Research On Relationships Between Industry Concentration And Performance Of Tobacco Industry In China

After China's accession to the WTO, with the cigarette import tariff rates are gradually reduced, foreign tobacco companies will inevitably compete strongly to obtain this world largest tobacco market. Meanwhile, China tobacco enterprises haven't formed a batch of scale advantages of large group of enterprises or enterprise groups under the traditional government plans to control and local blockade, China tobacco industrial concentration is much lower than foreign countries. Therefore, how to improve China tobacco industrial concentration and play scale effect is now the first priority of China tobacco industry .Industrial Structure can be reflected by industry concentration, economies of scale, trade barriers and other indicators. As a key indicator to measure the industrial structure, the degree of industrial concentration can be used to reflect the industry competition between existing enterprises, it shows the market power of the largest companies within the industry. It is the mirror of economies of scale and industry barriers .In this paper, we use the statistics from the tobacco industry between 1995-2007 to analyse relationship between industrial concentration and profit margins. It shows that whether the concentration can be increased is directly related to the tobacco industry profitability and the future of tobacco industry in the fierce international competition.In the industrial concentration area, we use the absolute concentration index CR4, CR8 and the relative concentration index HI to analyse the statistical data between 1995 and 2007. After comparing the statistical data with foreign tobacco companies, we find that although the focus of the tobacco industry is rising in recent years, it is still at a low level compared with foreign countries and the level of industrial concentration is to be further improved.In the study of the relationship between concentration and profitability, we use three concentration index - CR4, CR8 and the number of firms, three profitability indicators - the profit margin, cost margin, the contribution rate of the total assets and the output of cigarette production, then find that the companies within in the Chinese tobacco industry have significant economies of scale through statistical comparison of the indicators. We use SPSS, Pearson (Person) correlation analysis to analyse Concentration and profitability parameters of the tobacco industry on the statistical data between 1995 and 2007, the results showed that with increase in concentration of the tobacco industry, the industry's profit levels also constantly increased and the scale of production expanded, so that the tobacco processing industry are suitable for mass production and operation.In the arrangement of contents, text is divided into five chapters: The first chapter introduces the background and significance of thesis research, the related research of home and abroad, and the main research methods we use; the second chapter introduces some common measure of industrial concentration, focuses on the absolute concentration index, the relative concentration index, and several market structures which divided by degree of industry concentration to provide the necessary theoretical foundation for the empirical analysis in the following section; The third chapter describes the basic status of China's tobacco industry, and analyse the level of China's tobacco industry concentration, then compare concentration index with the world's major tobacco power, find that China's tobacco industry is still at a low concentration level. Meanwhile, we analyse historical and reality reasons that ead China's tobacco industry to this low concentration, and finally propose the practical significance to increase the concentration of China's tobacco industry; The fourth chapter is the focus of this paper, we use Pearson (Person) correlation analysis to analyse the relationship of China's tobacco industry concentration and profitability. First of all, we select concentration index and the margin indicators, then use Pearson (Person) correlation method to calculate different concentration index coefficient of correlation between the profit margin and explain the correlation between concentration and profit margins according to the results of determination, eventually come to conclusion that the tobacco industry has significant characteristics of economies of scale; The fifth chapter proposed to increase the concentration of China's policy recommendations on the basis of the foregoing research.After the foregoing discussion and research, it is summed up that China's tobacco industry can make efforts from industry consolidation, tax reform and introduce competition mechanism to improve industrial concentration and enhance international competitiveness.