To formulate an effective competitive strategy, managers must accurately assess the current competitive environment for actual and potential products. Data gathered by the federal government, private market research firms, and trade associations are often useful for this purpose. This section shows the types of market structure data available from public sources and explains why they are important for decision-making purposes.
How Are Economic Markets Measured?
An economic market consists of all individuals and firms willing and able to buy or sell competing products during a given period. The key criterion in identifying competing products is similarity in use. Precise determination of whether a specific good is a distinct economic product involves an evaluation of cross-price elasticities for broad classes of goods. When cross-price elasticities are large and positive, goods are substitutes for each other and can be thought of as competing products in a single market. Conversely, large negative cross-price elasticities indicate complementary products. Complementary products produced by a single firm must be evaluated as a single product line serving the same market. If complementary products are produced by other companies, evaluating the potential of a given product line involves incorporating exogenous influences beyond the firm’s control. When cross-price elasticities are near zero, goods are in separate economic markets and can be separately analyzed as serving distinct consumer needs. Therefore, using cross-price elasticity criteria to desegregate the firm’s overall product line into its distinct economic markets is an important task confronting managers. To identify relevant economic markets and define their characteristics, firms in the United States make extensive use of economic data collected by the Bureau of the Census of the U.S. Department of Commerce. Because these data provide valuable information on economic activity across the broad spectrum of U.S. industry, it is worthwhile to briefly consider the method and scope of the economic censuses.
Once every 5 years, the economic census provides a comprehensive statistical profile of the economy, from the national, to the state, to the local level. Censuses are taken at 5-year intervals during years ending with the digits 2 and 7—for example, 1992, 1997, 2002, 2007, and so on. As shown in Figure, the economic census covers economic activity in important sectors such as manufacturing, retail and wholesale trade, services, minerals, and construction. Sectors covered account for roughly three-quarters of total economic activity originating in the private sector. Principal industry groups with incomplete coverage are agriculture, education, financial services, forestry, professional services, and transportation. The economic census is the primary source of detailed public facts about the nation’s economy. As such, census data are essential inputs for decisions made by managers in government, business, and the not-for-profit sector. Economic census data allows businesses to compare company sales to census totals for specific industries or areas, calculate market share, evaluate performance, and make plans for expansion or asset redeployment. Companies can use census data to lay out territories, allocate advertising, and locate new stores or offices. Firms supplying goods and services to other businesses also use census data to target industries for business-tobusiness marketing. Manufacturers look at statistics on materials consumed to learn more about industries that use their products and to gain insight concerning industry growth potential.
All firms compare operating ratios to census averages to see how they stack up against competitive norms. Consultants, government researchers, and job seekers use census data to analyze changes in industrial structure, location, and the pace of growth in job opportunities. Both state and federal regulators use census data to monitor business activity as captured by fluctuations in monthly retail sales, gross domestic product (GDP), and other such measures. Industry trade associations and news media study census data to learn key business facts and to project trends. Legislators use census data in the preparation and evaluation of new legislation designed to spur economic development.
State and local government agencies monitor census information to better understand their regional economic base and to help them better focus efforts to attract new businesses and/or retain existing firms.
The economic census covers nearly all of the U.S. economy in its establishment statistics. There also are several related programs, including the collection and publication of statistics on minority- and women-owned businesses. Separate censuses of agriculture and government are also conducted at the same time as the economic census. Results from this most recent economic census were issued on CD-ROM and on the Internet in a series of continuing reports over a period of more than 2 years, starting in early 1999. Only summary reports are issued in print.
How Economic Census Data Are Collected and Published
The 1997 economic census measured economic activity during calendar year 1997. Census forms were mailed to more than 5 million companies in December 1997, with a due date of February 12, 1998. There were over 500 versions of the census form, each customized to particular industries. Some very small companies did not receive a census form. The economic census is authorized by law; compliance is mandatory. The law requires firms to respond and specifies penalties for firms that fail to report. The law also requires the Census Bureau to maintain confidentiality. Individual responses may be seen only by sworn Census Bureau employees. Moreover, precautions are taken to insure that no data are published that could reveal the identity or activity of any individual business.
Economic census statistics are collected and published primarily at the “establishment” level of aggregation. An establishment is a business or industrial unit at a single physical location that produces or distributes goods or performs services. For example, a single store or factory constitutes a single establishment under the census system. Of course, many companies own or control more than one establishment, and those establishments may be located in different geographic areas. They are often also engaged in different kinds of business activity. By collecting separate information for each establishment, the economic census is able to include detailed data for each industry group and geographic area.
Industry statistics contained in the economic census are largely classified using the North American Industry Classification System (NAICS). To a lesser extent, the classification of some industries is based upon the old Standard Industrial Classification (SIC) system that was used in previous censuses. Both NAICS and SIC systems categorize establishments by the principal activity in which they are engaged. The NAICS, developed in cooperation with Canada and Mexico, classifies North America’s economic activities at 2-, 3-, 4-, and 5-digit levels of detail. The U.S. version of NAICS further defines some industries to a more precise sixth digit of detail. The NAICS represents 96 sectors (3-digit codes), 313 industry groups (4-digit codes), and, as implemented in the United States, 1,170 industries (5 - and 6-digit codes). The NAICS example in Table illustrates the makeup of the broadcasting and telecommunications sector in the state of Colorado during 1997. Notice the logical progression as one moves from the 3-digit broadcasting and telecommunications sector (513), to the 4-digit telecommunications industry group (5133), to 5-digit wireless telecommunications carriers (except satellite) industry (51332), to the very narrow 6-digit paging industry (513321). Economists generally agree that 5-digit or 6-digit classifications correspond quite closely with the economic definition of a market. Establishments grouped at the 5-digit or 6-digit levels produce products that are ready substitutes for one another and thus function as competitors. Managers who analyze census data to learn about the number and size distribution of actual and potential competitors focus their attention primarily on data provided at the 5-digit or 6-digit levels. The Census Bureau also classifies products. In the case of manufacturing and mining industries, products are classified in a manner consistent with the NAICS structure. The first 6 digits of the 10-digit product code are normally the same as the NAICS code for the industry with which the product is most frequently associated. Broad product or service lines also are provided for retail and wholesale trade and other service industries.
Economic Census Data Are Available on the Internet
The most detailed economic census data are provided for the United States as a whole. Key statistics, albeit progressively fewer, are available for states, metropolitan areas (MAs), counties, and other places with 2,500 or more inhabitants. Only limited data are provided for ZIP codes. Statistics for smaller areas are typically withheld to avoid disclosing information about individual firms. The level of geographic detail varies widely for major data items. Basic census content includes several key statistics such as the number of establishments (or companies), number of employees, payroll, and measures of output like sales revenue, which the economic census refers to as the value of shipments.
Because the economic census is now based on the NAICS, only limited information is published according to the old SIC system. However, a detailed “bridge table” showing the relationships between NAICS and SIC categories makes for an easier comparison between current and previous statistics. Although still very slow by private-sector standards, 2002 economic census results will become available on the Internet much faster than the results from prior censuses, which were largely distributed in printed form. Although only highlights of recent economic censuses are available in printed form, software on both CD-ROM and the Internet allows companies to print detailed data. Given a faster publication cycle, industry reports for manufacturing, mining, and construction, previously issued in both preliminary and final form, are now issued only once. In another recent change, all reports are now titled simply as economic census reports. They are no longer treated as if each sector had a separate census, e.g., the census of manufacturers.
Detailed data are issued, sector by sector, on CD-ROM and on the Internet. Geographic area series (published for all sectors) provide detail for establishments with employees, for the nation, states, and substate areas. ZIP code statistics are also published for most sectors. Industry series reports for manufacturing, mining, and construction provide national totals on groups of related industries and their products. Limited data are available for individual states. Subject series (all sectors) provide national and limited local data on special topics including merchandise line sales, concentration ratios, and both establishment and firm sizes. Summary reports by sector provide highlights of the data in print. They feature primarily national data and general statistics by state, and include illustrations of some of the more detailed data available in electronic media. Table shows a typical example of the level of detail available in the geographic area series. This example shows the makeup of the broadcasting and telecommunications sector in the state of Colorado during 1997.
Managerial Economics Related Interview Questions
|Accounts and Finance for Managers Interview Questions||Corporate Governance and Business Ethics Interview Questions|
|Business Management Interview Questions||Bid Evaluation Interview Questions|
|Human Physiology Interview Questions||Statistics Interview Questions|
|Political science Interview Questions||Business Development Manager Interview Questions|
|Managing the Manager Interview Questions|
Managerial Economics Related Practice Tests
|Accounts and Finance for Managers Practice Tests||Corporate Governance and Business Ethics Practice Tests|
|Business Management Practice Tests||Statistics Practice Tests|
Managerial Economics Tutorial
Basic Economic Relations
Statistical Analysis Of Economic Relations
Demand And Supply
Demand Analysis And Estimation
Production Analysis And Compensation Policy
Cost Analysis And Estimation
Perfect Competition And Monopoly
Monopolistic Competition And Oligopoly
Regulation Of The Market Economy
All rights reserved © 2018 Wisdom IT Services India Pvt. Ltd
Wisdomjobs.com is one of the best job search sites in India.