Market Share

Cathy Anterasian and John L. Graham. "When It's Good Management to Sacrifice Market Share." Journal of Business Research, 19 (November, 1989), 187214.

Antarasian and Graham challenge the conventional view that increasing market share is a mark of success, arguing that in some business environments it may actually be a firm's best strategy to sacrifice market share.

They are particularly concerned with industries which experience a periodic boomandbust cycle. During the "boom" phase of such a cycle, firms may be strongly tempted to grow at least in pace with the growth of the market, if not to outpace that growth and grab a larger market share. Antarasian and Graham found, however, that smaller companies in cyclical industries were actually more profitable through the cycle when they sacrificed market share during the growth phase. The reason is that the fastgrowing companies tend to plow potential profits back into growth, and their rapid expansion may actually increase, rather than reduce, marginal unit costs. (The authors present an interesting instance in which Sony's Akio Morita actually quoted a higher unit price for a larger run.) Such companies are caught badly overextended when the downside of the cycle hits.

This is a wellargued and highly thoughtprovoking article. The long boom of the 1980s promoted much complacency about continual growth complacency now being undermined in many industries. Many CEOs could constr

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