Drill Down To Become A Market Leader
How powerful a company can be? Can it bail out a developed country or buy a few of the world's largest companies? Yes! Apple has enough cash reserves today to bail out Greece! Apple, one of the world's most valuable brands with market capitalization around $700 Billion and cash reserves close to $200 Billion, has the capacity to buy all of Uber, Tesla, Twitter, Netflix, Dropbox and a few more.
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Probably all entrepreneurs get inspired from Apple's phenomenal journey from a garage to becoming one of the world's largest technology companies. Entrepreneurs start businesses with a dream to become the market leader. They aspire to gain market share, so they aim to serve each and every potential customer. Then they face competition from innumerous competitors with deep pockets, resistance from customers, who are apprehensive about a new player, and resource scarcity within the organization. After significant struggle, a few of them might win some market share, but that would normally happen at the expense of profitability. No loss making business can sustain in the long run. So, either entrepreneurs quit or their businesses die a slow death.
On the contrary, successful entrepreneurs do things differently. They aspire big but they don't aim big in the initial phase. They Drill Down to become a Market Leader. Drill down can be defined as moving deeper within a context. For example, in case of residential address, we can drill down in the below manner.
Rather than, targeting on big industry, successful entrepreneurs drill down from industry to sub industry and then to specialised businesses. Similarly, they drill down from large market to specific market segment with customers having common characteristics & requirements, and then focus to become the leader in specialized business and market segment. A specialised business would have lesser competitors and it is easier to create a unique position and corporate image within a specific segment. This allows earning profits for venturing into new growth opportunities. Let's explore the successful implementation of drill down strategy of a few global giants.
Advertising Industry: From channels perspective, advertising industry can be drilled down into various online and offline channels. A few illustrative examples are shown in the below table.
Social Network is a specialised channel in advertising industry and Facebook is the largest social network in the world. In 2014, Facebook pulled in 75% of total ad spend on social networks and accounted for $11.4 billion of advertising revenue. Let's have a closer look at Facebook's drill down strategy. In 2004, when Facebook focused on a niche segment i.e. students at Harvard College, market size of social network advertising was almost negligible, but today it is a multi-billion dollar market with multiple specialized players such as LinkedIn, Twitter, etc. focused on specific market segments. With time, social networking picked up momentum and Facebook user base grew from just one college in the USA to ~50 per cent of world's internet users.
Restaurant Industry: Restaurants can be drilled down into multiple ways such as eating preference (Veg., Non-Veg., and Sea-Food), Ethnic (based on region specific cuisine), Themes, Consumption type - Beverage or Food, Service -Fine Dining or Fast Food etc. Various sub industries and specialized restaurants cater to customers, drilled down from people looking for eating options to market segments with specific characteristics & requirements. A few of the examples are shown below.
McDonald's, KFC, Pizza Hut, Subway, and Dunkin Donuts are few of the largest fast food companies in the world and one of the leaders in their respective specializations serving market segments looking for various kinds of fast foods. The mentioned multi-billion dollar companies started with focus on their respective specialization & with time they have entered in to other fast food items and size of their market segments has grown from one location in USA to multiple countries in the world.
Footwear Industry: Footwear can be drilled down into subindustries such as shoes, sandals, socks etc., which can be further drilled down into specialized businesses focused on specific requirements of various market segments (based on gender, age, occasion, lifestyle etc.). A few of the examples are shown below.
Nike is the one of the world's largest supplier and manufacturer of athletic shoes, apparel and other sports equipment. Company's beginning in 1970s was in athletic shoes (specialized product) for distance runners (market segment). By 1980, Nike had attained a 50% market share in the US athletic shoe market. After creating its name in one segment, Nike focused on other segments -players in other games such as Tennis, Basketball, Golf, Soccer, etc. With time, Nike also expanded into women & children market segment and other businesses such as sports apparel & equipment. In 2014, its global revenue amounted over $27 billion.
|(Left) Harsh Pamnani and Apalak Khatua|
To sum up, there can be debate on whether it was Facebook's drill down strategy in 2004 or mere serendipity because Facebook and social media advertising have coevolved in the last decade. However, occurrences of serendipity like this are little higher for successful entrepreneurs. Probably they can foresee things which others cannot. Steve Jobs famously said that "customers don't know what they want until we've shown them." In 1977, Apple introduced Apple II, one of the first successful personal computers. In 1984, it released Mac and introduced users with mouse and graphical user interface. In the early 2000s, it introduced the music lovers with iPod and iTunes. In 2007, it disrupted the cell-phone market with the iPhone. In 2010, it introduced the iPad and changed the dynamics of mobile computer industry. Recently, it has been in process of introducing its market segment with its specialized offerings in competitive industries such as Watch, Payment, and Cars etc.
There is a famous saying that a journey of a thousand miles begins with a single step. On the same lines, a company's journey of becoming a global leader begins with providing specialized offering to a niche market. So, drill down to become a market leader!
The authors are Harsh Pamnani, an Alumnus of XLRI and Apalak Khatua - Assistant Professor of Strategy at XLRI
LinkedIn Profile: https://www.linkedin.com/in/harshpamnani
Twitter Handle: @pamnani_harsh
LinkedIn Profile: https://in.linkedin.com/pub/apalak-khatua/6/788/247
Twitter Handle: @apalakkhatua
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