MARKET SHARE- A KEY TO PROFITABILITY

Group No. 3Swati Agarwal (01) Devarshi Bajpayi (03) Ashish Madnoorkar() Nitisha Pagaria (33) Saahil Sinha () Parnamoy Dutta(13) ()

Market Power Economies of Scale Quality of Management

Why is Market Share Profitable

High Market Share

More Profit margin on sales Lower Purchase-toSales ratio Decline in marketing cost as a percentage of sales Develop unique competitive strategies

Investment to sales ratio declines

More vertical integration

Scale economies

Higher price for higher quality

Use own distribution channel

Utilize more efficient mass media & marketing methods Use own sales force instead of commissioned agents

Low cost of raw material: economies of scale & bargaining power

Bandwagon effect for leading brands

Trend Variation among Industries

Market share more important for frequently purchased products Market share is more important when buyers are fragmented

ROI/Market Share link & Strategy

Building strategy

Market Share Goals

Harvesting Strategy Holding Strategy

I. Building Strategies

II. Holding Strategies

Preserve the Status quo. Relationship between ROI & Consumer Behavior Higher ROI
Large Share Business
Charging Premium prices Spend more than competitors on sales , adv and R&D.

Higher ROI

Small Share Business

Prices are below market average. Relatively low spending on marketing and R&D.

III. Harvesting Strategies

Deliberately permitting fall of market share. Obj Secure higher short run earnings and cash flow. PIMS Data indicates :
Large Share Business Harvest Successfully Returns are higher on harvesting. Small Share Business Diff in ROI between Holding & Harvesting are irregular.

ROI is increased in short run & reduced in long run. Depending on two factors
Management assessment of direction and timing of developments.

Preference for immediate rather than deferred profits.

Balancing Cost & Benefits

PIMS studies support the proposition Market share is positively related to ROI. Effects on management decision

Make or buy decision

Choosing the medium of advertising

Alteration in price or quality

Key Tools to interpret Market Share

BCG Matrix:

High Prioritize

Low Divest High

Market growth

Invest

Liquidate Low

Market share

GE 9 Cell Matrix:
Business Strength HIG H MEDIU M LOW Indices:

HIG H

Market Attractiveness

Winners

Winners

Question Marks

Build Hold

MEDIU M

Winners

Average Businesses

Losers

Harvest

LOW

Profit Producers

Losers

Losers