Instructions of the Industry Profile

Please produce an industry profile for the aircraft manufacturing industry at the 6-digit NAICS level. Please note that a NAICS code is attached to an establishment – which is one physical location where produc-tion is being undertaken. An enterprise or firm may be made up of different establishments, that produce differ-ent goods or services, and hence an enterprise may have more than 1 NAICS code attached to it. For example, GE produces at least in the following NAICS code industries: 333611 Turbine and Turbine Generator Set Units Manufacturing, 334510 Electro-medical and Electrotherapeutic Apparatus Manufacturing , 515120 Television Broadcasting , and 522220 Sales Financing (primary) .

In addition, the report must explicitly use and analyze readily available objective data pertinent to the in-dustry. The list of required analyses is presented below, as well as directions to find the data. These analyses are required, but remember that the purpose of the data and analysis is to provide support for your discussion of the industry in the context of the Five Forces Model.

The report must include

a. An executive summary page.

b. Body of report.
i. Brief description of what the industry produces, and a list of the top (max 5) firms that produce in the industry. If you can find it, also provide the market share for these firms in your particular industry.
ii. An assessment of each of the five forces using “Is it sufficiently strong to reduce or eliminate industry profits (both currently and in the future)?” as the mechanism for this assessment. This analysis must be done using the economic principles developed in the course of managerial economics.
The five forces are: 1) Internal rivalry, 2) Entry, 3) Substitute and complementary
products, 4) Supplier power, and 5) Buyer power. Internal rivalry is in the center
because it may be affected by each of the other forces. You should assess each force
by asking “Is it sufficiently strong to reduce or eliminate industry profits?” and then
seek to answer the question by applying the economic principles. You should consider
profits today, as well as trends.
iii. The required data, analyses and directed questions will be presented in the appendix. However, you should, as appropriate, refer to your tables or analyses to support your assessment of the five forces.
c. References
d. Appendix: Must include answers to data requests, data manipulations and directed questions. Note: You should NOT copy and paste tables or data directly into the appendix. Instead, enter data into Excel or Word, and manipulate and format as need.

Required Data, Analyses and/or Directed Questions

1. What goods are produced in the industry?

2. Firms that produce in the industry

a. Find a maximum of 5 “large” U.S. firms that produce in your industry. You are looking for the firms that are “large” in terms of U.S. consumer market share (i.e., you are looking for the “major U.S. players” in the industry). These firms may or may not have the industry as their primary line of business.
b. Be careful to find 5 independent companies
c. Research these firms in the context of the Five Forces Analysis. You may use infor-mation you found in the databases below or by reading annual reports or websites. Some items you might be able to discover are

i. An estimate of market share of the firms in the American market,
ii. The overall size of the firms (revenue and number of employees)
iii. Their degree of diversification (number of different NAICS codes in which they partici-pate).
iv. Economies of scale
v. Barriers to entry

d. Possible sources for Data

i. Hoover’s Online Database

1. Click on the Build A List Option.

2. Expand the Industry Option, and search for firms using your NAICS code.

ii. IBISWorld. Be careful if your 6-digit NAICS code is not the same as the 5-digit NAICS industry.

1. Find the 5-digit-level IBISWorld report that corresponds to your industry.

2. These reports often have discussions about scale economies and barriers to entry for your industry.

iii. ORBIS.

1. At ORBIS, you can construct a list of firms by NAICS 2007.

2. You can also select location as U.S. and status as active.

3. Size and growth of your industry in the U.S.

a. What was your industry’s size in 2002, 2007, and 2012? Size is measured by both number of em-ployees and value of shipments. You should display these values in a table for the 3 Economic Census years 2002, 2007, and 2012.
b. Calculate the average annual percentage growth rates for both employment and value of shipments for the following periods: 2002-2007, and 2007-2012. See http://www.wikihow.com/Calculate-an-Annual-Percentage- Growth-Rate for an example of how to make this calculation

c. Data Availability:

i. For 2012 data, go to http://www.census.gov/econ/index.html

1. Click on 2012 Economic Census.

2. Click on “what’s been released” link

3. Click on the “+” following Sector 31-33: Manufacturing.

4. Click on “Link to AFF” anywhere in the table in the column headed Link to Data.

5. Click on Data Set EC123111: Manufacturing: Industry Series: Detailed Statistics by Industry for the United States: 2012.

ii. For 2007 data, go to http://www.census.gov/econ/index.html

1. Click on 2007 after Search Databases

2. Click on Data Set EC0731SG1: Manufacturing: Summary Series: General Summary: Industry Statistics for Industry Groups and Industries: 2007.

iii. For 2002 data, go to http://www.census.gov/econ/census/data/historical_data.html

1. Click on 31-33 Manufacturing click on Industry Series to find a .pdf report for your industry. Both 2002 and 1997 data may be found in Table 1.

2. Click on Data EC0231SG102: Manufacturing: Summary Series: General Summary: Industry Statistics for Industry Groups and Industries: 2002.

4. Nominal versus real industry growth

d. The growth rates you calculated in the preceding task were nominal changes. You should also de-termine the amount of growth in your industry that is due to price changes and the amount due to changes in physical quantity.
e. The annual percent change in value of shipments is roughly equal to annual percent change in physical quantity plus annual percent change in price. Thus, you can calculate the annual percent change in quantity as annual percent change in value of shipments minus annual percentage change in price. Percentage change in quantity represents real growth, net of inflation.
f. The rate of inflation is simply the percentage change in the producer price index (PPI) between the earlier year and the later year. Calculate an annual percent change in prices using the same procedure as in task 3.
g. Data Availability:
i. Find information on price inflation in your industry by going to the website http://www.bls.gov.
ii. Under the “Subjects” pull-down menu, go to Inflation and Prices and then choose the link for “Producer Price Indices (PPIs).”
iii. Scroll down to find the PPI Databases information.
iv. On the Industry Data Row, click on “One-Screen Data Search” icon or the “Multi-Screen” Icon.

5. U.S. Industry Forecasts

h. The US Bureau of Labor Statistics produces output and employment forecasts for industries at the 4-digit NAICS code level. These forecasts can be found at http://www.bls.gov/emp/empinddetail.htm
i. Since your 6-digit industry represents only a share of the more aggregate industry found on this website, be sure to multiply the two forecasts by the relevant ratio (employment or value of ship-ments) of the six-digit industry’s size to the four-digit industry’s size. You may find four-digit shipments and employment using the instructions for task 3.

j. What are the real output and employment forecasts for annual compounded growth in your in-dustry? Given the past growth of your industry (from tasks 3 and 4), discuss whether the fore-cast from the Bureau of Labor Statistics makes sense to you. If not, please suggest and imple-ment an alternative method, explaining what you do carefully.

6. U.S. Seller Concentration in the Industry

a. How many firms in total were there in your industry?

b. Use the following site: http://www.census.gov/econ/census/help/sector/data_topics/concentration_ratios.html find the four-firm concentration ratio (CR4) and the Herfindahl-Hirschman index (HHI) for your industry for 2002, and 2007 (the last year data is available). Please note: You do not to compute these in-dexes from individual firm market shares. This site has already done this calculation for you.

c. According to the following tables, would your industry be considered competitive, moderately concentrated, or highly concentrated according to CR4 and according to HHI, respectively? Did this change between 2002 and 2007?

0 < CR4 < 50 50 < CR4 < 75 CR4 > 75
competitive moderately concentrated highly concentrated

0 < HHI < 1500 1500 < HHI < 2500 HHI > 2500
competitive moderately concentrated highly concentrated
7. U.S. Industry Buyers and Industry Input Suppliers

a. There are two goals here:

i. To find how much of the product your industry produces is used as an intermediate good in the production of other goods as compared to a final good used by consumers, etc.

ii. To find the industries that are the most important suppliers to your industry.

b. You must report

i. The total amount of the output of your industry that is bought by final purchasers, the to-tal amount of your commodity produced, and the percent of total commodity output pur-chased by household consumers, business investors, government, or international buyers (exports). An “F” for “final” should identify an input-output sector as a final purchaser.

ii. The total amount of the output of your industry that is bought by intermediate-buying industries, and the percentage of total commodity output purchased by the top five in-termediate-buying industries.

iii. The total intermediate inputs for your industry, and the percent of this total intermediate inputs purchased from each of the top five input supplying industries.

iv. If an industry is among its own top five buyers or suppliers, please do not include as one of the five.

c. Data Availability

i. Go to www.bea.gov.

ii. Under the “Industry” heading, click on link for “Benchmark Input-Output Accounts”.

iii. Click on the link for Benchmark I-O data tables : 2007

iv. Under the Supplemental Estimates List, find “Use Tables/After Redefinitions/Producer Value”. Click on the link “XLSX” to open the Excel workbook for 388 Industries.
v. The data is on the last tab in the sheet.

d. Note:

i. To get the intermediate buyers and final purchaser information, find the row that contains your industry and read across.

ii. To get the intermediate inputs bought by your industry, find the column that contains your industry and read down.
8. Salaries and Wage Rates in your Industry in the U.S.

a. Find the average annual salary (payroll divided by number of employees) and average hourly wage rate (production- worker wages by total production-worker hours) for your industry for 2007 and 2012
b. You will need data on payroll, number of employees, production-worker wages, and total pro-duction-worker hours

c. Data Availability

i. 2012: Same location as used in Size of Industry above.

ii. 2007: Same location as used in Size of Industry above.

9. Geographic Location of Industry in the U.S.

a. Describe the geographic location of production in the US for your industry in 2012, 2007, and 2002. On measure of this is to provide a list of the 5 states with the highest number of employ-ees in your industry.
b. Data Availability: County Business Patterns

i. Go to http://www.census.gov/econ/cbp/

ii. In the “View data in tables” box, click on the “Go” button after U.S., States, and Coun-ties pulldown. Make sure that you keep the pulldown listing as “United States”

iii. Click on “Detail” on the Manufacturing line

iv. Find your specific industry, and click on Compare.

v. Data from 2012, 2007, and 2002 can be accessed from the pull down menu on the page.

vi. Note that if a state has a letter by its name (e.g. “C”), this typically means that rather than a precise count, some states may show a range of employees. That’s fine. If states have a large number (e.g. some states may have a range of 10,000-24,999 employees), relative to other states in your list, please include them if they may be among the largest 5 states.

vii. If a state isn’t listed, you may assume that it has essentially zero employees in your indus-try.

Instructions of the Industry Profile

Please produce an industry profile for the aircraft manufacturing industry at the 6-digit NAICS level. Please note that a NAICS code is attached to an establishment – which is one physical location where produc-tion is being undertaken. An enterprise or firm may be made up of different establishments, that produce differ-ent goods or services, and hence an enterprise may have more than 1 NAICS code attached to it. For example, GE produces at least in the following NAICS code industries: 333611 Turbine and Turbine Generator Set Units Manufacturing, 334510 Electro-medical and Electrotherapeutic Apparatus Manufacturing , 515120 Television Broadcasting , and 522220 Sales Financing (primary) .

In addition, the report must explicitly use and analyze readily available objective data pertinent to the in-dustry. The list of required analyses is presented below, as well as directions to find the data. These analyses are required, but remember that the purpose of the data and analysis is to provide support for your discussion of the industry in the context of the Five Forces Model.

The report must include

a. An executive summary page.

b. Body of report.
i. Brief description of what the industry produces, and a list of the top (max 5) firms that produce in the industry. If you can find it, also provide the market share for these firms in your particular industry.
ii. An assessment of each of the five forces using “Is it sufficiently strong to reduce or eliminate industry profits (both currently and in the future)?” as the mechanism for this assessment. This analysis must be done using the economic principles developed in the course of managerial economics.
The five forces are: 1) Internal rivalry, 2) Entry, 3) Substitute and complementary
products, 4) Supplier power, and 5) Buyer power. Internal rivalry is in the center
because it may be affected by each of the other forces. You should assess each force
by asking “Is it sufficiently strong to reduce or eliminate industry profits?” and then
seek to answer the question by applying the economic principles. You should consider
profits today, as well as trends.
iii. The required data, analyses and directed questions will be presented in the appendix. However, you should, as appropriate, refer to your tables or analyses to support your assessment of the five forces.
c. References
d. Appendix: Must include answers to data requests, data manipulations and directed questions. Note: You should NOT copy and paste tables or data directly into the appendix. Instead, enter data into Excel or Word, and manipulate and format as need.

Required Data, Analyses and/or Directed Questions

1. What goods are produced in the industry?

2. Firms that produce in the industry

a. Find a maximum of 5 “large” U.S. firms that produce in your industry. You are looking for the firms that are “large” in terms of U.S. consumer market share (i.e., you are looking for the “major U.S. players” in the industry). These firms may or may not have the industry as their primary line of business.
b. Be careful to find 5 independent companies
c. Research these firms in the context of the Five Forces Analysis. You may use infor-mation you found in the databases below or by reading annual reports or websites. Some items you might be able to discover are

i. An estimate of market share of the firms in the American market,
ii. The overall size of the firms (revenue and number of employees)
iii. Their degree of diversification (number of different NAICS codes in which they partici-pate).
iv. Economies of scale
v. Barriers to entry

d. Possible sources for Data

i. Hoover’s Online Database

1. Click on the Build A List Option.

2. Expand the Industry Option, and search for firms using your NAICS code.

ii. IBISWorld. Be careful if your 6-digit NAICS code is not the same as the 5-digit NAICS industry.

1. Find the 5-digit-level IBISWorld report that corresponds to your industry.

2. These reports often have discussions about scale economies and barriers to entry for your industry.

iii. ORBIS.

1. At ORBIS, you can construct a list of firms by NAICS 2007.

2. You can also select location as U.S. and status as active.

3. Size and growth of your industry in the U.S.

a. What was your industry’s size in 2002, 2007, and 2012? Size is measured by both number of em-ployees and value of shipments. You should display these values in a table for the 3 Economic Census years 2002, 2007, and 2012.
b. Calculate the average annual percentage growth rates for both employment and value of shipments for the following periods: 2002-2007, and 2007-2012. See http://www.wikihow.com/Calculate-an-Annual-Percentage- Growth-Rate for an example of how to make this calculation

c. Data Availability:

i. For 2012 data, go to http://www.census.gov/econ/index.html

1. Click on 2012 Economic Census.

2. Click on “what’s been released” link

3. Click on the “+” following Sector 31-33: Manufacturing.

4. Click on “Link to AFF” anywhere in the table in the column headed Link to Data.

5. Click on Data Set EC123111: Manufacturing: Industry Series: Detailed Statistics by Industry for the United States: 2012.

ii. For 2007 data, go to http://www.census.gov/econ/index.html

1. Click on 2007 after Search Databases

2. Click on Data Set EC0731SG1: Manufacturing: Summary Series: General Summary: Industry Statistics for Industry Groups and Industries: 2007.

iii. For 2002 data, go to http://www.census.gov/econ/census/data/historical_data.html

1. Click on 31-33 Manufacturing click on Industry Series to find a .pdf report for your industry. Both 2002 and 1997 data may be found in Table 1.

2. Click on Data EC0231SG102: Manufacturing: Summary Series: General Summary: Industry Statistics for Industry Groups and Industries: 2002.

4. Nominal versus real industry growth

d. The growth rates you calculated in the preceding task were nominal changes. You should also de-termine the amount of growth in your industry that is due to price changes and the amount due to changes in physical quantity.
e. The annual percent change in value of shipments is roughly equal to annual percent change in physical quantity plus annual percent change in price. Thus, you can calculate the annual percent change in quantity as annual percent change in value of shipments minus annual percentage change in price. Percentage change in quantity represents real growth, net of inflation.
f. The rate of inflation is simply the percentage change in the producer price index (PPI) between the earlier year and the later year. Calculate an annual percent change in prices using the same procedure as in task 3.
g. Data Availability:
i. Find information on price inflation in your industry by going to the website http://www.bls.gov.
ii. Under the “Subjects” pull-down menu, go to Inflation and Prices and then choose the link for “Producer Price Indices (PPIs).”
iii. Scroll down to find the PPI Databases information.
iv. On the Industry Data Row, click on “One-Screen Data Search” icon or the “Multi-Screen” Icon.

5. U.S. Industry Forecasts

h. The US Bureau of Labor Statistics produces output and employment forecasts for industries at the 4-digit NAICS code level. These forecasts can be found at http://www.bls.gov/emp/empinddetail.htm
i. Since your 6-digit industry represents only a share of the more aggregate industry found on this website, be sure to multiply the two forecasts by the relevant ratio (employment or value of ship-ments) of the six-digit industry’s size to the four-digit industry’s size. You may find four-digit shipments and employment using the instructions for task 3.

j. What are the real output and employment forecasts for annual compounded growth in your in-dustry? Given the past growth of your industry (from tasks 3 and 4), discuss whether the fore-cast from the Bureau of Labor Statistics makes sense to you. If not, please suggest and imple-ment an alternative method, explaining what you do carefully.

6. U.S. Seller Concentration in the Industry

a. How many firms in total were there in your industry?

b. Use the following site: http://www.census.gov/econ/census/help/sector/data_topics/concentration_ratios.html find the four-firm concentration ratio (CR4) and the Herfindahl-Hirschman index (HHI) for your industry for 2002, and 2007 (the last year data is available). Please note: You do not to compute these in-dexes from individual firm market shares. This site has already done this calculation for you.

c. According to the following tables, would your industry be considered competitive, moderately concentrated, or highly concentrated according to CR4 and according to HHI, respectively? Did this change between 2002 and 2007?

0 < CR4 < 50 50 < CR4 < 75 CR4 > 75
competitive moderately concentrated highly concentrated

0 < HHI < 1500 1500 < HHI < 2500 HHI > 2500
competitive moderately concentrated highly concentrated
7. U.S. Industry Buyers and Industry Input Suppliers

a. There are two goals here:

i. To find how much of the product your industry produces is used as an intermediate good in the production of other goods as compared to a final good used by consumers, etc.

ii. To find the industries that are the most important suppliers to your industry.

b. You must report

i. The total amount of the output of your industry that is bought by final purchasers, the to-tal amount of your commodity produced, and the percent of total commodity output pur-chased by household consumers, business investors, government, or international buyers (exports). An “F” for “final” should identify an input-output sector as a final purchaser.

ii. The total amount of the output of your industry that is bought by intermediate-buying industries, and the percentage of total commodity output purchased by the top five in-termediate-buying industries.

iii. The total intermediate inputs for your industry, and the percent of this total intermediate inputs purchased from each of the top five input supplying industries.

iv. If an industry is among its own top five buyers or suppliers, please do not include as one of the five.

c. Data Availability

i. Go to www.bea.gov.

ii. Under the “Industry” heading, click on link for “Benchmark Input-Output Accounts”.

iii. Click on the link for Benchmark I-O data tables : 2007

iv. Under the Supplemental Estimates List, find “Use Tables/After Redefinitions/Producer Value”. Click on the link “XLSX” to open the Excel workbook for 388 Industries.
v. The data is on the last tab in the sheet.

d. Note:

i. To get the intermediate buyers and final purchaser information, find the row that contains your industry and read across.

ii. To get the intermediate inputs bought by your industry, find the column that contains your industry and read down.
8. Salaries and Wage Rates in your Industry in the U.S.

a. Find the average annual salary (payroll divided by number of employees) and average hourly wage rate (production- worker wages by total production-worker hours) for your industry for 2007 and 2012
b. You will need data on payroll, number of employees, production-worker wages, and total pro-duction-worker hours

c. Data Availability

i. 2012: Same location as used in Size of Industry above.

ii. 2007: Same location as used in Size of Industry above.

9. Geographic Location of Industry in the U.S.

a. Describe the geographic location of production in the US for your industry in 2012, 2007, and 2002. On measure of this is to provide a list of the 5 states with the highest number of employ-ees in your industry.
b. Data Availability: County Business Patterns

i. Go to http://www.census.gov/econ/cbp/

ii. In the “View data in tables” box, click on the “Go” button after U.S., States, and Coun-ties pulldown. Make sure that you keep the pulldown listing as “United States”

iii. Click on “Detail” on the Manufacturing line

iv. Find your specific industry, and click on Compare.

v. Data from 2012, 2007, and 2002 can be accessed from the pull down menu on the page.

vi. Note that if a state has a letter by its name (e.g. “C”), this typically means that rather than a precise count, some states may show a range of employees. That’s fine. If states have a large number (e.g. some states may have a range of 10,000-24,999 employees), relative to other states in your list, please include them if they may be among the largest 5 states.

vii. If a state isn’t listed, you may assume that it has essentially zero employees in your indus-try.