Strategic Marketing: Planning and Control, Third Edition

While such a relationship is often true, it is not universal, and some
industries display a ‘V-shaped’ relationship. Here, profitability can ini-
tially fall until a critical mass, in terms of market share, is reached. The
effect of the ‘V-curve’ is polarisation – industries with small niche players
and large dominant companies. Medium-sized firms see profits fall until
critical mass is reached. This makes it very difficult for small/medium
companies to grow. Figure 8.13 shows the relationship.

Strategy formulation 169

Profitability

Market share

Figure 8.12

Profit related to

market share

Profitability

Market share Figure 8.13

‘V-shaped’

profit/market share

relationship

Clearly, the marketing strategist must consider the nature of these rela-
tionships and not blindly pursue market share. It should be possible to
determine the optimal market share/profitability position.