Question

Scenario B: Texas Electronics is a firm that competes in the track switching signal device marketplace. In the international railroad industry, there are about 80,000 TSSD installations. The market is primarily a replacement market, rather than a growth market. About 10% of TSSDs are replaced annually. The industry has recently switched from mechanical to electronic TSSDs. These units sell for an average of $10,000. Texas Electronics currently holds a 17% share of this annual replacement market. Additionally, you have the following data: • Sales of 4 largest firms in industry (excluding Texas Electronics :) SNCF (a French firm) $17,600,000 TCCD (a Turkish firm) $14,450,000 Deutsche Bahn (A German firm) $ 5,175,000 Shinkansen (a Japanese firm) $ 4,325,000 Calculate: Texas Electronics' Sales Relative market share The 4 firm industry concentration Based on your findings, what are 2 key implications for Texas Electronics?

Answer 1

1) Texas Electronics total sales = 17% of the total replacement market of 8000 units. That is 10% of the total installation of 80,000 units. The value of the 8000 units at $10,000 per unit= $80,000,000.

The total sale for Texas Electronics in market is 17% of $80,000,000 = 80,000,000/ 100*17 = $13,600,000

2) Relative market share of Texas Electronics = to find out the relative market share we have to divide the market share of Texas Electronics that is 17% with the market share of the other players in the market combined.

=17 / 83 *100 = 20.481
3) The 4 firm industry concentration.

To find out the 4 firm industry concentration

The top four firms in the industry are

SNCF $17,600,000

TCCD     $14,450,000

Texas Electronics $13,600,000

Deutsche Bahn $5,175,000

To find out the 4 firm industry concentration we have to divide the total sales of the top four players with the total sales of the industry

=$50,825,000 / 55,150,000 *100 = 92.16 %

The two key implication for Texas Electronics is that the total sales of the company is $ 13,600,000 and that the company got the third position in the total market share in the industry.