STRATEGIES OF EFFECTIVE LOW SHARE BUSINESSES
Abstract
This research identifies the strategies of effective businesses operating in a low relative market share position. Two types of strategy decisions are discussed. The first type defines the immediate environment of the business. How a business competes and establishes itself in this environment is represented by the second type. This study challenges the validity of a host of dismal statements on small share businesses. It identifies a sample of profitable low share businesses and specifies the combinations of product, market and industry characteristics which have proven favorable for them. The competitive postures of these businesses are delineated and analyzed in the context of the aforementioned characteristics. Effective low share businesses are also contrasted against two control groups: (1) effective high share businesses, and (2) ineffective low share businesses. The optimal data base for this study is the PIMS data base. PIMS (Profit Impact for Market Strategy) is a research program sponsored by the Strategic Planning Institute for the study of business level strategies and "laws" governing market performance. Cluster analyses, discriminant analyses and the Goodness of Fit test are used for statistical analyses. On the whole, we find that the product/market environments of effective low share businesses do not so much shield them from large producers, as provide them with a degree of stability. Elements contributing to this stability include low real market growth, infrequent product changes, high purchase frequency and the less elastic demand typical of industrial components and supplies. Within these product/market environments, the competitive postures of effective low share businesses are characterized by restraint and selective focus. These businesses usually offer high product value, are less vertically integrated and spend less on discretionary activities.
Degree
Ph.D.
Subject Area
Management
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