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An Analysis of the Market Share-Profitability Relationship
Abstract
A number of researchers in the marketing, management, and economics disciplines have expressed reservations regarding the validity and generalizability of the reported relationships between market share and profitability. Against this backdrop, the authors performed a meta-analysis on 276 market share-profitability findings from forty-eight studies to address whether market share and profitability are positively related and to examine the factors that moderate the magnitude of that relationship. The authors found that, on average, market share has a positive effect on business profitability. However, the magnitude of the market share-profitability relationship is moderated by model specification errors, sample characteristics, and measurement characteristics. The relationship is moderated the most (and, on average, the relationship could be artifactual) when firm-specific intangible factors are specified in the profit model or the estimate of the market share-profitability relationship is based on an analysis of non-PIMS businesses. The authors discuss the implications of these results for the evaluation and utilization of market share information by managers in reference to strategies that focus on building market share as a means for increasing profits.
... In the same year, and using identical metrics (profitability and market share), Szymanski, Bharadwaj, and Varadarajan (1993) found that each industrial organization has distinctive characteristics that influence the link between profitability and market share. Studying the factors which influence the market share of small and medium-sized manufacturing firms in Greece, Thomadakis and Droucopoulos (1996) resulted that the change in market share is influenced negatively by the market size in contrast with capital intensity and profitability which influence positively the market share. ...
... Paper conclusions Citations Majumdar (1997) The size of a firm has a negative impact on productivity in contrast with age. 757 Szymanski et al. (1993) The link between profitability and market share has special characteristics. 654 Moon et al. (1998) Multiactivity is a special factor for competitiveness models. ...
... Martin et al. (1993) Financial indexes Canadian manufacturing firms are less competitive than the USA ones. Szymanski et al. (1993) Financial indexes Concentration influences profitability and market share. Thomadakis and Droucopoulos (1996) Financial indexes Market influences negatively market share. ...
Competitiveness estimation is a crucial matter both at the firm and the national level. Consequently, the justification of the factors creating a competitive advantage combining with the ways which affect them and especially in manufacturing firms hold great importance because they perform as an advisory tool for the selection of the proper strategy for them. To provide a specific framework and to study the way in which specific factors affect the competitiveness of manufacturing firms a literature review was conducted. Papers from 1967 to 2022 were selected including all the existing methodologies for competitiveness estimation (Porter’s Five Diamonds and financial indexes) and their main results were presented. The main results of this work show the relationship between the variables used for the competitiveness estimation as well as the existence of the effect of different factors on it such as profitability, market share, and advertising as instruments for advice in choosing the best approach. Specifically, the effect of profitability on market share and vice versa is generally seen as well as the effect of factors such as customer satisfaction, tradition, etc.
... S heth and Sisodia (2002) published The Rule of Three: Surviving and Thriving in Competitive Markets to critical acclaim. Their book on market evolution and dynamics has wide-ranging corporate, marketing, investment, and policy implications, some of which are at odds with the positive linear market share-performance relationship that has been heavily debated in marketing and strategy literature (e.g., Buzzell 2004;Buzzell and Gale 1987;Ramanujam and Venkatraman 1984;Rumelt and Wensley 1981;Szymanski, Bharadwaj, and Varadarajan 1993). Sheth and Sisodia make the case that an industry structure consisting of three large generalists and numerous smaller specialists generates a competitive environment that is "optimal" for firm stability and profitability. ...
... Of particular importance to all business disciplines is the widely held conviction that market share and profitability are strongly positively related, both for U.S. markets (Buzzell and Gale 1987) and for foreign markets (Douglas and Craig 1983;Kotabe et al. 1991). According to the majority of studies on this topic, there is a linear (or at least monotonic) positive relationship between market share and financial performance (Branch 1980;Buzzell 2004;Kohli, Venkatraman, and Grant 1990;Shepherd 1972;Szymanski, Bharadwaj, and Varadarajan 1993). Bharadwaj and Varadarajan (2005) review seven schools of thought and directly link market share to financial performance in their integrated model. ...
... Finally, several researchers have challenged the Profit Impact of Market Strategy (PIMS) data set on which this relationship has typically been advanced (e.g., Anderson and Paine 1978;Ramanujam and Venkatraman 1984). Learning to date overwhelmingly depends on the PIMS foundation (Farris and Moore 2004), though a metaanalysis concluded that its use has led to inflated estimates of the market share-profitability relationship (Szymanski, Bharadwaj, and Varadarajan 1993). ...
This study represents the first empirical examination of the “Rule of Three,” a theory at odds with several popular notions regarding industry structure and business performance, including the positive linear market share–performance relationship. In general, the findings from more than 160 industries support the Rule of Three and provide five main insights: First, there appears to be a prevalent competitive structure for mature industries in which three “generalist” firms control the market. Second, industries that conform to this structure tend to perform better than industries with a fewer or greater number of generalists. Third, both “specialists” and generalists outperform firms that are “stuck in the middle.” Fourth, the performance benefits of market leadership appear to diminish with excessive market share. Fifth, the Rule of Three industry structure and its influence over firm profitability do not appear to be priced appropriately by financial markets. The authors discuss the implications for multiple stakeholders.
... Prior research supports a positive relationship between perceived product quality and market share (see Buzzell & Wiersema, 1981). However, if customers do not appreciate greater conformance to product specifications, a firm may be unable to charge higher prices (Szymanski, Bharadwaj, & Varadarajan, 1993). Alternatively, the usage of more expensive features to enhance product quality may lead to higher prices and reduced sales (and shrinking profits), if consumers do not accept higher prices (Szymanski et al., 1993). ...
... However, if customers do not appreciate greater conformance to product specifications, a firm may be unable to charge higher prices (Szymanski, Bharadwaj, & Varadarajan, 1993). Alternatively, the usage of more expensive features to enhance product quality may lead to higher prices and reduced sales (and shrinking profits), if consumers do not accept higher prices (Szymanski et al., 1993). Moreover, increasing the net effect of product quality to enhance customer satisfaction (and loyalty) may be difficult to predict, as superior quality requires more innovative components, less standardized procedures, and increased marketing efforts. ...
... Moreover, increasing the net effect of product quality to enhance customer satisfaction (and loyalty) may be difficult to predict, as superior quality requires more innovative components, less standardized procedures, and increased marketing efforts. If these extra costs cannot be passed on to consumers (eventuating in high customer satisfaction), profit margins would squeeze, and quality and profit would be inversely related (Phillips, Chang, & Buzzell, 1983;Szymanski et al., 1993). Thus, high customer satisfaction and loyalty do not necessarily lead to high profitability. ...
... Market share represents the proportion of sales volume or sales revenue of an enterprise to similar products in the market. Szymanski et al. (1993) [11] found that most researchers believe the size of enterprise market share can promote enterprise profitability. In the process of stateowned enterprises participating in mixed ownership M&A, if the enterprise merger can bring scale effect and synergy effect to the enterprise, the market share of M&A enterprises will increase, which will increase customers' trust in the enterprise's products. ...
... Market share represents the proportion of sales volume or sales revenue of an enterprise to similar products in the market. Szymanski et al. (1993) [11] found that most researchers believe the size of enterprise market share can promote enterprise profitability. In the process of stateowned enterprises participating in mixed ownership M&A, if the enterprise merger can bring scale effect and synergy effect to the enterprise, the market share of M&A enterprises will increase, which will increase customers' trust in the enterprise's products. ...
Due to the particular nature of ownership, the motivations for state-owned enterprises to participate in the mixed ownership M&A include not only the realization of corporate capital appreciation and value creation, but also some strategic factors at the national level, such as concentrating state-owned economic power to promote the development of the industry and maintaining stable social development. Based on the characteristics of the self-development of state-owned enterprises and the maximization of interests, this paper constructs the evaluation system of trust mechanism from five dimensions of shareholders’, creditors’, suppliers’, buyers’ and enterprises’ sincerity; constructs the evaluation system of innovation mechanism from three dimensions of technological innovation ability, market competitiveness and sustainable development ability; and the evaluation system of the mixed ownership M&A value of state-owned enterprises from four dimensions of Tobin’s Q, operating cash flow, return on total assets and corporate governance.
... B. Market Indicators: [6] 1) Market Share: Market share= (Enterprise sales)/(Total market sales) (5) This indicator shows the company's share of the total market. ...
... A positive relationship between brand popularity and perceived quality has also been established (e.g., Kim and Min, 2014;Kim, 2018;Steinhart et al., 2014). According to product quality assessment theory, customers use popularity as a signal not only for a brand's quality, but for the widespread acceptance of the brand's superior quality over other products (Szymanski et al., 1993). Popularity as a cue to quality is particularly relevant to first-time users of a given product or service. ...
... They also discuss the reasons of market share as economies of scale, market power and quality of management. Conducting a meta-analysis on 276 share -profitability findings from 48 studies, Szymanski, Bharadwaj, and Varadarajan (1993) concluded that market share positively affects business profitability. Wernerfelt (1986) analyzed when and to what extent market share is profitable to a firm and suggest that when a firm in a stable position, asymmetric equilibrium, a higher market share will correspond to a higher profit. ...
This study is conducted to examine the effects of market share on profitability. A panel data covering 8 full-fledged Islamic banks of Bangladesh and the period 2011-2020 is used for the analysis. Based on Hausman test, random effects model is chosen to estimate the effects of market share. Market share is represented in terms of asset as well as deposit. To measure profitability, return on equity is used. Investment is used as control variable. Time dummies are also used to account for time effects. Findings suggest that one percentage point increase in market share in terms of asset leads to 3.73 percentage points increase in ROE. Besides, if market share in terms of deposit increases by one percentage point, ROE increases by 3.14 percentage points. Based on these findings, Islamic banks of Bangladesh should consider increase in market share as one of the effective ways to enhance profitability. IIUC Business Review Vol. 9, Dec. 2020 pp. 103-110
... Competition reflects the structural characteristics of the living environment of firms. The change of competition degree can change the original structural characteristics of firms (Szymanski et al. 1993). In other words, when the market competition faced by firms increases, firms reconfigure the internal and external resources and change strategic choices to gain or maintain competitive advantages (Teece et al., 1997). ...
... This perspective is especially useful by considering the following applications. In finance, a company not only wants to maximize their profits but also to have a healthy market share (Szymanski et al., 1993;Genchev, 2012). But a realistic question is that the company cannot invest on every products. ...
We study an important variant of the stochastic multi-armed bandit (MAB) problem, which takes penalization into consideration. Instead of directly maximizing cumulative expected reward, we need to balance between the total reward and fairness level. In this paper, we present some new insights in MAB and formulate the problem in the penalization framework, where rigorous penalized regret can be well defined and more sophisticated regret analysis is possible. Under such a framework, we propose a hard-threshold UCB-like algorithm, which enjoys many merits including asymptotic fairness, nearly optimal regret, better tradeoff between reward and fairness. Both gap-dependent and gap-independent regret bounds have been established. Multiple insightful comments are given to illustrate the soundness of our theoretical analysis. Numerous experimental results corroborate the theory and show the superiority of our method over other existing methods.
... The literature on the measurement of performance supports the use of market share as a robust indicator of firm performance (Katsikeas, Morgan, Leonidou, & Hult, 2016;Talay, Townsend, & Yeniyurt, 2015;Guo 2013;Iversen & Hem 2011). It is also regarded as one of the principal determinants of business profitability (Faria & Wellington, 2005;Farris et al., 2006;Szymanski, Bharadwaj, & Varadarajan, 1993). ...
The international business literature, while extensive by now, has given scant attention to the direct comparison of the performance of advanced economy multinational enterprises (AMNEs) and emerging market multinational enterprises (EMNEs) in international markets. In particular, the question of how well these firms perform in each other's home markets is an intriguing one. In this study, we examine "market share" performance of AMNEs and EMNEs in each other's countries using a comprehensive, longitudinal dataset. Drawing from the eclectic paradigm , we contend that, in comparison, EMNEs perform better as they: i) develop non-traditional ownership advantages based on their learnings in their home markets, and ii) expand into advanced economy markets relying on non-traditional ownership advantages. Our findings show a declining performance of AMNEs operating in emerging markets over time, while EMNEs generally appear to benefit from increased market shares in advanced economy markets for the same period.
... According to industrial organisation theory, market share is related to monopoly power, which affects the markup ratio of price to cost (Gilbert 2006). In general, there is a positive relationship between market share and business profitability; however, the magnitude of the market share-profitability relationship is moderate (Szymanski, Bharadwaj, and Varadarajan 1993). Unless they are anchors or lead firms, the relationship between market share and GVC position is undetermined. ...
We investigate the effect of servicification on global value chain (GVC) upgrading within the context of China’s manufacturing industry. Utilising comprehensive data on manufacturing value-added, we present new evidence for the influence of servicification on the GVC position of the manufacturing industry in China. We find that although domestic and aggregate servicification enhances GVC, foreign servicification curtails the GVCs of manufacturing firms. Our results show that foreign direct investment, capital intensity and institutions are GVC enhancing. At the same time, the increased global market share of the Chinese manufacturing industry has reduced the GVC of manufacturing firms in China. From a policy perspective, the results highlight the need to take cognisance of the heterogeneity of manufacturing firms and the impact of domestic and foreign servicification on the GVC of manufacturing firms in China.
• Highlights
• Total servicification and domestic servicification enhanced the GVC position of Chinese manufacturing industry.
• Foreign servicification worsened the GVC position of Chinese manufacturing industry.
• Foreign direct investment, capital intensity and institutions are GVC-enhancing, while increased global market share is GVC-impeding.
• The GFC exacerbated the adverse impact of foreign servicification on the GVC position of Chinese manufacturing industry.
... According to the assumption, formulating the next pricing strategy, recycler 2 will take both his own market share [Dutta & King, 1980;Szymanski et al., 1993] and profitability into consideration. This is because higher market occupation rate will become an important criterion to achieve consumers' recognition. ...
Recycling and remanufacturing is one kind of production and operation mode in which enterprises maintain harmony and compatibility with the environment. This paper constructs a competition model for the recycling of reverse supply chain considering the behavioral factors of recyclers. In accordance with the definition of the fixed point, we calculate the four equilibrium points of the system and also analyze the local and global stability of the system. Different from former researches, this paper emphasizes on the study of the impact on the long-term operation and profit of the system by those behavioral factors. The study shows that: those behavioral factors of the enterprise, like price adjustment speed, the fairness concern coefficient, and the trade-off coefficient of market share, have significant effects on the size of the stability region. Through some simulation methods like the system’s price bifurcation diagram, maximum Lyapunov exponent, price power spectrum and so on, the characteristics of the system with its chaotic dynamics will be illustrated in this paper. The paper also focuses on the study of the impacts on the system’s profits by heterogeneous behavioral factors. It is furthermore found that once some drastic pricing strategies are being adopted, both the profits of any party and the operating efficiency of the entire system will be damaged.
... MS is significantly and positively related to profitability in Indian automobile firms as consistent with the existing studies on market share-profitability linkages (Buzzell et al., 1975;Mazumdar, 2013;Mukhopadhyaya et al., 2012;Petria et al.;2015;Szymanski et al., 1993) while its quadratic term MSSQ shows insignificant association with the profitability. Giant market leaders enjoy consumer preference as large market share acts as an entry barrier for new entrants. ...
This study tends to examine the firm-level profitability determinants of Indian automobile and ancillary industry which is recognised for its global competitiveness. The study uses recent dataset to investigate the firm-level profitability determinants in the Indian automobile and ancillary industry and records the effect of shifts in profitability due to change in economic environment. This study intends at using real financial balanced panel data for a period 1999–2019 and applies the two-step system generalised method of moments regression model with robust standard errors. The study has found that lagged profitability, marketing and advertising intensity, firm’s market power and operational efficiency have exercised positive impact on firm-level profitability. Negative and statistically significant impact of raw material import intensity and export intensity highlights the need of planning and implementation of appropriate investment strategies. The findings of this study suggest that firms should pay more attention to optimise their operating expenditures, marketing and advertisement expenditures and expand their market power as a part of their survival and growth strategy.
JEL Code: L25
... We measured sales growth as the compounded annual growth rate in sales, calculated as the natural logarithm of Sales J,T divided by Sales J,TÀ1 for firm J in year T (Brush et al., 2000). Early studies have also found a positive association between market share and firm performance (Montgomery & Wernerfelt, 1988;Szymanski et al., 1993), for example, due to greater market power (Smirlock et al., 1984). We, therefore, included market share as a control variable and measured it as the ratio of a firm's annual sales to the total annual sales of the industry (Bharadwaj et al., 1999). ...
... According to t ratios market share is a statistically significant determinant of sales growth, only during the crisis period (2010-2016) with a positive association. The positive sign is in line with previous studies (Gale, 1972;Szymanski et al., 1993). It should also be noted that the regression coefficient has the greatest effect on the dependent variable compared to the rest of the coefficients. ...
This paper aims at determining the critical factors affecting the growth of the tourism sector in Greece, by using data for an extensive panel of Greek tourism enterprises for 2005–2016 period. As the Greek economy is trying to recover from a deep and prolonged recession, exploring growth issues in specific sectors could help identify those sectors which could act as drivers of growth for the Greek economy out of the recession. The tourism sector, which accounts for almost 25% of GDP in Greece (directly and indirectly), is an obvious candidate for contributing to this goal. The econometric results suggest that the recent crisis has resulted to a differentiation of the determinants of growth of Greek tourism firms.
This paper takes up the interesting phenomenon and behavior observed in practice of some firms which appears contrary to the normally expected market-share maximizing behavior. In practice, many firms have been found to not pursue market share relentlessly and aggressively, (which we refer to as the Active Phase) but prefer rather to level off their market share after a point of time (the Passive Phase) or exit the market. In this paper, we analyze such behavior through a simple mathematical model and examine whether there could be economic reasons for such behavior, and whether it would make for a good economic and financial decision. We find that in the Infinite Horizon case, it would not be optimal to withdraw from active marketing but to actively pursue market share indefinitely, whereas in the Finite Horizon case, we find that there could be a point of time where the Passive Phase could also be a viable option to pursue, and a profitable/beneficial economic decision.
Purpose
Market share gain is one of the key objectives for all firms for seeking growth. It is also a fundamental aspect of competitive rivalry. The extant review of the literature points to a gap among market share performances of emerging market multinationals (EMNEs) firms, advanced economy multinationals (AMNEs) and local firms. The purpose of this study is to delineate and contrast the market share performance of EMNEs, AMNEs and local firms in Africa.
Design/methodology/approach
The study used available longitudinal data (2013–2022) of six industries across four African countries from Euromonitor Passport, a rich, proprietary database.
Findings
Applying contingency theory, the study shows that, over time, there is no clear-cut winner in all markets and industries. Rather, market share gain is contingent on country and industry settings in Africa. Empirical analysis demonstrates that high-tech EMNE firms operating in Africa will exceed those of high-tech AMNEs and local firms. The findings also show that local firms generally performed better during the pandemic.
Originality/value
As Africa is a region of interest for scholars and practitioners, critical international business (IB) research contributions in Africa have predominantly focused on foreign investments from a particular nation. The present study enriches the literature by comparing the market share performance of AMNEs, EMNEs and local firms in this important region – during and prepandemic. The study offers theoretical and managerial implications for understanding the long-term performance of these three types of firms.
Purpose
This study aims to explore how logistics firms exploit lean logistics and corporate green practices as significant catalysts for achieving business excellence via the mediation roles of green internal stakeholder satisfaction and green external stakeholder satisfaction.
Design/methodology/approach
Questionnaire is used in garnering data from 137 Ghanaian logistics firms. Structural equation modeling, particularly partial least squares, was applied to test all hypotheses.
Findings
The results confirm the notion that although lean logistics has positive effect on business performance, the effect is insignificant; hence, it is the concurrent implementation of lean logistics and corporate green practices that leads to superior business performance. The mediation analysis further confirms that both green internal stakeholder satisfaction and green external stakeholder satisfaction are significant precursors through which logistics firms can achieve superior business performance when lean logistics and corporate green practices can influence business performance.
Research limitations/implications
Data is collected from logistics firms from a single country. Hence, the results obtained cannot be imported to reflect the general occurrence in other geographical settings.
Practical implications
This study informs managers of logistics firms that lean and green strategies are compatible when implemented together; hence, it should not be treated in isolation. Managers are further enlightened that in their pursuit of business excellence, there is a need to prioritize green internal stakeholder satisfaction and green external stakeholder satisfaction via prudent investment in lean and green practices.
Originality/value
The research model proposed in this study magnifies the literature on lean and environmental management via bridging the literature gap concerning the interrelationship between lean logistics, corporate green practices, green internal stakeholder satisfaction, green external stakeholder satisfaction and business performance.
The study analyzed the effect of abnormal marketing and capital expenditure on firm value. Public firms in consumer staples sectors within the Association of Southeast Asian Nations (ASEAN)-5 countries, such as Indonesia, Malaysia, Thailand, the Philippines, and Vietnam, were chosen as the sample. Data collection yielded 432 data points from 144 firms during the period 2018–2020. The effect of abnormal marketing and capital expenditure on firm value was analyzed using cross-sectional regression analysis. The dependent variable was firm value, proxied by Tobin’s Q. The independent variables were abnormal marketing and capital expenditure. Abnormal marketing expenditure was measured using the difference between the marketing expenditure to total assets ratio for the year of interest, that is, 2018–2020, and the 5-year average of the marketing expenditure to total assets ratio for the years 2013–2017. The same methods applied to abnormal capital expenditure. The control variables were internal financial constraints, that is, Kaplan–Zingales (KZ) index; external financial constraints, that is, financial development index; and COVID-19, which is a dummy variable with a value of 1 for the pandemic period and zero otherwise. The study revealed that positive abnormal marketing and capital expenditure exhibit an adverse impact on firm value and financial constraints increase the negative effect of abnormal marketing and capital expenditure on firm value.
Purpose
This paper aims to analyze variations in the parameters of the market share–rank power law across consumer packaged goods (CPG) categories.
Design/methodology/approach
The authors use a two-level hierarchical linear model to examine the relationships between category-level variables and the parameters of the market share–rank power law in 790 CPG categories.
Findings
The slope of the market share–rank power law is shallower – indicating more equal market shares – in categories of high importance to retailers and those with high levels of promotional activity or high-volume purchases. Higher levels of market share inequality are associated with categories with high overall prices.
Research limitations/implications
To the best of the authors’ knowledge, this is the first research to show the systematic influence of category characteristics on the relationship between brands’ market shares and their ranks, thus, identifying a key moderator for this important empirical generalization in marketing.
Practical implications
While market leadership may be a desirable goal for many brands, the corresponding market share at the top brand does vary. Moreover, the share premium for being number one in the category (gap between the top and other highly ranked brands) can be greatly affected by retailers’ strategies. In addition, the slope of the power law has desirable qualities as a measure of market concentration. However, the empirical study shows that category characteristics must be considered when analyzing differences in concentration across categories or time.
Originality/value
While other studies document variations in the market share–rank power law relationship, to the best of the authors’ knowledge, this is the first that models these variations as a function of observable category characteristics. The comprehensive nature of the data demonstrates the universality of the market share–rank power law relationship across CPG categories in the USA.
Exploring how SRDI enterprises achieve high‐quality development constitutes a pivotal task for small and medium‐sized enterprises (SMEs) and niche leaders. While prior research primarily concentrated on the influence of innovative policies on SRDI enterprises, it has disregarded the intrinsic propelling forces intrinsic to these enterprises. To bridge this research gap, our study leverages a machine learning model that incorporates 19 feature variables spanning four dimensions—“specialization, refinement, distinctiveness, and innovation”—to anticipate high‐quality development in enterprises. Drawing on a sample of 667 A‐share SRDI‐listed enterprises from 2012 to 2022, and after subjecting the data to preprocessing, the study employs the mean of five machine learning models to predict high‐quality development in enterprises. Moreover, we discern pivotal feature variables and dimensions. Notably, outcomes underscore the paramount significance of market share in achieving high‐quality progress within SRDI enterprises, with refinement emerging as the foremost feature dimension among the four. Moreover, during the three stages delineated by SRDI policies, research and development intensity, equity financing, and market share emerge as the preeminent feature variables within their respective stages.
The servitization literature has evolved into a rich field of academic inquiry that today calls for a consolidation of extant knowledge and opens new opportunities for meta-analytic reviews. The present research provides a fine-grained understanding of the servitization–firm performance relationship. We first develop an integrative conceptual framework that systematically ties together factors identified in prior research that affect the relationship. Through a meta-analysis of 379 effect sizes across 85 studies, we then provide broad-based empirical evidence that servitization indeed exerts a positive effect on firm performance. We further examine a broad set of potential moderators affecting the servitization–performance relationship to understand and explain the heterogeneity and, at times, the inconsistency of prior results regarding the relationship’s directionality and strength. Finally, we provide guidance for future research, from both a substantive and methodological standpoint, and sketch out an integrative conceptual model for future research.
We study a courier dispatching problem in an on-demand delivery system in which customers are sensitive to delay. Specifically, we evaluate the effect of temporal pooling by comparing systems using the dedicated strategy, with which only one order is delivered per trip, versus the pooling strategy, with which a batch of consecutive orders is delivered on each trip. We capture the courier delivery system’s spatial dimension by assuming that, following a Poisson process, demand arises at a uniformly generated point within a service region. With the same objective of revenue maximization, we find that the dispatching strategy depends critically on customers’ patience level, the size of the service region, and whether the firm can endogenize the demand. We obtain concise but informative results with a single courier and assuming that customers’ underlying arrival rate is large enough, meaning a crowded market, such as rush hour delivery. In particular, when the firm has a growth target and needs to achieve an exogenously given demand rate, using the pooling strategy is optimal if the service area is large enough to fully exploit the pooling efficiency in delivery. Otherwise, using the dedicated strategy is optimal. In contrast, if the firm can endogenize the demand rate by varying the delivery fee, using the dedicated strategy is optimal for a large service area. The reason is that it is optimal for the firm to sustain a relatively low demand rate by charging a high fee for a large service radius: within this large area, the pooling strategy leads to a long wait because it takes a long time for multiple orders to accumulate. Moreover, with an exogenous demand rate to meet, customers’ patience level has no impact on the dispatch strategy. However, when the demand rate can be endogenized, the dedicated strategy is preferable if customers are impatient. Furthermore, we extend our model to account for social welfare maximization, a hybrid contingent delivery policy, a general arrival rate that does not have to be large, a nonuniform distribution of orders in the service region, and multiple couriers. We also conduct numerical analysis and simulations to complement our main results and find that most insights in our base model still hold in these extensions and numerical studies.
This paper was accepted by Jeannette Song, operations management.
Funding: This work was supported by the Natural Sciences and Engineering Research Council of Canada [Grants RGPIN-2015-06757 and RGPIN-2021-04295].
Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mnsc.2023.4858 .
Although prior research in operations management has explored the working capital—firm performance relationship, the results from these studies remain inconclusive, with studies finding positive, curvilinear, or even insignificant relationships. This is largely due to contingent factors that make this relationship both complex and idiosyncratic. To strengthen the beneficial effect of working capital on performance, firms must therefore make appropriate investments that would foster more objective, informed, and firm‐specific working capital choices. This article examines one such investment, namely in information technology (IT), that can allow firms to optimize the working capital–firm performance relationship. This is important, as the role of IT in this relationship is yet to be explored. Using proprietary IT data from the Harte Hanks database, and based on a sample of 1,054 US‐based manufacturing firms during 2011–2013, we find that IT investment positively moderates the performance effects of inventory, payables, and receivables cycles, and that these moderating effects vary by the type of IT investment, namely IT infrastructure and IT labor. Drawing on the theory of the Smart Machine, we explain how IT infrastructure and IT labor perform distinct roles that can help automate (i.e., use technology to increase the speed and accuracy of process execution) and/or informate (i.e., use technology to create new information), thereby moderating the working capital–firm performance relationship. We argue and find evidence that, due to the largely transactional nature of working capital processes, IT infrastructure has a relatively stronger moderating effect on performance than IT labor.
Drawing together contributions from leading thinkers around the world, this 2007 book reviews developments in the theory and practice of performance measurement and management. Significantly updated and modified from the first edition, the book includes ten additional chapters which review performance measurement from the perspectives of accounting, marketing, operations, public services and supply-chain management. In addition to these functional analyses the book explores performance measurement frameworks and methodologies, practicalities and challenges, and enduring questions and issues. Edited by one of the world's leading experts on performance measurement and management, Business Performance Measurement will be of interest to graduate students, managers and researchers who wish to understand more about the theory and practice of performance measurement and management.
Drawing together contributions from leading thinkers around the world, this 2007 book reviews developments in the theory and practice of performance measurement and management. Significantly updated and modified from the first edition, the book includes ten additional chapters which review performance measurement from the perspectives of accounting, marketing, operations, public services and supply-chain management. In addition to these functional analyses the book explores performance measurement frameworks and methodologies, practicalities and challenges, and enduring questions and issues. Edited by one of the world's leading experts on performance measurement and management, Business Performance Measurement will be of interest to graduate students, managers and researchers who wish to understand more about the theory and practice of performance measurement and management.
China's regional market segmentation weakens the market mechanism, creates convenience for enterprises with high market share to obtain market power, and will eventually reduce the effectiveness of market competition. However, infrastructure such as high-speed rail (HSR) can break the market segmentation and improve the effectiveness of market competition. In this end, based on the data of Chinese A-share listed companies from 2007 to 2019, this paper constructed a quasi-natural experiment model to examine the relationship between the opening of high-speed railway and the effectiveness of market competition. This paper finds that: (1) the opening of HSR can help restrain the market power of enterprises with high market share; (2) the opening of HSR has a more significant effect on spatially dispersed industries, low capital-intensive enterprises, non-eastern enterprises, manufacturing industries and non-heavy asset industries; (3) the opening of HSR will inhibit the advantages of enterprises with high market share in expanding sales and R&D innovation, thus reducing their market power. The conclusion still holds after considering important factors such as city administrative level, traditional transportation capacity, company stock price crash risk and merger and reorganization (M&A). The findings of this paper mean that the space-time compression effect brought by the opening of HSR will reduce the market power of enterprises brought by market segmentation, and then improve the effectiveness of market competition. Therefore, we should fully tap the value of HSR to help high-quality economic development.
Multinational corporations (MNCs) must balance opportunity-seeking initiatives locally with global programs and imperatives. This balancing act between generating and responding to local insights and exploiting standardized marketing programs calls for some form of marketing agility. Under this lens, our study investigates the relationship between market orientation (MO) and marketing program standardization (MPS) — two critical marketing capabilities —and their dual effects on subsidiary performance. We compare the cases of Western MNCs’ subsidiaries operating in Japan and Turkey and inquire about the moderating role of a country’s economic development (advanced vs. emerging market) and an industry’s global competitive interdependence. Analyzing MO at the sub-component level, we find a positive relationship between responsiveness and MPS in both markets. MPS also functions as a partial mediator between responsiveness and profitability in an advanced market. In an advanced market, both responsiveness and MPS are positively related to profitability and market share. In an emerging market, MPS is negatively related to profitability in support of adapting the marketing program. Our results and follow-up discussions with executives from established multinationals support the conceptualization of MO and MPS as reflections of international marketing agility in subsidiaries.
The level of diversity within a company’s technology portfolio is one of the most important factors impacting its long-term adaptability and financial performance. In this study, we investigate how industry conditions, as well as a firm’s market share within the industry, have systematic influences on the profitability of diverse technological portfolios. Using matched patent and performance data across all US manufacturing industries from 1976 to 2006, we show that greater technological diversity increases the firm’s profitability when (1) it has a high market share, (2) there is a low level of industry concentration, or (3) there is a low level of industry dynamism. In contrast, greater technological focus increases the firm’s profitability when it has a low market share, there is a high level of industry concentration, or there is a high level of industry dynamism.
This paper empirically examines the marketing strategy of advanced technological companies by contemplating the critical role of innovation and advertising when using market share as the central marketing metric. The focus of the empirical setting is the U.S. Information and Communications Technology industry, which includes 150 manufacturing and nonmanufacturing companies over a 10 year period. Surprisingly, the importance of the qualitative characteristics of the industry and its strategic initiatives are largely ignored in the literature. Our quantitative study demonstrates R&D has a significant positive effect on companies’ performance. Increasing the R&D share and the number of patents granted in advanced technological companies raises market share and revenue whereas increasing advertising alone has no significant effect on market share and revenue. Advertising effectiveness in this industry is systematically moderated over a short time. The results imply maintaining innovation efforts in advanced technology industries is necessary to yield better performance.
We investigate the unique role and mechanisms of industry growth in firms’ risk-taking policies. We find that industry growth is negatively associated with corporate risk-taking, consistent with the prospect theory that a high-growth industry gives firms a superior external environment, which may cause them to refrain from corporate risk-taking as in the saying “thinking of peace when rich.” This correlation is stronger for product market leaders, industries encouraged by industry policies and industries that receive more government support. Firms reduce risk-taking through various corporate policies, including long-term, high-value investments, operational efficiency and cash holdings in response to high industry growth. Overall, our results are consistent with industry growth negatively affecting corporate risk-taking.
Investors' attention to a firm's stock has been demonstrated to influence stock returns (Da et al., 2011). But does a firm's marketing information draw attention to a firm's stock? Research in finance, accounting, and marketing has investigated advertising as one potential driver of investors' attention to a firm's stock. How about other potential marketing drivers? The authors develop hypotheses related to the impact of the changes in four marketing levers: advertising, product development announcements, WOM, and customer satisfaction on the change in investor attention to a firm's stock. Furthermore, they investigate the moderating role of competitors' marketing levers in these relationships.
To test the hypotheses, they compile a panel dataset with 349 firms covering the 2007-2017 period. The results suggest that the changes in the focal firm's advertising and WOM have a positive and significant impact on the changes in investor attention to the focal firm’s stock. Furthermore, these effects are amplified when there is an increase in competitors' advertising spending and WOM, respectively. For the customer satisfaction lever, the results suggest that the change in competitors' customer satisfaction enhances the impact of the change in focal firm's customer satisfaction on investor attention. Collectively, the results suggest that investors attend to the firm's and its competitors' marketing information in a much more nuanced manner than previously thought.
Given the role and importance of competitiveness indicators for businesses’ performance and profitability, the question arises why no research has been undertaken internationally in this regard. Therefore, the main purpose of the present study is to investigate the impact of competitiveness index on the financial performance of top companies in the world using performance theory and to evaluate the validity of Global Competitiveness Index data. For this purpose, 176 top companies in the world from 2013 to 2018 that were profitable among the top 200 companies each year were selected as the statistical population. World Bank annual reports, Global Competitiveness Index, and Fortune site were used to collect the data. Also, the data analysis was done according to the panel data method using Eviews10 software. The results show that in general, there is a positive relationship between competitiveness index and financial performance of top companies in the world. On the other hand, the per capita income of the countries in which the top companies belonged was considered a control variable and the results show that the per capita income has a positive and significant relationship with the financial performance of the top companies in the world.
Mergers and acquisitions (M&As) are often surrounded by uncertainty since they do not always deliver the anticipated results. The uncertainty ascribed to the outcomes of M&As is not a boundary concept, rather guides firms’ decision in favour of or against undertaking M&As. Typically, M&As suffer from estimation biases. Moreover, M&As are always treated synonymously as a single entity. Thus, evaluating M&A as a single event under traditional stationary specifications is not adequate for capturing the disaggregate effect of an individual event. This study examines announcement returns of both events individually under the asymmetric specification. Asymmetric specification captures the variance of uncertainty associated with the event outcome for each set of events. The findings further document acquirers (acquisition sample) register pre-announcement wealth loss, but not so with mergers. The cross-sectional analysis indicates that the announcement returns under asymmetric specification are associated with the deal characteristics of both sets of events, except deal premium.
Der Leser kennt die verschiedenen Kategorien von Zielen in Unternehmen und insbesondere die verschiedenen Kategorien von Marketingzielen.
Voluminous research documents marketing’s ability to produce results. However, there is limited direct evidence relating firm marketing expenditure to profitability, or marketing efficiency. The challenge arises from poor data availability on marketing decisions in firms and questionable surrogates commonly used in place of marketing expenditure. In response, we collect actual marketing expenditure data in a representative sample of firms and investigate the relationship between marketing intensity and common measures of current and future performance. We find the impact to be positive. We contrast these results with findings based on selling, general and administrative expense (SG&A), which is a popular marketing proxy. We show that using SG&A may lead to questionable inferences about the impact of marketing spending on accounting performance. We propose an alternate, less noisy, approximation to total marketing expenditure and investigate the focal relationship among our sampled firms which do not disclose their marketing costs.
This paper analyses the development of a performance assessment model for the most important listed companies operating in the energy sector, using a dataset obtained merging different sources. The construction of the model is based on a multiple criteria decision aid approach considering various indicators. The multidimensional nature of the topic in this paper requires the definition of a hierarchical structure of criteria, which has been aggregated into a composite index to obtain a final ranking for the energy companies under investigation. To handle with a hierarchical criteria structure and to take into account the space of fluctuations related to the imprecision on criteria weights, we employ the Hierarchy Stochastic Multi-Attribute Analysis. Thus, the proposed model is able to evaluate the performances of energy companies under different uncertainty scenarios. The results indicate that the first and last positions are quite robust in all considered scenarios, while the rankings relative to the intermediate positions vary widely by the chosen set of weights, exemplifying the need to rank companies based on multiple sets of criteria weights.
This paper considers a Stackelberg game model in a dual-channel supply chain, which is composed of a manufacturer and a retailer. The manufacturer and retailer consider fairness concern in the market competition, and the manufacturer takes market share and profit as his/her business objectives. The entropy complexity and dynamic characteristic of the dual-channel system are analyzed through mathematical analysis and numerical simulation, such as local stability, bifurcation, entropy, and chaos. The results show that, with the increase of price adjustment speed, the dual-channel supply chain is more complex and falls into a chaotic state in which system entropy increases; the stability of the dual-channel supply chain will be robust with the increase of weight of market share and weaken with the increase of the fairness concern level of the manufacturer and retailer. The high level of fairness concern of the manufacturer and retailer is always disadvantageous to the leading manufacturer but not always bad for the follower retailer. The performance of the dual-channel supply chain is improved with a high level of the manufacturer’s fairness concern and reduced with a high level of the retailer’s fairness concern. We also find the retailer will gain more profits in the chaotic state than the stable state in the Stackelberg game model. The variable feedback control method is applied to control the chaos of the dual-channel supply chain, and choosing appropriate control parameters can make the dual-channel supply chain system return to the stable state from the chaotic state, or delay the system to enter the bifurcation state. The research results can provide a guideline for enterprise decision-making.
Presently, the prediction of share is a challenging issue for the research community as share market is a chaotic place. The reason behind it, there are several factors such as government policies, international market, weather, performance of company. In this article, a model has been developed using long short term memory (LSTM) to predict the share price of DLF group. Moreover, for the experimental purpose the data of DLF group has been taken from yahoo financial services in the time duration of 2008 to 2018 and the recurrent neural network (RNN) model has been trained using data ranging from 2008 to 2017. This RNN based model has been tested on the data of year 2018. For the performance comparison purpose, other linear regression algorithms i.e. k-nn regression, lasso regression, XGboost etc has been executed and the proposed algorithm outperforms with 2.6% root mean square error.
Firm’s operating contexts and asymmetric perspectives of success versus failure outcomes are two essential features typically absent in research on firms’ implemented strategies. The study here describes and provides examples of formal case-based models (i.e., constructing algorithms) of firms’ implemented strategies within several of 81 potential context (task environments) configurations—large versus small, service versus production orientation, low versus high competitive intensity, low versus high technological turbulence, and ambiguous settings for each. The study applies the tenets of complexity theory (e.g., equifinality, causal asymmetry, and single causal insufficiency). The study proposes a meso-theory and empirical testing position for solving “the crucial problem in strategic management” (Powell et al. Strategic Manage J. 32(13):1370, 2011)—firm heterogeneity—why firms adopt different strategies and structures, why heterogeneity persists, and why competitors perform differently. A workable solution is to identify/describe implemented executive capability strategies that identify firms in alternative specific task environments which are consistently accurate in predicting success (or failure) of all firms for specific implemented capabilities/context configuration. The study shows how researchers can perform “statistical sameness testing” and avoid the telling weaknesses and “corrupt practices” of symmetric tests such as multiple regression analysis (Hubbard, 2015) including null hypothesis significance testing (NHST). The study includes testing the research issues using survey responses of 405 CEO and chief marketing officers in 405 Hungarian firms. The study describes algorithms indicating success cases (firms) as well as failure cases via deductive, inductive, and abductive fuzzy set logic of capabilities in contexts solutions.
Environmental management practices (or “EMPs”) afford a firm the opportunity to reduce the effects of its activities and products on the natural environment. However, companies compete in different industry contexts, and currently little is known about the moderating effects of these contexts on firm profitability. Improved understanding of how industry context influences the relationship between a firm’s environmental practices and its financial outcomes is needed to help managers make better EMP investment decisions. Combining insights from resource-based theory and industrial organization theory, this paper formulates and empirically investigates how the effects of a firm’s EMPs on its financial performance are contingent upon the joint influence of industry concentration and industry growth. Empirically rebuttable hypotheses are tested by fitting a multi-level model. We find that firms within high growth/high concentration industries that implement EMPs realize the greatest improvement in financial performance. Additionally, industry growth amplifies the effect on firm financial performance of engaging in EMPs in relatively concentrated industries, but not in less concentrated ones. The study’s findings shed valuable light on the possible context-influenced role and effect of EMPs, including potential managerial and policy implications.
In response to certain discrepancies prevalent in the debate on global advertising, we have identified important gaps in the global advertising literature. The focus of this inquiry is an investigation of the operational aspects of the standard advertising strategy by multinational companies (MNCs). Specifically, the authors attempt to identify the path to strategic implementation of standard advertising strategy through network analysis, with the determinant factors that play an important role in determining the degree of advertising strategy. The findings suggest that the extent to which multinationals can standardize their international advertising strategies will depend on the level of similarity among the countries in the network. The authors highlight that, given the inconsistency that exists in observation, it is evident that a single distinctive strategy for standard advertising may be followed by MNCs which can be the optimal solution of standardized global advertising for sustenance in the presence of steep competition. The authors discuss and highlight the various implications of the findings for business practitioners. The authors conclude the study by showing the scope for future research along with the limitations of the study.
The authors propose that a general class of market response models with marketing parameter equations be used for the study of marketing interactions. They inventory alternative model specifications of marketing mix interactions, along with the estimation procedures, and compare two that are relevant in an application to the determinants of U.S. Navy salesforce effectiveness. The authors also illustrate the importance of modeling interactions as a basis for making inferences about marketing mix resource allocation.
Despite recent attention to organizational issues in the management of advertising, sales, new product development, and channels, there has been little empirical study of the management of the marketing research function. The study reported complements earlier work on the use of marketing information in consumer goods businesses by examining factors seen as affecting the use of marketing information in industrial firms.
A meta-analysis of 213 applications of diffusion models from 15 articles relates model parameters to the nature of the innovation, the country under study, model specification, and estimation procedure. The effect of use of the same data by several researchers is examined, as are weighting schemes for improving efficiency of the meta-analysis. A Bayesian scheme is used to combine results from the metaanalysis with new data for estimation of parameters in a new situation.
The authors evaluate several factors affecting the attention given to or “use” of specific market research information by marketing managers. They apply path analysis to test a model of research use involving 11 variables. Factors found to be especially important are organizational structure, technical quality, surprise, actionability, and researcher-manager interaction. The topic and findings of the study relate to a central activity of the marketing profession—the application of knowledge—and to the use of an important product—market research. Both the knowledge system of marketing and the behavior of managers as consumers of research products have been relatively neglected.
In a broad cross section of consumer goods businesses, market pioneers generally have substantially higher market shares than late entrants. In fact, the empirical association between order of entry and market share is almost as strong as the association between market share and return on investment. The authors examine theoretical sources behind this relationship. The empirical results suggest that the higher pioneer shares are derived from firm-based superiority as well as from consumer information advantages. Nine hypotheses are developed and tested empirically. The results also indicate that order of market entry is a major determinant of market share.
The authors attempt to assess what has been learned from econometric models about the effect of advertising on sales. Short-term and long-term advertising response as well as model fit are analyzed for 128 econometric models involving the impact of advertising on sales. The approach, a form of meta-analysis called “replication analysis,” treats the studies as imperfect experimental replications and uses ANOVA to identify sources of systematic variation. For short-term advertising elasticities, systematic variability is found related to model specification, estimation, measurement, product type, and setting of study. For advertising carryover and model goodness of fit, the “quasi-experimental design” is so imperfect that a high degree of sharing of explained variance among explanatory factors makes it difficult to identify the impact of a particular factor. Because the studies mostly address mature products in the U.S., suggestions are made for research needs crucial to better understanding of how advertising affects sales.
The authors investigate the effects of the organizational structure used for marketing planning on the credibility and utilization of marketing plans. Data on 53 organizations were obtained from multiple respondents in the marketing areas of those organizations. The results indicate that a bureaucratized planning structure with formal rules and procedures and departmental specialization can enhance both plan credibility and utilization. However, high centralization of authority affected these variables negatively. The explanatory mechanisms suggested by these results are discussed and managerial implications presented.
Although much study has examined how and why consumers use information in making product choices, little work has been done on the use of market research information in product/service policy decisions. The authors report on the producer side of the market research dyad (market researchers’ perceptions of the use of research) to complement an earlier JMR article on the manager side of the dyad. Findings indicate that although both managers and researchers are very satisfied with the end product, they differ widely on the factors they believe to be most important in making research useful.
The authors conducted a meta-analysis of the generics literature. The meta-analysis reveals the strongest predictors of a proneness to buy generic products are consumer perceptions of generics’ quality and price and consumers’ overall evaluation of generic products. Demographic and psychographic variables and consumer shopping behaviors are related only weakly to consumers’ proneness to buy generics.
Relatively little is known about how managers interact with marketing decision support systems such as a computer simulation. The authors investigate individual difference variables to determine their role in influencing the utilization of and satisfaction with one component of a marketing decision support system. The research vehicle used is a computer simulation model for assisting decision making in retailing. The findings indicate that risk averseness, involvement, cognitive differentiation, and age are important predictors of utilization and satisfaction. Managerial implications of the findings are discussed.
This article shows that distributions of market shares in narrowly-defined product markets follow the same general pattern found in earlier studies of broad “industries” and in the economy as a whole. Typically, the structure of a market conforms to the semi-logarithmic distribution; this pattern is so pervasive as to suggest that it is a “natural” phenomenon. The nature of growth processes that lead to unequal distributions of size is explored, and evidence from the PIMS data base is used to test two key assumptions about business growth and its relationship to size.
The authors propose that a general class of market response models with marketing parameter equations be used for the study of marketing interactions. They inventory alternative model specifications of marketing mix interactions, along with the estimation procedures, and compare two that are relevant in an application to the determinants of U.S. Navy salesforce effectiveness. The authors also illustrate the importance of modeling interactions as a basis for making inferences about marketing mix resource allocation.
A central assumption of meta-analysis is that the sample of studies fairly represents all work done in the field, published and unpublished. However, if studies with “poor” results are less likely to be published, a potential publication bias is present. The authors propose a maximum likelihood approach to estimating publication bias for the situation in which censorship based on effect size may occur. An explicit hypothesis test is provided for testing whether or not censorship is present. The method also simultaneously estimates the proportion of studies censored, the threshold past which censorship is avoided, and the probability of censorship if a potential observation is under the censorship threshold. Two published meta-analyses are examined and some publication bias is found in each, but no publication bias is detected in a meta-analysis of proprietary research data.
A behavioral simulation in a laboratory setting was used to investigate decision makers’ evaluation and use of marketing research results. Propositions about the persistence of the decision makers’ prior beliefs under various research design conditions (qualitative interview or quantitative survey, convenience or probability sampling, large or small sample size) were tested. Support for most of the propositions is found, suggesting that research confirming prior beliefs tends to be rated higher and used whereas research contrary to prior beliefs tends to be evaluated as poor and is less likely to be used.
The author describes a meta-analysis of econometric studies that estimated the elasticity of selective sales or market share to price. The literature review yielded 367 suitable price elasticities from about 220 different brands/markets. The results indicate that the price elasticity is significantly negative and, in absolute value, eight times larger than the advertising elasticity obtained from a prior meta-analysis. The omission of distribution or quality, the use of only cross-sectional data, and temporal aggregation lead to severe biases in the estimates of price elasticity. The elasticity also differs significantly over the brand life cycle, product categories, estimation methods, and countries.
Empirical studies assessing the role of market share in influencing profitability have been challenged because of their inability to distinguish among competing hypotheses. The author addresses this concern by estimating a reduced form model of profitability. The estimated reduced form, producing market share coefficients indistinguishable from zero, is consistent with an underlying structural model with no direct market share effect. The bivariate correlation between market share and ROI arises primarily from a failure to control for the unobservable factors contemporaneously influencing both variables and inducing serial correlation in ROI models. An alternative structural model that both contains a substantial market share effect and is consistent with the estimated reduced form is not apparent.
The process of knowledge utilization within firms has come to be viewed as an increasingly important area for research in light of its implications for organizational effectiveness. However, our current understanding of this phenomenon is limited because the process of knowledge use in organizations is complex and difficult to conceptualize and measure. Building on prior research in public policy, sociology, marketing, and other administrative disciplines, the authors first explicate the nature of knowledge utilization and propose a framework for circumscribing the concept of knowledge utilization. Next, using an emerging theoretical perspective on knowledge utilization, the “organizational” view, the authors present a conceptual model and research propositions that provide insights into informational and organizational factors that affect marketing knowledge utilization in firms.
The author presents a framework for thinking about the impact of information and information technology on marketing. The focus is on the concept of “information” or “knowledge” as both an asset to be managed and a variable to be researched. After developing a particular operationalization of the value of information in marketing contexts, which can be used to describe firms in terms of their relative levels of “information intensity,” the author presents a series of propositions examining the consequences of increasing information intensity for some key components of firm strategy and organizational structure. The concepts discussed are illustrated with a description of the transaction-based information systems that are being implemented in a variety of firms in pursuit of competitive advantage.
This article evaluates the dynamic interaction of market share and profit. The determinants of market share are compared with published empirical research and illustrated in a consumer product industry. The effects of market growth, maturity and decline, competitive attack, price leadership, and heavy user strategies on market share and profit are analyzed theoretically and simulated over a 10-year period.
Few strategy concepts are more likely to give misleading insights than the experience curve. As a result there is considerable disenchantment with the simplistic market share prescriptions that marked the early applications. Nonetheless, the experience curve remains an extremely useful organizing framework when scale, technology and learning effects are influential forces in the environment. This article reviews the measurement and interpretation problems that have to be overcome before the experience curve can be productively applied. Conclusions provide rewarding topics for further research.
The market share-ROI relationship is examined to determine the extent of the causal versus spurious association. By making use of the PIMS data base, it is found that a large proportion of the association is spurious in the sense that both market share and ROI are the joint outcome of some third factor(s). The direct impact of market share on ROI is found to be much smaller than previous studies have indicated. It is suggested that too much emphasis is placed on market share and that more attention needs to be focused on other fundamentals.
This study uses a causal modelling methodology to examine competing methodological and theoretical hypotheses concerning the effects of product quality on direct costs and business unit return on investment (ROI). Results show that the PIMS’ measures under study exhibit high reliability across all samples. The findings fail to support the widely held view that a high relative quality position is incompatible with achieving a low relative cost position in an industry.
In a field study, decision makers were found to choose information sources based on accessibility rather than quality. Some variation in source use was associated with individual characteristics such as motivation and tenure. Implications of the results are discussed for studies of communication and decision making.
The authors use meta-analysis techniques to investigate the evidence that has been gathered on the determinants of salespeople's performance. A search of the published and unpublished literature uncovered 116 articles (the list of which is available upon request) that yielded 1653 reported associations between performance and determinants of that performance. The results indicate the determinants can be ordered in the following way in terms of the average size of their association with performance: (1) role variables, (2) skill, (3) motivation, (4) personal factors, (5) aptitude, and (6) organizational/environmental factors. When ordered according to the amount of the observed variation in correlations across studies that is real variation (i.e., not attributable to sampling error), the determinants rank as follows: (1) personal factors, (2) skill, (3) role variables, (4) aptitude, (5) motivation, and (6) organizational/environmental factors. To investigate whether the associations between each of the categories of predictors and performance could be partially accounted for by the presence of moderator variables, the results were broken out by customer type, product type, and type of dependent measure used. The results indicate that the strength of the relationship between the major determinants and salespeople's performance is affected by the type of products salespeople sell. The authors discuss the implications of these findings for sales managers and researchers.
Provides a systematic presentation of the economic field of industrial organization, which is concerned with how productive activities are brought into harmony with the demand for goods and services through an organizing mechanism, such as a free market, and how variations and imperfections in the organizing mechanism affect the successful satisfying of an economy's wants. Of the three market mechanisms (tradition, central planning, and free markets), the field of industrial organization deals primarily with the market system approach. This book primarily emphasizes the manufacturing and mineral extraction sectors of industrialized economies, with less discussion of wholesale and retail distribution, services, transportation, and public utilities. Beginning with a discussion of the welfare economics of competition and monopoly, the structure of industries in the U.S. and abroad and their determinants are described, including motives for mergers and their effects. Extended analysis of pricing, product policy, and technological innovation then follows. Antitrust, price fixing, related restraints, structural monopolies, regulation, and price discrimination are examined, as are the complex policies governing pricing relationships between vertically linked firms. The role of advertising in product differentiation and the roles of market structure and product variety are identified. Innovation, patents, and their relation to market structure are explored. Overall, this analysis seeks to identify attributes or variables that influence economic performance and to build theories about the links between these attributes and end performance. (TNM)
A successful JIT program requires large amounts of capital and a revamping of labor/management relationships. Many wood product manufacturers are now pursuing the Just In Time (JIT) method of manufacturing. Unfortunately, many of these manufacturers are dealing with only one of the five elements needed for success. Success means reducing unit production costs while improving customer service. Costs are reduced via smaller material and work in process inventories, less waste, a lower labor cost content, and a higher production rate. Customer service is improved by living up to promised delivery dates of delivering faster than promised.
Latest research on the PIMS database shows that ROI increases as R&D expenditures increase, and that R&D spending leads to gains in market share and gross margins.
This article shows that distributions of market shares in narrowly-defined product markets follow the same general pattern found in earlier studies of broad "industries" and in the economy as a whole. Typically, the structure of a market conforms to the semi-logarithmic distribution; this pattern is so pervasive as to suggest that it is a "natural" phenomenon. The nature of growth processes that lead to unequal distributions of size is explored, and evidence from the PIMS data base is used to test two key assumptions about business growth and its relationship to size.
The PIMS research program is examined in eight key areas. In general, the PIMS approach was found to be the best current attempt to gather and analyze data on strategic actions of businesses. Suggested improvements will enhance its usefulness to the practitioner. These improvements will further the state of theoretical model building and validation in the strategy field.
Relatively little is known about how managers interact with marketing decision support systems such as a computer simulation. The authors investigate individual difference variables to determine their role in influencing the utilization of and satisfaction with one component of a marketing decision support system. The research vehicle used is a computer simulation model for assisting decision making in retailing. The findings indicate that risk averseness, involvement, cognitive differentiation, and age are important predictors of utilization and satisfaction. Managerial implications of the findings are discussed.
The authors investigate the effects of the organizational structure used for marketing planning on the credibility and utilization of marketing plans. Data on 53 organizations were obtained from multiple respondents in the marketing areas of those organizations. The results indicate that a bureaucratized planning structure with formal rules and procedures and departmental specialization can enhance both plan credibility and utilization. However, high centralization of authority affected these variables negatively. The explanatory mechanisms suggested by these results are discussed and managerial implications presented.
The authors evaluate several factors affecting the attention given to or "use" of specific market research information by marketing managers. They apply path analysis to test a model of research use involving 11 variables. Factors found to be especially important are organizational structure, technical quality, surprise, actionability, and researcher-manager interaction. The topic and findings of the study relate to a central activity of the marketing profession-the application of knowledge-and to the use of an important product-market research. Both the knowledge system of marketing and the behavior of managers as consumers of research products have been relatively neglected.