Market leadership is determined by a company’s profitability, volume and value of market share, and quality and stability of executive team members. It requires consistent profitability, significant market share volume and value, and production of high-quality goods at competitive prices.
Market leadership is generally understood in terms of a particular company’s position within an industry or market, based on three factors. In determining whether a company can properly be called a market leader, the company’s profitability will play an important role. Along with the company’s profitability, the volume and value of market share will also be considered.
While market leadership does not necessarily require the highest profit margin or market share in the industry, a corporation is typically expected to demonstrate a consistent level of profitability from one financial period to the next. This level of profit must be significant and represent a sizable portion of the available market. When the company is able to sustain profitability through changes in the general economy, as well as during changes in the market sector, this degree of stability is an excellent indicator of market leadership.
Market share is important to share in two ways. First, there is the issue of market share volume. Like profit margin, market share volume doesn’t have to be the highest in the industry, but it should represent a significant amount. A strong ongoing position will demonstrate the company’s ability to appeal to the market, even in the face of change, and is certainly a hallmark of a leader.
Along with volume, any company that commits to market leadership will also demonstrate value through its market share. The goods and services offered by the company are not only competitively priced, but also have a solid reputation for high quality. From this perspective, market leadership requires the production of goods that inspire consumer confidence and are available at prices that consumers find affordable.
In recent years, a fourth indicator of market leadership has begun to emerge. The quality and stability of executive team members and senior management can also distinguish a company as a market leader. This is generally considered to be the case when the corporation’s leadership is comprised of professionals who have been with the company for many years and have a proven track record of successfully guiding the company through changes in the economy.
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