The Analysis of the Third-Party Logistics Industry in China_In Structure-Conduct-Performance Approach
The Analysis of the Third-Party Logistics Industry in China
In Structure-Conduct-Performance Approach
Introduction
The structure-conduct-performance (SCP) paradigm, which laid the foundation for the development of industrial organization, is based on the analysis of empirical data and neoclassical economics theory. The fundamental logic of SCP is that the industry’s structure influences the conduct of incumbent firms, which in turn influences the performance for each firm. Despite the unidirectional effects, feedback effects are also included. This report will evaluate the three main sectors in the third-party logistics industry through SCP approach and finally find an appropriate theory to explain the industry.
Structure
According to the calculation of concentration ratio, the market of third-party logistics in China can be defined as atomistic market under Bain’s (1951) measure standard of market structure. Since the number of firms is extremely huge, over 510 thousands, the market structure is classified into perfect competition indisputably with negligible market share. The first graph below shows the counting process of concentrate ratio in the year of 2004, based upon the total industry output was 845.9 billion RMB. Though the concentrate ratio is in a low level, second graph shows a gradual increase every year. However, there still a long way to reach the highly concentrate market. Whereas, followed the judgment of atomistic market structure before, it should be pointed out that the existence of dual-sector economy characteristic in the third-party logistics market in China. Since logistic cover a large scope in definition, the higher-ranked sectors such as international freight, aviation transportation, container-terminal logistics, where the concentrate ratio is concluded in high concentrated (Zhang, 2004). The lower-ranked sectors are generally undertaking monotonous work of storage, transportation and distribution. However, over 85 percent of
In Structure-Conduct-Performance Approach
Introduction
The structure-conduct-performance (SCP) paradigm, which laid the foundation for the development of industrial organization, is based on the analysis of empirical data and neoclassical economics theory. The fundamental logic of SCP is that the industry’s structure influences the conduct of incumbent firms, which in turn influences the performance for each firm. Despite the unidirectional effects, feedback effects are also included. This report will evaluate the three main sectors in the third-party logistics industry through SCP approach and finally find an appropriate theory to explain the industry.
Structure
According to the calculation of concentration ratio, the market of third-party logistics in China can be defined as atomistic market under Bain’s (1951) measure standard of market structure. Since the number of firms is extremely huge, over 510 thousands, the market structure is classified into perfect competition indisputably with negligible market share. The first graph below shows the counting process of concentrate ratio in the year of 2004, based upon the total industry output was 845.9 billion RMB. Though the concentrate ratio is in a low level, second graph shows a gradual increase every year. However, there still a long way to reach the highly concentrate market. Whereas, followed the judgment of atomistic market structure before, it should be pointed out that the existence of dual-sector economy characteristic in the third-party logistics market in China. Since logistic cover a large scope in definition, the higher-ranked sectors such as international freight, aviation transportation, container-terminal logistics, where the concentrate ratio is concluded in high concentrated (Zhang, 2004). The lower-ranked sectors are generally undertaking monotonous work of storage, transportation and distribution. However, over 85 percent of
References: Bain, J. S. (1951) Relation of Profit Rate to Industry Concentration: American Manufacturing, 1936-1940. The Quarterly Journal of Economics, v. 65, n. 3, 293-324 Bain, J. S. (1956) Barriers to New Competition. Cambridge: Harvard University Press CAWS (2005) Sixth China logistics market survey report. Beijing: CAWS Ding, J. (2006) China Logistics Development Report in 2005 to 2006. Beijing: CFLP Geroski, P. A. (1995) International Journal of Industrial Organization 13, 421-440 McAfee, R. Preston and Mialon, Hugo M. and Williams, Michael A., (2003) What is a Barrier to Entry?. Available at SSRN: http://ssrn.com/abstract=594601 [Accessed 10 Dec 2013] Schumpeter, J. (1942) Capitalism, Socialism and Democracy. New York: Harper Wang, L. (2006) The influence of economic globalization on China 's logistics industry organization. Economic issue 9/12 Zhang, G. (2004) China 's Logistics Industry Research Based on the SCP Model. Science of finance and economics S1, 20-21 Zhu, Q. (2008) China Building Materials Logistics Forms Revolution Analysis. Chinese Market 6/12