Increasing Market Share A company’s market share is the percentage of the overall market for its products and services that it controls. Market share is an important business metric since it indicates a company’s profitability and performance. It might indicate an industry’s dominance and how successfully a company’s revenue-generating initiatives are performing to fulfill corporate objectives. Market share can have an impact on operations, product and service pricing, and potentially stock market performance. Growing market share leads to increased revenue. As a result, a company can scale up its operations and increase its profitability. Gaining market share should be a serious business objective. Apple Inc.: Apple is an excellent real-life example of a business that commands a large absolute market share and dominates the industry within which it operates. In the smartphone industry, it is one of the market leaders, fighting very strong competitors such as Samsung and Huawei. In the majority of the markets in which Apple operates, the US-based company enjoys, on average, a market share of 70%. Colgate: Colgate is another excellent example of a company that commands a large absolute market share. In the toothpaste industry, Colgate accounts for over 80% of all toothpaste sales. No wonder competition has turned fierce in so many markets: One share point can be worth tens of millions of dollars. Gaining increased share does not automatically produce higher profits, however—especially for labor-intensive service companies that may not experience many economies of scale. Much depends on the company’s strategy. Because the cost of buying higher market share through acquisition may f ar exceed its revenue value, a company should consider four factors first: The possibility of provoking antitrust action- Frustrated competitors are likely to cry “monopoly” and seek legal action if a dominant firm makes further inroads. Microsoft and Intel have had to fend off numerous lawsuits and legal challenges around the world as a result of what some feel are inappropriate or illegal business. Antitrust laws were designed to protect and promote competition within all sectors of the economy. The Sherman Act, the Federal Trade Commission Act, and the Clayton Act are the three pivotal laws in the history of antitrust regulation. The Philippine Competition Act (PCA) or R.A. 10667 is the primary competition policy of the Philippines for promoting and protecting competitive market. It will protect the well-being of consumers and preserve the efficiency of competition in the marketplace. Back to the Story of Microsoft Vs. United States Link. https://www.software-developer-india.com/why-netscape-lost-all-of-theirmarket-share-to-the-internet-explorer/ https://www.justice.gov/atr/us-v-microsoft-courts-findings-fact Netscape Communications Corp., a subsidiary of Internet and media giant AOL Time Warner Inc., filed a lawsuit against Microsoft Corp. today, alleging that the software maker harmed Netscape with anticompetitive practices related to the Windows operating system. Netscape Navigator, the web browser which ruled the world in the early 1990s succumbed to a sad end when Internet Explorer began to take the reins of the web browser world. Eventually, Microsoft’s Internet Explorer emerged as the most formidable opponent for Netscape Navigator. While IE was free, Netscape was not free completely and this brought a huge market share advantage to Microsoft. Actually, Netscape should have seen this was happening because Netscape knew in the beginning itself that Microsoft was interested in browsing technology and Netscape had rejected the offer about licensing their browsing technology with them in 1994. When Microsoft provided its own browser for free, Netscape also provided its own for free, but eventually lost out on its market share. Microsoft started with its own browser, but the initial endeavors were abysmal failures. The battle between Microsoft and Netscape started right about then and the email, conferencing and group discussion features that Netscape introduced were not very exciting when compared to IE. Netscape was pushed to a corner and it became just a stand-along browser. Eventually, Microsoft’s IE came to be known as a stable browser and things started going downhill for Netscape. Reasons for Netscape’s decline Microsoft began commandeering a monopoly position through its office suite products space and DOS/Windows. Netscape lost its focus because instead of focusing on their browser and preventing it from bloating, they tried to become an complete bussiness communication tool.They failed to understand the potential of the new marketplace that had opened up through Internet. On May 18, 1998, the DoJ and the attorneys general of 20 different states filed antitrust charges against Microsoft to determine whether the company’s bundling of additional programs into its operating system constituted monopolistic actions. The suit was brought following the browser wars that led to the collapse of Microsoft’s top competitor, Netscape, which occurred when Microsoft began giving away its browser software for free. The government case accused Microsoft of making it difficult for consumers to install competing software on computers operated by Windows. If Microsoft was found to have made it unreasonably difficult for consumers to uninstall Internet Explorer and use a competing browser, the company's practices would be deemed anti-competitive. The trial didn't necessarily run very smoothly. In fact, the DOJ's case against Microsoft was plagued with problems. First, there were questions about whether charges should have been brought against Microsoft in the first place. Microsoft claimed that its competitors were jealous of its success. The Ruling Despite the creative editing of video, facts, and emails, Microsoft lost the case. The presiding judge, Thomas Penfield Jackson, ruled that Microsoft violated parts of the Sherman Antitrust Act, which was established in 1890 to outlaw monopolies and cartels. He found that Microsoft’s position in the marketplace constituted a monopoly that threatened not only the competition but also innovation in the industry. Jackson also called for Microsoft to divide the company in half and create two separate entities that would be called baby bills. The operating system would make up one half of the company and the software arm would make up the other. Microsoft was highly critical of the ruling and alleged bias in favor of the prosecution. The ruling was challenged by Microsoft, and an appeals court overturned the ruling. However, it did successfully set a precedent that is echoed in calls for breaking up big tech among progressive American politicians. For example, many lawmakers suggest that Amazon should be divided into two separate entities, one for e-commerce and the other for the Amazon Web System. Economic cost- Figure 12.3 shows that profitability might fall with market share gains after some level. In the illustration, the firm’s optimal market share is 50 percent. The cost of gaining further market share might -exceed the value if holdout customers dislike the company, are loyal to competitors, have unique needs, or prefer dealing with smaller firms. And the costs of legal work, public relations, and lobbying rise with market share. Pushing for higher share is less justifiable when there are unattractive market segments, buyers who want multiple sources of supply, high exit barriers, and few scale or experience economies. Some market leaders have even increased profitability by selectively decreasing market share in weaker area. Market-Challenger Strategies Most businesses consider and prepare for market share in addition to profit and sales volume. Gaining market share is what they believe will lead to long-term profitability. Contrary to this advice, a company’s objective should be to achieve the ideal market share rather than to maximize it. When moving away from the share in either direction will unfavorably affect the company’s long-term profitability or risk (or both), a company has reached its ideal market share in that product or market. When a company’s market share falls below the ideal level, it should make plans to increase it; when it reaches the ideal level, it should work to hold onto it; and when it exceeds it, it should work to decrease it. Investors and analysts monitor increases and decreases in market share carefully as this can be a sign of the relative competitiveness of the company’s products or services. As the total market for a product or service grows, a company that is maintaining its market share is growing revenues at the same rate as the total market. A company that is growing its market share will be growing its revenues faster than its competitors. A low market share is considered to be a market share that is less than half of the market share of the industry leader. So if the industry leader has a market share of 40% and another company has a market share of 10%, that company would be considered to have a low market share as 10% is less than 20% (half of 40%). At different levels of market share, a company’s risk also changes. Risk is high for low market-share companies, declines as market share increases, and then increases again at very high share levels. Risk is high at low market-share levels because a business is subject to competitive forays by stronger competitors, cannot afford adequate marketing research and promotional spending, and is vulnerable to sudden changes in consumer tastes or spending. Risk starts to fall with increased market share because an organization can engage in more market research, operate better information systems, recruit more experienced marketing personnel, and spend more on marketing. Risk reaches a low point at a high share level and then may begin to increase at higher levels because of the growing probability that the government, consumers, and competitors will single the business out for specific attack. The danger of pursuing the wrong marketing activities- Companies successfully gaining share typically outperform competitors in three areas: new-product activity, relative product quality, and marketing expenditures. Companies that attempt to increase market share by cutting prices more deeply than competitors typically don’t achieve significant gains because rivals meet the price cuts or offer other values so buyers don’t switch. Example: Washing Powder Nirma It started becoming a “Low-cost-value for money” detergent in the minds of consumers. Popularity of the brand made to attains 15% of market share while Surf excel acquired 65% market share while targeting the premium segment. In 2000, with highly grown competitive market, Nirma gained the market share of 38% beating Surf Excel 31%. But despite being a million dollar company its market share suddenly started to decline due to unbranded competitive rivals. They fail to perceive the interest of the consumers that Low cost product will not work anymore, since customer started perceiving the product as cheap as the market grows with new competitions variants. They slowly tried to new product offer like Nirma Blue but the customer no longer can differentiate the product and positioning. Nirma followed the same campaign of competitors and failed to penetrate into the premium segment due to the brand perception. The ‘Myth of Market Share’: Can Focusing Too Much on the Competition Harm Profitability https://knowledge.wharton.upenn.edu/article/the-myth-of-market-share-canfocusing-too-much-on-the-competition-harm-profitability/ It is a common practice of many companies to focus their attention on grabbing market share from their competitors. But such efforts can actually be detrimental to the firm’s profitability, according to Wharton marketing professor J. Scott Armstrong. For years, Armstrong has been conducting research showing that competitor-oriented objectives, such as setting market-share targets, are counterproductive. After coauthoring a paper in 1996 that reached this conclusion, he and a different co -author, Kesten C. Green of Monash University in Australia, have written another paper summarizing 12 new studies that add additional weight to the original conclusion. Their study is titled, “Competitor-oriented Objectives: The Myth of Market Share.” In their 1996 study, Armstrong and Collopy also analyzed data amassed by scholars to measure the level of competitor orientation of 20 major corporations, as stated by the companies themselves, and how the level of competitor orientation was related to the firms’ after-tax return on investment (ROI) for five nine-year periods beginning in 1938 and ending in 1982. “Competitive-oriented objectives were negatively correlated with ROI for these data,” Armstrong and Collopy concluded. In other words, the more managers tried to be the biggest in their market, the more they harmed their own profitability. For example, companies whose only goal was profit maximization — DuPont, General Electric, Union Carbide and Alcoa — posted stronger returns on investment than did the other firms studied. By contrast, the six firms whose only goal was market share — National Steel, the Great Atlantic & Pacific Tea Company, Swift, American Can, Gulf and Goodyear — fared worse in terms of ROI. Indeed, some of these companies, like National Steel and American Can, no longer exist. In another study, a team of researchers including Armstrong analyzed additional data, through 1997, on the 20 companies originally studied by Armstrong and Collopy. The researchers introduced two new criteria: real return on equity and the percent of aftertax return on sales. All of the correlations between competitor-oriented objectives and profits were negative, ranging from minus 0.28 to minus 0.73, according to Armstrong and Green. Armstrong says the focus on beating the competition remains entrenched in the world’s biggest companies. Jack Welch, the former CEO of General Electric, famously stated that GE would not be in any business in which it could not be first or second in market share. Welch’s belief in the myth still holds sway in boardrooms, but Armstrong says it is never too late for CEOs to change. We’re not saying companies shouldn’t pay attention to their competitors; they might be doing reasonable things that you may also want to do,” Armstrong says. “What we’re saying is that the objective should not be to try to beat your competitor. The objective should be profitability. In view of all the damage that occurs by focusing on market share, companies would be better off not measuring it.” The effect of increased market shares on actual and perceived quality.- Too many customers can put a strain on the firm’s resources, hurting product value and service delivery. Charlotte-based Fair Point Communications struggled to integrate the 1.3 million customers it gained in buying Verizon Communications’ New England franchise. A slow conversion and significant service problems led to customer dissatisfaction, regulator’s anger, and eventually short-term bankruptcy. FairPoint Communications sought bankruptcy protection after struggling to absorb phone lines purchased from Verizon Communications.The company said it would not make interest or principal payments on its pre-petition debt during the time of its bankruptcy protection. FairPoint said it was seeking to cut interest payments by more than $200 million a year, to about $65 million. FairPoint, which is also losing customers to mobile phones and digital-voice services offered by cable companies, has posted four consecutive quarterly losses. The company lost 11 percent of its phone lines in the year that ended June 30. Market Challenger Strategies There will always be rival businesses and competition anywhere there is a demand for a good or service. The word "market" itself is actually very similar to the concept of competition in the business sector. There will be competitors who have already seized the market share in front of a startup company entering the market. So what can a company do? When faced with competition, should it give up? NO, started to move against those competitors would be the best plan. A company that takes on its rivals will not only make life difficult for them but will also make it difficult for newcomers, acting as a barrier to entrance. The new company will be able to steadily climb the success ladder with the help of this strategy. Market Challenger strategies, are the marketing strategies that a company adopts to challenge or attack the market leader or immediate competitors to earn projected revenue and capture projected market share. That company can be either new in the market or holds a runner-up, third, or even lower position in the competition. The company that challenges other companies is often called a “market challenger.” A question we should ask is, Can a company at any position challenge the market leaders? What is your answer to that?. If a company is just entering a market, its real competitors will be low position firms. A new entrant simply cannot challenge the industry leader or the runner-up. However, if a company holds 4 th or 3rd position in a market competition, it can target the industry leaders. Defining the strategic objective and opponent(s).A market challenger must first define Its strategic objective, which is usually to increase market share. It then must decide whom to attack: It can attack the market leader.- This is a high-risk but potentially high-payoff strategy and makes good senses. If the leader is not serving the market well. A market challenger may decide to attack the market leader. Such a decision should be a well-thought one in order to be successful. In order to attack, the firm should identify the segments that are either poorly served or un-served by the leader. This will give the firm the opportunity to exploit the unmet or improperly met needs of the consumers and thus cash the gap. Ex. Netscape and Microsoft. It can attack firms its own size that are not doing the job and are underfinanced.- The challenger may find firms of its own size that are performing poorly in terms of customers’ needs satisfaction and are suffering from cash problems. These firms have aging products, are charging excessive prices, or are not satisfying customers in other ways. Among the businesses of their size, some may provide the market with antiquated and out-of-date goods, some may charge unreasonable prices for their goods, and yet others may fall short of satisfying customers’ needs in other ways. These companies could easily be the focus of challenger firms’ attacks. If such an attack were to be effective, the corporation might benefit significantly. It can attack small local and regional firms.- Many small local and regional firms also fail meeting customers’ needs properly with respect to quality, service, price, fashion, and others. If identified, a firm can successfully attack such firms, provided measures could be taken to minimize customers’ expectation gap. The objectives of the market challenger vary as its opponent to attack vary. If the firm decides to attack the market leader, its objective should be to capture a leader’s portion. It can attack the status quo- Status quo is defined as the current or existing state of affairs. When there is chaos in the market. This could happen in times of economic stress, such as a recession, or when the leader sees competition building rapidly from many quarters and therefore requires time to devise a suitable strategy.However, once a brand has started to make some progress in taking market share from the leader, it must work consistently to continue to grow. The brand must follow a combination of strategies that have been outlined above, consistently and repeatedly, using good market judgment. For this purpose, the marketing campaign must address new customer behavior and demographics while maintaining a constant relationship with its existing target audience. Without this effort, the positioning may be ultimately copied and potentially replaced by another brand or company. A challenger might not attack a specific firm as much as an industry as a whole or a pervasive way of thinking that doesn’t adequately address customer needs. Firms like Jet Blue, Ally Bank, and Netflix have succeeded by contrasting their services with those of competitors. Choosing a general attack strategy To compete with the competition, you can use a variety of various attack strategies. Whichever strategy you choose will be determined by the strengths and shortcomings of your own company, product, or service, your financial and resource capacity, and the specific strengths and weaknesses of the rival you are pursuing. Frontal Attack- A Frontal attack strategy is common in industry leaders where one market leader takes on the other one directly. In other words, if one brand introduces a new good or service, the rival brand will respond with a similar offering at a similar price and with similar marketing tactics. The counter product’s price may be decreased by the replying company while maintaining the same value and quality. In essence, a frontal attack strategy is a battle plan where one company confronts another based on the latter’s advantages. In a pure frontal attack, the attacker matches its opponent’s product, advertising, price, and distribution. The principle of force says the side with the greater resources will win. A modified frontal -attack, such as cutting price, can work if the market leader doesn’t retaliate and if the competitor convinces the market its product is equal to the leader’s. Example: Pepsi and Coca-Cola have been “at war” for decades, and both have captured immense global market share. Both companies have a diverse product portfolio, and if one brand launches a product, the other one counterattacks with a similar product. For instance, when Coca-Cola introduced Diet Coke, Pepsi responded with Diet Pepsi. Flank Attack. - In a flank attack strategy, a company targets the weak points of its competitor. The market challenger identifies and targets the weaker areas of its competitors with consideration of segmental and geographical aspects. In a pure frontal attack, the attacker matches its opponent’s product, advertising, price, and distribution. Flanking strategy is another name for identifying shifts that cause gaps to develop in the market, then rushing to fill the gaps. Flanking is particularly attractive to a challenger with fewer resources and can be more likely to succeed than frontal attacks. The challenger searches for the competition’s weak points and underperforming areas as well as untapped markets where the competitor is absent. After being recognized, the challenger will promote its goods or services to fill the market’s gap. Examples: Sampoorna,” the colour television made by LG, is an example of a flank attack strategy. The company launched this product specifically for people in rural India while the competitors didn’t to do so. Encirclement Attack- Encirclement attempts to capture a wide slice of territory by launching a grand offensive on several fronts. It makes sense when the challenger commands superior resources. A business that follows an encirclement attack strategy will go in with all guns blazing.In this strategy, one competitor simultaneously attacks the competitor from every angle. In an effort to defeat the competition, the rival may simultaneously focus on its advantages and disadvantages. Combining both flank and frontal attack strategies results in an encirclement attack strategy. The challenger might start up several advertising strategies to put the rival on the losing end. To establish long-term market dominance is the main goal of the encirclement attack strategy. Example: - The eCommerce Market The eCommerce industry can serve as a great illustration of the encirclement attack strategy. Online retailers frequently cut their profit margins to outperform the competition in terms of sales. To increase their consumer base and gain market share, they would go to any measures. Bypass Attack- Bypassing the enemy altogether to attack easier markets instead offers three lines of approach: diversifying into unrelated products, diversifying into new geographical markets, and leapfrogging into new technologies. A company following a Bypass attack strategy simply outplays the competitor. That is, a company does not identify the weak areas of its competitor or launch counterattacks. Rather, the company innovates a new product and creates a segment of its own. However, there are other ways to bypass the competition completely, such as; o Expansion to the uncovered/untapped markets. o Diversifying with the help of unrelated products. o Updating or modernizing an existing product with new features. The competitors follow later, but until then, the “trendsetter” will be able to create a brand identity in that market. Examples: Aquafina water from Pepsi Co. o The mineral water brand Aquafina from Pepsi Co is a great example of a bypass attack strategy. The company totally invested in a new market, and Coca-Cola followed later with its own Dasani water brand. o The iPod from Apple company completely bypassed the Walkman from Sony. Guerrilla attack.-What would you say about the dominance of LG TV over Samsung TV? The dominance of Coca Cola and Pepsi in the market. How was Whirlpool able to overthrow its competition with Godrej in the refrigerator segment? The answer to the questions is the Guerrilla attack strategy where the companies did thorough research on the untapped territories and then adopted all possible measures and marketing tactics to create a meaningful impact. Guerrilla attacks consist of small, intermittent attacks, conventional and unconventional , including selective price cuts, intense promotional blitzes, and occasional legal action, to harass the opponent and eventually secure permanent footholds. A guerrilla campaign can be expensive, though less so than a frontal, encirclement, or flank attack, but it typically must be backed by a stronger attack to beat the opponent. This strategy is more like a “dog-fight” where competitors try to demoralize or harass each other with the help of any or all conventional or unconventional methods. Example: Coca-Cola Vs. Pepsi The punch line, “Nothing official about it,” was Pepsi’s counterattack when Coca-Cola became the official partner of the world cup. Market-nicher strategies An alternative to being a follower in a large market is to be a leader in a small market, or niche, as we introduced in Chapter 8. Smaller firms normally avoid competing with larger firms by targeting small markets of little or no interest to the larger firms. Over time, those markets can sometimes end up being sizable in their own right. Market nicher (Niche marketer) is a company that focuses on the narrow niche in the market. A differentiating factor that allows companies to compete with big brands who are already well established. Market nichers focus on specific groups of cus tomers, buying motives and competitors for their products or services. Nichers have three tasks: creating niches- selecting your target audience, defining an unmet or underserved need, researching your customer base, creating a business plan, and marketing your business to your specific audience. expanding niches- Building up a niche audience can be a key to success for many brands. Sometimes, however, it’s important to expand your brand beyond its initial niche. Introducing your brand to a more global audience can grow your business and bring new customers to your brand. protecting niches- A solid market niche helps ensure that specific customers will want to buy from your business instead of the competition. A niche allows them to identify your product and brand, and know that your offer suits their needs. NICHE SPECIALIST ROLES MARKETING End-user specialist. The firm specializes in one type of end-use customer. For example, a value-added reseller (VAR) customizes computer hardware and software for specific customer segments and earns a price premium in the process. For example, the German company Tennispoint aims to supply all the needs of tennis players and thereby outperforms general sports suppliers in that specific segment. Vertical-level specialist. The firm specializes at some vertical level of the production-distribution value chain.The company may only decide to sell retail, thus planning a vertical specialist role in distribution. Example: A copper firm may concentrate on producing raw copper, copper components, or finished copper products. Customer-size specialist. The firm concentrates on either small, medium-sized, or large customers. By customer-size specialist means concentrating on a particular customer size group. It is a common practice in niche marketing to concentrate on small customer groups. The reason is that large firms usually neglect small customers. Thus, a firm taking care of this group can reap its benefit and develop a strong brand loyal customer group. Example: High-end customers are served well by shopping malls like Greenbelt and The Podium in Manila, mid-end customers are typically connected to shops and streets like SM and Robinsons. Low-end customers are ideally spread over various outlets like Bazaar and Shopping Center. Specific-customer specialist. The firm limits its selling to one or a few customers. This guarantees the selling of a firm’s product, and it can comfortably schedule its production and marketing activities.Many firms sell their entire output to a single company, such as Walmart or General Motors. For example, Weber carburettors supply high-performance carburettors to most prestige car manufacturers. It is not worthwhile for the car manufacturers to produce their own carburettors. Geographic specialist. The firm sells only in a certain locality, region, or area of the world. Example: Some of the cosmetics manufacturing companies in this country are found to specialize geographically like Happy skin and Colourette Product or product line specialist. The firm carries or produces only one product line or product. A food product manufacturing company may decide to produce only mango pickle (product) or a whole range of pickles (product-line). Product-feature specialist. The firm specializes in producing a certain type of product or product feature. The firm concentrates on a particular feature (s) of a product and want to take the lead on it—a toiletries product manufacturer for specializing in producing anti-dandruff shampoo. Job-shop specialist. The firm customizes its products for individual customers. This is practiced mostly in the computer software business. The firm deciding to play a job-shop specialist role may develop and sell customized software, meeting its particular needs. Quality-price specialist. The firm operates at the low- or high-quality ends of the market. McIntosh Laboratory only makes high-performance luxury audio systems—its hand-built audio products appeal to audiophiles everywhere. Service specialist. The firm offers one or more services not available from other firms. A bank might take loan requests over the phone and hand-deliver the money to the customer. Channel specialist. The firm specializes in serving only one channel of distribution. Ideal for manufacturers of furniture Example: IKEA Summary 1. Growing the core or seeking organic growth—focusing on opportunities with existing products and markets—is often a prudent way to increase sales and profits. 2. A market leader has the largest market share in the relevant product market. To remain dominant, it looks to expand total demand and protect and perhaps increase Its current share. 3. A market challenger attacks the market leader and other competitors in an aggressive bid for more market share. There are five types of general attack and specific attack strategies. 4. A market follower is a runner-up firm willing to maintain its market share and not rock the boat. It can be a cloner, imitator, or adapter. 5. A market nicher serves small market segments ignored by larger firms. The key is specialization, which can command a premium price in the process. 6. Companies should maintain a good balance of consumer and competitor monitoring and not overly focus on competitors. 7. Technologies, product forms, and brands exhibit life cycles with distinct stages, usually introduction, growth, maturity, and decline. Most products today are in the maturity stage. 8. The introduction stage is marked by slow growth and minimal profits. If successful, the product enters a growth stage marked by rapid sales growth and increasing profits. In the maturity stage, sales growth slows and profits stabilize. Finally, the product enters a decline stage. The company’s task is to identify truly weak products and phase them out with minimal impact on company profits, employees, and customers. 9. Like products, markets evolve through stages: emergence, growth, maturity, and decline. 10. In a slow-growth economy, marketers must explore the upside of increasing investments, get closer to customers, review budget allocations, put forth the most compelling value proposition, and fine-tune brand and product offerings.
