1. “Women Born in 1966 Stigmatized by Superstition,” Rafu Shimpo, 26 October 1994 (Japan), p. 17;
R.W. Hodge and H. Ogawa, Fertility Change in Contemporary Japan(Chicago: University of Chicago Press, 1991).
2. Fortune avoids the market share trap when its researchers measure the reputations of corporations. See:
“Corporate Reputations,” Fortune, 6 March 1995, pp. 24–44.
More typically, Dorn P. Levin falls into the trap when he quotes Lou Ross, a top executive at Ford in the 1980s: “We considered our natural share of the market about 25 percent. . . . In the worst ten-day reporting periods following the [1970s] fuel crisis, our share dropped to 12 percent.” [page 18] Ironically, Levin ends his article with the following quote, which supports our basic thesis: “The automobile business is cyclical. Even a mediocre automaker should make money —money it needs to develop new models — when the economy is expanding. The trick is not to pile up losses when the market for vehicles turns weak in an economic recession, as it did in the early 1980s and early 1990s, and as it inevitably will again.” See:
D.P. Levin, “How Ford Finally Found the Road to Wellville,” LA Times Magazine, 10 March 1996, p. 42.
3. P. Kotler, Marketing Management, 8th ed. (Englewood Cliffs, New Jersey: Prentice Hall, 1994).
4. W. Baldwin, “The Market Share Myth,” Forbes, 14 March 1983, pp. 109–115;
R.G. Hamermesh, M.S. Anderson and J.E. Harris, “Strategies forLow Market Share Businesses,” Harvard Business Review, volume 56, May–June 1978, pp. 95–102; and
C.Y. Woo and A.C. Cooper, “Evaluation of the Strategies and Performance of Low ROI Market Share Leaders,” Strategic Management Journal, volume 4, April–June 1983, pp. 123–135.
5. L.W. Phillips, D.K. Chang, and R.D. Buzzell, “Product Quality, Cost Position, and Business Performance: A Test of Some Key Hypotheses,” Journal of Marketing, volume 47, Spring 1983, pp. 26–43;
R.D. Buzzell, B.T. Gale, and R.G.M. Sultan, “Market Share — A Key to Profitability,” Harvard Business Review, volume 53, January–February 1975, pp. 97–106;
R.D. Buzzell and F.D. Wiersema, “Modeling Changes in Market Share: A Cross-Sectional Analysis,” Strategic Management Journal, volume 2, January–February 1981, pp. 27–42;
R. Jacobson and D.A. Aaker, “Is Market Share All That It’s Cracked Up to Be?,” Journal of Marketing, volume 49, Fall 1985, pp. 11–22; and
C. Anterasian and L.W. Phillips, “Discontinuities, Value Delivery, and the Share-Returns Association: A Re-Examination of the ‘Share Causes Profits’ Controversy” (Cambridge, Massachusetts: Marketing Science Institute Report No. 88–109, October 1988).
6. C. Anterasian, “Disentangling Rival Hypotheses among Marketing Expenditures, Market Share, and Profitability” (Stanford, California: Stanford University, Ph.D. dissertation, 1986); and
D. Schendel and G.R. Patton, “A Simultaneous Equation Model of Corporate Strategy,” Management Science, volume 24, November 1978, pp. 1611–1621.
7. Jacobson and Aaker (1985).
8. K.J. Clancy and R.S. Shulman, Marketing Myths That Are Killing Business (New York: McGraw-Hill, 1994), p. 29.
9. C. Anterasian and J. Graham, “When It’s Good Management to Sacrifice Market Share,” Journal of Business Research, volume 19, 1989, pp. 187–213; Anterasian (1986); and
W. Bishop, J.L. Graham, and M.H. Jones, “Volatility of Derived Demand in Industrial Markets and Its Management Implications,” Journal of Marketing, volume 48, Fall 1984, pp. 95–103.
10. J. Flanigan, “UAW and Ford Will Sign Deal: Strike at GM?,” Los Angeles Times, 16 September 1987.
11. See L.G. Franko, “The Japanese Juggernaut Rolls on,” Sloan Management Review, volume 37, Winter 1996, pp. 103–109. Obviously, we do not like his market-share-based analyses, but his overall point that Japan is still prominent is salient.
12. Our favorite quote is: “No wonder the wits at AT&T Corporation quip that chairman Robert Allen will soon fire everyone but himself, and AT&T will stand for Allen & Two Temps.” See:
A. Underwood, J. McCormick, and D. Branscorne, “The Hit Men,” Newsweek, 26 February 1996, pp. 44–48.
13. L.J. Krajiewski, B.E. King, L.P. Rizman, N. Weiner, and D.S. Wong, “A Comparison of Japanese and American Systems for Inventory and Production Management: A Simulation Approach” (American Institute for Decision Sciences, Proceedings of the 13th Annual Meeting, 1981), pp. 1109–1111.
14. A. Morita, “When Sony Was an Up-and-Comer,” Forbes, 6 October 1986, pp. 98–102.
15. W. Egelhoff, “Great Strategy or Great Strategy Implementation — Two Ways of Competing in Global Markets,” Sloan Management Review, volume 34, Winter 1993, pp. 37–50.
16. Anterasian and Graham (1989).
For another paper taking into account market volatility, see:
D.O. Mckee, P. Rajan Varadarajan, and W.M. Pride, “Strategic Adaptability and Firm Performance: A Market Contingent Perspective,” Journal of Marketing, volume 53, July 1989, pp. 21–35.
17. Anterasian and Graham (1989). The various hypotheses were tested using correlation coefficients and regression analyses. The findings summarized here are all statistically significant at the p < 0.05 level.
18. Volatility was defined in two ways. The first was averaging the absolute value of the percentage change in sales across the years of study. The second averaged percentage change for the years of sales declines. We found statistically significant differences (p < 0.05) between U.S. and Japanese volatility for the second measure of volatility.
19. F. Kofman and P.M. Senge, “Communities of Commitment: The Heart of Learning Organizations,” Organizational Dynamics, volume 22, Autumn 1993, pp. 5–22.
20. J.S. Armstrong and F. Collopy, “Competition Orientation: Effects of Objectives and Information on Managerial Decisions and Profitability,” Journal of Marketing Research, volume 33, May 1996, pp. 188–199;
L. Thurow, Head to Head (New York: Morrow, 1992).
Kazuo Inamori does not once use the words “market share.” Instead, listed strategic goals are increasing revenues, decreasing costs, employee personal growth, customer satisfaction, incremental improvements across the board, and stability. See:
K. Inamori, A Passion for Success (New York: McGraw-Hill, 1995). Alternatively, Donald Petersen, while emphasizing people (i.e., team-work, participative management, and employee involvement) and quality (i.e., in the best traditions of Deming) as the keys to running a successful enterprise, uses the term “market share” some seventeen times beginning on page xiv! See:
D. Peterson, A Better Idea: Redefining the Way America Works (Boston: Houghton-Mifflin, 1991).
One of our colleagues has made the point that the Japanese are more interested in long-term market share gain — a look at Figure 2 certainly supports that notion. But we believe the Japanese emphasis on stability to be the key factor influencing the patterns in our data. See also:
A.G. Hallsworth, The New Geography of Consumer Spending: A Political Economy Approach (London: Belhaven Press, 1992).
21. For agreement on this point, see:
J.C. Abbegglen and G. Stalk, Jr., Kaisha, The Japanese Corporation (New York: Basic Books, 1985), pp. 176–177, 276.
Also, the newly appointed CEO at Toyota Corporation recently said, “I intend to do whatever I can do to regain our market share.” See:
“Chop Shop,” Newsweek, 21 August 1995, p. 44.
Alternatively, Yoshihide Munekuni, executive vice president at Honda, has said, “Gaining market share is not important.” See:
“Trying to Rev Up: Can Japan’s Car Makers Regain Lost Ground?,” Business Week, 24 January 1994, p. 32.
Finally, there also appears to be a bit of disagreement among U.S. executives. See:
J.B. Treece, K. Kerwin, and H. Dawley, “Ford,” Business Week, 3 April 1995, pp. 94–104.
Regarding CEO Alex Trotman’s stated corporate goal of a 30 percent U.S. market share, “Rivals ask whether it’s a goal even worth pursuing. ‘Why? What’s the value of being big?’ asks Chrysler president Robert A. Lutz. He argues that chasing market share just leads to ‘buying’ sales with excess incentives.” [p. 97]
22. N. Makino, “The Advantages of Japan’s Management Strategy,” Economic Eye, Autumn 1992, pp. 18–21.
In an earlier study by other Japanese researchers, more equivocal findings are reported: Japanese managers ranked “increase in market share” as a more important corporate goal than did comparable Americans, but those same Americans expressed greater agreement than did the Japanese with the statement, “Your company consistently seeks high market share and tries to take advantage of cost efficiencies in every market” (both differences were statistically significant, p < 0.05). See:
T. Kagono, I. Nonaka, K. Sakakibara, and A. Okumura, Strategic vs. Evolutionary Management: A U.S.-Japan Comparison of Strategy and Organization (Amsterdam: North-Holland, 1985).
23. The relatively greater emphasis on stability of Japanese and German companies’ strategies is further well supported by a variety of observations. See, for example:
Thurow (1992).
Regarding hurdle rates, see:
J.M. Poterba and L.H. Summers, “A CEO Survey of U.S. Companies’ Time Horizons and Hurdle Rates,” Sloan Management Review, volume 36, Fall 1995, pp. 43–53.
See also:
B. Powell, “Keep Your Profits,” Newsweek, 6 November 1995, p. 98; and
N.A. Nichols, “Efficient? Chaotic? What’s the New Finance?,” Harvard Business Review, volume 71, March–April 1993, pp. 50–59.
Related to German companies, in particular, see:
“Dreaming of Butterflies,” The Economist, 26 June 1993, pp. 65–67;
H. Simon, “Lessons from Germany’s Midsize Giants,” Harvard Business Review, volume 70, March–April 1992, pp. 115–123; and
K.S. Weven and C.S. Allen, “Is Germany a Model for Managers?,” Harvard Business Review, volume 70, September–October 1992, pp. 36–43.
24. H. Mintzberg, “Strategy Making in Three Modes,” California Management Review, volume 16, Winter 1973, pp. 44–53.
25. T. Levitt, “Marketing Myopia,” Harvard Business Review, volume 38, July–August 1960, pp. 52–53.
26. P. Drucker, “The Theory of Business,” Harvard Business Review, volume 72, September–October 1994, p. 103.
Regarding retailing, Al Ries attributes the great success of Toys ‘R’ Us over rivals such as Child World and Kiddie City to founder Charles Lazarus’s emphasis on “market share, market share, market share” (page 69). But, unconsciously consistent with our views are Ries’s further descriptions of Wal-Mart, not a direct competitor, currently undercutting Toys ‘R’ Us’s prices and “market dominance.” We believe that a market share strategic focus such as that expressed so clearly by Lazarus leads quite directly to an unhealthy, narrow vision of the future. See:
A. Ries, Focus: The Future of Your Company Depends on It (New York: Harper Business, 1996).
27. Buzzell, Gale, and Sultan (1975).
28. W. Fruhan, “Pyrrhic Victories in Fights for Market Share,” Harvard Business Review, volume 50, September–October 1972, pp. 100–107.
29. V. Cook, “The Net Present Value of Market Share,” Journal of Marketing, volume 49, Summer 1985, pp. 49–53.
30. R. Buzzell, “Commentary on ‘Unobservable Effects and Business Performance,’” Marketing Science, volume 9, Winter 1990, pp. 86–87.
31. Kotler (1994).
32. J. Badaracco, The Knowledge Link — How Firms Compete Through Strategic Alliances (Boston: Harvard Business School Press, 1991).
33. J.F. Moore, The Death of Competition, Leadership and Strategy in the Age of Business Ecosystems (New York: Harper Business, 1996).
34. I. Nonaka and H. Takeuchi, The Knowledge-Creating Company (New York: Oxford Press, 1996), p. 41.
35. J.S. Armstrong and R.J. Brodie, “Effects of Portfolio Planning Methods in Decision Making: Experiential Results,” International Journal of Research in Marketing, volume 11, 1994, pp. 73–84.
36. C. Fornell, “A National Customer Satisfaction Barometer: The Swedish Experience,” Journal of Marketing, volume 56, January 1992, pp. 6–21.
37. R. Deshpande, J.N. Farley, and F.E. Webster, Jr., “Corporate Culture, Customer Orientation, and Innovativeness in Japanese Finance: A Quadrad Analysis,” Journal of Marketing, volume 57, January 1993, pp. 23–37.
38. H. Thorelli, “Networks: Between Markets and Hierarchies,” Strategic Management Journal, volume 7, 1986, pp. 37–51.
39. Nichols (1993).
40. Because overall soft-drink demand is stable over time, Pepsi focuses on Coke’s strategic moves. For them, a focus on market share is the same as a focus on sales revenues. Alternatively, in highly volatile businesses like commercial aircraft or automobiles, Boeing and Ford have to pay careful attention to both their competitors and cyclical market demand. For Boeing and Ford, increases in market share can still mean declines in sales revenues, depending on where the overall market is headed. Thus market share goals can be quite misleading. Pepsi may be engaged in a tough “waterpolo” match against Coke, but at least the pool water is warm and calm. Boeing and Ford are playing their matches in the Colorado River rapids. For them, it’s crucial to keep one eye on their competitiors but focus their better eye on the rocks and white-water of fast fluctuating market demand. For them, simply calculating market share induces a blurry tunnel vision.
