Question

g For a number of years, General Motors used a pricing strategy designed to maintain at least 40 percent of the American car market. Does this strategy suggest that GM was maximizing profits or pursuing an alternative strategy?

Answer 1

High rates of return usually accompany with high market share. So General motor need not go for an alternative strategy.

Explanation:

If the market share rises, the turnover on investment also rises little bit, but the profit margin on sales increases more due to high market share.Many business experts recognized that one of the main determinants of business profitability is market share. Under most circumstances, enterprises that have achieved a high share of the markets can get considerably more profit than their smaller-share rivals. There is no doubt that market share and return on investment ( ROI) are strongly related one with another.

High market share enjoys economies of scale which helps to reduce the total cost.Large-share businesses usually have achieved economies of scale in procurement, manufacturing, marketing, and other cost components.Once a business achieves a leadership position by using it's market share, surely it will develop a new field that able much easier for it to retain its lead than for others to catch up.Finally general motor must follow it's existing strategy to fix prices to catch at least 40 percent of the American car market.