Research performed at The Wharton School suggested a ‘Myth of Market Share’ may compel companies to focus way too much attention at eroding the market share of competitors.
There are only so many times a person can beat his head against a brick wall (or coach Terrell Owens) that after a while the damage becomes irreversible. In the world of search engines, Google is the equivalent of The Wall, with a market share of queries that could be anywhere from 45 to 80 percent of the market, depending on who you ask.
We have seen a tactical shift taking place with Google’s major search competitors, Yahoo, Microsoft, and Ask. They have pursued readily available resources to varying degrees of effort and success, rather than just trying to recreate Google’s secret sauce.
That may be the best strategy for the trio. Wharton marketing professor J. Scott Armstrong crafted a paper about the pursuit of market share; an overview of it appeared at Knowledge@Wharton.
From the days of the Industrial Revolution to the middle of the 20th Century, companies pursued a zero-sum strategy: a win for you is a loss for me, so we can’t have you winning. Over time, scholars have questioned that practice.
Armstrong has been one of those researchers, delving into the concept that market share targets are counter-productive. A look at some companies a decade ago provided a boost to his argument:
For example, companies whose only goal was profit maximization — DuPont, General Electric, Union Carbide and Alcoa — posted stronger returns on investment than did the other firms studied. By contrast, the six firms whose only goal was market share — National Steel, the Great Atlantic & Pacific Tea Company, Swift, American Can, Gulf and Goodyear — fared worse in terms of ROI. Indeed, some of these companies, like National Steel and American Can, no longer exist.
There is a disconnect between market share and profitability, Armstrong believes, although those who have watched Google amass a nine-figure market cap may beg to differ. It may be time for Microsoft’s Steve Ballmer to stop worrying about the fight for search share; it could be time to recognize the wisdom of Yahoo’s Susan Decker, who said the company was happy with second place in search share.
Wouldn’t that be a surprise?
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David Utter is a staff writer for Murdok covering technology and business.
