18 Do you think that an increase in market share will always lead to higher profits for SENG? Justify your answer. [6]

[BASEL Moderator]

SENG manufactures cameras. Last year its market share increased by 2% to 18%. Production is capital intensive. This allows SENG to use lean production methods such as just-in-time. Cameras have a short product life cycle. SENG spends $200m each year on extension strategies. The Marketing manager thinks that an increase in market share will lead to higher profits.

18 Do you think that an increase in market share will always lead to higher profits for SENG? Justify your
answer. [6]

Possible KN Points:
• Lower prices could increase sales
• If larger share of a smaller market
• Larger market share due to increased sales volumes may lead to purchasing economies of scale
• Stronger brand recognition
• More power to charge higher prices