Market Leader of the Pack

From small acorns... Growth is possible even in times of economic uncertainty

A recent article appearing in The Wall Street Journal, entitled In Chaos Lies Opportunity, used a racing analogy to illustrate how different companies become the winners and losers in times of economic instability:

Like dangerous curves on a racetrack, economic downturns create more opportunities for companies to move from the middle of the pack into leadership positions than any other time in business.

Unlike straight-aways where leaders can thrive on raw power alone, steep curves require strategic finesse.  That often results in dramatic differences in performance as leaders steer out of the curve.

The article goes on to highlight the example of Southwest Airlines, which surged ahead from its competitors during the recession of 2001.  As other rivals struggled and fell by the wayside, Southwest adopted a strategy of lowering its fares to gain market share.  Promoting its price advantage by boosting its advertising accordingly, it also built solid relations with its workforce by avoiding layoffs when others in the airline industry were cutting jobs.

Yet Southwest is not unique in its remarkable success in the face of seeming adversity:

About 24 percent more firms moved from the back of the pack to the front in the 2001 downturn compared with the subsequent period of economic calm, according to an eight-year study by Bain & Company that analyzed the net profit margins and sales growth of more than 2,500 companies.  Meanwhile, about one-fifth of all leadership companies – those in the top quartile of financial performance in their industry – fell to the bottom quartile.  By comparison only three-quarters as many companies made such dramatic gains or losses after the recession.

Obviously recessions affect different industries and different geographies in various ways and to different degrees.  But this itself presents opportunities for the outward-looking and forward-thinking organization.  Johnson & Johnson, GE and IBM are three companies said to have benefited from shifting their focus to economically healthier regions across the globe; in the second quarter of 2008, all have reported solid performance outside the U.S.

  • More information on entering new markets is available on our main website.
  • Many of our white papers discuss various ways in which you may be able to gain competitive advantage in difficult times.
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