Reference no: EM131092766

I need a calculation and an analysis (one paragraph) with visuals (graphs), on the 3 Firm Concentration Ratio on the following scenario:

Bob is the largest motorcycle dealer in Miami-Dade county. His business sold 1,523 motorcycles in 2012 and has been growing steadily at 20% over each of the last three years. The next largest competitor is Sam's motorcycles which sold 1,015 bikes in 2012 followed by Dave's motorcycles which sold 902 in the same year. The total market of motorcycles in Miami-Dade saw purchases of 7,274 motorcycles in 2012 which was a 10% increase over each of the previous 3 years. While Sam's motorcycles saw an increase in line with the total bike purchases (+10%) over the past 3 years, Dave's business has been stagnant and saw basically no increase over that same period. There are a total of 54,470 motorcycles registered in Miami-Dade county. All three of these dealerships - Bob's, Sam's and Dave's - opened three years ago and sold all of their bikes to people within Miami-Dade. The population of Miami-Dade county is approximately 2.591 million people and it is estimated that 1/3rd of that population (863,670) are of legal driving age and considered part of the potential "target market" to purchase a motorcycle.

There are four major brands in the Miami-Dade area - Honda, Suzuki, Harley-Davidson and Kawasaki. Honda is the largest brand representing 50% of the total purchases in the market followed by Suzuki at 25%, Harley-Davidson at 20% and Kawasaki at 5%. Each motorcycle dealer's sales fall within the same share for the brands that they carry, however, each dealer does not carry all of these brands. For example, Dave's motorcycles does not carry the Honda brand so the other brands fill in the total share but at the same ratio (Suzuki 50%, Harley-Davidson 40% and Kawasaki at 10%). Bob's motorcycles does not carry the Harley-Davidson brand but does carry the other 3 major brands. Sam's and the "other" dealers carry all four major brands. These brands sell for different prices - for the purpose of this exercise we can assume an average price for all bikes within a specific brand which is: Harley-Davidson = $18,000, Suzuki = $12,000, Honda = $10,000 and Kawasaki = $8,000. All bikes have a contribution margin of 20%. Due to the complexity of this market we will assume fixed costs are similar across the dealerships and does not become an important factor in analyzing this business.

Bob's motorcycles has 3 locations in the Miami-Dade area and both Sam's and Dave's have two locations each. There are 9 physical locations based on the "other" dealerships. Bob is constantly being approached by the representatives of the different motorcycle brands to understand their market distribution from both a physical location and from an ACV perspective. Also, Honda spends $2million per year in advertising, Harley-Davidson spends $1million and Suzuki and Kawasaki spend $500k each. The brands are also interested in knowing whether they are spending the right amount in advertising.

There are also different values associated with each type of motorcycle. While most consumers will come in for service twice a year over a three year period spending an average of $50 for each service visit and will purchase approximately $100 in gear over each of those three years, Harley-Davidson consumers will spend twice as much on service and both Harley-Davidson and Honda consumers will spend three times that much on gear over each of the three years.