Lesson 5 of 12 · All lessons in this module
  1. Why analyse an industry, and the five steps
  2. Defining an industry and grouping companies
  3. Industry size and the character of its growth
  4. Top-down and bottom-up: sizing an industry, shares and HHI sensitivity
  5. Integrated case: concentration, competitive intensity and market-share trends
  6. Industry profitability: margins, ROIC and value creation
  7. Industry structure: Porter's Five ForcesVideo lesson
  8. Economic moats and lasting barriers to entry
  9. Supplier and customer power, vertical integration and rating the forces
  10. External influences: PESTLE analysis
  11. The innovation matrix and other PESTLE themes
  12. Integrated case: from an industry survey to a forecast

This lesson is part of the 2027 curriculum. You are following the 2026 curriculum, where it is not taught in this form. Switch if you are sitting the exam under the 2027 curriculum.

Lesson 5 of 12 · 13 min

Integrated case: concentration, competitive intensity and market-share trends

Lower concentration generally means greater competitive intensity (unless the industry is segmented or differentiated) and rising concentration means easing rivalry; the HHI makes this quantitative, and share trends must be read as ranges and split into organic and acquired change.

In short

  • Lower concentration → greater competitive intensity, unless the industry is segmented or highly differentiated; rising concentration generally means easing rivalry and higher profitability.
  • HHI = the sum of squared shares (shares as whole numbers); a monopoly is 10,000, and more firms or more equal shares mean a lower HHI.
  • A merger raises the HHI by 2 × s₁ × s₂; some regulators call an HHI above 1,800 highly concentrated and scrutinise deals adding more than 100.
  • Market shares are estimates: read them as a range, and test how far the HHI moves when the shares move.
  • Split a share change into organic and acquired: a rise bought through an acquisition says nothing about the firm's offer; large share changes and new entrants signal intense rivalry.

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