Market domination produces tremendous internal resistance against any innovation.
A major decision underlying marketing objectives is market standing. One common approach is to say, “We want to be the leader.” The other one is to say, “We don’t care what share of the market we have as long as sales go up.” Both sound plausible, but both are wrong. It does not do much good for a company’s sales to go up if it loses market share, that is, if the market expands much faster than the company’s sales do. A company with a small share of the market will eventually become marginal in the marketplace, and thereby exceedingly vulnerable. There is also a maximum market standing above which it may be unwise to go—even if there were no antitrust laws. Market domination tends to lull the leader to sleep; monopolists flounder on their own complacency rather than on public opposition. Market domination produces tremendous internal resistance against any innovation and thus makes adaptation to change dangerously difficult. There is also well-founded resistance in the marketplace to dependence on one dominant supplier. No one likes to be at the mercy of the monopoly supplier.
The market standing to aim at is not the maximum but the optimum. This requires careful analysis of customers, of products or services, of market segments, and of distribution channels. It requires a market strategy, and it requires a decision of high risk.
ACTION POINT: Define your institution’s optimal market share by carefully analyzing your customers, competitors, market segments, and distribution channels. Base your market strategy on your optimal market share, not on simply dominating the market or increasing market share.
Management: Tasks, Responsibilities, Practices
* Source: The Daily Drucker by Peter F. Drucker