Marketing Notes and Communications 59

that the stages of a product's life cycle can beidentified, is not readily accepted by mostforecasters.' The product life cycle is not pre-determined; rather, it is dependent on brandstrategy and consumers' preferences. Thus, theargument is made that CC's example of Gillette'spoor strategy would not have been aided by pos-session of the CC table, but instead shows thefundamental importance of knowing where one isin the product life cycle and how difficult thisknowledge is to obtain.

Second, although the article is concerned withstrategy, it in fact ignores strategy because it ig-nores the likelihood of competitive responses.This is a major deficiency in a study working withmarket shares. Although CC note that "the deci-sion of a competitor to increase or decrease itsshare also modifies the firm's competitive posi-tion . . . ,"'" they do not develop this point. In thisrespect, they are leading firms into the danger

9. Doug Wood and Robert Fildes, Forecasting for Busi-ness: Methods and Applications (London: Longman, to bepublished 1976), sections 7.5, 7.6, and 8.3.1.

10. Same reference as footnote 1, pp. 31-32.

that Simmonds has noted: "widespread develof)-ment of corporate strategy has produced a con-vergence of strategies around identifiable oppor-tunities with most firms underestimating this con-vergence," so that msirket share opportunitiesdisappear."

Conclusions

Catry and Chevalier's laudable attempt to helpresolve an important problem appears to bemarred by analytic errors in the development oftheir argument and by a basic lack of empiricalsupport. Further, the article tends to make funda-mental and unwarranted assumptions concerningthe predictability of the product life cycle and theirrelevance of competitive reactions. The need forsolid empirical research in this area remains.

11. Kenneth Simmonds, "And Here Comes Mr. Strategistand His Bag of Tricks!!!" European Business, No. 33 (Spring1972), pp. 66-70, at p. 69.

None of the views expressed in this article reflect the opinion ofthe Industries Assistance Commission.

Market Share Strategy:The Concept and the Evidence

Bernard Catry andMichel Chevalier

The Fitdes and Lofthouse comments provide the opportunity toclarify some important points in our article.

CONTRARY to presentations of research find-ings, which are generally fairly conclusive, the

purpose of a conceptual paper is to stir up con-troversy and dialogue. This was indeed our originalgoal and, thanks to Robert Fildes and StephenLofthouse (hereafter FL), it has been reached.'Nevertheless, FL's comments seem to indicatesome misunderstandings and misinterpretations.

Market Share and Profitability

First, Fildes and Lofthouse criticize the lack ofevidence regarding the market share-profitability

1 Bernard Catry and Michel Chevalier, "Market ShareStrategy and the Product Life Cycle," JOURNAL OF MARKET-ING. Vol. 38 (October 1974), pp. 29-34; and Robert Fildesand Stephen Lofthouse, " 'Market Share Strategy and theProduct Life Cycle': A Comment," JOURNAL OF MARKETING. Vol.39 (October 1975), pp. 57-59.

relationship. However, proof of this relationshipwas not the purpose of our article for variousreasons:

1. An attempt to prove such a relationship wouldcall for a more in-depth presentation than ispossible in one journal article. In addition, anumber of people have been studying thissubject for a long time and have come up withcomplex findings, some of which we men-tioned in our article.^

2. Although many researchers have consideredthe problem, the statistical validation of therelationship between market share andprofitability is far from obvious, if only be-cause of causality direction problems.

2. Catry and Chevalier, same reference as footnote 1, p. 30,footnote 5.

60 Journal of Marketing, October 1975

3. Even if the market share-profitability rela-tionship were obvious, the purpose of ourarticle remains to warn strategists that othervariables should be taken into account in thedefinition of the marketing plan. Fruhan, forinstance, stressed the fact that gaining marketshare may be too expensive in the short run tobe worthwhile.^ Bloom and Kotler indicatethe risks inherent in the position of a leader ina market."* Along these same lines, we tried tostress the influence of the product life cycle onthe role of market share in the design of themarketing strategy. As a result, the centralargument of our article is not, contrary to FL'sstatement, that "increasing market share isinadequate as a corporate strategy," but thatthe value of this increase depends very heavilyon the stage of the product life cycle and thecompetitive position of the company. AsBloom and Kotler understood it, our article"cautions against overspending to buy gainsin mcirket share."^

On the Differences betweenCash Return and Profitability

Fildes and Lofthouse remark that our Table 2(reproduced as Table 1 in their article) is, in someinstances, inconsistent with the Marketing ScienceInstitute's PIMS study.* We are pleased that it is,since we are not dealing with the same concepts asthose in the PIMS study. The PIMS analysis dealswith returns on investments. Our analysis tries todifferentiate the investment from the return. As

3. William Fruhan, Jr., "Pyrrhic Victories in Fights forMarket Share," Han'ard Business Review, Vol. 50(September-October 1972), pp. 100-107.

4. Paul N. Bloom and Philip Kotler, 'Strategies for HighMarket Share Companies" (Unpublished paper, March 1975).

5. Same reference as footnote 4, their footnote 4.6. See Sidney Schoeffler, Robert D. Buzzell, and Donald F.

Heany, "Impact of Strategic Planning on Profit Performance,"Harvard Business Review, Vol. 52 (March-April 1974), pp.137-145; and Robert D. Buzzell, Bradley T. Gale,and Ralph G.M. Sultan, "Market Share—A Key to Profitability,"Harvard Business Review, Vol. 53 (January-February 1975),pp. 97-106.

• ABOUT THE AUTHORS.Bernard Catry is a doctoral candidate at the HarvardBusiness School and a research associate at the Mar-keting Science Institute, Cambridge, Massachusetts.

Michel Chevalier is assistant professor at INSEAD (TheEuropean Institute of Business Administration) in Fon-tainebleau, France.

indicated in the article, investments cover produc-tion and marketing expenses that appear, or shouldappear, on the balance sheet. The notion of cashreturn includes income statement items: it may beaffected by the need to undertake extensive market-ing campaigns, to initiate price wars, or the like.When this is accepted, then FL's criticisms of ourtable, which are all based on an MSI-like, limiteddefinition of profit, lose their relevance. For exam-ple, even after reading FL's comments, we do thinkthat a dominant firm in its introductory stage will,in order to maintain its position, have to investmore in balance sheet items (/ + + in the table) andwill have a lower cash return {E + +) because of theneed to initiate more marketing moves than in thematurity stage (/ and E + + + + , respectively).

Problems of Implementation

It seems that on the subject of implementation,FL's criticisms are not extremely convincing. Weagree with them that the stages in the life cyclecannot always be easily identified a priori, but thisdoes not necessarily mean that all articles dealingwith this concept are useless. By the same token,Fildes and Lofthouse's criticism also applies toBuzzell's or Levitt's articles on the subject.^ It alsoapplies to most marketing concepts, such as thewheel of retailing.

The last of FL's comments is that our article"ignores strategy because it ignores the likeli-hood of competitive response." Actually, the like-lihood of competitive response is the basic elementthat explains the values given for E and / in theabove-mentioned table. Our article does not ignorecompetitive response; it is based on the likelihoodof competitive response. The failure of Fildes andLofthouse to understand this has led to their com-ments on our Table 2. It indicates a misunder-standing on their part of the purpose of our article.

Our purpose was precisely to indicate thatcompetitive responses are a function of the com-petitive position. We were calling for a betterunderstanding of the basic strategic variables:product life cycle, competitive posture, and long-term objectives. We must thank Fildes and Loft-house for the opportunity they have given us tobetter express this important notion.

7. Robert D. Buzzell, "Competitive Behavior and ProductLife Cycle," in New Ideas for Successful Marketing (Chicago:American Marketing Assn., 1966), p. 50; and Theodore Levitt,"Exploit the Product Life Cycle," Harvard Business Review,Vol. 43 (November-December 1965), pp. 81-94.