SHARING MARKET SHARE
Abstract
Research to the relation between market share, number of competitors, the scope
of competition, customers’ price sensitivity and the type of industry.
,Content
1. Introducton........................................................................................................................................2
2. Data analysis strategy.........................................................................................................................3
3. Descriptie statstcs...........................................................................................................................6
4. Multple regression analysis...............................................................................................................7
4.1 Regression models........................................................................................................................7
4.2 Assumptons ased on the fnal model.......................................................................................13
5. Residual analysis...............................................................................................................................14
6. Conclusion and managerial recommendatons.................................................................................15
7. References........................................................................................................................................16
8. Appendix...........................................................................................................................................17
1
, 1. Introduction
Organizations are always looking for ways to perform more efficiently and effectively.
In other words, they are always striving to perform better, faster and cheaper in order to
attract new customers and retain their current customer base. However, when searching for
ways to attract new customers and retain current customers, simply said, gaining and retaining
market share, it also is crucial to take the competition into account.
Competition pertains to the ability and performance of a firm, sub-sector or country to
sell and supply goods and services in a given market, in relation to the ability and
performance of other firms, sub-sectors or countries in the same market (Brickley et al.,
1996). In order to assess this competition, one has to take two important features into account,
according to Collins and Montgomery (1997). These are the number of competitors in the
market and the scope of the competition, which entails the number of business activities that
is affected by the competition (Collins and Montgomery, 1997).
Besides the importance of the number and scope of competition, the price, more
specifically, the price sensitivity of customers, and the type of industry also can affect the
market share and the way the number and scope of competition affect the market share of an
organization.
Consequently, the research question is as follows:
‘In what way do the number of competitors, the scope of competition, and their interaction
affect the market share of an organization, when controlled for price sensitivity of customers
and the type of industry?’
In order to answer this question, data obtained from 736 SME’s (small and middle
enterprises), containing the variables ‘number of competitors’, ‘scope of competition’, ‘price
sensitivity of customers’, ‘type of industry’ and ‘market share’, are used and analysed by
means of a multiple regression analysis.
Besides answering the above research question, the following hypothesis will be tested
within this research:
‘The number of competitors and the scope of competition affect the market share of an
organization negatively. The number of competitors and the scope of competition combined
has an additional negative effect on the market share of an organization. However, this
relationship should be controlled for the type of industry and the price sensitivity of
customers since these two variables can also influence the market share of an organization.’
2
