A study of the achievement of profit potential in a simulated environment
Description
Does the marketing performance of the typical business reach its potential? If actual performance falls short of potential, how large is the gap? How much of performance can be explained by selected economic variables or by stochastic processes? This dissertation employs a theory of profit potential applied in a simulated, growth environment. Results are compared with a recent study that used the PIMS data base. Both this paper and the previous study use a market share framework of analysis, although definitions of profit potential differ In our simulated, growth environment the hypothesis of systematic shortfalls from potential of a substantial order is rejected. Instead, it is equally likely to exceed or fall short of profit potential. We next explore a variety of factors that impact achievement of potential profit and seek to interpret these results for the benefit of marketing managers who wish to improve performance of their firms We investigate the extent to which shortfalls from potential may result from controllable factors, such as attention to primary demand, costs and competitors' investments. (Other factors, such as quality of management, may also be important but will not be treated in this exploratory study). We next study the effect on above potential performance of factors within the manager's control. Finally, we explore the effects on both above and below average performance of purely stochastic factors The data available for this study support a detailed comparison of actual and potential profit performance and produce a number of interesting results concerning the existence and magnitude of any shortfall from potential. They also permit exploration of underlying stochastic processes. They are less adequate for analysis of economic decision variables that we think contribute substantially to below potential performance. Nevertheless, an exploratory study of these relationships is conducted. Finally, the paper explores directions for future research