April 13, 2019

Strategy of Market Leader

Marketing Management Revision Article Series

Strategic Choices for Market Leadership Firms

Expand the Market and Defend Market Share

Expanding the Market Size

Market leader or leaders are dominant firms in an industry with the largest market share. Many times, only one firm is acknowledged as the market leader. Market leader usually takes initiative in new product introduction, price changes, increasing distribution outlets or coverage and increasing advertisement and promotion intensity. The leader may not be admired or respected but its dominant position is obviously visible to every observer.

The leader has to face challenges from competitors unless, its dominance is protected by a patent ( or legal monopoly). It has to defend its position against challengers. But the first strategic choice for the leader is to take actions that expand the market for the product in general. The alternative ways for increasing the usage of a product are: finding new users, finding new uses for the product and increasing the usage by existing customers. Market leaders make appropriate efforts to increase usage of their industry product. As market expansion is generally profitable to the market leader.

Defending Market Share

But in case there is competition for market share, a leader has to defend its market share. Kotler quotes Sun Tsu in this context. Leaders should not rely on the enemy not attacking, but have to become unassailable. Market leading firms have to innovate continuously and be the first to introduce new product variants and customer services. They have to undertake cost reduction and thereby decrease selling prices and improve distribution net work. It has to keep on maintaining and improving its competitive advantage and provide increased value to its customers. Increased strength is always the best defense.

The marketing competitive strategy literature has borrowed heavily military strategy literature. Philip Kotler and Ravi Singh in their paper, "Marketing Warfare in the 1980s" (Journal of Business Strategy, Winter 1981) identified six defensive strategies that a market leader can implement to ward off competition or challenge.

1. Position defense
2. Flank defense
3. Preemptive defense
4. Counteroffensive defense
5. Mobile defense
6. Contraction defense

Expanding Market Share

Gaining Market Share: Market leaders can also try to increase their market share. According to Buzzell and Wiersema ("Successful Share Building Strategies" Harvard Business Review, Jan-Feb 1981), gain in market share can be achieved by new product introduction, improving relative product quality and increasing marketing expenditures relative to market growth.

1. Share-gaining companies typically developed added more new products to their product offering.

2. Companies that increased performance and quality of their products relatively and services gained market share.

3. Companies that increased their marketing expenditures relatively increased market share.

Is BJP using the above three strategies in the 2019 Parliament Elections?

Expanding the market may not be relevant in the election. Defending is certainly relevant. But in this election, BJP has to increase vote percentage as the opposition is more united this time. Hence strategies that expand market share are to be effectively employed.

1. Are they attracting more segments of the electorate with segment specific poll manifesto programs?  Orissa and Bengal are expected to give them more MP seats this time. It is extending its reach to newer market segments.

2. Are they convincing the electorate that their policy making and administrative oversight is relatively better?

3. Have they increased their committed cadre for electioneering?  No doubt BJP is able to be ahead in election expenditure. But what is the quality of campaigning by committed cadre vs. new political recruits that came along with their leaders from other parties. But BJP quickly finalized their alliances giving it an extra manpower in a way.

These issues need analysis.

Indian Opposition's Challenger Strategy Use in 2019 Parliament Elections

Marketing Strategies for Challenger Firms

Further Reading

Read how a market leader in Thailand applied the defensive strategies. (2008 conference paper)

The Best Defense
Jim Stengel, author of Grow: How Ideals Power Growth and Profit at the World’s Greatest Companies, introduces an excerpt presenting tactics for protecting your market share from Defending Your Brand: How Smart Companies Use Defensive Strategy to Deal with Competitive Attacks, by Tim Calkins.

Originally posted in
http://knol.google.com/k/narayana-rao/strategy-of-market-leader/2utb2lsm2k7a/   3905

Updated  14 April 2019,  1 March 2019, 1 November 2016,  1 June 2014