Branding Strategies for Success (Collection)

Truth 17. Market share doesn't matter

Is growth desirable? Is market share a worthy goal? Most managers would answer unambiguously "yes." Actually, it depends. Growing profit margins and return on equity typically enhances shareholder value. Simply getting bigger does not. Over a recent five-year period, Nike added three billion dollars in sales, yet only forty million dollars of profits—that's top-line growth with little effect on profitability. The stock market does not reward simply chasing market share and sales volume unless such growth leads to greater return on equity, generating profits more efficiently.

A friend, an IT vice-president at a large company, was talking about his company's history of acquisitions. Over the years, his company ...