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Competitor-oriented Objectives: The Myth of Market Share

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  • Kesten C. Green
  • J. Scott Armstrong

Abstract

Competitor-oriented objectives, such as market-share targets, are promoted by academics and are common in business. A 1996 review of the evidence indicated that this violation of economic theory led to reduced profitability. We summarize the evidence as of 1996 then describe evidence from 12 new studies. All of the evidence supports the conclusion that competitor-oriented objectives are harmful. However, this evidence has had only a modest impact on academic research and it seems to be largely ignored by managers. Until this situation changes, we expect that many firms will continue to use competitor-oriented objectives to the detriment of their profitability.

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Bibliographic Info

Paper provided by Monash University, Department of Econometrics and Business Statistics in its series Monash Econometrics and Business Statistics Working Papers with number 17/05.

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Length: 21 pages
Date of creation: Jul 2005
Date of revision:
Handle: RePEc:msh:ebswps:2005-17

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Related research

Keywords: Competition; Market Share; Objectives; Profitability.;

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References

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  1. JS Armstrong & Fred Collopy, 2004. "Effects of Objectives and Information on Managerial Decisions and Profitability," General Economics and Teaching 0412014, EconWPA.
  2. Ulf G. Marks & Sönke Albers, 2001. "Experiments In Competitive Product Positioning : Actual Behavior Compared To Nash Solutions," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 53(3), pages 150-174, July.
  3. JS Armstrong & Raymond Hubbard, 2005. "Does the Need for Agreement Among Reviewers Inhibit the Publication of Controversial Findings?," General Economics and Teaching 0502052, EconWPA.
  4. JS Armstrong, 2004. "Peer Review for Journals: Evidence on Quality Control, Fairness, and Innovation," General Economics and Teaching 0412027, EconWPA.
  5. Buzzell, Robert D., 2004. "The PIMS program of strategy research: A retrospective appraisal," Journal of Business Research, Elsevier, vol. 57(5), pages 478-483, May.
  6. JS Armstrong & Roderick J. Brodie, 2004. "Effects of Portfolio Planning Methods on Decision Making: Experimental Results," General Economics and Teaching 0412016, EconWPA.
  7. Anterasian, Cathy & Graham, John L., 1989. "When it's good management to sacrifice market share," Journal of Business Research, Elsevier, vol. 19(3), pages 187-213, November.
  8. Mueller, Dennis C., 1992. "The corporation and the economist," International Journal of Industrial Organization, Elsevier, vol. 10(2), pages 147-170, June.
  9. Charles Abramson & Imran S. Currim & Rakesh Sarin, 2005. "An Experimental Investigation of the Impact of Information on Competitive Decision Making," Management Science, INFORMS, vol. 51(2), pages 195-207, February.
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Cited by:
  1. Nippa, Michael, 2011. "Zur Notwendigkeit des Corporate Portfolio Management: Eine Würdigung der wissenschaftlichen Forschung der letzten vier Jahrzehnte," Freiberg Working Papers 2011,02, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
  2. Woodside, Arch G., 2012. "Incompetency training: Theory, practice, and remedies," Journal of Business Research, Elsevier, vol. 65(3), pages 279-293.

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