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Profitability in the car industry: new measures for estimating taergets and target directions
journal contribution
posted on 2023-06-08, 16:59 authored by Hans Van Der HeijdenHans Van Der Heijden, Wolfgang GarnIn this paper we study the profitability of car manufacturers in relation to industry-wide profitability targets such as industry averages. Specifically we are interested in whether firms adjust their profitability in the direction of these targets, whether it is possible to detect any such change, and, if so, what the precise nature is of these changes. This paper introduces several novel methods to assess the trajectory of profitability over time. In doing so we make two contributions to the current body of knowledge regarding the dynamics of profitability. First, we develop a method to identify multiple profitability targets. We define these targets in addition to the commonly used industry average target. Second, we develop new methods to express movements in the profitability space from t to t + j, and define a notion of agreement between one movement and another. We use empirical data from the car industry to study the extent to which actual movements are in alignment with these targets. Here we calculate the three targets that we have previously identified, and contrast them with the actual profitability movements using our new agreement measure. We find that firms tend to move more towards to the new targets we have identified than to the common industry average.
History
Publication status
- Published
Journal
European Journal of Operational ResearchISSN
0377-2217Publisher
ElsevierExternal DOI
Issue
3Volume
225Page range
420-428Department affiliated with
- Business and Management Publications
Full text available
- No
Peer reviewed?
- Yes
Legacy Posted Date
2014-03-31Usage metrics
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