Analisis Structure-

Conduct-Performance
(SCP analysis)
DR. Ir. R. Abdoel Djamali, MSi
STRUCTUR-CONDUCT-PERFORMANCE ANALYSIS

Strukture Conduct Performance Maximization

Profit
When is it useful?
• SCP Model has just explanatory power in an industry that is not changing. It is most powerful
when used DYNAMICALLY to predict how an industry’s profitability will change in response to
an external shock.
• For example, when electricity was deregulated in the UK, we can predict a nosedive in
profitability. Deregulation impacts industry Structure  by reducing barriers to entry and
increasing number of competitors increased as the monolithic state-run Central Electricity
Electricity Board was privatised into small Regional Electricity Companies (RECs). With
economies of scale important, this change in structure drove aggressive pricing Conduct to
capture share in each others regions. This drove down profit Performance. However, over time
the natural economics re-emerged, M&A activity drove many RECs to merge again, leading to a
more concentrated industry Structure, less aggressive competitive Conduct and better
profit Performance. 
• External Shocks often play out like this – a dramatic change in the industry leads to a landgrab, a
bloodbath, a consolidation stage then a return to profitable stability.
• This model can be used to justify consolidation in the industry. If Structure drives Performance,
one way to improve performance is to create a more attractive industry Structure.
• This analysis is similar to the Porters 5 forces analysis.
• The usefulness of this model is diminished when industry boundaries are blurred and primary
threats are coming from outside the industry
An Example?
How do you do the analysis?
Highlight in Structure
• Industry concentration (Herfindal index) – from
monopoly to perfect competition
• Market share pattern – is there a dominant leader?
• What is the Minimum Efficient Scale?
• Is it vertically integrated? Why?
• Ownership of major companies (if they are
listed/family/state-owned)
 Highlight in Conduct
• Where do they compete? Prices? Service? Advertising
investment? War for Talent? Product innovation?
• Is the conduct stable, or is it erratic, linked to the industry
cycle?
• Do player try to differentiate, or follow “me-too”
 strategy?
• Do competitors try to grow the pie (“good competitors”),
or fight to enlarge their share (“bad competitors”)?
 Highlight in Performance
• Long term Total Shareholder Returns (TSR)?
• Return on Capital Employed? (ROCE)
• Economic Profit
• 80/20 rule – if you calculate this for the largest companies,
your estimate for the industry will be accurate. If you can’t get
the data for some private companies or divisions, then identify
the best comparable company and assume the same
profitability
• Quantify, and average over several years to remove the
industry cycle effect
 Market Structure
Describes the
characteristics and market
composition of the Share
industry in an economy.

Strcture

Concentration
Market Entry
Barriers
 Pangsa Pasar (Market Share)

Every company has its own market share (market share), and
the amount ranges from 0 to 100 percent of the total output of
the entire market (market). Market Share (Market Share) can
be interpreted as part of the market controlled by a company,
or the percentage of sales of a company to total sales
the biggest competitors at a certain time and place (William
J.S, 1984).
If a company with a particular product has a market share of
35%, then it can be interpreted that if the total sale of similar
products in a certain period is 1000 units, then the company
through its products will get sales of 350 units. The amount of
market share at any time will change according to changes in
consumer tastes, or the shift of consumer interest from one
product to another (Charles W. Lamb, 2001).
Marketing strategies can be classified on the basis of
market share obtained by a company, then divided into
4 groups, namely:
1. Market Leader, called market leader if the market
share that is controlled is in the range of 40% or
more.
2. Market Chalengger, called a market challenger if
the market share held is in the range of 30%
3. Market Follower, called market follower if the
market share that is controlled is in the range of 20%.
4. Market Nitcher, also called market niche cultivator
if the controlled market share is in the range of 10%
or less.
The market share of an industry can be formulated
as follows:

MSi =
Si
x100
Stot
Where: MSi is the company's market share i (%), Si
= company sales i (rupiah) and Stot = total sales of
all companies (rupiah).
Market classification based on the level of
competitiveness
The most well-known and widely used methods of measuring
market concentration by economists in conducting empirical
tests include:
a. Concentration Ratio / CR
The concentration ratio (CR) measures the total market share
(S) of the largest number (m) of companies in an industry
(Kuncoro, 2007, p. 156). Market share can be viewed from the
value of sales, total assets, and value added (Waldma & J., 2000,
p. 95). Usually CR is measured at a minimum of two companies
and at most eight companies.
JThere are 4 biggest companies for the concentration ratio:

CR4 = S1 + S2 + S3 + S4)

Where,

CR4 is the concentration ratio of the 4 largest companies

 S is the percentage of market share of a company.

Criteria

The CR4 value is in the range of 0% to 100%.

low concentration market, where CR4 value is below 50%;

markets with moderate concentrations that have CR4 values ​between 50% and 85%; and
• the most extreme is the perfect competition in which many
companies with their respective market shares are relatively
small, and monopoly in terms of which one company has a 100
percent market share. Competition and the number of
companies are large in the perfect competition and a little in
monopoly.
• In the perfect competition, there are many companies, so that
individual companies cannot control prices. Companies
produce homogeneous products, and buyers know prices and
and have information. There are no entry and exit barriers in
the perfect competition. On the contrary, in monopoly, there is
only one company that sells products to many buyers and no
new producer can enter the market, thus this company has
monopoly power.
• a high CR4 number will show that the market is dominated by
a small number of companies, which means the form of an
oligopoly structure. In the oligopoly structure, large producers
can influence prices by controlling production output. There
are levels of oligopoly, starting from the moderately
concentrated oligopolistic markets to highly concentrated
oligopolies, which indicate low to high levels of market
influence.
• The lower the CR4, the closer the market is to a perfectly
competitive condition
b. Herfindal-Hirshman Index (HHI atau Herfindahl Index)

Kriteria:
• HHI below 1000 – a competitive market.  There are no
dominant competitors in this market.
• HHI between 1000 and 1800 – a moderately concentrated market
• HHI above 1800 – a concentrated market.  There are one or more
dominant competitors in this market.  Higher HHI values translate
into fewer, more dominant competitors.
Market A
1% 1% 1% 1% 1% 1%
1% 1% 1% 1% 1% 1%
70% 1% 1% 1% 1% 1% 1%
1% 1% 1% 1% 1% 1%
1% 1% 1% 1% 1% 1%

Market B
20% 1% 1% 1% 1% 1%
20% 1% 1% 1% 1% 1%
20% 1% 1% 1% 1% 1%
20% 1% 1% 1% 1% 1%
• Market A: Index= 1(70) + 30(1) = 100
• Market B: Index= 4(20) + 20(1) = 100
In this case the markets may be equally as competitive, however
looking at the Herfindahl index a case could be made that
market B is more competitive:
• Market A: Index= 1(70)2+ 30(1)2 = 4,930
• Market B: Index= 4(20)2+20(1)2 = 1,620
• As market B has a lower index value in this case it can be
regarded as being more competitive than market A.  This is
because the higher the value the higher the market
concentration (thus less competition as there are fewer larger
firms in the market, thus less motivation for industries to be
more efficient). 
• So in one extreme where there is a pure monopoly situation,
i.e. a market concentration ratio value of 1, the index would
have a value of 1002 because only one firm has all the market
share.  In the other extreme there may be hundreds of firms in a
market, each bearing a small portion of the total market share,
thus the index value would be close to zero and the market
concentration would be low.
Contoh: Tabel I. Nilai CR4 Industri
Hypermarket Indonesia (2002-2006)
Tahun CR4
2002 88.88
2003 90.44
2004 97.03
2005 89.87
2006 89,92
Rerata 91,23

Dapat dilihat bahwa industri hypermarket mempunyai

tingkat konsentrasi yang tinggi. Hal ini terlihat dari nilai
rata-rata CR4 yang sebesar 91,23%
Tabel 2. Nilai HHI Industri Hypermarket
Indonesia (2002-2006)
Tahun HHI
2002 2.172,62
2003 2.210,76
2004 2.524,58
2005 2.407.56
2006 2.504,41
Rerata 2.363,99
• As a comparison in measuring concentration, the value of HHI
is calculated in the industry. It can be seen in table 2 that even
though it is included in high concentration industries, with an
average value of 2363.99 in the hypermarket industry no
company dominates. Although the concentration is high but
still quite even.
Kinerja Industri Hypermarket 2002-2006
• Measurement results using financial ratios are displayed in the
form of radar charts. From the picture above, it can be seen that
Carrefour has a good performance seen from its ability to
generate profits and not depend on capital from outside.
Whereas for Macro, almost all the ratings are in a bad position,
for example, it can be seen from their poor ability to generate
profits. Although Alfa's ability is not good enough to generate
profits, the effectiveness and efficiency of the company in
using it
From the two tables, it can be seen that the relationship between
concentration level and company performance in the
hypermarket industry in Indonesia is not significant as seen in
the change in the value of the CR4 hypermarket industry does
not affect the sales profit / loss ratio and profit / loss ratio of
operating funds. This shows that the change in the value of CR4
does not affect the company's ability to earn profits for each sale
generated.
Because in reality, changes in the value of CR4 are more due to
changes in turnover in 3 other companies. So that the change in
the value of CR4 does not have a direct effect on the value of
the profit / loss ratio of each company.
Barrier to Entry
Market entry barriers can be seen by the number of
competitors in seizing market share to achieve the
desired profit target. This obstacle can be analyzed by
measuring the economies of scale that are approached
through the company's output. The output value is then
divided by the total industry output.
Measurement of market entry barriers can be used
MES (Minimum Efficiency of Scale)
Output Perusahaan Terbesar
MES =
Output Total
Minimum Efficiency Scale (MES)
 ANALISIS KINERJA PASAR
(PERFORMANCE)
1. Profitability ratio
    In this analysis, we can use price cost margin
(PCM) analysis and TurnOver Total Asset

PCM is defined as an indicator of a company's

ability to increase prices above production costs and
also as a percentage of profits from excess revenues
at direct costs.
High PCM levels in general can be created if the
concentration ratio is high, meaning that the higher the
added value in an industry, the more the industry's
performance will be efficient in minimizing costs so that
the profits will be even greater. PCM is defined as the
ratio of the value added of the company or industry
minus the total expenditure of wages from the company
or industry to the value of the industrial output.
 Total Asset Turnover
Total Assets Turnover is used to measure the
ability of funds embedded in all assets that
rotate in a period or the capital capacity
invested to produce "revenue". The formula is
as follows:

Total Assets Turnover

= Penjualan Bersih/Total Aktiva
2. Productivity ratio
Results achieved per labor or unit of
production factors within a certain
period of time. Labor productivity is a
comparison between the value of
output and labor
3. Efisiency Internal
Internal efficiency (X-eff) shows the ability
of companies in an industry to reduce
production costs. The more efficient an
industry, the greater the profits obtained. To
measure the level of internal efficiency is
formulated by: