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WWW.IBISWORLD.

COM Special Report February 2012   1

Special Report
Highly Concentrated: Companies That  February 2012
Dominate Their Industries

Highly Concentrated: Companies


That Dominate Their Industries
By Andrea Alegria, Agata Kaczanowska and Lauren Setar

Through brand loyalty and mergers and acquisitions activity,


these companies own commanding shares in their industries.

Today, greater levels of industry would need to develop their own


High start‑up concentration can be seen as a measure algorithms. The Search Engines industry
of superior economic performance, is continually investing in innovation by
costs and stronger competitiveness in the global developing new features for their search
competition market and increased profitability from results, new matching and relevancy
have kept economies of scale. IBISWorld has algorithms, new tracking capabilities and
identified the 10 most concentrated new advertising performance
new, smaller industries in the United States, with the measurement abilities. The high initial
companies four largest companies in each industry and continued investment costs provide a
generating at least 90 percent of revenue. competitive advantage to the companies
at bay in the industry over new entrants because
Search Engines they have already invested significant
Top four market share: 98.5% funding in their products and they have a
Major companies: well-established track record of returns
Google: 64.1% on investment. In 2012, the Search
Yahoo: 18.0% Engines industry is expected to grow
Microsoft: 13.6% 8.2% to $26.5 billion in revenue.
This industry’s concentration has
increased steadily during the past five Arcade, Food & Entertainment
years, primarily driven by Google’s Complexes
growth while smaller search engines like Top four market share: 96.2%
Ask.com and AOL decline in prevalence. Major companies:
It may be difficult for new companies to CEC Entertainment Inc.: 52.2%
enter the industry since they’ll require Dave & Buster’s: 35.0%
access to skilled software programmers, CEC Entertainment Inc., more
IT professionals and systems engineers. commonly known as Chuck E. Cheese’s,
Additionally, search engines need has about 540 locations across the United
substantial computing resources for States, South and Central Americas and
ongoing operation and sophisticated the Middle East. Dave & Buster’s (D&B)
software algorithms to handle indexing operates 56 US arcade-restaurants and
and relevancy tasks. Unless an entrant one franchise in Canada. Though not
chooses to license a competitor’s representing more than 5.0% of total
technology, companies in this industry industry revenue, Sega Entertainment

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WWW.IBISWORLD.COM Special Report February 2012   2

Highly Concentrated: Companies That 


Dominate Their Industries

USA Inc. and Namco Cybertainment Inc., Paper Product Manufacturing industry is
a subsidiary of Japanese parent company expected to grow 2.5% in 2012 to
Namco Bandai Holdings, are the third $11.7 billion in revenue.
and fourth largest companies in this
industry. The industry has become Wireless Telecommunications
increasingly concentrated over recent Carriers
years as large players seek cost Top four market share: 94.7%
advantages through higher volumes of Major companies:
sales. For instance, during the economic Verizon Wireless: 36.5%
slowdown, stronger firms pursued AT&T Inc.: 32.1%
financially challenged firms in order to Sprint Nextel Corporation: 15.4%
expand market share. The Arcade, Food T-Mobile USA: 10.7%
and Entertainment Complexes industry There were two waves of mergers and
will generate about $1.5 billion in 2012, acquisitions (M&As) in this industry over
which represents a 1.1% revenue increase the past decade. First, there was a high
from 2011. level of M&A activity among the “baby
bells” (the spin-offs of the former AT&T
Sanitary Paper Product monopoly), which led to the creation of
Manufacturing new number-one and number-two
Top four market share: 92.7% players. This event was then followed by
Major companies: a second wave of M&A activity that
Kimberly-Clark Corporation: 35.5% yielded a significant increase in
Proctor & Gamble: 30.0% concentration across the various
Georgia-Pacific: 27.2% telecommunications industries.
The Sanitary Paper Product Major companies have pursued
Manufacturing industry has a high level substantial M&A activity in this
of market share concentration, with an industry to acquire subscribers and
estimated 92.5% of the market being expand coverage. A large subscriber
held by the top three producers in 2012. base is critical to competitiveness
The level of concentration differs among because it delivers considerable scale
various product groups. For example, economies, enabling a carrier to offer
the disposable diapers market effectively cheaper prices and realize higher
has a duopoly, with Texas-based margins. With a stronger cash flow, a
Kimberly-Clark and Cincinnati-based carrier is able to invest more heavily in
Procter & Gamble both holding more upgrading network infrastructure to
than 40.0% of the segment market deliver new and improved services. In
share. A similar situation exists with 2012, industry revenue is expected to
tissue products: Atlanta’s Georgia- increase 3.1% to $20.2 billion.
Pacific is estimated to hold nearly half
the market share for these products. Satellite TV Providers
This kind of product separation among Top four market share: 94.5%
the large companies intensifies the Major companies:
market power held by each player, DirecTV: 57.6%
making the industry effectively more Dish Network: 36.9%
concentrated. There is a higher degree of For the past decade, high-definition
brand loyalty in this industry compared (HD) programming has been the focus of
to other paper converting industries, and the Satellite TV Providers industry (as
the industry has become increasingly well as cable networks). Since delivering
competitive over the years. The Sanitary HD services to customers in 2002,
WWW.IBISWORLD.COM Special Report February 2012   3

Highly Concentrated: Companies That 


Dominate Their Industries

deployment has been on an upward arc, Food Service Contractors


with constant investment in technology Top four market share: 93.2%
from the top two providers. As a result, it Major companies:
is difficult for smaller players to compete Compass Group: 32.8%
in terms of quality and the level of Aramark: 28.3%
services they can offer to consumers at a Sodexo: 25.6%
reasonable price. In addition to the Delaware North: 6.5%
intense competition, high start-up costs This industry has also experienced a
and regulation have prohibited small great deal of mergers and acquisitions
producers from developing niche recently, culminating in this high market
markets. To remain relevant against share concentration for the Food Service
larger operators, such companies Contractors industry. Driving the
typically vie for specific target audiences consolidation has been the trend toward
by providing channels specific to their full-service contractors. Major industry
audiences’ interests or culture. In 2012, clients are increasingly looking for
industry revenue is anticipated to grow food-service contractors that can handle
4.1% to $39.8 billion. catering, property maintenance, security
and other services. This trend favors
Soda Production larger operators because smaller ones
Top four market share: 93.7% may not have the capital and
Major companies: infrastructure that is required to fill all
The Coca-Cola Company: 41.2% of these roles for clients. Additionally,
PepsiCo: 33.6% new entrants are discouraged from
Dr Pepper Snapple Group: 15.4% entering the market because the large
The major companies in the industry, operators have higher marketing
particularly Coca-Cola and PepsiCo, budgets, bargaining power in contract
engage in significant marketing and negotiations, better brand recognition
brand promotion to generate brand and existing contacts. Industry revenue
loyalty, which translates to a larger is expected to grow 3.1% in 2012 to
market share for these carbonated soft $32.6 billion.
drink (CSD) manufacturers. Additionally,
Coca-Cola and PepsiCo are currently Lighting & Bulb Manufacturing
undergoing major structural changes: Top four market share: 91.9%
Previously, they licensed a number of Major companies:
bottlers to produce finished beverages General Electric Company: 32.9%
under the Coca-Cola and Pepsi brand Koninklijke Philips Electronics NV: 31.7%
names, but they are now incorporating Siemens AG: 27.3%
these operations into their company Global brand recognition, along with
structure. As these top two players merge established relationships with major
with their major bottlers and streamline customers, has allowed this industry to
operations, IBISWorld expects them to be dominated by a few key players.
withhold license renewals from Well-known brands include GE, Osram
producers in certain market segments Sylvania and Philips. Industry
and bring operations in house. Despite concentration has been on the rise due
the top companies’ efforts, consumers to mergers and acquisitions in the past
have been increasingly switching away five years. In addition to the dominance
from CSDs, so this $16.2-billion industry of existing players, many other factors
is expected to decline 4.5% in 2012. make it difficult for any new companies
WWW.IBISWORLD.COM Special Report February 2012   4

Highly Concentrated: Companies That 


Dominate Their Industries

to enter the industry, including: to decline as global manufacturers


About IBISWorld Inc. significant government regulation, concentrate on providing tires for
Recognized as the nation’s resource constraints, technological emerging economies. This industry is
most trusted independent changes and the industry’s declining anticipated to grow an estimated 2.1% to
source of industry and life cycle. New entrants must have the $19.4 billion in 2012.
market research, IBISWorld resources to stock high inventories and
offers a comprehensive have a strong knowledge of niche Major Household Appliance
database of unique markets to survive the high levels of Manufacturing
information and analysis on internal competition. In 2012, the Top four market share: 90.0%
every US industry. With an Lighting and Bulb Manufacturing Major companies:
extensive online portfolio, industry is expected to grow 3.6% to Whirpool Corporation: 43.8%
valued for its depth and $2.5 billion. AB Electrolux: 20.7%
scope, the company equips General Electric Company: 17.1%
clients with the insight Tire Manufacturing LG Electronics: 9.2%
necessary to make better Top four market share: 91.3% Market concentration in the Major
business decisions. Major companies: Household Appliance Manufacturing
Headquartered in The Goodyear Tire & Rubber industry has increased over the past five
Los Angeles, IBISWorld Company: 39% years. During the economic recession,
serves a range of business, Michelin North America: 28.2% some smaller firms left the industry
professional service and Copper Tire & Rubber Company: 12.5% because they were unable to weather the
government organizations Bridgestone: 11.6% rapid revenue decline. Larger players
through more than The Tire Manufacturing industry gained market share as the smaller
10 locations worldwide. experienced a wave of mergers and companies exited. The industry is
For more information, visit acquisitions since the 1980s, largely expected to become even more
www.ibisworld.com or call driven by an increase in cross-border concentrated in the next five years. Firms
1-800-330-3772. production and trade by automobile such as Whirlpool and Electrolux are
manufacturers. As a result, most tire expected to acquire more companies,
manufacturers were taken over and further reducing the number of
control transferred to foreign owners. enterprises. These acquisitions will add
Today, there is a relatively stable number to the companies’ economies of scale,
of players in the industry and most are lowering production costs and enabling
outsourcing production to low-cost firms to broaden their product ranges.
countries. Over the next five years, The industry is expected to grow 2.2% in
market share concentration is expected 2012 to $17.6 billion.

Contact:
Savannah Haspel
VP, Public Relations
IBISWorld

Phone: 1-310-866-5044
savannahh@ibisworld.com
www.ibisworld.com
www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com

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