Measures of Competition

1) Herfindahl Index
The Herfindahl index (also known as Herfindahl–Hirschman Index, HHI, or
sometimes HHI-score) is a measure of the size of firms in relation to the industry
and an indicator of the amount of competition among them. It is calculated by
squaring the market share of each firm competing in a market and then
summing the resulting numbers. It can range from close to zero to 10,000.

Sr. No. Market Share

1 Nestle 27%
2 cadbury 15%
3 Hershey’s 13%
4 Kraft 13%
5 Barry Callebaut 7%
6 Farrero 4%
7 Lindt 4%
8 Others 17%

Global Market Share of chocolate companies

Herfindahl Index=(27)^2 + (15)^2+ (13)^2+ (13)^2+ (7)^2+(4)^2+(4)^2
=1373
Since(1373<1600), this means that the industry is not concentrated.
2) Largest 4
Sr. No. Market Share

1 Nestle 27%
2 cadbury 15%
3 Hershey’s 13%
4 Kraft 13%
Total of market shares of largest four companies =27%+15%+13%+13=68%
Since (68% > 40%), we can say that industry is concentrated.
3) Largest 7
Sr. No. Market Share

1 Nestle 27%
2 Cadbury 15%
3 Hershey’s 13%
4 Kraft 13%
5 Barry Callebaut 7%
6 Ferrero 4%
7 Lindt 4%

Total of market shares of largest seven companies

=27%+15%+13%+13%+7%+4%+4%
=83%
Since (83% > 70%), we can say that industry is concentrated.