The Profitability of Winning

3 Pages Posted: 19 Aug 2008

See all articles by Fred Collopy

Fred Collopy

Case Western Reserve University - Department of Information Systems

J. Scott Armstrong

University of Pennsylvania - Marketing Department

Multiple version iconThere are 2 versions of this paper

Date Written: August, 17 2008

Abstract

Sports and war metaphors abound in business today. For example, one management book, Thunder in the Sky, by Thomas Cleary, opens with a Chinese saying that translates: "The marketplace is a battlefield. The Asian people view success in the business world as tantamount to victory in battle." The book advises American executives to do the same. However, such metaphors are misleading. The objective in both sports and war is to beat the competitor. Business, on the other hand, aims to create wealth. Ignoring this reality, many people believe the metaphors and choose competitor-oriented strategies that pursue market share rather than profits, according to research at Wharton, Weatherhead, and other institutions. In one study, one-third of 105 managers said their firms had competitor-oriented objectives. Another revealed that managers opted to sacrifice profits to beat the competition on price. A third showed that firms stating pricing goals in competitive terms had lower returns-on-investment over a 45-year span. Our conclusion: Firms should focus on profits, not competition. Our premise is neither mysterious nor modern. It originates in classical micro-economics. Competitive objectives are especially harmful, because they likely will provoke unfavorable reactions from business rivals, which may, in turn, lead to price wars.

Suggested Citation

Collopy, Fred and Armstrong, J. Scott, The Profitability of Winning (August, 17 2008). Available at SSRN: https://ssrn.com/abstract=1232568 or http://dx.doi.org/10.2139/ssrn.1232568

Fred Collopy

Case Western Reserve University - Department of Information Systems ( email )

10900 Euclid Ave.
Cleveland, OH 44106-7235
United States

J. Scott Armstrong (Contact Author)

University of Pennsylvania - Marketing Department ( email )

700 Jon M. Huntsman Hall
3730 Walnut Street
Philadelphia, PA 19104-6340
United States
215-898-5087 (Phone)
215-898-2534 (Fax)

HOME PAGE: http://marketing.wharton.upenn.edu/people/faculty/armstrong.cfm

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