The formal individual assignment is modelled as a country and industry report and is weighted at 100%. Students are expected to choose a country, probably one in which they have a personal interest, and analyse an industry in their country of choice.

Suppose that you are asked to prepare a report that would help a company to make a decision about expanding to a certain industry in a certain foreign country. The company that commissioned the report would like to be informed about both the macroeconomic background and about the detail of the target industry.

The report should be no more than 2000 words long (including tables, figures and diagrams and excluding appendices, footnotes, and references). Approximately, 1000 words for the first part, and 1000 words for the second part. High marks can potentially be achieved with far fewer words.

In total, there are 10 questions; each question is worth 10 marks. Choose a country and an industry. Organize your report according to the following questions:

First Part: Country Analysis

You are asked to prepare a report about the macroeconomic conditions in a country of your choice. (Imagine that a company needs the report in order to make an entry decision into that country.) When choosing the country, make sure that you can find the data necessary to answer the questions below.

1. Find GNP/GDP data for the last 5 years. Plot the growth rate. Compute total factor productivity (TFP) and plot the results for that period. Show how the TFP numbers are calculated according to the formula derived in class. (You may use existing TFP numbers, but you are still required to show how they are being derived.)

2. What is the earnings yield (inverse of the price-to-earnings ratio) in the domestic stock market? Is this number compatible with the performance of the economy as analysed in the previous question?

3. Find data for the price level and calculate the rate of inflation for the last 5 years. What was the nominal interest rate? What was the real interest rate?

4. Find money supply data for your country. Can you find correlations between the money supply, inflation and economic growth?

5. What was the exchange rate five years ago and what is it now? Has the domestic currency appreciated or depreciated during this period? What was the real appreciation/depreciation? Did interest rate parity hold during this period? If not, infer in what direction (above or below) did expectations deviate from actual changes in the exchange rate?

Second Part: Industry Analysis

In the second part of your report, you are required to carry out an economic analysis of an industry of your choice.

Examples of appropriate industries include: automobile manufacturing, index fund management, cigarettes, supermarkets and mobile phone networks.

Since the idea is to study an existing industry, you should not study the market for an extremely new product, nor focus on the opportunities facing one specific firm. If you are unsure of the suitability of your choice, then ask your class lecturer.

6. Market structure. How concentrated is the market? Would you characterize the market as monopolized, competitive, or an oligopoly? Who are the major players (if any)? How did you decide where to draw the market boundaries, both geographically and in terms of the characteristics of the product? For a monopoly or oligopoly: what steps are the incumbents taking to strategically deter entry? For a competitive market: is the market currently in equilibrium? How would you expect prices to change in the short and long term?

7. Important characteristics of demand. What is the outlook for demand growth? What are the closest substitutes? Carry out an analysis of the price-elasticity of demand, both for the market and for individual firms. How much market power do firms in the industry have?

8. Important features of costs. What is the outlook for industry cost levels? How important are economies of scale? Describe the pricing strategies (e.g., price discrimination) that firms use.

9. Structural barriers to entry. What, if any, structural barriers to entry protect industry profit levels. Do you anticipate any changes?

10. Entry Decision: Is this an attractive market to be in for the current incumbents? What strategy should incumbents follow in the face of potential or actual entry?

You are free to make use of material from other courses BUT you will be judged primarily on your ability to use the economic concepts learned in Firms and Markets to draw useful, interesting and clearly argued conclusions. You should include descriptions of the economic models that you employ, and reference appropriate academic literature and industry sources. While your answers should be based on actual data as far as possible, you will also get credit for qualitative judgements, and for indicating how you would improve your analysis if more information were available.