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Extensive research has examined the effect of market share on profitability and, in general, has found a significantly positive relationship between the two metrics. However, this article demonstrates that the digital transformation of companies has substantially altered this relationship and its underlying mechanisms. The authors first theoretically develop the different influences of digital transformation on the traditional market share–profitability framework. Subsequently, they estimate a firm–profitability model based on a sample of 6,389 observations from 824 U.S. firms over 25 years that accounts for companies’ degree of digital transformation by text mining their financial statements using a self-developed and validated dictionary. The authors find a significantly negative interaction between the degree of digital transformation of a company and the impact of market share on profitability. However, they also show that this effect is moderated by i) a firm’s digital transformation emphasis (i.e., digital transformation of internal vs. external processes; digital transformation through platformization), ii) a firm’s general strategic emphasis (value appropriation relative to value creation), and iii) a firm’s general market environment (B2C versus B2B). The findings suggest that managers and investors of digital companies should exercise caution when relying on market share as a metric for performance.
Market share has traditionally correlated strongly with profitability because of efficiency, market efficiency, and customer perception effects. But, as the authors demonstrate, the relationship has been changed by the digital transformation in firms. The authors’ research finds that the market-share profitability relationship has become weaker for firms that favor investment in value creation over value appropriation and for firms operating in B2B markets. In both cases, digital helps smaller firms catch up with larger rivals. But digital can also amplify market share effects for large firms focusing digital investments on customer-facing processes and for large firms that create digital platforms.
Firms usually undertake layoffs to improve financial performance. However, layoffs often have negative effects on various stakeholders, including consumers. In this paper, we examine the magnitude and duration of the potential negative effect of layoff announcements on brand strength. We also examine how a firm's communication accompanying a layoff can potentially counteract the observed negative effect of layoff announcements on brand strength. We compare how advertising communication intensity, social media communication (i.e., brand-initiated tweets), public relation (PR) communication, and communication of CSR initiatives moderate the main effect of layoff announcements on brand strength. Using an error correction model and drawing on 366 announcements of layoff events in Germany, this study identifies the magnitude and duration of the main effect. An examination of five years of weekly consumer brand perception data across multiple industries and domestic and foreign firms shows that advertising communication intensity and social media communication amplify the negative impact of layoff announcements on brand strength. Conversely, PR communication and communication of CSR initiatives help mitigate the negative effect. These findings provide guidance on the best way for firms to design firm communication in the context of layoff announcements.
Interpretation of cash flow statements is usually considered very challenging by business students. This case reflects a fictitious situation where students are about to begin a lesson in which cash flow statements are to be analyzed. The students discuss the meaning of the cash flow statement. They help each other to better understand its structure and content. In this way, they prepare together to analyze the cash flow statements of six different companies. These companies come from a wide variety of industries and are also at different stages in the life cycle. The differences between these companies should stimulate in-class discussions and diverse learning opportunities. All cash flow statements are IFRS-compliant and include examples of the direct as well as the indirect method.
In this study, we examine stock market reactions to corporate downsizing using a neo-institutional perspective. Over the course of the 1990s, a time period in which shareholder value orientation gained momentum, downsizing became an institutionalized management practice. We argue and propose that the growing legitimacy of this practice is displayed in investors’ reactions to downsizing announcements. Using a sample of 391 downsizing announcements of the S&P 100 firms for the period 1990–2006, we show that the announcement year has a positive (diminishing) effect on the abnormal stock market return and that prior downsizings in the focal firm’s institutional field have a positive linear impact on abnormal stock market return. In addition, we provide evidence that these relationships are positively moderated by proactive downsizing motives and firm size. Our results contribute to a deeper understanding of the performance effects of corporate downsizing and investors’ role in legitimizing this prevalent business practice.
This case presents the accounting treatment of leasing contracts under IFRS 16. Since IFRS 16 replaced IAS 17, the case focuses on the changes due to IFRS 16 and their impact on financial statements. Besides the presentation of these changes, the case uses a company of the shipping industry (ie, Hapag-Lloyd) to demonstrate the profound consequences of the introduction of IFRS 16. In a broader context, the case illustrates the challenges for the organization of companies when new accounting standards become effective.
Lange Zeit war es angesagt, die Marktführerschaft in einer Branche anzustreben. Die Steigerung des Marktanteils ist ein prägnantes Ziel, auf das die Unternehmensleitung die Mitarbeiter einschwören kann. Doch in Zeiten von Digitalisierung und Globalisierung geht die simple Gleichung „mehr Marktanteil = höhere Profitabilität“ immer weniger auf. Eine Metaanalyse bestätigt dies nun. Andere Zielgrößen wie Markenstärke oder Kundenzufriedenheit beeinflussen die finanzielle Performance viel stärker. Das hat auch Auswirkungen auf das Change Management.
The impact of market share on financial firm performance is one of the most widely studied relationships in marketing strategy research. However, since the meta-analysis by Szymanski, Bharadwaj, and Varadarajan (1993), substantial environmental (e.g., digitization) and methodological (e.g., accounting for endogeneity) developments have occurred. The current work presents an updated and extended meta-analysis based on all available 863 elasticities drawn from 89 studies and provides the following new empirical generalizations: (1) The average raw market share–financial performance elasticity is .132, which is substantially lower than the effectiveness of other intermediate marketing metrics. This result challenges a widely used strategy that solely focuses on increasing market share. (2) Elasticities differ significantly between contextual settings. For example, they are lower for business-to-business firms than for business-to-consumer firms, for service firms than for manufacturing firms, and for U.S. markets than for emerging and Western European markets. The authors also observe differences between countries with respect to a general time trend (e.g., lower elasticities in recent times for Western European markets) and recessionary periods (e.g., lower elasticities in the United States, higher elasticities in non-Western economies).
The accounting literature voices increased concerns about sustainability issues. Environmental performance as one dimension of sustainability includes among others the management and control of energy. Energy is a key production factor to which the stakeholders of a firm pay increased attention. Since energy has a significant influence on the economic costs and the environmental footprint of firms, management accounting is under growing pressure to better monitor and control energy costs. As a consequence, management accounting needs to develop energy management systems which control energy consumption and aim to reduce energy costs which in turn diminish a firm’s environmental impact and thus improve corporate reputation. One of the most important elements for energy management systems is an effective and cost-efficient measure of the energy consumption. However, firms and their management accounting departments, respectively, are still struggling to develop any cost-efficient approach for measuring energy consumption. That is why we suggest a statistical approach to easily and cost-efficiently measure energy utilization which in turn provides information input to improve environmental management accounting (e.g., cost allocations). We demonstrate our approach for a firm from an energy-intensive industry. The approach allows to distinguish more efficient from less efficient production units. We derive implications from this measurement approach for environmental management accounting and environmental management control systems.
Marketing and finance executives follow different objectives and focus on different stakeholder groups. Marketers want to create sales impact. Finance executives are concerned about the financial health of the firm. As a result, both worlds tend to be rather disconnected in their daily business. We argue that this does not reflect the dynamics of the firm where important marketing and financial metrics in fact interact. As long as marketing and finance officers do not fully appreciate the interplay of their key metrics, their decisions are likely to be suboptimal.
This article proposes a simultaneous equation model that reflects the interaction of marketing and finance-domain variables in the value creation process. We focus on brand-building activities and the attraction of capital as major tasks of marketing and finance officers. Our model shows how advertising and other investments increase customer-based brand equity (CBBE) that in turn impacts financial leverage and credit spread and ultimately elevates the level of financial resources.
Based on a broad sample of 155 firms covering various B2C industries, we test for the empirical relevance of our model. We also assess the practical significance of our results by transforming them into elasticities. Our results suggest that marketing and finance executives need to consider the dynamic interaction of their decision and performance variables to fully evaluate the effects of their decisions on the firm's financial health.
Caroline Hansen is planning to open a dance club, called the Flood Club, in a new city quarter (the HafenCity) of Hamburg, Germany. She has gathered information on all costs that are relevant for her business venture. She has also found an investor willing to share ownership and also to provide the dance club with a long-term loan. Based on this scenario this case introduces fixed, variable and start-up costs, the contribution margin and the concept of break-even analysis.
Firms regularly terminate sponsorships, even without publicly known misconduct by the sponsee such as athlete doping. Consumer reactions to these sponsorship terminations by firms have not been studied despite being a regular occurrence. Using a set of experimental studies, this paper analyzes consumer reactions to these sponsorship terminations (i.e., early and non-renewal) that were not caused by a sponsee’s misconduct, the underlying process that causes the reactions, and the role of several moderating factors (trust, power balance, and locus of control). Our findings reveal that sponsorship terminations have a negative effect on sponsors’ brand images‐-particularly early terminations that occur before the end of a contract‐-because consumers perceive these sponsorship terminations as unfair. The results also suggest that a termination is particularly harmful for the sponsor’s perceived fairness if the sponsor is powerful and if the termination decision is under the sponsor’s control. Further, the termination effect is particularly strong for firms that consumers trust.
Recent marketing studies suggest that non-financial metrics, such as customer satisfaction and brand value, help explain the variation in the cost of equity and the cost of debt. These studies typically focus on only one non-financial metric and one component of capital cost. In this study, we broaden the understanding of the relevance of non-financial metrics to the cost of capital. We investigate the joint role of customer satisfaction, brand value, and corporate reputation for stock market beta and credit ratings, which reflect variation in equity and debt risk premiums across firms. In addition to the joint direct influence of these metrics on capital cost, we also study their interaction effects. We develop a conceptual model to explain the effects on capital costs and test the resulting hypotheses in a broad sample of 344 firms from diverse industries using data from the 1991–2006 period.
Our results suggest that higher satisfaction ratings reduce both the cost of equity and cost of debt, whereas brand value and corporate reputation only show a negative direct association with the cost of debt. In addition, both measures moderate the effect of satisfaction on the cost of debt. Brand value attenuates the influence of satisfaction, whereas corporate reputation amplifies this effect.
Unternehmen wenden erhebliche Investitionsmittel zum Aufbau von Marken auf. Da die Entwicklung neuer Marken allgemein mit hohen Kosten und Risiken verbunden ist, ist es für Unternehmen sinnvoll, bestehende erfolgreiche Marken zu kapitalisieren. Dies kann durch Markendehnungen (Brand Extensions) oder Markenkooperationen (Co-Brandings) erfolgen. Bei einer Markentransferstrategie wird der Wert einer etablierten Marke für neue Produkte durch Verwendung eines gemeinsamen Namens genutzt und somit auf die Übertragung positiver Imagebestandteile abgezielt (z. B. „Nivea“ und „Nivea for men“). Eine Co-Branding Strategie umfasst die systematische Markierung einer Leistung durch mindestens zwei Marken von unterschiedlichen Markeninhabern, wobei alle sowohl für Dritte wahrnehmbar sein als auch eigenständig auftreten müssen (z. B. „Sony“ und „Ericsson“). Die Marketingliteratur hat sich ausgiebig mit den Chancen, Risiken und Erfolgsfaktoren der jeweiligen Strategien beschäftigt. Bisher wurden jedoch die beiden Strategien isoliert betrachtet und nicht systematisch miteinander verglichen.
Dieser Beitrag wertet die empirischen Ergebnisse von 27 Arbeiten zu verschiedenen Fragen von Brand Extensions und Co-Brandings aus. Zu beachten ist, dass bei den empirischen Arbeiten häufig nur eine Strategieoption betrachtet wird und sich weitreichender Forschungsbedarf hinsichtlich mehr direkter Vergleiche der beiden Strategieoptionen ergibt.
Der Beitrag zeigt auf, dass Co-Brandings im Vergleich zu Brand Extensions mehr Möglichkeiten zum Imagetransfer, mehr Potenzial für sog. positive Spillover-Effekte (d. h. Rückwirkungen des Neuproduktes auf die Muttermarken) sowie Kosten- und Risikovorteile bieten, da zwei unterschiedliche Unternehmen an dem Co-Branding beteiligt sind. Signifikanter Vorteil der Brand Extension gegenüber dem Co-Branding ist die Unabhängigkeit bei Managemententscheidungen hinsichtlich der Gestaltung des Neuproduktes sowie dass es nicht zu negativen Spillover-Effekten durch schlechte Managemententscheidungen eines anderen Unternehmens auf die eigene Marke kommen kann. Beide Strategieoptionen scheinen außerdem in gleichem Maße von der Gefahr einer Imageverwässerung betroffen zu sein.2
Insgesamt diskutiert der Beitrag 12 verschiedene und von der empirischen Marketingliteratur als zentral eingeordnete Faktoren, die den Erfolg von Brand Extensions und Co-Brandings beeinflussen. Diese Erfolgsfaktoren werden den Kategorien Eigenschaften der Muttermarke(n), Eigenschaften der Markenerweiterung, Konsumenteneigenschaften sowie unternehmens-/marktbezogene Rahmenbedingungen zugeordnet. Für beide Strategieoptionen ist eine Grundvoraussetzung für den Erfolg des Neuproduktes, dass eine signifikant positive Einstellung gegenüber der (den) Ausgangsmarke(n) vorliegt. Darüber hinaus ist für den Erfolg des Neuproduktes der Produkt-Fit (d. h. der Fit der physischen Produkteigenschaften) für eine Brand Extension von größerer Bedeutung im Vergleich zum Co-Branding, während bei einem Co-Branding der Marken-Fit (d. h., der Fit der Markenimages) einen zentralen Erfolgsfaktor darstellt. Wird zudem bei der Markenkapitalisierung angestrebt, der bestehenden Marke ein neues Produktattribut hinzuzufügen, dann sollte eine Co-Branding Strategie verfolgt werden, da das Neuprodukt in diesem Kontext besser von den Konsumenten beurteilt wird. Stark markenorientierte Kunden sind des Weiteren eher geneigt, ein doppelt markiertes Produkt zu kaufen als ein einfach markiertes Produkt.
Verschiedene Tabellen liefern neben einem Überblick der zugrunde liegenden empirischen Basis zusammenfassend eine Übersicht über Chancen, Risiken und Erfolgsfaktoren der jeweiligen Strategieoption. Der Beitrag schließt mit entsprechenden Managementimplikationen, insbesondere einer Diskussion verschiedener Szenarien, wann welche Strategie tendenziell auf Basis der entsprechenden empirischen Ergebnisse zu bevorzugen ist. Beispielsweise sollten Unternehmen, die strategisch wenig markenorientiert und eher ressourcenschwach aufgestellt sind, eine Co-Branding Strategie anstreben.
Cost reduction is usually confronted with conflicts and resistance. Besides planning and controlling measures the management accounting literature discusses behavioral and organizational factors (e.g., top management commitment, participation, cost culture) in order to overcome this resistance. Thus, from a theoretical perspective different concepts exist for implementing an effective long-term cost reduction. However, only little empirical research can be found that investigates the relative importance of “soft” behavioral and implementation factors compared to general planning and control measures. This study examines the role of behavioral and organizational (“soft”) factors in comparison to planning and control (“hard”) factors in cost reduction projects. Target costing or activity-based costing projects represent examples for strategic cost reduction projects which are considered in this study. The sample comprises 131 chief management accountants of medium-size and large German companies which were involved in such strategic cost reduction projects. Structural equation modeling is used for deriving the results. The results show that cost culture, top management commitment, and participation are of particular importance for the success of cost reductions. Their influence drives significantly planning and controlling measures which in turn determine the effectiveness of cost reduction measures.
This paper comprises the results of an empirical study on the use of project management standards in German and Swiss enterprises. This research points out the expectations, the realized benefits and – more importantly – the major differences between them. For this purpose, it compares ex-ante expectations of their respective users and compares them in turn with ex-post realised benefits. The results of the study are based on the statements made by 234 participants in an online survey conducted in 2006. Generally, standards are only rarely used in project management in Germany and Switzerland. And if standards are indeed used, they are rarely used “as is”; in fact they are usually modified or adapted before application. Moreover, it can be observed that most participants expect consistent communication in the projects and better process quality to be the primary benefits of standards. However, it is often impossible to realize expected benefits. Benefits are offset by deficiencies, such as the lack of acceptance, administrational overheads and associated costs. Based on the results of this study, recommendations for standard-giving organizations and standard-applying organizations are put forward.
Die Conjoint-Analyse ist zuerst in der Psychologie in den sechziger Jahren des vorigen Jahrhunderts eingesetzt worden (Luce und Tukey 1964). Green und Rao (1971) führten die Methode Anfang der siebziger Jahre in die Marketing-Literatur ein. Befragungen von Marktforschungsinstituten (Hartmann und Sattler 2002; Wittink, Vriens und Burhenne 1994) zeigen die große Bedeutung, die Conjoint-Analysen in der praktischen Anwendung heutzutage zukommt.
