Markets vs. management: what 'drives' profitability?

Article Abstract:

Researchers in the field of industrial organization economics (IOE) and the field of strategic management (SM) are divided regarding the chief source of profits. The IOE camp argues that the principal profit source is the markets while the SM group contends that the main source is organizational behavior. The classic article supporting the IOE view is by Schmalenee (1985) while the quintessential paper upholding the SM perspective is that of Rumelt (1991). When a relatively recent, broad SBU panel spanning seven years was applied to the two models using variance components analysis, the findings of Rumelt are confirmed. The findings also suggest the existence of a corporate effect which has previously been undetected.

Corporate profits

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Market share and ROI: observing the effect of unobserved variables

Article Abstract:

The profitability of a firm may be attributed to the unobserved skills of its market share managers rather than readily observed industry trends. This finding explains why some firms with high levels of market share do not exhibit a proportionately high return on investment. The difference in profits is traceable to market share managers' adeptness at implementing efficient processes through effective relationships with their suppliers. Their market strength also gives them leverage to demand for product discounts from their suppliers.

Marketing Management, Economic aspects, Return on investment, Vertical integration, Industrial suppliers, Market share, Rate of return

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Share the wealth

Article Abstract:

The transfer of tax-exempt life insurance policies from insured persons to family members from successive generations is described as a tax efficient method of passing on wealth.

Taxation, Finance, Life insurance, Inheritance and succession

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