Market Leader

What Is A Market Leader?

A market leader is the largest producer in its market space and has the highest profit margin. A leader can control the market’s direction and influence consumer loyalty to its brand.

A company with the largest market share leads the market in the industry it operates. A company that represents the highest market share becomes the market leader in an industry. 

Such a leader has advantages over its competitors and outshines them in many metrics that measure successful business performance. These metrics include:

• Brand loyalty
• Perceived value
• Customer retention
• Price
• Advertising
• Profit margins

Leaders usually have a strong, competitive product line in the market. Such a company may be the first to develop some advanced technology, which it sells in a market where it plays a leading role.

Maintaining a technological edge further supports a company’s strong market position and becomes perceived by the market as a brand that consumers associate with the offering. Innovation is an effective method used by a market leader to increase its market share.

This leader attaches great importance to strengthening its brand identity and maintaining a strong positive corporate image. A company’s brand image is significant when it plans to enter new markets or seek to expand into other regions.

With a strong brand identity and a positive image, a company has an advantage over competitors, including companies claiming leadership. A strong, prestigious brand allows a market leader to retain existing loyal customers and attract a new customer base.

The leader not only has higher profits and a strong brand identity but also has bargaining power. A company can use its dominant position in the industry to bargain profitable negotiations with suppliers, thus minimizing its production costs.

Understanding How Market Leadership Works

A company with a leading position in the market has the most innovative products and technologies that competitors do not yet have access to. It is then that a company defines the ideal characteristics that distinguish it from its competitors.

Innovation and breakthroughs are great methods a company can use to strengthen its leading position in the market. Being the first to bring an innovative new product to market is a very effective way to convince consumers to switch to a company’s product.

A company can increase its market share and maintain strong leadership by attracting a more consumer base. 

A company also puts a lot of emphasis on market research and product development. Market research helps a company understand the needs of its customers and use that information to develop new products and enhance the features of existing ones.  

To cater to different market segments, most of the time, a company launches several product lines. Collecting consumer feedback and using it in product development allows the company to maintain its leadership position while serving a wide range of consumers.

Having the largest market share allows a company to use its leading position to increase economic efficiency in the market. A company has the ability to drive down unit costs through economies of scale and set price trends with a first-mover advantage.

The loyalty of consumers to the brand makes them buy products of market leaders at slightly inflated prices to minimize risk. A company uses this information about the purchasing decisions made by its customer base to enhance its advertising and add value to its brand offerings.

The leading position in the market allows the company to negotiate with suppliers to minimize production costs. As a result, industrial suppliers tend to give companies huge discounts as the volume of each order increases. 

Market leadership allows the company to access the best distribution channels and gain the best technical knowledge. A company can attract the highest quality development partners when outsourcing their value chain functions. 

Example of a Market Leader

Market leadership requires more than just a big piece of the pie. To achieve leadership over the market, a company needs a top-notch strategy. A company must create a truly compelling and distinctive value proposition that will get customers to reach out to the company.

To maintain a dominant position in the market, a company must retain existing customers and attract new ones. A company can also attract competitors’ customers by figuring out the perfect combination of quality and price for their products.

Great examples of consumer-driven leaders in the market are these successful companies: 

• Apple
• Google
• Coca-Cola
• Amazon 

For example, Apple is best known for introducing innovative new products, improving features every year, and ensuring a seamless experience across multiple devices. Apple is the leader in the smartphone industry, owning 57.65% of the US market.

Apple keeps its consumers updated on the latest innovation trends by holding three to four annual events to announce new or updated products.

Tesla is also undeniably a very successful company in the automotive industry. The company uses a unique approach to establish itself in the market by creating an attractive car that has created a demand for electric vehicles. 

Tesla is exceeding customer expectations by producing innovative products and attracting a new customer base. The company has full control over its relationship with its customers by selling vehicles directly to its customers and not including any third parties.

Customers now want to join companies actively involved in sustainability and the environment. Companies understand that to take a leading position in the market, they must be involved and have active programs to solve these problems.

For example, Google attracts new customers by being carbon neutral. The company offsets 100% of the electricity consumption of its global operations from renewable energy sources.

Google is committed to making all of its data centers completely carbon-free by 2030.

Market Leadership Strategies 

Maintaining a leading position in the industry is challenging due to the competitive field. Business competitors challenge the company’s strengths and take advantage of its weaknesses. 

Therefore, companies use various strategies to retain their position in the market. Companies typically follow three essential strategies to protect and maintain their leading position in the market:

• Expand the total market size
• Defend market position
• Expand market share

Expand the Total Market 

The expansion of the total market size takes the pressure off the leader, and expanding the market allows the company to get the maximum. Customers play an important role in increasing the size of the market. 

Taking up the market’s leadership is exceedingly challenging. Competitor companies would try to undermine your company’s advantages or exploit your shortcomings.

Your market dominance would be weakened if emerging and established companies adopted the newest trends. Companies and businesses employ a variety of techniques to keep their market share. Today, we’ll go into great detail on competing market leader strategies with examples.

A market expansion strategy is when a company aims to meet the needs of an existing market with a current product. For example, a company can increase its total number of customers by promoting its existing product or service. 

Expanding a company’s market into a new geographic region is an excellent strategy for finding a new customer base and selling the current product. In addition, a company can expand the market by discovering new applications and adding innovative features to its existing products.

Launching a promotional campaign can increase the consumer’s consumption of the company’s product. Developing unique promotions can help a company reach more potential customers and encourage them to choose its business over its competitors.

Defend Market Leadership

The disadvantage of dominating an industry is that competitors may accuse the company of abusing its position or monopolizing the market. This may cause antitrust lawsuits and the attention of market regulators.

For example, in 1998, Microsoft became the target of antitrust lawsuits and was sued by the Department of Justice. The company was accused of trying to create a monopoly that brought down rival Netscape by giving away its browser for free.

For instance, Amazon has also been accused of repeatedly using predatory pricing techniques to outperform its competitors and gain market share. As market leaders expand the overall size of their market, they have to defend their businesses from competitive attacks.

When defending market leadership, a company must maintain a low cost of production, and the retail price must match the value of the product as perceived by customers.

Sometimes, companies use a proactive defense strategy further to strengthen their company’s position in the market. This strategy allows the company to attack competitors before they can attack the company.

In this case, a company that occupies a large part of the market attacks competitors regarding low pricing. A low price allows companies to gain market share by attracting a new customer base that spreads the word about the offer and gets customers from competitors.

Expand Market Share

Market share is a perfect measuring tool for management. A company with the largest market share may dominate the industry. 

Expanding a company’s market share will increase the profitability of the business. A company will have a competitive edge over competitors when it is profitable.

A company can expand its market share by offering its customers new innovative technologies that competitors do not yet have access to, building customer loyalty, having a skilled workforce, acquiring competitors, and improving marketing and advertising.

Expand Market Share strategy includes:

• The study and tactics creating new users
• New uses & applications of products/services
• Amplifying the usage of products/services

When creating the strategies for acquiring new users, there is a detailed study and formulation of tactics on how an organization would participate in new markets and new geographical markets.

To maintain its leadership in the industry, a company must follow a good marketing strategy. A company can choose a sound strategy based on the following factors:

• The cost of implementing market mix activities
• SWOT analysis 
• Structural costs related to production
• Product Profitability
• Market size and growth rate
• Competitive track record
• Product Quality

Researched and authored by Mumina Abdurakhmonova | LinkedIn

Free Resources

To continue learning and advancing your career, check out these additional helpful WSO resources:

• Circular Flow Model
• Market Share
• Medium of Exchange
• Pareto Distribution
• Pareto Efficiency