Market share, profits and business strategy

Abstract

Research into the correlation between market share and profitability has led to debate over whether the observed association is direct or spurious. The fundamental question remains whether the pursuit of market share is an appropriate strategy. This paper reports the results of a structural equations model which provides the clearest test to date of the competing viewpoints. The direct association between market share and profitability depends upon restrictive statistical assumptions. When these assumptions are relaxed, the results show that there is no direct association between market share and profitability.

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