You are required to carry out an economic analysis of an industry of your choice. Examples of appropriate industries include: automobile manufacturing, index fund management, cigarettes, supermarkets and mobile phone networks. Since the idea is to study an existing industry, you should not study the market for an extremely new product, nor focus on the opportunities facing one specific firm. If you are unsure of the suitability of your choice, then ask your class lecturer.
1. Market structure. How concentrated is the market? Would you characterize the market as monopolized, competitive, or an oligopoly? Who are the major players (if any)? How did you decide where to draw the market boundaries, both geographically and in terms of the characteristics of the product? For a monopoly or oligopoly: what steps are the incumbents taking to strategically deter entry? For a competitive market: is the market currently in equilibrium? How would you expect prices to change in the short and long term?
2. Important characteristics of demand. What is the outlook for demand growth?
What are the closest substitutes? Carry out an analysis of the price-elasticity of demand, both for the market and for individual firms. How much market power do firms in the industry have?
3. Important features of costs. What is the outlook for industry cost levels? How important are economies of scale? Describe the pricing strategies (e.g., price discrimination) that firms use.
4. Structural barriers to entry. What, if any, structural barriers to entry protect industry profit levels. Do you anticipate any changes?
5. Entry Decision: Is this an attractive market to be in for the current incumbents? What strategy should incumbents follow in the face of potential or actual entry?