverages Manufacture of soft drinks; production of mineral waters Secondary Industries Growing of vegetables, horticultural specialties and nursery products Processing and preserving of fish and fish products Manufacture of cocoa, chocolate, sugar confertionery and other food products n.e.c. Publishing

Textile Primary Industries Manufacture of textiles Manufacture of other textiles Manufacture of knitted and crocheted fabrics and articles Manufacture of wearing apperel, except fur apparel Manufacture of basic chemicals, plastics in primary forms and of synthetic rubber Manufacture of cleaning materials, cosmetics and other chemicals and man-made fibres Secondary Industries Agricultural and animal husbandry service activities, except veterinary activities Manufacture of plastic products Manufacture of glass and glass products

Furniture Primary Industries Forestry, logging and related service activities Sawmilling and planing of wood Manufacture of wood and of products of wood and cork Manufacture of furniture Secondary Industries Manufacture of cocoa, chocolate, sugar confertionery and other food products n.e.c. Manufacture of coke, refined petroleum produtcs Manufacture of rubber products

Regional Specialisations İstanbul- İzmirStone-based industry ÇukurovaTextile Ankara and Kırıkkale Engineering Furniture Ankara RegionProduction and processing of field crops Stone-based industry KayseriFurniture GaziantepTextile KonyaEngineering Production and processing of field crops SamsunProduction and processing of field crops EskişehirEngineering Stone-based industry Packaged food and beverages

Figure 6.2 Diamond framework of competitive advantage Source: Adapted from Porter (1990), figure 3.1, p. 72.