I have friends who work across various industries-FMCG, including Retail, Telecom, Technology, Financial Services, etc. We meet up regularly, and I often ask them a naive' question: So, how is the company doing?
And invariably, their answer is: "Great! We have the largest market share in this product category";" My territory market share has gone up by x% "; " Oh! We are feeling some pressure; our market share is falling".
Does this sound familiar? , almost everyone seems to be talking about 'Market-Share,' but very few talk about 'profitability.' So let me share my perspective on the same…
Market share is a short-term perspective, while Profitability is a long-term perspective. It is easy to sacrifice profit under misplaced exuberance to achieve market share. This is/was very much happening around us (in India) as I write…. Airlines 'burning' cash faster than they can burn fuel, Retail players risking their balance sheets by getting into ‘leveraged expansion,’ and Financial services companies (consumer loans, credit cards, Insurance) completely distorting their ‘cost structures’ to acquire the maximum number of customers(market-share), irrespective of whether it makes any economic sense for the business or not.
Market share is or should be a consequence. It is the result of doing the right thing. Market share results from attractive products, excellent processes, customer service, and other structural strengths of the company. The focus should be on ‘profitable growth.’ When a business is not profitable, it is a serious sign that something is wrong.
Profitability gives the freedom to invest in future opportunities, develop new products, and attract, retain, train, and reward the best talent.
As some wise guy said, “ The worst crime against working people is a company that fails to operate at a profit."
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