Industry Concentration
Concentration refers to the number of major competitors in a given industry. The best industries, from an investing perspective, are near monopolies, that is, highly concentrated industries.
Leading firms in concentrated industries, those with only two or three major competitors, typically report higher profit margins than companies in fragmented markets. These firms give a higher priority to increasing profit margins than to gaining market share through price-cutting. Oil refiners and automobile makers are examples of concentrated industries.
Conversely, fragmented markets with many participants vying for position are usually price competitive, resulting in lower profit margins. For instance, the apparel industry with ...
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