Relating Marketing, Economics, Accounting, and Strategy

As I read the materials from the following links, the reinforcing and cumulative nature of the OneMBA curriculum becomes very obvious.

Industry Analysis : The Fundemantals
Excerpt-
Cost Conditions: Scale Economies and the Ratio of Fixed to Variable Costs
When excess capacity causes price competition, how low will prices go? The key factor is cost structure. Where fixed costs are high relative to variable costs, firms will take on marginal business at any price that covers variable costs. The consequences for profitability can be disastrous. Between 2001 and 2003, the total losses of the US airline industry exceeded the cumulative profits earned during the entire previous history of the industry. The willingness of airlines to offer heavily discounted tickets on flights with low bookings reflects the very low variable costs of filling empty seats. The devastating impact of excess capacity on profitability in petrochemicals, tires, steel, and semiconductors is a result of high fixed costs in these businesses and the willingness of firms to accept additional business at any price that covers variable costs.
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Industries and Markets: The first issue is clarifying what we mean by the term “industry.” Economists define an industry as a group of firms that supplies a market. Hence, a close correspondence exists between markets and industries. So, what’s the difference between analyzing industry structure and analyzing market structure? The principal difference is that industry analysis – notably Five Forces analysis – looks at industry profitability being determined by competition in two markets: product markets and input markets. Everyday usage makes a bigger distinction between industries and markets. Typically, industry is identified with relatively broad sectors, while markets refer to specific products. Thus, the firms within the packaging industry compete in many distinct product markets – glass containers, steel cans, aluminum cans, paper cartons, plastic containers, and so on.
Source: http://www.blackwellpublishing.com/grant/pdfs/CSA5eC03.pdf

Concentration ratio:
Excerpt-
Some examples of the four-firm concentration ratio include:

* Traditional agriculture: Less than 5 percent
* Sheet metal: 9 percent
* Asphalt paving: 15 percent
* Typesetting: 16 percent
* Publishing: 23 percent
* Soap and detergents: 63 percent
* Men's slacks: 75 percent
* Aircraft: 79 percent
* Greeting cards: 84 percent
* Cigarettes: 93 percent
Source: http://en.wikipedia.org/wiki/Concentration_ratio

Herfindahl index:
Excerpt-
In economics, the Herfindahl index is a measure of the size of firms in relationship 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 monopolistic producer. Decreases in the Herfindahl index generally indicate a loss of pricing power and an increase in competition, whereas increases imply the opposite.
Source: http://en.wikipedia.org/wiki/Herfindahl_index

Industrial Concentration:
Excerpt-
Merger and Antitrust Policy: Economists now understand that industrial concentration is unlikely to cause collusion and that concentration is a natural result of economies of scale and successful competition. This new understanding is now reflected in U.S. antitrust laws. Whereas antitrust officials used to disallow mergers that gave the top four firms a market share of less than 40 percent, they now often approve mergers that would give the top four firms a market share of over 70 percent. The merger of tire producers Michelin and Goodrich is one example. Charles F. Rule, formerly the Reagan administration's chief antitrust official, summed it up: "In the Sixties and Seventies [the evaluation of proposed mergers] was all based on concentration. In the Seventies, as an underpinning, it was wiped out. There was a problem with just using concentration. [In the Eighties], we used it as a screen to tell us when to look further, say, into market operations, price discrimination, previous market share and loss of entry into the market by competitors."
Source: http://www.econlib.org/library/Enc/IndustrialConcentration.html