Analytical Framework, Concepts, Definitions, and Classifications

Purpose: To calculate concentration indicators for the decision makers and analysts as economic indicators for Industry and Service Sectors. The indicators are calculated from the Annual Industry and Service Statistics survey.

Classification: The classification of enterprises by type of activity is determined in accordance with the Statistical Classification of Economic Activities in the European Community (NACE Rev.2).

International and regional guidelines: None.

Scope of the Data

Scope: The ratios are calculated by turnover (12 11 0) which derived from the data which compiled by “Annual Business Statistics – Industry and Service Statistics Questionnaire”.

Sectoral Coverage: Sectoral Coverage is the coverage of Annual Industry and Service Statistics.

Geographical coverage: Geographical coverage is the coverage of Annual Industry and Service Statistics.

Accounting Conventions

Method:

For the single-unit enterprises, the main activity of the enterprises; for multi-unit enterprises, the main activities of the local units are considered as kind of activity unit.

Concentration ratio for j’th class is the share of first k enterprises’ turnover ordered descending in the total turnover of class j.

Herfindahl (H) index is the total of squares of the share of all enterprises in the class.H-index considers all turnovers of enterprises in the class. It takes values between 0 and 1. If there is only 1 enterprise it takes value 1, if all shares are equal it takes 1/n. If the value close to 1, it means the concentration is high.

In calculations, the rounded values of the enterprises’ weights are used. For instance, if the weight is 2.45, the rounded value will be 2; if the weight is 2.55, the rounded value will be 3. But the original weight used to calculate the total turnover of the class as a denominator.

Statistical Unit: The kind of activity of the enterprise.

Definitions and Concepts Enterprise: An enterprise is an organizational unit that produces goods and services using decision autonomy concerning allocation of resources. An enterprise produces goods and services on the market by carrying out one or more activities at one or more locations.

Turnover:

Turnover is the total of the sales of goods and services invoiced by the observation unit during the reference period.

Kind of Activity unit (KAU):

The Kind of Activity unit (KAU) groups all the parts of an enterprise contributing to the performance of an activity at class level (four digits) of NACE Rev.2 and corresponds to one or more operational subdivisions of the enterprise.

KAU is the statistical unit in the CR calculations. The enterprise may have several local units with the same or different activities. In that case of the same activities, we sum up the turnovers to get one KAU’s turnover. For the different activity cases, each activity takes place as KAU of the enterprise.

To explain that situation as an example: Suppose that enterprise X has 5 local units. The local unit’s activity codes and their turnovers are shown in the table.

With the rules mentioned above, KAUs and their turnovers are found as in the table:

KAU

Turnover

4771

205

1413

95

1414

50

Finally, enterprise X has 3 KAU. Enterprise X considered as a statistical unit for each 3 KAU in the calculation of the concentration ratio

Concentration Ratio (CR_{kj}):

m represent the number of classes, n represent number of observations and S_{ij} represents the share of turnover of the observed units in the class m.