Sunday, November 12, 2006

Management Lite & Ezy 14 – Market Leader, Challenger, Follower and Nicher

We can classify firms by the roles they play in a particular market. We will use an example from the book of Kotler and Keller to explain this:

In this hypothetical market, 40% of the market share is held by a market leader; another 30% is held by a market challenger; another 20% is in held by a market follower, a firm that is willing to maintain its market share and not rock the boat. The remaining 10% is in the hands of market nichers, firms that serve small market segments not being served by larger firms.

Let's look at some real world markets...

Mobile phone – Nokia (leader), Samsung & Motorola (challengers)

Microprocessor – Intel (leader), AMD (challenger)

Operating system – Microsoft (leader), Linux movement (challenger)

Fast food – McDonald’s (leader), Burger King (challenger)

Credit card – Visa (leader)

Commercial airliner – Boeing (leader), Airbus (challenger)

However, identifying a firm's role based on its market share can be erroneous. In the market of digital SLR – a kind of high-end camera preferred by professionals – top three spots are held by Canon, Nikon and Olympus respectively. Sony entered the market by acquiring the business of Konica-Minolta. Despite being a new entrant, this consumer electronics giant has assumed the role of a challenger. Leveraging its strong brand and extensive distribution channel, Sony aims to capture 20-25% of the market.

Olympus, on the other hand, makes smaller digital SLR with features appealing to casual users. It turns out that Olympus is the real nichers.

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