89.64.251.204 at 15:37, 25 January 2014

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{{Other uses|Dominance (disambiguation){{!}}Dominance}}
{{for|the game theory|Strategic dominance}}
{{Refimprove|date=May 2008}}
{{Marketing}}
'''Market dominance''' is a measure of the strength of a [[brand]], [[product (business)|product]], [[Service (economics)|service]], or [[corporation|firm]], relative to competitive offerings. There is often a geographic element to the competitive landscape. In defining market dominance, you must see to what extent a product, brand, or firm controls a product category in a given geographic area.<ref>http://kuznets.fas.harvard.edu/~athey/Invest_Mkt_Dominance.pdf</ref>

==Calculating==
There are several ways of calculating market dominance. The most direct is [[market share]]. This is the percentage of the total market serviced by a firm or brand. A declining scale of market shares is common in most industries: that is, if the industry leader has say 50% share, the next largest might have 25% share, the next 12% share, the next 6% share, and all remaining firms combined might have 7% share.

Market share is not a perfect proxy of market dominance. The influences of customers, suppliers, competitors in related industries, and government regulations must be taken into account. Although there are no hard and fast rules governing the relationship between market share and market dominance, the following are general criteria:
* A company, brand, product, or service that has a combined market share exceeding 60% most probably has market power and market dominance.
* A market share of over 35% but less than 60%, held by one brand, product or service, is an indicator of market strength but not necessarily dominance.
* A market share of less than 35%, held by one brand, product or service, is not an indicator of strength or dominance and will not raise anti-competitive concerns by government regulators.

Market shares within an industry might not exhibit a declining scale. There could be only two firms in a [[duopoly|duopolistic market]], each with 50% share; or there could be three firms in the industry each with 33% share; or 100 firms each with 1% share. The [[concentration ratio]] of an industry is used as an indicator of the relative size of leading firms in relation to the industry as a whole. One commonly used concentration ratio is the ''four-firm concentration ratio'', which consists of the combined market share of the four largest firms, as a percentage, in the total industry. The higher the concentration ratio, the greater the market power of the leading firms.

Alternatively, there is the [[Herfindahl index]]. It is a measure of the size of firms in relation to the industry and an indicator of the amount of competition among them. It is defined as the sum of the squares of the market shares of each individual firm. As such, it can range from 0 to 10,000, moving from a very large amount of very small firms to a single [[monopoly|monopolistic]] producer. Decreases in the Herfindahl index generally indicate a loss of [[pricing power]] and an increase in competition, whereas increases imply the opposite.

Kwoka's ''dominance index'' (D) is defined as the sum of the squared differences between each firm's share and the next largest share in a market:
:<math>D = \sum_{i=1}^{n-1} (s_i-s_{i+1})^2</math>

where

:<math>s_1 \ge ... \ge s_i \ge s_{i+1} \ge ... \ge s_n</math> for all ''i'' = 1, ..., ''n'' - 1.<ref>Kwoka, J. E. "Large firm dominance and price-cost margins in manufacturing industries." Southern Econ J (1977) vol. 44, pp. 183–9.</ref>

As part of its merger review process, Mexican Competition Commission uses ''dominance index'' (ID), described as the [[Herfindahl index]] of a [[Herfindahl index]] (HHI). Formally, ID is the sum of squared firm contributions to the market HHI: <math>ID = \sum_{i=1}^n h_i^2</math> where <math>h_i = \left. s_i^2 \right/ HHI.</math>

[[European Commission]]'s ''Tenth Report on Competition'' implies that a significant disparity between the largest and the second-largest firm shares can indicate that the largest firm has a dominant position in the market. Specifically, under a section entitled "Scrutiny of mergers for compatibility with Article 86 EEC," the Report states:
:A dominant position can generally be said to exist once a market share to the order of 40% to 45% is reached. [footnote: A dominant position cannot even be ruled out in respect of market shares between 20% and 40%; Ninth Report on Competition Policy, point 22.] Although this share does not in itself automatically give control of the market, if there are large gaps between the position of the firm concerned and those of its closest competitors and also other factors likely to place it at an advantage as regards competition, a dominant position may well exist. (European Commission's Tenth Report on Competition, page 103, paragraph 150.)

''Asymmetry Index'' (AI) is defined as the [[Variance|statistical variance]] of market shares: <math>AI=\left.\sum_{i=1}^n \left(s_i- {1 \over n}\right)^2 \right/n.</math> <ref>Brown, Donald M., and Frederick R. Warren-Boulton, Testing the Structure- Competition Relationship on Cross-Sectional Firm Data, EAG 88-6, May 11, 1988.</ref><ref>Warren-Boulton, Frederick R. (1990). "Implications of U.S. Experience with Horizontal Mergers and Takeovers for Canadian Competition Policy". in Mathewson, G. Franklin et al. (eds.). The Law and Economics of Competition Policy. Vancouver, B.C.: The Fraser Institute. ISBN 0-88975-121-8.</ref>

==Examples==
Here are some examples of market dominant products:
* [[Adobe Flash]]<ref>98%: [[NPD Group|NPD]] [http://www.macromedia.com/software/player_census/npd/ study]</ref><ref name="Flash Player Statistics">99.3%: Millward Brown survey, conducted June 2007. {{cite web |url=http://www.adobe.com/products/player_census/flashplayer/ |title=Flash Player Statistics |accessdate=2007-06-18 |author= |authorlink= |date= |year= |month= |work= |publisher=Adobe Systems |pages= |archiveurl= |archivedate= |quote= }}</ref>
* [[Amazon.com]], e-book retail
* [[Adobe Photoshop]]{{Citation needed|date=April 2008}}
* [[Anglo American plc]], platinum production
* [[Apple Inc.|Apple]] [[iPod]], portable media players
* [[De Beers]], diamond production
* [[Facebook]], social networking
* [[Microsoft Windows]],<ref>{{cite web|url=http://www.macworld.com/article/1031512/consolidation.html |title="IDC: Consolidation to Windows won't happen"|publisher=MacWorld |accessdate=20 March 2013}}</ref><ref>[http://www.w3counter.com/globalstats.php W3Counter - Global Web Stats]</ref><ref>[http://marketshare.hitslink.com/report.aspx?qprid=8 Market share for browsers, operating systems and search engines]</ref> [[Microsoft Office]]{{Citation needed|date=April 2008}}
* [[Intel]], personal computer processors<ref>{{cite news| url=http://uk.reuters.com/article/technologyNews/idUKL1730607220080718?pageNumber=2&virtualBrandChannel=0 | work=Reuters | title=EU files new competition charges against Intel | first=Pete | last=Harrison | date=July 17, 2008}}</ref>
* [[Google]], Internet search <ref>{{cite web|url=http://searchenginewatch.com/article/2226212/Google-Smashes-U.S.-Search-Market-Share-Record-Closes-in-on-70 |title="Google Smashes U.S. Search Market Share Record, Closes in on 70%" |publisher=Search Engine Watch|accessdate=20 March 2013}}</ref>
* [[Cisco]], Ethernet switching<ref>{{cite news| url=http://www.forbes.com/2004/11/17/1117automarketscan06_print.html | work=Forbes | title=Cisco Gains Market Share In Ethernet Switching | deadurl=yes}} {{Dead link|date=September 2011|bot=RjwilmsiBot}}</ref>
* [[Dolby]], audio technologies{{Citation needed|date=October 2012}}
* [[Qualcomm]], mobile cellular chipsets - including processors, wireless baseband and SoC. <ref> [http://assets.fiercemarkets.com/files/wireless/fierceimages/baseband_app_processors_fc.jpg] [Fierce Wireless - Forward Concept graph of mobile baseband marketshare]</ref>
* [[ARM Limited|ARM]], mobile processor architecture (IP licensing)<ref>[http://techon.nikkeibp.co.jp/NEA/archive/200204/177680/ [Cover Story] ARM CPU Core Dominates Mobile Market - Nikkei Electronics Asia - Tech-On!]</ref>
* [[L'Oréal|L'Oréal Group]], the world's largest cosmetics and beauty company{{Citation needed|reason=Largest does not necessarily mean dominant, needs source for being dominant.|date=May 2013}}

Further back in history, the majority of goods which became identified with the task had significant market dominance - Kodak, Instamatic, Hornby, Scalextric, Meccano to name a few.

==See also==
* [[Market power]]

== References ==
{{reflist}}

{{DEFAULTSORT:Dominance (Economics)}}
[[Category:Monopoly (economics)]]
[[Category:Imperfect competition]]
[[Category:Economics terminology]]

Graph traversal - Revision history

89.64.251.204 at 15:37, 25 January 2014