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Compute the market concentration using various indicators with Microsoft Excel

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Compute the market concentration using various indicators with Microsoft Excel

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Below is a link to a spreadsheet with the calculations and formulas for computing the two indicators used in this project report.

https://docs.google.com/spreadsheets/d/1aOvk3qmgHO9lns3TRwfbQxt2K7AwvVa8FxLCoEQjrcA/edit#gid=0

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Present the results for the market concentration in Table

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Present the results for the market concentration in Table

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Table 2: Herfindahl-Hirschman Index (HHI)

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Table 2: Herfindahl-Hirschman Index (HHI)

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1) Amirul Aiman Bin Zulkifli (145504)
2) Muhammad Azhar bin Azmi (146660)
3) Muhamad Afiq Ikmal Bin Rosidi
(145567)
4)  Muhammad Alif bin Zahari (146661)
5) Rakhael Bin Kosman (145633)

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Identify the indicators used for computing the degree of market concentration.

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Identify the indicators used for computing the degree of market concentration.

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Analysis of the results for the market concentration

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Analysis of the results for the market concentration

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Based on the result that we have computed, there are several findings that we can discuss about.

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According to Concentration Ratio value for revenue indicator that has been computed for each firm (55.3%), it may be concluded that those firms are oligopoly (loose oligopoly) structure. This is because the total Concentration Ratio value is between 40% and 60%. Therefore, this reflects that the degree of market concentration is moderate.

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According to Concentration Ratio value for subscriptions indicator that has been computed for each firm (69.3%), it may be concluded that those firms are tight oligopoly structure. This is because the total Concentration Ratio value is above 60%. Therefore, this reflects that the degree of market concentration is high.

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According to Concentration Ratio value for market capitalisation indicator that has been computed for each firm (78.85%), it may be concluded that those firms are tight oligopoly structure. This is because the total Concentration Ratio value is above 60%. Therefore, this reflects that the degree of market concentration is high.

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The following are the main reference where the data was obtained throughout the process of identifying indicators used for computing market concentration in the mobile cellular telecoms business, based on the 2020 reference year.

Malaysian Communications and Multimedia Commission. (2021a, July). Industry Performance Report 2020 (No. 1823 – 3724). https://www.mcmc.gov.my/skmmgovmy/media/General/pdf/HighRes-MCMC_12102021_spread.pdf

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Based on Table 1, the concentration ratio of three companies (CR3) formula is as follows:

CR3 = S Maxis + S Axiata + S Digi

*S= Market share of the firm

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From the HHI value shown in the table, the value of HHI for revenue is 1055. From HHI method, as the value is more than or equal to 1000 but less than 1800, the market concentration low, indicating firms in the market practicing moderate oligopoly market: certain firms dominate the market.

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From the HHI value shown in the table, the value of HHI for Mobile Subscription is 1650. As the HHI value more than to 1000 but less than 1800, in terms of subscription, the concentration of the market is low, thus indicating the presence of moderate oligopoly in the market

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From the HHI value shown in the table, the value HHI for market capitalisation is 2088. As the HHI is more than 1800, the concentration of the market is at a moderate level, thus indicating that there is a strong oligopoly in the market

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we can see the second indicator of market share is market subscription. From the figure, Maxis commanded the highest share of 28.2%, followed by Digi (22.8%) and Axiata (18.3%).

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Based on table 2, the HHI of these firm formulated as follows:

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Based on table 2, the HHI of these firm formulated as follows:

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We used the Industry Performance Report 2020, provided by MCMC as our main source of data. For year 2018, at page 35 in the report.

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Note: For the market, we included both fixed and mobile communication firms (total market) to accurately determine the concentration of the market. The squared value of share is calculated for Herfindahl-Hirschman Index method

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Following the appointment with Dr. Lim, the new indicator has been modified encompass two years of references (2018 & 2019).

1. Mobile cellular subscriptions

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Concentration Ratio (2018)

According to Concentration Ratio value for mobile subscription indicator that has been computed for each firm (88%), it may be concluded that those firms are tight oligopoly structure. This is because the total Concentration Ratio value is between above 60% and below 90%. Therefore, this reflects that the degree of market concentration is high.

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Concentration Ratio (2019)

According to Concentration Ratio value for mobile subscription indicator that has been computed for each firm in 2019 (86.9%), it may be concluded that those firms are still tight oligopoly structure. This is because the total Concentration Ratio value is between above 60% and below 90%. Therefore, this reflects that the degree of market concentration is also high.

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4 firms have been taken into account in the computation of the concentration ratio 4 [CR4] based on the mobile cellular subscriptions indicator.

CR4 = S Maxis + S Axiata + S Digi + S Umobile

*S= Market share of the firm

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We are using the mobile cellular subscription market share for Maxis, Axiata, Digi, U Mobile and others in 2018 and 2019

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From the HHI value shown in the table, the value of HHI for Mobile Subscription is 2158.38 in the year 2018, but the figure slightly drop to 2148.04 in the year 2019. As the HHI value of both year more than 1800, in terms of subscription, the concentration of the market is considered moderate, thus indicating the presence of strong oligopoly in the market, although the market concentration and the dominance of some firms shown to be slightly diminished as the year passes.

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We have to make major correction in the analysis part. 

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We have to make major correction in the analysis part. 

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The value of CR4 for mobile subscription indicator in 2018 is 88%. This indicates that the CR4 value for the mobile cellular telecommunication industry is 60 or higher. Therefore, this implies that the degree of market concentration for the mobile cellular telecommunication industry is high. Thus, based on the value of CR4, the proposed market structure is tight oligopoly market.

What do you guys think? Kindly leave any idea/remarks in the comment section.

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The value of CR4 for mobile subscription indicator in 2019 is 86.9%. This indicates that the CR4 value for the mobile cellular telecommunication industry is 60 or higher. Therefore, this implies that the degree of market concentration for the mobile cellular telecommunication industry is high. Thus, based on the value of CR4, the proposed market structure is tight oligopoly market.

I really appreciate every remarks from you guys!