When Does Market‐Share Matter?

One of the tenets of the conventional wisdom of the strategic management literature is that if a business succeeds in increasing its market‐share it will usually enjoy an improvement in its profitability. It is not simply that it serves as one of a battery of measures of relative performance, nor that, ceteris paribus, increases in the volume of sales must be linked to increases in the total amount of profits earned, but that increases in market share will directly cause increases in profitability, that is profits deflated to take into account the level of output. As might be expected, the strength of feeling that is displayed about the virtues of market‐share as a strategic tool varies enormously among opinion leaders. Those from the influential Boston Consulting Group (1970) are almost messianic in their exhortations to businesses to aim single mindedly for increased market‐share in order to move down their experience curves. Others, most notably from the Strategic Planning Institute, through its Profit Impact of Market Strategies Programme (PIMS), e.g. Schloeffer, et al., (1974), Buzzell, et al., (1975) and Gale (1972), imply the importance of market‐share by the emphasis they place upon its influence in their reporting of the results of regressing return‐on‐investment in a model which contains over thirty other variables.