Automotive Manufacturing Industry: Market Share or Profitability - Essay Example

From the discussion above, we can deduce that a company aiming for an increase in market share is generally pursuing a penetration strategy. In order to capture more customers, companies need to cannibalize the shares of their competitors or pursue aggressive strategies to win potential customers. It should also be noted that when the total market is growing, in order to increase market share, a player's share should grow more rapidly than the rate that the market is growing.

Capturing a sizeable market share becomes a priority of a business organization to take advantage of increasing economies of scale. Profitability The importance of profit in a business organization can be encapsulated in one sentence-the company needs profit in order to survive. It should be emphasized that profit is not only required for the successful operation of a business organization but is required for its mere survival. Profitability is a very good indication of the overall performance of a business organization.

Profitability reflects the ability of the company to efficiently managing its resources. It should be noted that when a company is registering profit, its management is generally able to distribute its resources to fund cost expenditures. Due to these reasons, profitability is one of the primary goals of any business organization. Market Share vs. Profitability in the Manufacturing Industry The debate on whether the automotive manufacturing industry should focus on increasing its market share or pursuing profitability is quite baffling.

As stated with the industry expert Maryann Keller (2004), car manufacturers' objective should incorporate increasing market share to show their manufacturing capability supported by a cost structure to maximize profits at the current output level. However, past situations show that increases in market share do not necessarily mirror profitability and vice versa. Accenture (2004) notes that "revenues are not profits." This is also mirrored by the strategies pursued by major players in the automotive manufacturing industry.

Ford, Volkswagen, and General Motors all announced their profit over shares objective. This is in contrast with Toyota's goal of being the second-largest car manufacturer in the world (Keller, 2004). This paper believes that the primary goal of any automotive manufacturing firm is pursuing profitability.