High profit margin holds an umbrella over the competitor.
Most businesspeople are aware that profit is not the same as profit margin. Profit is profit margin multiplied by the turnover of capital. Maximum profitability and maximum profit flow are thus obtained by the profit margin that produces the optimum market standing and with it the optimum turnover of capital.
Why is the worship of high profit margin likely to damage—if not destroy—the business? It not only holds an umbrella over the competitor; it also makes competing practically risk-free and virtually guarantees that the competitor will take over the market. Xerox invented the copier, and in all of business history very few products have been ...
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