The UK Truck Market: An Investigation into Truck Purchasing Behaviour and Changing Market Shares

Abstract

THE empirical analysis of market performance within industrial economics is still predominantly focused on market structure-performance relations. When applied to cross-section industrial studies, this approach implicitly assumes that industries are insignificantly dispersed from their respective short-run equilibrium positions and that each industry (or market) is homogeneous in terms of the behaviour of buyers and sellers. However, these assumptions will not be appropriate in the case of markets experiencing market share instability to the extent that the relative positions of competitors are changing. Structural adjustments towards new equilibrium positions resulting from competitors having different degrees of market success suggests that corporate market behaviour has an effect on market performance independent of any market structure variable. Recently, there has been a small, but growing, recognition of the importance of the behavioural mechanism in determining corporate market performance which is reflected in the work of Hatten and Schendel [6], Dorward [3], [4] and Caves and Porter [1]. These studies suggest that corporate behaviour has an independent effect on short-run market performance. Such an effect is particularly likely in the case of product differentiated industries where the market performance of competing manufacturers is affected by their relative success in matching planned product characteristics to buyer preferences. The importance of heterogeneous buyer preferences in explaining the variation of such variables as market share and profitability between firms means that detailed buyer requirements must be analysed in addition to the different competitive strategies of manufacturers. Thus, rather than assuming the complete structural dependence of the behavioural mechanism, empirical research needs to investigate the role of buyer and seller behaviour in affecting market performance. This paper focuses on the relationship between the purchasing behaviour of truck operators and the changing market performances of UK medium and heavy truck manufacturers between 1976-79. While this is a relatively short period for the analysis of structural change, there have been substantial changes in fortune for some of the leading manufikturers. In the 7.5-20 tonne gross vehicle weight (gvw) sector, Bedford, the market leader, had a decline in market share from 39.7 to 29.7 percent and in the over 20 tonne s'ector Leyland, the market leader, saw its share fall from 27 to