We can classify firms by the roles they play in the target market: leader, challenger, follower, or nicher. Suppose a market is occupied by the firms shown in Figure 1.1. Forty percent of the market is in the hands of a market leader; another 30 percent is in the hands of a market challenger; another 20 percent is in the hands of a market follower, a firm that is willing to maintain its market share and not rock the boat. The remaining 10 percent is in the hands of market nichers, firms that serve small market segments not being served by larger firms.
. Market Leader
Many industries contain one firm that is the acknowledged market leader. This firm has the largest market share in the relevant product market, and usually leads the other firms in price changes, new-product introductions, distribution coverage, and promotional intensity. Some well-known market leaders are Microsoft (computer software), Intel (microprocessors), Gatorade (sports drinks), Best Buy (retail electronics), McDonald's (fast food), Gillette (razor blades), UnitedHealth (health insurance), and Visa (credit cards).
Market Leader’s Objectives
Remaining number one calls for action on three fronts. First, the firm must find ways to expand total market demand. Second, the firm must protect its current market share through good defensive and offensive actions. Third, the firm can try to increase its market share, even if market size remains constant.
Expanding The Total Market
The dominant firm normally gains the most when the total market expands. If Americans, for instance, increase their consumption of ketchup, Heinz stands to gain the most because it sells almost two-thirds of the country's ketchup. If Heinz can convince more Americans to use ketchup, or to use ketchup with more meals, or to use more ketchup on each occasion, Heinz will benefit considerably. In general, the market leader should look for new customers or more usage from...
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