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Automotive Manufacturing Industry: Market Share or Profitability - Essay Example

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Summary
Each of every business organization exists for a unique reason. In turn, they have their own missions and goals which guide them in the establishment of their individual objectives and strategies. The most important decisions of a business organization is often dependent on how it wants to see itself-of its primary goal.
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Automotive Manufacturing Industry: Market Share or Profitability
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Download file to see previous pages The next section will briefly define market share and profitability. The discussion will broaden to particularly investigate the importance of market share and profitability in the chosen sector. Lastly, the paper will conclude with its findings.
Increasing market share has become one of the most common set goals of business organizations since time immemorial. Market share is defined as the "percentage or proportion of the total available market or market segment that is being serviced by a company (Market Share 2006.)." Typically, market share is often expressed as a company's sales revenue divided by the total sales revenue available in that market. It is also commonly denoted as the company's unit sales volume divided by the total volume of units sold in that market.
From the discussion above, we can deduce that a company aiming 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 scal...
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 in 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 quiet baffling. As stated with the industry expert Maryann Keller (2004), car manufacturers' objective should incorporate increasing market share to show its manufacturing capability supported by a cost structure to maximize profits at the current output level. However, past situations show that increases in market share does 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 in pursuing profitability and increasing ...Download file to see next pagesRead More
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