Examining manufacturer concentration metrics in consumer packaged goods

Arry Tanusondjaja , Steven Dunn and Christopher Miari

The research compares three different market concentration metrics (Concentration Ratio, Herfindahl-Hirschman Index, and Gini Coefficient) over the share of revenue (market share) and their application in consumer packaged goods markets.

Introduction

Along with meeting consumers' category needs, firms need to monitor their competitors in the market. Part of this evaluation is measuring the level of manufacturer concentration, that is, understanding the extent to which sales within a product category flow toward a small group of manufacturers. This knowledge has implications for the overall competition and strategic behavior in the category (Rhoades, 1995).

Consequently, understanding the true competitive nature within a market is important for manufacturers, retailers, consumers, government regulators, and academics. As an example, this knowledge is useful for manufacturers in their decision to enter a particular market or not—while...

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