Market Leader

Categories: Company Valuation

Google is the market leader in search. Apple is the market leader in high-end cell phones. Tesla is the leader in electric cars. Wyoming, Florida, and Texas are all tied for leaders in no-tax states. Disney is the leader in theme parks.

Why does being a market leader even matter? Well, when you’re the leader, you have incremental freedoms that you can manage, which your competitors can’t. Like…no theme park can charge more for admission than Disney. The DIS experience is the best, the “only” of its type, anyway, and it rules the roost on theme parks. So Disney sets admission at, say, $100; well, then Six Flags has to come in at like $70. Or less. Iterate this process many times, and the market leaders then usually have a higher profit margin structure than their struggling competitors. Iterate more and you'll find that the market leaders are a magnet for young talent who would often take a bit less pay in return for being allowed to work for the best.

The system is sort of a self-fulfilling prophecy, until usually-short-term-greed-thinking management ruins the party by being too focused on next quarter’s earnings, rather than next decade’s market dominance. They cut costs or make short-term moves. And they lose their market leadership position...and then, yes, the party’s over. Lots of competitors waiting hungrily in the wings to take over that top slot, because, well, it’s a small world, after all.

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Finance: What does it mean to be a marke...1 Views

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And finance Allah Shmoop What does it mean to be

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a market leader Well it's way better than Vienna market

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Half gallon Oh wait Yeah different leader A market leader

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is like this guy the Alfa dog the man or

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the womb There the price center not the price taker

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there The one who sets the standard in that industry

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Okay think Disney Land They're the unquestioned unrivaled market leader

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in theme parks They set prices meaning that they simply

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figure out what price optimizes whatever Disney wants to optimize

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like profits or throughput or revenues And it says Hey

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Walt it's one hundred fifty bucks a day each to

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come here with your whining kid cranky grandma and angry

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Nanny don't like it Well then don't come We have

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a million others all waiting for the privilege So Disney

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sets the prices market leader and a visit to every

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other theme park has to cost less than it does

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to attend Disneyland or Disney World or Disney Town or

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Disney Escape Room Or you know whatever in the land

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of soda and soft drinks while Coke is the leader

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with Pepsi just a skosh behind the two of them

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comprised eight duopoly I eat a monopoly comprised of two

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sellers who together completely dominate the industry They set price

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in terms and distributing their wares to grocery stores and

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restaurants and ballparks And you know desert vending machine thing

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is everywhere We'll market leaders don't have to be huge

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behemoth things either However Ferrari is the market leader in

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mid life crisis cars For men they're the best The

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gotta have the best distanced Yeah and they set prices

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for their cars and more or less wherever they want

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within a range and buyers pay up Very few if

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any Ferraris ever go unsold Ferrari is the market leader

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the brand leader the pack leader while other things come

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to you as market leader like while the best employees

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right the best at rule following grinded out corporate America

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are new lamented MBA is from Harvard Business School They

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run forward with blinders and enormous horsepower and when you're

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the market leader they all want to fall in line

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working for you Market leaders also get first dibs on

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things like acquisitions like your Anheuser Busch the market leader

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biggest producer of beer in the world Along comes a

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whippersnapper upstart local chain of microbreweries whose customers just love

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their cantaloupe line flavored drink beer Well the founders are

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really ready to start enjoying life instead of smelling molding

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yeast all day Who's there first phone call Gonna be

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Yeah to you but no but wiser Why then while

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Anheuser Busch gets first look at all the hot acquisitions

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Because well they're the market leader and pretty much everyone

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heart's being associated with the market leader The winner the

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Alfa the Tiger the Michael The downside of being a

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market leader Well there's room to fail and fall The

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ladder gets slippery up there Coca Cola didn't always used

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to be the bomb R the Mentos in the Coke

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bottle in the early nineteen seventies Some genius exactly Coke

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recognized that they bought a lot of TV ads so

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that exact got Coke toe by a movie studio Columbia

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Studios Yes they actually thought that buying a lot of

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TV ads qualified them Tio you know tell stories of

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love drama and pathos and put butts in seats in

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theaters So Coke bought Colombia in the string of total

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flops almost bankrupted the company Finally they sold it and

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got back to repurpose ing sugar and fizzy water and

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well they're really good at that Really really good Market

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leaders also risk missing a big cycle especially in the

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hard fought landscape of tech companies You know technology land

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well in two thousand eh Well was the largest market

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cap company in the world along with Yahoo and a

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few other noteworthy Sze all of whom ended up being

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sold for a tiny scrap fraction like just a few

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percent of what they were worth That their peaks Companies

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get protective they get conservative they get bureaucratic and slow

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moving Sometimes live hungry entrepreneurs a lot of them from

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Silicon Valley these days have all kinds of weaponry Teo

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you know go whale hunting against market leaders so you 00:04:05.545 --> [endTime] know beware if you're one of them No

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