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Practical Strategist

Practical Strategist By Dan Simpson Grow by Shrinking Your Market Share One of the biggest constraints to nel? Warner Brothers grew by opening growth in many companies is too nar­ retail outlets. row a definition of their market. Don't Brand equity is another vector. get me wrong—high market share is a What does the brand name mean, and good thing. The positive correlation can that equity be extended into other between high share and high profitabil­ product or service categories? Nike ity is has been known for decades. began as a shoe company and is now in the fashion business. But in the context of strategy and growth, market share is a dangerous lens Yet another vector is value-added through which to view your business. capability. Embedded in every suc- cessful company are skills and The reason is that your growth opportunities are very often capabilities that are the key constrained by your defini- drivers of its success. Dis- tion of the market. The ney is good at crowd man- agement. If they regard higher your market share, the more limited your that as a market, what growth opportunities. I new growth opportunities might it present? One useful strategy- Those are some of the developmen t trick to more obvious vectors to broaden growth avenues consider, but there are oth- is to force the share of ers . Once you identify the every business to a single digit and redefine the market. possibilities , the hard work The tasks are fairly straightforward. begins. Which one or two offer the The first is to define the relevant vec­ best opportunities? tors to consider. The second is to The heart of that issue is your abili­ select the one or two that offer the ty to compete effectively. In consider­ best possibilities for profitable growth. ing that, you must understand the key success factors in the broadened mar­ There are often numerous vectors ketplace, the external environment, upon which you can broaden a mar­ ket. One is geography. Large-share the competitive set, and the influential regional players can become small- constituencies. In evaluating each vec­ tor, you must carefully consider your share national players. Large-share own capabilities as well. What do you national players can become small- share global players. A good portion of bring to the party that lets you com­ McDonald's growth has been geo­ pete? Perhaps even more important, graphic expansion. what new capabilities are required? Another vector is product usage. Being a big fish in a small pond is Coke's view of its opportunities nice in a lot of ways, but if you want to change d rather radically when it grow faster than your competition, one changed the market boundary from way is to make your pond bigger. ♦ colas to beverages. Another vector is distribution chan­ Dan Simpson, vice president of strategy and nels. Can you reach a new set of cus­ planning for a consumer products company, tomers by offering your product or ser­ is chairman of the Conference Board's vice in an additional distribution chan­ Council of Strategic Planning Executives. 8 September/October 1998 http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Business Strategy Emerald Publishing

Practical Strategist

Simpson, Dan
Journal of Business Strategy , Volume 19 (5): 1 – May 1, 1998
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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0275-6668
DOI
10.1108/eb039957
Publisher site
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Abstract

By Dan Simpson Grow by Shrinking Your Market Share One of the biggest constraints to nel? Warner Brothers grew by opening growth in many companies is too nar­ retail outlets. row a definition of their market. Don't Brand equity is another vector. get me wrong—high market share is a What does the brand name mean, and good thing. The positive correlation can that equity be extended into other between high share and high profitabil­ product or service categories? Nike ity is has been known for decades. began as a shoe company and is now in the fashion business. But in the context of strategy and growth, market share is a dangerous lens Yet another vector is value-added through which to view your business. capability. Embedded in every suc- cessful company are skills and The reason is that your growth opportunities are very often capabilities that are the key constrained by your defini- drivers of its success. Dis- tion of the market. The ney is good at crowd man- agement. If they regard higher your market share, the more limited your that as a market, what growth opportunities. I new growth opportunities might it present? One useful strategy- Those are some of the developmen t trick to more obvious vectors to broaden growth avenues consider, but there are oth- is to force the share of ers . Once you identify the every business to a single digit and redefine the market. possibilities , the hard work The tasks are fairly straightforward. begins. Which one or two offer the The first is to define the relevant vec­ best opportunities? tors to consider. The second is to The heart of that issue is your abili­ select the one or two that offer the ty to compete effectively. In consider­ best possibilities for profitable growth. ing that, you must understand the key success factors in the broadened mar­ There are often numerous vectors ketplace, the external environment, upon which you can broaden a mar­ ket. One is geography. Large-share the competitive set, and the influential regional players can become small- constituencies. In evaluating each vec­ tor, you must carefully consider your share national players. Large-share own capabilities as well. What do you national players can become small- share global players. A good portion of bring to the party that lets you com­ McDonald's growth has been geo­ pete? Perhaps even more important, graphic expansion. what new capabilities are required? Another vector is product usage. Being a big fish in a small pond is Coke's view of its opportunities nice in a lot of ways, but if you want to change d rather radically when it grow faster than your competition, one changed the market boundary from way is to make your pond bigger. ♦ colas to beverages. Another vector is distribution chan­ Dan Simpson, vice president of strategy and nels. Can you reach a new set of cus­ planning for a consumer products company, tomers by offering your product or ser­ is chairman of the Conference Board's vice in an additional distribution chan­ Council of Strategic Planning Executives. 8 September/October 1998

Journal

Journal of Business Strategy – Emerald Publishing

Published: May 1, 1998

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