Being a market leader is cause for great jubilation. But if we look beyond the immediate advantages, a more disturbing picture emerges. Throughout history, one challenge has done more damage to leading brands than any other: success. Becoming the number-one brand in any market brings with it new, potentially fatal dilemmas.
The first is prominence: getting to the top puts you directly in the sights of every competitor. This can leave you vulnerable to imitators that ape your winning strategies and then improve upon them. This was the case with Nokia. Just as it was about to attain its goal of 40% global market share, major competitors such as Motorola and Samsung began to fight back with superior products.
Market leadership also leaves you vulnerable to smaller, specialist players that can aim for just one of your many customer segments and lure them away with a tighter, more specific offering.
There is also the realisation that the only way to go is down. Many of the staff responsible for creating a leading brand may seek out new challenges, because they feel retaining the number-one spot is not half the challenge of getting there in the first place.
Compounding this potential exodus is the fact that, as employees of the number-one brand, your staff are now much more attractive to recruiters. One of the main reasons that Marks & Spencer's fortunes have declined again over the past two years is that almost every member of the fantastic management team that was responsible for its original turnaround, including chairman Luc Vandevelde, has been headhunted away to pastures new.
Another problem is complacency. Many leading brands have foundered by assuming that market forces and customer loyalty would remain eternally unchanged. IBM dominated the computer industry for 40 years, only to cede the lucrative PC market in the 80s because it did not anticipate how easily competitors could produce computers and how fickle customers would be in response.
Success breeds the assumption of success, and that can blind a brand to strategic threats and market changes.
Allied to complacency is risk aversion. Brands soon get used to their number-one status and seek to retain, at all costs, their existing position and well-worn strategies. This can result in conservative decisions that are easily countered by an aggressive competitor. The number-one status of Coca-Cola during the 70s was one of the key reasons it was unable to respond to the growing threat of Pepsi.
The leading brand must continue to take the most risks and act the most aggressively, even though it has the most to lose from failure.
On achieving market leadership, chief executives and marketing directors should thank their employees for their efforts. Maybe even have a drink or two. Then they should set their alarms 30 minutes earlier, because life as market leader is about to become even tougher.
- Mark Ritson is assistant professor of marketing at the London Business School
30 SECONDS ON ... NOKIA
- Since launching its first mobile phones in the late 80s, Nokia has dominated the market thanks to its reputation for innovative, cutting-edge design.
- However, sales for the first half of 2004 fell by 4% year on year to £8.4bn. Handset sales fell by 14%.
- Nokia's brand value fell by 18% this year from $29,440m in 2003 to $24,041m (£13,490m), and it fell from 6th to 8th in Business Week's list of the 100 top global brands.
- Critics claim the company has taken its eye off the ball in terms of design - for example, initially ignoring the demand for clam-shell handsets. As a result it has lost ground to competitors such as Samsung. Nokia's head of global branding, Tapio Hedman, admitted that some young people might find Nokia 'middle of the road'.
- In August Nokia appointed Coca-Cola executive Keith Pardy to be its global marketing chief. His brief is to refocus marketing activity.