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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 Garn
In 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 Research

ISSN

0377-2217

Publisher

Elsevier

Issue

3

Volume

225

Page range

420-428

Department affiliated with

  • Business and Management Publications

Full text available

  • No

Peer reviewed?

  • Yes

Legacy Posted Date

2014-03-31

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