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02/07/2012

Research Proposal On The Relationship Between Advertising Intensity And The Level Of Concentration In Britain’s Mobile Telecom And Music Industry


The Relationship Between Advertising Intensity and the Level of Concentration in Britain’s Mobile Telecom and Music Industry

 

INTRODUCTION

This paper discusses the proposal on the relationship between advertising intensity and the concentration in Britain’s mobile telecom industry and music industry. In particular, the research will focus on the questions: “What are the related factors in advertising and Britain’s Mobile Telecom and Music Industry and degree of their relationship?” This proposal suggests that extended research in this field should be further explored to broaden the knowledge of the concerned few and to prove that such intensity dictates the flow of Britain’s mobile telecom, and music industry. In this proposal, the background, context and theme of the study are presented; the objectives of the study and the research statements are formulated. Here, vital concepts, questions and assumptions are stated. Finally, the scope and limitation of the study, methodology to be used and the significance of the research are discussed. Further, this paper briefly reviews related literature. 

PROBLEM TO BE INVESTIGATED

PURPOSE OF THE STUDY

Generally, the purpose of the research is to conduct an experimental study to determine the relationship between advertising intensity and the level of concentration in Britain’s mobile telecom, and music industry. The research will specifically identify the different factors related to advertising in accordance to Britain’s Mobile Telecom, and Music Industry. Moreover, this proposed study would review relevant literature on the same topic.  Based on the preliminary review of literature, the researcher assumed that advertising has an effect to Britain’s mobile telecom, and music industry. This study attempts to prove that advertising intensity in certain British industries, particularly the British mobile telecom industry, and music industry will experience increases in concentration in the next five months. It will try to determine the effects of advertisement in the concentration of specific industries. It will examine if the increases in advertising expenditures relative to sales are generally positively related to increases in concentration in the British mobile telecom, and music industry. It will also examine if levels of advertising intensity are related to subsequent changes in concentration. Also, it will observe if the changes in advertising intensity are generally positively related to changes in concentration, and if the increases in industry advertising expenditures and advertising per firm related to changes in concentration throughout the scope of months in which the study would be conducted. It will also observe if the decreases in advertising intensity are related to decreases in concentration, and finally to evaluate the magnitude of the influence of advertising in the British mobile telecom industry and music industry.

Research Question and Null Hypothesis

The focus of this problem statement is to establish and determine the relationship between advertising intensity and the level of concentration in Britain’s Mobile Telecom and Music Industry. Currently, there are no studies that provide a definitive answer regarding the negative and positive influence of advertising intensity and the level of concentration in Britain’s Mobile Telecom and Music Industry and degree of their relationship. The researcher is hopeful that the proposed research will yield a significant result in terms of both positive and negative impact of advertising to Britain’s Mobile Telecom and Music Industry. Thus, the study will work on the following hypothesis: “There is a significant relationship between advertising intensity and the level of concentration in Britain’s Mobile Telecom and Music Industry”

            Tuerck (1978) states that the traditional tests of the hypothesis that advertising is a source of monopoly power have related advertising to industry rates of return as well as to concentration. However, these three variables, as Tuerck explains it, have not been able to be proven to derive the various interrelationships and directions of causality. “Part of the reason for this incomplete analysis is the difficult econometric and data problems involved.” Another factor is that, there is no precise theory relating advertising intensity, concentration ratios, and profit rates.

 

            Gisser (1991) expressed the same as she stated in her journal article entitled “Advertising, Concentration and Profitability in Manufacturing,” that for decades, economists have devoted much effort to empirically testing the hypothesized relationships between industrial concentration, profits and advertising. The dissatisfaction on theoretical basis is the factor why studies in the relationship between advertising, concentration and profitability have been disregarded.

 

            Generally, the purpose of this study is to conduct a descriptive study on the relationship between advertising intensity and its level of concentration in the British mobile telecom industry and music industry. To support the primary purpose, this study tries to answer the following questions:

 

1.            What is the importance of change in concentration?

2.            Is the increase of in advertising expenditures relative to sales are generally positively related to increases in concentration in the British industry?

3.            Are the levels of advertising intensity related to subsequent changes in concentration?

4.            Are the changes in advertising intensity were generally positively related to changes in concentration?

5.            What are the influences of advertising to the British mobile  telecom industry and music industry? 

Definition of Terms

Brief Overview of the Study

The proposed study will attempt to prove that there is a significant relationship between advertising intensity and the concentration in Britain’s mobile telecom industry and music industry. A comparison of policies in advertising and Britain’s mobile telecom industry and music industry, using experimental research method, will be made to selected advertising companies, cellphone companies, and recording companies in Britain.

The study will be divided into five sections. The first section will introduce the topic and the background and nature of the problem. The second section will present a review of literature. The third section will discuss the methodologies that will be used for the study. The forth chapter will be presenting the results and findings. And the final section will present the conclusion. 

BACKGROUND AND REVIEW OF RELATED LITERATURE

            Advertising is one of the most important factors in economics today. One of its most important purposes is that advertising and the other methods of sales promotion constitute a form of communication. According to Tuerck (1978), the theory of economics in advertising refers that it is a product supplied jointly with some physical good or service, but is not physically tied to the good or service. Not all of the receivers of advertising messages pay for the advertising. Only those who actually buy the advertised good or service pay for the advertising. Advertising is a major source of revenue for certain entertainment industries, especially radio and television broadcasters, and the market for advertising messages is implicit. It is not directly visible to the casual observer in the same sense that a tourist in Chicago could see the Chicago Board of Trade. Finally, neither the sender nor the receiver of advertising messages knows the value and possibly the cost of the message in advance.

For decades, researchers have been trying to conduct research regarding the relationship between advertising intensity and the level of concentration.  Hypotheses such as increasing advertising expenditures leads to higher concentration, and advertising's role in creating strong buyer-seller attachments or brand loyalty through its ability to differentiate products have opened up the minds of advertisers and economists that to be able to conduct a reliable result on the topic, one must provide a certain theoretical framework that would prove the relationship of the two variables. Kaldor (1950) hypothesized that increasing advertising expenditures leads to higher concentration. It owes increasing returns to advertising, which favor large firms over small firms as a result of the more severe capital market constraints on small firms, and the greater degree of success of some firms' advertising programs, leading to greater sales and profits that may be reinvested in advertising to promote further growth in market share at the expense of rivals. It then leads to the end result in an oligopoly market structure rather than monopoly. Kaldor (1950) hypothesised as well that that a decrease in advertising would lead to a decrease in concentration. Bain (1956) on the other hand, stressed advertising's role in creating strong buyer-seller attachments or brand loyalty through its ability to differentiate products. His basic behavioral postulate was that buyers generally prefer established brands to new brands.

Tuerck (1978) believes that the relationship of advertising with concentration is ambiguous, as he believes that changes in advertising economies of scale and capital requirements do not necessarily change concentration. Tuerck’s (1978) conclusion to his study states that there is no basis to predict that industries of his time with high advertising intensity will experience increases in concentration in the present time. This holds true because such research requires time and tremendous effort to finish. Gisser (1991) has provided an alternative hypothesis as she uses the theory of the relationship between concentration and advertising by Stigler and Becker (1977) and extends it to incorporate the relationships among advertising, concentration and profitability. She uses the conventional theory known as the inverted-U hypothesis, asserts that advertising is expected to increase with concentration at first, but to decrease at very high levels of concentration because collusion to avoid advertising costs becomes easier. She came up with the results that Gisser’s new theory predicts an inverted-U relationship only for industries facing relatively less elastic demand curves. For industries facing highly elastic demand curves, the new theory predicts a positive relationship between concentration and advertising at all levels of concentration. Given the inconclusive evidence from Stigler and Becker’s research, that from 1963 to 1977 concentration increased slightly in the heterogeneous sub sample and decreased slightly in the homogeneous sub sample, she find only limited support for the plausible hypothesis that already-large firms get an extra push from advertising. The advantage from economies of scale in advertising slightly exceeds the disadvantage of facing a less elastic demand curve. Gisser’s hypothesis is that when concentration increases, even if the large firms do not collude and continue to act independently, they will eventually decrease their advertising intensity at high levels of concentration provided that the demand curve for the industry's product is relatively inelastic. If the industry's demand curve is relatively elastic, advertising intensity increases monotonically with concentration at all levels of concentration. She supported this hypothesis by the 1977 data taken from the Census and the Input-Output Structure of the U.S. Economy. On the other hand, this study will be supported by the census and structure of the British economy as it will focus on the British mobile telecom industry and British music industry.           

            To address the aforementioned objectives, the researcher will conduct a survey on the influence of advertising in the concentration of the British mobile telecom and music industry, to be answered by the industries’ advertising managers, general managers and market analysts. Interviews the aforementioned personalities will also be conducted to provide a qualitative basis on the study.

In this study, the intensity of advertising will be examined as well as the principles, beliefs and practices used. The impact of advertising in terms of profitability will also be discussed. It will use the conventional theory, known as the inverted-U hypothesis, which asserts that advertising is expected to increase with concentration at first, but to decrease at very high levels of concentration because collusion to avoid advertising costs becomes easier.   

METHODOLOGY

Methods of Research to be Used

            The descriptive research method will be utilized in this study. In this method, it is possible that the study will be cheap and quick. It can also suggest unanticipated hypotheses. Nonetheless, this method will be very hard to rule out alternative explanations and especially infer causations. This descriptive type of research utilizes observations in the study.  To illustrate the descriptive type of research, Creswell (1994) states that the descriptive method of research is to gather information about the present existing condition. The purpose of employing this method is to describe the nature of a situation, as it exists at the time of the study and to explore the cause/s of particular phenomena. The researcher opts to use this kind of research considering the desire of the researcher to obtain first hand data from the respondents.

There will be two sources of research to be used in this study: primary and secondary.  Primary research data are obtained through this new research study.  The researcher, then, uses secondary research data that exists and is available. Primary research will be conducted using two methods; survey questionnaires and interviews. By combining the methodologies in conducting the primary research, the researcher will enable to take a broader and complimentary view of the issues being researched.

The study will base its findings through both quantitative and qualitative research method because it aims to provide valid empirical basis as it intends to find and build theories out of other theoretical framework on previous studies that would supply explanation on the relationship of one variable with another variable through qualitative and quantitative elements in research The questionnaires will be used to collect quantitative data and the in-depth interviews will be used to provide qualitative insights into the data collected.

The research design will require the researcher to gather data, collate published studies from different local and foreign universities and articles from books and journals; and will make a content analysis of the collected documentary and verbal material. Afterwards, the researcher will summarize all the information, make a conclusion based on the hypotheses posited and provide useful recommendations on advertising and concentration relationship.  

This study requires conducting a survey and an Interview. The process will include identifying the general population for the survey, designing of the instrument (survey-questionnaire) and validation of the instrument. After the validation, the researcher will present the instrument to the supervisor for approval, before administering the instrument. Finally, with the help of a statistician, the researcher will make the statistical analysis. After gathering the results, a preliminary analysis of the results of the survey and focus group discussion will be conducted. Then the supervisor will check the preliminary analysis. Afterwards, the researcher will conduct detailed analysis of the results.

Respondents of the Study

Randomly selected managers and market analysts in the British mobile telecom industry and British music industry particularly in selected advertising companies, cellphone companies, and recording companies will answer the survey-questionnaires. The 50 respondents for the quantitative method will be selected from 10 companies in the British mobile telecom industry and music industry. For the qualitative method, interviews will be conducted to 3 leaders: 1 from advertising; 1 from the mobile telecom industry; and 1 from the music industry.

Instruments to be Used

            To determine the relationship of advertising intensity and concentration in the selected British industries, the researcher will prepare a questionnaire and a set of guide questions for the focus group that will be asked to the intended respondents. The respondents will grade each statement in the survey-questionnaire using a Likert scale with a five-response scale wherein respondents will be given five response choices. The equivalent weights for the answers will be:

 

Range                                                Interpretation

4.50 – 5.00                            Strongly Agree

3.50 – 4.00                            Agree

2.50 – 3.49                            Uncertain

1.50 – 2.49                            Disagree         

0.00 – 1.49                            Strongly Disagree

 

            In addition, the researcher will also provide interview questionnaires for the 3 leaders that will be selected to provide that data that would be necessary for the qualitative insight in the study.

Validation of the Instrument

For validation purposes, the researcher will initially submit a sample of the set of survey questionnaires and interview templates. The questionnaire and interview templates will be pre-tested to 10 supervisors working in the field of mobile telecom industry and music industry to validate its effectiveness to the research. Suggestions necessary for the improvement of the questionnaires and interview templates will be considered. The researcher will again examine the content of the interview questions to find out the reliability of the instrument.  The researchers will exclude irrelevant questions and will change words that would be deemed difficult by the respondents, into much simpler terms.

Research Management

            To carry out the overall aim the researcher will first examine the intensity of advertising being applied in mobile telecom industry and the music industry in the United Kingdom. The researcher will also examine the level of concentration of these industries and how they are affected by advertising through the British census. Then a review of related literature on the effect of concentration on advertising intensity, and vice-versa, along with other relevant themes will be undertaken. Afterwards, the researcher will identify main issues and problems. The researcher will design the instrument to be used in survey and focus group discussion; it will be validated and approved by the supervisor. After the approval, the researcher will conduct the survey and focus group with the help of some friends.  The researcher will make sure that the information given by the respondents and interviewees will be confidential. Finally, after the presentation and analysis of the data, the researcher will generate significant conclusions and insightful recommendations.

 

REFERENCES

Bain, Joe S. (1956). Barriers to New Competition. Harvard University Press,

Cambridge, Mass.

 

Becker, G. and Stigler, G. (1977). "De Gustibus Non Est Disputandum."

American Economic Review. Cited from: Advertising, Concentration and Profitability in Manufacturing. Economic Inquiry. Volume: XXIX. Issue: 1.

 

Creswell, J.W. (1994) Research design. Qualitative and quantitative approaches. Thousand Oaks, California: Sage.

 

Evily, R. and Little I. M. D (1960). Concentration in British Industry. Cambridge,

England

 

Gisser, Micha (1991). Advertising, Concentration and Profitability in

Manufacturing. Economic Inquiry. Volume: XXIX. Issue: 1.

 

Kaldor, Nicholas (1949-1950). The Economic Aspects of Advertising. Review of

Economic Studies, vol., pp. 1-27. Harvard University Press, Cambridge, Mass.

 

Tuerck, David G. (1978). The Economics of Persuasion, (pp. 1, 219-220, and

249-250). American Enterprise Institute, Washington, DC

 

 

 

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