Factors Influencing Market Penetration

R. W. Allen
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R. W. Allen: Douglas Aircraft Company, Inc., Huntington Beach, California

Management Science, 1966, vol. 13, issue 1, 22-41

Abstract: The decision of a company in the selection of a technological business area to exploit is a difficult one to make because of the many complex factors involved and the uncertainties of predicting future events. To assist the management decision processes, a mathematical model is developed which relates the many factors such as company capability, time, market, competition, investment and costs to the expected economic gain over time. The basis of the model presupposes that the markets of interest are composed of many product areas in which companies will compete for a share. Thus, the model is concerned with two opposing forces (competition versus the company) trying to penetrate the same available product area simultaneously over a given time period. In addition to the model formulation several basic types of markets are analyzed as to their effect on the various economic factors. Also, the effect of the investment program in the market penetration is exhibited as well as the effect of loss in market shares on the maximum economic gain.

Date: 1966
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