The Myth of Market Share
The recent merger activity between XM/Sirius and Whole Foods/Wild Oats has me thinking about market share business goals. An influential book I read on this subject is THE MYTH OF MARKET SHARE: Why Market Share is the Fool’s Gold of Business (Richard Miniter, 2002).
Below is a cut/paste remix summary of the book. If you like this remix summary, go buy the book.
”Market share is treated like an article of religious faith, unquestioned and unquestionable. Virtually every study on market share simply assumes a direct connection between market-share growth and profitability.” (pg. 25)
“But the pursuit of market share, once market share is made the centerpiece of corporate strategy, can lead to other questionable moves. Executives and managers often find themselves ‘forced’ to make a series of risky decisions—deep discounts, cheap financing, and unprofitable or thinly profitable sales—just to defend or boost market share. These actions reduce profit margins, erode brand identity, and harm the long-term health of companies.” (31-32)
“The alternate philosophy may sound basic and uncomplicated, but it works. It’s called profit leadership. Profit leaders think about customers, not competitors, and thing about next quarter’s opportunities, not justifying last quarter’s market share.” (12)
“Let me be clear. I am not saying that companies should ignore market share, although it would probably not hurt them if they did. Market share should simply be seen as a by-product, a secondary effect of pursuing a company’s core mission. Market share is not an advantage, by itself. It is the result of a sustainable competitive advantage, not the cause.” (14, 15)