COMMISSION OF THE EUROPEAN COMMUNITIES A STUDY OF THE EVOLUTION OF CONCENTRATION IN THE ELECTRICAL APPLIANCES INDUSTRY FOR THE UNITED KINGDOM — Electrical Appliances Primarily for Domestic Use — Broadcast Receiving and Sound Reproducing Equipment A report prepared for the Directorate-General for Competition of the COMMISSION OF THE EUROPEAN COMMUNITIES by MLH Consultants Ltd. Manuscript finished in June 1977 © Copyright ECSC/ EEC/ EAEC, Brussels and Luxembourg, 1977 Printed in Belgium Reproduction authorized, in whole or in part, provided the source is acknowledged. PREFACE The present volume is part of a series of sectoral studies on the evolution of concentration in the member states of the European Community. These reports were compiled by the different national Institutes and experts, engaged by the Commission to effect the study programme in question. Regarding the specific and general interest of these reports and the responsibility taken by the Commission with regard to the European Parliament, they are published wholly in the original version. The Commission refrains from commenting, only stating that the responsibility for the data and opinions appearing in the reports, rests solely with the Institute or the expert who is the author. Other reports on the sectoral programme will be published by the Commission as soon as they are received. The Commission will also publish a series of documents and tables of syntheses, allowing for international comparisons on the evolution of concentration in the different member states of the Community. The report has been prepared by Mr. J.E. Sussams and the associates research has been performed by Mr. M.E. Evans and Mr. J.E. Sussams of MLH Consultants Ltd. CONTENTS Page I INTRODUCTION . 7 1.1 Background to the study .................................... 7 1.2 Statistical Considerations . 8 1.3 to 1.7 Overall Summary . ................................. 14 II DOMESTIC ELECTRIC APPLIANCES . 21 2.1 Total Market Survey . .............. ...... 21 2.2 Structure of the Industry . ...................... 22 2.3 Productivity............................. ..................... 24 2.4 Cookers . ........................................ ... 25 2.5 Heaters .............. ..................... ... 28 2.6 R e f r i g e r a t o r s ............................................... 31 2.7 Washing Machines ................................ ... 33 2.8 Vacuum Cleaners ........................................... 35 2.9 Other P r o d u c t s ........................................... 37 III BROADCAST RECEIVING AND SOUND REPRODUCING EQUIPMENT . 39 3.1 Total Market Survey . ......................... ... 39 3.2 Structure of the Industry ......................... ... 40 3.3 Productivity . ......................... ... 43 3.4 Colour Television Sets ..................................... 44 3.5 Mono Television Sets ........................................ 46 3.6 Other Products .................. ... ..................... ... 48 IV NOTES ON THE LEADING M A N U F A C T U R E R S ......................... 51 V DEVELOPMENT OF THE LINDA INDEX AND OTHER MEASURES OF CONCENTRATION AND PROFITABILITY ............................. 9 7 VI CONCLUSIONS . .................. .145 APPENDICES CONCENTRATION TABLES 161 I INTRODUCTION 1.1 Background to the study This report is one of a series of sectoral studies on the evolution of concentration in the member states of the European Community. The sectors covered in the present study include 'Electrical Appliances Primarily for Domestic Use' (Standard Industrial Classification, Minimum List Heading 368) and 'Broadcast Receiving and Sound Reproducing Equipment' (MLH 365.2). The report has been prepared by Mr. J.E. Sussams and the associated research has been performed by Mr. M.E. Evans and Mr. J.E. Sussams of MLH Consultants Ltd. Since many of the firms studied are important under both MLH 368 and 365.2 we have organised the report to deal first with the individual product groups within each sector and then with the enterprises in alphabetical order. There is a further section in which we discuss concentration in the light of the computer analysis of the data which were collected in respect of each enterprise. The final chapter contains a number of general remarks and conclusions. The concentration tables are appended. 7 1.2 Statistical Considerations During the course of this study statistics have been obtained from three major sources :- Official statistics from the Department of Industry Reports and financial accounts from individual enterprises (plus supplementary data supplied by some of the firms and trade associations) Market research (including published surveys and data from marketing manuals, etc.) The official statistics are based on confidential returns by the firms concerned. They give, in aggregated form, the information some of which is not available from the firms individually because, they believe, its general knowledge could prove commercially damaging. To the extent that firms have provided confidential information in connection with the present study we are under the same kind of obligation as the Department of Industry not to disclose details. 8 Information which is given in firms' published reports and accounts is most useful in the case of the smaller and more specialised firms because these are the enterprises whose products fall entirely or almost entirely within one of the categories of product under consideration. It is unfortunate, from the statistical point of view, that many of the major manufacturers of electrical appliances and of broadcast receiving and audio equipment are actually large conglomerates and multi-national companies which do not (and in many instances could not) produce accounts relating to the various manufacturing sub units within the group. Unless and until the law is changed (and harmonised within the EEC) certain key items of information will have to be derived or estimated from secondary sources rather than obtained directly from accounts which give unambiguous information in relation to each product group and market sector. Market research gives a snapshot (or, at most, the average of a series of snapshots) of the situation at a particular time. The estimated market share 9 for a particular brand is normally correct within plus or minus 1 when based on data from market research. However, because of time-lags and stock changes these shares do not necessarily equate to production in the same period. They do however provide a good indicator, particularly in the case of major manufacturers whose sales do not fluctuate greatly from year to year. The basic information on the whole industry comprises sales (by manufacturers) including exports (for which separate figures are available) and imports. An estimate of the home market (i.e. purchases by consumers) is therefore obtained from sales by manufacturers minus exports plus imports. The way in which the market is divided among the various manufacturers is obtained from market research data and applied to the total value to give an estimate of sales by product for each manufacturer. This approach overlooks a number of factors: 10 Imports do not always find their way directly on to the market but may be purchased by 'manufacturers' and sold under a different brand name Sales by manufacturers include sales to other manufacturers Some imports are re-exported Goods may be purchased under one heading (e.g. parts of radios, audio-separates) and sold under another (e.g. televisions, stereo systems) The diagram (Figure 1) shows materials flow and sources of information relating to this flow. In Chapters II and III at the end of each paragraph relating to a specific product group we give a table showing the estimated market shares achieved by the major U.K. producers. These estimates are based on three groups of published market surveys (Mintel, EIU and MRGB) and on other non-confidential information (chiefly the reports and accounts) 11 published by the enterprises. In the instances where it has been possible to check the market share estimates against detailed company information (i.e. where the structure of the published accounts enables one to attribute turnover to specific product groups) the estimates have been close to the 'true' figures. In the tables the figures in brackets are inter­ polated/extrapolated and may be less accurate than the others, particularly where the market share is relatively small. 12 Figure 1. Materials and Information Flow -------- Known from official statistics by product group (£) M Known from official statistics by product group (£) and from company information by enterprise (£) , . Known from market research by enterprise and product group (%) -------- Can be estimated from the above ++++++++ Could be estimated from the above plus value added 13 Overall Summary 1.3 The electrical appliances industry in the UK (i.e. the manufacture of products under headings NICE 375 and 376) cannot be defined in terms of enterprises. Since most of the major firms concerned with the manufacture of electrical appliances are conglomerates, multinationals and diversfied companies which are not primarily concerned with the manufacture of electrical appliances. Nor can it be defined in terms of product markets, since the home market includes imports and excludes exports of home manufactured goods and many goods which are 'finished' by home manufacturers consist substantially of imported components. Finally, the competition between manufacturers within the industry is imperfect, in