MIT Sloan Management Review

Marketing

Are U.S. Managers Superstitious about Market Share?

By Cathy Anterasian, John L. Graham and R. Bruce Money

July 15, 1996

DOES THE STRATEGY OF LINKING MARKET SHARE TO PROFITS REALLY WORK? THIS INVESTIGATION ARGUES THAT THERE IS SIMPLY NO CAUSAL relationship between market share and profits. In highly volatile industries, market-share-based strategies can be misleading. The authors provide evidence from two studies, one using the FTC Line of Business data and the other employing data on the performance of sixty-three companies in three countries. In the first case, companies that maintained stable operations were more profitable than those that maintained stable market shares. In the latter, Japanese companies in a wide variety of industries had more stable operations than comparable U.S. firms.

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Superstition has always had a big impact on human behavior, sometimes yielding macroeconomic effects for even the most industrialized societies. An example of the effects of superstition is the rate of Japanese births from 1960 to 1990 (see Figure 1). A general, steady decline is evident in recent decades. But what jumps out is the single-year 25 percent drop in 1966. Such a sudden dip and recovery in birthrates meant all kinds of problems for companies selling baby cribs in 1966 or bicycles in 1972, for colleges and universities in 1984, and for employers in 1988.

Why did the market plunge 25 percent for only one year? In much of Asia (where Chinese influences are strong), each year is associated with one of twelve animals. For example, 1996 is the year of the Rat. Both 1990 and 1978 were years of the Horse, as was 1966. In Japanese culture, there is a traditional belief about heigo, or the year of the Fire Horse, which occurs once every sixty years, the last in 1966. According to this long-standing superstition, a female born in a year of the Fire Horse is destined both to live an unhappy life and to kill her husband if she marries.1 Judging by the birthrate that year in Japan, superstitions about... To read the complete article, login or sign-up using the form below.

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