Growth Market Strategies for Market Followers

Instructor: James Blackburn

James has an MBA and a MA in Humanities. He writes on leadership, business strategy and finance.

In this lesson, we briefly explore the five strategies a company may use to overtake a market leader. We will discuss the merits of various strategies and also discuss the merits of the leap frog and flanking strategies in increasing market share.

Hit 'em Where They Ain't

Wee Willie Keeler's phrase, ''Hit em' where they ain't '' is one of the most quoted sayings in baseball. Of course, like most bits of advice, it's easier said than done. It's difficult enough to put the baseball in play. Even more so, hitting the ball where the fielder is unable to make the catch is tremendously difficult. To do so, the batter must hit the ball over the fielder's head. Or, he may try to punch a ground ball through the tiny gap between players in the infield. Either way, success is (forgive the pun) hit or miss.

For example, the 1939 Hall of Fame inductee Keeler had a lifetime batting average of only .345. That's slightly over one hit in every three at bats. In baseball, that's good. In business, that's not so good.

Market Growth Strategies

A one in three chance of success is not great odds in business. However, business leaders have identified five strategies that can improve a market follower's chance of success. A market follower may be a company that has entered into a market after another company has established a strong position. The market follower is also a company that has a smaller share of the market.

Frontal Attack

A company using the frontal attack strategy will compete with the market leader toe-to-toe or as equals. A good example of this approach is the battle between Coke and Pepsi. These are two powerful companies that compete as if they already own the largest market share. The downside of this strategy is that the market follower must have the same resources available as the market leader. In many cases this strategy is not a good fit, because the market follower is much smaller and resources are scarce.

Guerrilla Strategy

Named after a style of combat, the guerrilla strategy is where a much smaller force takes on a well-established army. In this strategy, a smaller company launches unconventional or targeted campaigns on the market leader. This approach takes a tremendous amount of effort and often results in small wins. At best, the market follower proves a nuisance to the market leader. For example, let's say a new restaurant in town is trying to increase its share of the weekly diners. So, one Saturday afternoon, they set up a temporary eatery at a busy intersection and pass out free samples. As a result, more diners visit the new restaurant. Free give-aways are always a tactic of the guerrilla strategy.

Leap Frog Strategy

The iPhone was Apple's new example of product innovation as a strategy. This leap frog approach began years earlier when Apple revolutionized several industries with the iPod. It replaced Sony Walkmans and disc players with a compact digital music player. At the same time, Apple disrupted the music industry by selling music one song at a time through its iTunes platform.

Apple was using a leap frog strategy to bypass the market leader through disruptive innovation. In this strategy, a company innovates the product or service thereby increasing the value to the customer. The use of smart phones in third world companies is another example. Instead of stringing telephone wires from house to house, phone companies construct cell phone towers and effectively bypass or leap frog an existing industry.

Encirclement Strategy

A company using the encirclement strategy identifies the strengths and weakness of the market leader and launches an attack on both. For example, Apple established the smartphone market and wrestled away market share from Motorola and Nokia using a leap-frog approach to become the market leader. Then, Samsung analyzed the iPhone's weaknesses and created an improved smartphone at a lower price point. Samsung approached the same market in a similar way as the leader.

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