C4_M2

Relying on the information in the SABI database, in this assignment you are asked to carry out a concentration analysis of the industry you identified as the relevant one in the previous major assignment, for the firm you are analyzing all along the course. More precisely:

1. Calculate the 5-firm concentration ratio, the 2-firm concentration ratio, and the Herfindalh index.

2. Put these analyses in context, comparing them with the results you obtain in the same industry for another year.

Your answer has to show both, the results and the link to the spreadsheet where the calculations have been made.

Once done, answer the following questions:

2.1. Are there any differences among the conclusions you may reach comparing your results for the different concentration indexes along the 2 years? Put it in another way: Imagine that you calculate the 3 required concentration indexes for 2010 and 2015:

−In which year is the industry more concentrated?

−Does the previous answer depend on the concentration measure you use?

2.2. Take now your results for the 2-firm concentration ratio in the 2 years you selected. Imagine that in these 2 years analyzed, everything is the same in this industry but the concentration index. Could you draw any conclusions regarding the evolution of the strength of competition among these two years in this industry? Has it increased or decreased?

In 2017, with the information obtained from the data base, we can see that the 5 biggest sales are located in Comercial Gazpi SA, Sagamovil SA, Unsain SL, Automoviles Torregrosa SL and Automoviles Marco SA. The same happens in 2016.

Company	Sales (2017)	Sales (2016)
Comercial Gazpi SA	58.609	45.267
Sagamovil SA	34.263	33.380
Unsain SL	29.101	27.735
Automoviles Torregrosa SL	29.997	25.134
Automoviles Marco SA	30.801	19.761
Total	182.772	151.277

The whole profit obtained by the 125 companies in this data base is 462.301 in 2017 and 407.300 in 2016. This means that these 5 companies have the proportion of 182.772/462.301 (=0,3953=39,53%) in 2017 and 151.277/407.300 (=0,3714=37,14%) in 2016. This is the 5-firm concentration ratio. The 2-firm concentration ratio is formed by only Comercial Gazpi SA and Sagamovil SA. In this case, they are going to obtained 92.872/462.301 (=0,2008=20,08%) in 2017 and 78.646/407.300 (=0,1930=19,31%) in 2016.

How the Herfindahl index is calculated is located in the excel document. The results are 0,048367 in 2017 and 0,044690 in 2016.

As we can see, the 5-firm concentration ratio is bigger in 2017 in contrast to 2016, but the 2-firm concentration ratio is the other way around. This means that the three companies that are below the two firms of 2-firm concentration ratio (Comercial Gazpi SA and Sagamovil SA) has increased their sales in comparison to the increase of the whole sales of every company.

The industry is more concentrated in 2017 than in 2016, because the % of the five companies is bigger in 2017. The same number of companies has more % of the sales. This happens also in the two biggest companies. So, the market tends to be more concentrated as time goes by. This all means that the competitive level of this market is falling down. In an infinitive time-reality, this could mean that the future will involve just few companies instead of 125 as this shows.

https://drive.google.com/file/d/1GqZmTes8BckeN-bCffsXjDRCEEYz9iDM/view?usp=sharing