Market Dominance
“Dominant firms: Impact on
consumers and producers plus
issues of control and regulation”
Wouldn’t it be nice to be the leader
in your industry?
• It would be like your business being a
giant like Tesco or Microsoft.
• When your business presence can affect
change in the market, you have achieved
market dominance.
What is Market Dominance?
• Market dominance is a measure of the strength
of a brand, product, service or firm, relative to
its competition in a specific geographical area.
• For a business, product, brand to have Market
Dominance, it needs to have the “lion’s share”
of the market in a particular area.
• Market dominance allows the dominating
vendor to adopt the "my way or the highway"
attitude
Market Share
• There are several ways of calculating market
dominance. The most direct is Market Share.
• Market Share is the percentage of the total market
achieved by a firm or brand.
• As a general rule, a firm or brand must control at
least 50% of a particular market to be considered
dominant in that market
• However, Market share is not a perfect indicator of
market dominance. We must take into account the
influences of customers, suppliers, competitors in
related industries, and government regulations.
Case Study on Market Share - Dixons
• Dixons is widely regarded as the dominant
electrical retailer in the UK
Advantages of size in the electrical retail market:
• Buying advantage: An ability to use size to source product more
cheaply is a clear advantage in an industry that faces rapidly
declining consumer prices
• Volume advantage: As a low-margin business, retailers that can sell
in high volumes are in the best position to gain market share
• Access to new products: The largest retailers typically have firstmover advantage in stocking new "in demand" products that have
just been released
• Advertising scale: As a price-led business, access to national
advertising provides the ability to keep customers regularly informed
of the latest product deals. This helps to reinforce customer
perception of value, in addition to strengthening the Dixons Group
brands
• Access to retail property: With the continuing trend towards out-oftown, larger destination stores that offer a broader range of choice,
and with restrictive planning laws limiting opportunities, the larger
electrical retailers have both the financial and operational capacity to
secure such important new sites.
The Market Leader
• The market leader is dominant in it’s industry.
• It has substantial market share and often
extensive distribution arrangements with
retailers.
• It typically is the industry leader in developing
innovative new business models and new
products (although not always).
• It tends to be on the cutting edge of new
technologies and new production processes.
• It sometimes has some market power in
determining either price or output.
• A business that has achieved market
dominance makes it hard for other
businesses of that type to enter into
competition in the geographic area. There
is not enough of a market left for them to
compete since you control most of it.
• Market dominance doesn’t automatically
transfer from one area to another. It
depends on the strength and adaptability
of your product in the market. If you
began to offer your product internationally,
you have the potential to dominate that
market as well, but it is not a
certainty. The competition there may be
different and stronger.
• Recall, that in the early 1980s you could not simply buy a
printer and assume it would work with your computer
software. In fact, software developers needed to do extra
work to make sure their specific software program
worked with different printers. This all changed when
Microsoft Windows captured the majority of the desktop
PC operating system business. With the market
dominance of Windows, Microsoft was able to dictate
driver standards to printer hardware vendors. The net
result was that customers could buy any printer and it
worked. Customers won, not because all the printer
hardware vendors agreed to interoperate, but because
the vendors were forced into submission. As a printer
vendor, if you didn't write a Windows print driver you
went out of business.
• There was also a time, prior to 2001, when
you couldn't necessarily download any
song instantly. Thank Apple for dominating
the music publishers and forcing
compliance. Clearly customers won.
• When looking at the necessary level of market
dominance required, it is clear that the dominance does
not need to be complete in order to foster
interoperability; it simply has to be an undeniable victory
over a material chunk of the market. Both Microsoft
Windows and Apple iOS have dominated respective
portions of the market. As such, both Microsoft and
Apple can define "their standards", other vendors follow
and customers win. To continue the printer driver story
from above, most printers now ship with both Windows
and Apple print drivers due to the Microsoft/Apple
dominance.