Question

Companies who believe that a higher sales volume leads to lower unit costs and higher long-run profits are attempting to ________.

Answer 1

Companies who believe that a higher sales volume leads to lower unit costs and higher long-run profits are attempting to (a) maximize their market share.

Market share definition:

"Market share is the percent of total sales in an industry generated by a particular company. Market share is calculated by taking the company's sales over the period and dividing it by the total sales of the industry over the same period"

Benefits of maximizing market share:

• As market share increases, a business is likely to have a higher profit margin, a decrease in purchase-sales ratio, a decrease in marketing costs as a percentage of sales, high quality and high priced products.
• Increasing market share also benefits the companies which sell less frequently to a particular customer group. Comparing smaller market share companies, the larger market share companies profit the most.
• According to the 'experience curve' by the Boston Consulting Group, when the company's overall output is doubled the production-sales rate goes down in a certain percentage hence, benefiting with higher profits.

One of the main strategy for increasing business profitability is through market shares. Hence it can be concluded that market share and yield on investment are propotional to each other.

Complete question:

Companies who believe that a higher sales volume leads to lower unit costs and higher long-run profits are attempting to ________.

A) maximize their market share

B) skim the market

C) become a product-quality leader

D) merely survive in the market

E) maximize their current profits