Firms seek market share to increase profits. Empirical studies have also indicated that there is a positive relation between market share and firms' profitability. Is all this about to change in the new business environment.
The
main problem in business today is how to make profits.
Where and how managers will be able to make profits in
their businesses is yet another question which is
giving them sleepless nights. They see gains in market
share as the key to long-term profitability. In 1975,
Robert D Buzzell, a Harvard Business School professor
in an article `Market Share - A Key to Profitability,'
published in Harvard Business Review wrote,
"One of the main drivers of business
profitability is market share." The Boston
Consulting Group (BCG) observed, "In a
competitive business, market share determines relative
profitability."
However,
others do not agree. Richard Mitter, in his book The
Myth of Market Share, has written "market
share theory for business profitability does not work
in most industries in most time." Authors Cathy
Anterasian, John Graham and R Bruce Money wrote in
`Are US Managers Superstitious About Market Share?'
published in Sloan Management Review that the
"companies that maintained stable operations were
more profitable than those that maintained stable
market shares." Recent events such as the demise
of Bethlehem Steel in US and the Enron episode also
suggest that the concept of market share may be the
biggest business myth. The advent of Internet has also
blown away advantages of market share. |
