Market Leader

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.