Validating Business Simulations: Does High Market Share Lead to High Profitability?

Abstract

Among the nine major strategic influences on profitability reported as part of the ongoing stream of PIMS research is that a business firm’s share of its served market has a strong positive impact on profit and net cash flow. This finding is based on an examination of the performance history of over 3,800 companies contributing data on a yearly basis to the Strategic Planning Institute. A major concern of simulation users through the years is how realistic are business simulation games. Numerous validation studies on business simulations have examined game validity. The market share and profitability levels of 440 simulation companies in 96 industries from two separate simulation games were examined and it was found that market share and profitability levels were significantly and positively correlated but the strength of relationship wasn’t as strong as suggested by the PIMS findings.