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ASSIGNMENT I
Market Structure of Tokyo Cement Company
Date: 4/04/2007
Title: Market Structures
Objective:
1. Company background and what are the products of the company.
2. Identify for which market structure the company is belongs to.
3. Reasons why we categorizing the company for the above market structure.
4. Giving recommendation of the market structure about the company.
Introduction:
Tokyo Cement Company in Sri Lanka is selected for this assignment. The
Tokyo Cement Company is one of the leading cement manufacturers in Sri
Lanka. The assignment is giving the company background, compare the
Tokyo Cement Company with other cement companies and the products that
available also finding out for which market structure the Tokyo Cement
Company is belongs to. The following points are going to study.
In past the government was the main player of the cement industry in Sri
Lanka. The first ever private cement company placed here was the Tokyo cement
company. At present most of the cement companies belongs to the private sectors.
With Mitsui Cement enjoying premium product status, a clear need was felt
for a cost-effective option. In 1998 the market witnessed the emergence of
Atlas Cement as the undisputed choice of the cost-conscious builder. More ambitious
and exciting plans were now in the pipeline. Buoyed by resounding corporate growth,
Tokyo Cement embarked on its biggest project yet, with a new subsidiary, Fuji
Cement Company (Lanka) Limited.
MR 2 , MR 2 = Marginal
Revenue curves of firm 1
and firm 2
Concentration Curve is a very popular measure to identify the market structure. Firms
are ranked in size order from the largest to the smallest and then plotted against their
cumulative output. For Cement market (figure 01) the concentration curve shows that
the Tokyo Cement company supplies around 26 per cent of the market and largest
four firms around 86 per cent of the market. So that it can identify that cement market
is Oligopolistic market.
100
90
80
70
Culmulative Market Share
60
50
40
30
20
10
0
1 2 3 4 5 6 7 8 9 10
x
CRx = ∑ Si CRx = the X firm concentration ratio
i=1
Sri Lankan market concentration ratio can be calculated using the data which obtained
from Tokyo Cement Company. According to monthly survey data the cement market
concentration ratio is 86 (for four largest firms), which reflect cement market as an
Oligopolistic market.
Conclusion
The selected Tokyo Cement Company for this assignment, according to the reasons
mentioned above it clearly belongs to the Oligopolistic Market Structure. The main
point for that is there are only 10 – 12 cement companies in Sri Lanka. We can also
tell that it belongs to the Imperfect Oligopoly Market Structure because there are
differentiated and branded products of cement all over the country. Clearly cement
companies avoided price wars and concentrated on non-price strategies to win market
share. They use strategies such as better product design and finish, improvement of
quality, better packing, effective distributions, advertising etc. Finally we can come a
conclusion that cement industry in Sri Lanka is clearly belongs to Oligopoly Market
Structure.