Suppose that you are asked to prepare a report that would help a company to make a decision about expanding to a certain industry. The company that commissioned the report would like to be informed about the details of the target industry.

Choose an industry and carry out a detailed economic analysis of it. Example industries include: automobile manufacturing, index fund management, cigarettes, supermarkets, and mobile phone networks, either globally or in one country or region, as appropriate. You should not focus on the opportunities facing one specific firm; rather analyze the industry as a whole.

The report should be no more than 4 pages long (excluding figures, bibliography, and appendices). High marks can potentially be achieved with far fewer words.

Organize your report according to the following questions:

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?

2. Nature of competitive and strategic interaction. For an oligopoly: how do firms compete, i.e., is a Bertrand or Cournot model more appropriate? 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?

3. Important characteristics of demand and costs. What are the closest substitutes? Carry out a qualitative or quantitative analysis of the price-elasticity of demand for the market. What is the outlook for demand growth? What is the outlook for industry cost levels? How important are economies of scale?

4. Barriers to entry. Are there any barriers to entry to protect industry profit levels? Describe. Do you anticipate any changes in these barriers?

5. Entry Decision: What would be a good possible strategy for an entrant (even if you think an entry is not actually attractive)? Describe in detail. What strategy should incumbents follow in the face of potential or actual entry? Remember to consider whether your recommendation is a credible threat.

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