Question

Explain how the estimation of the HHI would aid a multinational firm's strategic decisions.

Answer 1

Hirfandahl Hirschman Index (HHI) is defined as the measurement of concentration of market in an industry. It consists of at the most of 50 companies in an industry to find out if the market is competitive or can be a monopoly. This is a tool to measure the concentration of market and the choice of consumer. It promotes healthy competition and try to become a monopoly. Thus in this scenario, it helps companies to adopt to common strategic decisions. It is also a determinant as it is easy to understand and simple to calculate. However market share may arise due to geographic factors of the country in which company is located. So it is concentrated in that particular region only. However it is unusual that this factors may not hamper the health of the competition. It would help in providing strategic decisions to multinational companies.