Market share Exhibit V Industry variations in the share/ROI relationship A Frequently purchased vs, infrequently purchased products Concentrated vs fragmented custom 30 Under10%10-20% 2030% 3040% Over 40% Under10%10-20%2030%3040%over40% Market share Market share ● frequent nted ● Concentrated and they pulled out. Similarly, Motorola, with an Building strategies are based on active efforts to in- estimated 6% to 7% share of U.S. TV-set sales, and crease market share by means of new product intro- a rumored loss of $20 million in the period from ductions, added marketing programs, and so on. I970 to 1973, announced its intention early in I974 to sell the business to matsushita Holding strategies are aimed at maintaining the existing level of market share On the other hand, when share is not so low as to dictate withdrawal, but is still not high enough to Harvesting strategies are designed to achieve high yield satisfactory returns, managers can consider short-term earnings and cash flow by permitting aggressive share-building strategies. They should market share to decline recognize, however, that a) big increases in share are seldom achieved quickly; and(b) expa nding share is almost always expensive in the short run When does each of these market-share strategies seem most appropriate? How should each be im- Among the 6oo businesses in the PIMS sample, only plemented? The experiences documented in the about 20% enjoyed market share gains of 2 points PIMS data base provide some clues or more from I970 to 1972. As might be expected successful building strategies were most common among relatively new businesses. Of those that have Building strategies begun operations since I965, over 40%achieved The data presented in Exhibit I imply that, in many share increases of 2 points or more-compared with cases, even a marginally acceptable rate of return only I7% of the businesses established before I9so can be earned only by attaining some mi InImum level of market share. If the market share of a busi- Generally speaking, businesses that are building ness falls below this minimum, its strategic choices share pay a short-run penalty for doing so. Exhibit Isually boil down to two: increase share or with- VI compares ROI results for businesses with differ draw. Of course there are exceptions to this rule. ent beginning market shares and for businesses with decreasing, steady, and increasing shares over the But we are convinced that in most markets there is period I970 to 1972. Generally the businesses that a minimum share that is required for viability. RCa were"building"(i.e. had share increases of at least and General Electric apparently concluded that they 2 points) had ROI results of I to 2 points lower than were below this minimum in the computer business, those that maintained more or less steady(hold ing)positions. The short-term cost of building was