Final answer:
The statement that "increases in market share limit the expansion of scale economies" is not true. Market share is a measure of a company's sales relative to industry sales, and higher market share generally allows for increased exploitation of economies of scale, contrary to the option presented.
Step-by-step explanation:
Understanding market share is critical in analyzing a company's position within an industry. Market share refers to the percentage of an industry's sales that is captured by a company, and it is an indicator of competitiveness, customer base, and market power. Here are some key points related to market share:
• Increases in market share can lead to enhanced firm profitability due to economies of scale and increased market influence.
• Many firms do indeed seek a high market share as it can be associated with numerous competitive advantages.
• Contrary to what some might think, some firms seek a low market share; they may target niche markets or choose to maintain a low profile to focus on profitability over size.
• The statement that "increases in market share limit the expansion of scale economies" is not accurate. Typically, as market share increases, a firm can more fully exploit scale economies, meaning they can reduce per-unit costs through larger operations.
The concept of market share is also intertwined with industry dynamics such as barriers to entry, competitive intensity, and the effects of innovation. Barriers to entry might secure the market share of existing players and deter new entrants, maintaining higher profitability for those within the industry. Additionally, firms must be aware of competition and consumer preferences, as shifts in these areas can impact market share and overall success. In summary, while many firms seek to increase their market share, the strategies they employ and the outcomes they desire can vary greatly depending on their unique goals and the market conditions they operate within. The correct option that is not true about market share, which is the question at hand, is that "increases in market share limit the expansion of scale economies."