Wednesday, January 13, 2010

Marchionne on Market Share vs. Profits

I always teach my students that market share does not necessarily equal profitability. Plenty of firms with sizeable market share fail to make good profits, and plenty of niche firms achieve high profitability. Still, far too many executives remain obsessed with market share, and they pursue unprofitable volume growth.

With that in mind, I was very pleased to read about Sergio Marchionne's attempts to change the mindset at Chrysler. Here are Marchionne's refreshing comments at the North American International Auto Show, as reported by the Wall Street Journal:

"There's almost a fanatical, maniacal interest in [market] share. Unprofitable volume is not volume I want. We have a very good track record for how to destroy an industry - run the [plants] just for the hell of volume, and you're finished."

As you may recall, on this blog post a few months ago, I worried about GM's Board Chairman (and now CEO)Edward Whitacre's emphasis on market share gains. I'm glad to see Marchionne questioning Detroit's past obsession with volume growth.

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