What is a market leader? Definition and meaning
The market leader is a company or country that has the highest sales of a specific product in the market. By ‘market,’ we are referring to a country, region, or the whole world. The word ‘market’ may have a physical or abstract meaning. In this article, its meaning is mainly abstract.
The leader in the market contrasts with the market challenger. The challenger tries aggressively to expand its market and get higher up in the leadership league table.
A market leader by country
The United States produces 14.855 million barrels of oil per day, making it the market leader in oil.
A market leader by company
Coca-Cola Co. has 48.6% of the global carbonated beverages market, while PepsiCo Inc. has 20.5%. Therefore, Coca-Cola is the market leader, while PepsiCo is a market leader. In this context, when we use the definite article (‘the’), there is only one. When we use the indefinite article (‘a’), there is more than one.
There are several ways we can measure leadership in the market. Some league tables list companies or countries according to the total value of sales. Others calculate according to volume, i.e., the total number of units they have sold.
According to the Macmillan Dictionary, a market leader is:
“A company that sells more of its products than any other company of its type.”
Market leader has a dominant position
Market leaders can use their dominant position to shape the competitive landscape and influence the direction the market takes.
Co-founder of IT giant Apple Inc., Steve Jobs (1955-2011), says companies aiming to become leaders in the market should:
– Own and control the relevant technology in their specialized market. Leaders do this either by the use of patents or other proprietary protections.
– Immediately adopt and implement the best technologies as soon as they become available, regardless of whether rivals and other organizations are using them.
– Be a pioneer, i.e., the first to create a category for a product or use a technology. Then, make that the industry standard.
Some analysts say that a market leader can only be classed as one when it has shown its ability to sustain its profitability through changes within the market sector and shifts in the general economy. Market sector is part of an economy that covers a wider area than an industry.
We may class a country as a market leader if it has several leading companies that focus on a market sector.
Focus.com wrote in August 2015 that the UK had become the market leader in tidal energy solutions. This, the author wrote, had been the result of a joint effort from regulatory, technology, funding, and infrastructure stakeholders turning the tide.
A market follower is a company that copies what the leader does. It implements all the market leader’s successful strategies.
The market follower does not want to challenge the leader, i.e., it is happy with the current status quo. All the follower wants is to maintain its market share.
Market followers have lower advertising and R&D costs than leaders.
Video – market leaders, challengers & followers
In this video, Ian Johnson explains the importance of being a market expert and then deciding whether to lead, challenge, or follow your market.