The major companies in the Computer Manufacturing Industry are Hewlett-Packard, Dell, IBM, Apple, and Oracle. These companies make up approximately 80% of the market share. The industry, as a whole, has had an annual growth rate of -2.5% from 2006 to 2011. The growth rate is expected to fall to -6.9% from 2011-2016.
Market share is the percentage of an industry or market’s total sales that is earned by a particular company over a specified time period. To calculate market share, you take the company’s sales over the period and dividing it by the total sales of the industry over the same period. This metric is used to give a general idea of the size of a company to its market and its competitors.
It is important to look at the concentration of the Computer Manufacturing Industry, because the more concentrated a market, the more market share one company has which may lead to a monopoly and less competition.
To find the concentration of a company, you must calculate the Herfindahl-Hirschman Index (HHI). It is calculated by squaring the market share of each firm competing in a market, and then summing the resulting numbers. The HHI number can range from close to zero to 10,000.
HHI for Computer Manufacturing Industry
- Hewlett-Packard: 25.1%
- Dell: 21.5%
- IBM: 15.4%
- Apple: 14.3%
- Oracle: 4.6%
Square each of these numbers and add them together:
630.01 + 462.25 + 237.16 + 204.49 + 21.16 = 1,555.07
“The U.S. Department of Justice considers a market with a result of less than 1,000 to be a competitive marketplace; a result of 1,000-1,800 to be a moderately concentrated marketplace; and a result of 1,800 or greater to be a highly concentrated marketplace.”
The Computer Manufacturing Industry has an HHI score of 1,555.07, meaning the industry is moderately concentrated. Companies find this number important because they want to have a part in many industries in case one industry is more concentrated. On the graph below, you can see that the industry is moderately concentrated because there are five key competitors owning approximately 80% of the market share combined.