by Tom Bradley

Corporate profitability has been very strong for a number of years now. There are lots of reasons for this: economic growth; modest wage increases; globalization; and technology. There’s another reason, however, that has crept, or should I say blasted, into the picture – industry consolidation. Companies are merging, such that today most industries have fewer players. As a result, there’s more rational pricing and higher profit margins.

Last month, The Economist magazine had an article related to this topic. The magazine’s research found that, “two-thirds of American industries were more concentrated in the hands of a few firms in 2012 than in 1997.” Dare I say, in the last five years this trend has continued.

The article also highlighted research done by AXA Investment Managers Rosenberg Equities which showed that the use of the word ‘competition’ in annual reports has declined by three-quarters since 2000.