Market follower

From CEOpedia | Management online

Market follower is a runner-up firm that chooses not to rock the boat, usually from fear that is stands to lose more than it might gain. But the follower is not without a strategy and seeks to use its particular skills to gain market growth. Some followers enjoy a higher rate of return than the leaders in their industry[1].

A follower can gain many advantages. The market leader often bears the huge expenses of developing new products and markets, expanding distribution, and educating the market. By contrast, as with challengers, the market follower can learn from the leader's experience. It can copy or improve on the leader's products and programs, usually with much less investment. Although the follower will probably not over-take the leader, it often can be as profitable[2].

Types of market followers

The market follower may adopt four broad approaches as under[3][4]:

  • counterfeiter strategy involving duplicating the market leader's product and packaging and selling it in the black market (clearly illegal, but extremely prevalent in the entertainment and fashion industries).
  • cloner strategy involving emulating the market leader's products, name and packaging (e.g., makers of the IBM PC clones).
  • imitator strategy involving copying some things from the market leader while retaining some other features such as pricing, packaging or advertising (e.g., many car manufacturers imitate the styles of one another).
  • adapter strategy involving adapting one's own products to those of the market leader and selling them in different markets (many Japanese firms have proved to be excellent adapters initially before developing into challengers and eventually leader).

Effect on the market place

The effect of a new software product on the marketplace will depend on whether the product is a market leader, challenger, follower or nicher:

  • market challenger would be software program that is innovative or well established (e.g., Microsoft Word)
  • market challenger is a non-leader that makes an aggressive bid for market position held by the market leaders
  • market followers do not produce innovative new products; rather they rely on obtaining a portion of the market share of the market leaders
  • market nichers are specialists who concentrate on a small and focused area of the software market

When a market leader introduces a new product, it encourages competitors to improve their product to retain market share. If a market challenger or follower develops a product that is as good as the market leader, it encourages the market leader to continue to innovate or potentially lose market share. As market nicher it is important to have the first product to fill the niche, as niche markets are usually quite small[5].

Examples of Market follower

  • Apple: Apple is a market follower in the consumer electronics industry. The company has a strategy to launch products that capitalize on the success of its competitors. Apple follows the leader in terms of product features, design, and pricing, but then adds its own unique twist. For example, when iPod was a big hit, Apple followed suit and released the iPod Nano, a smaller, more affordable version of the iPod.
  • Walmart: Walmart is a market follower in the retail industry. The company has a strategy to stock the same products as its competitors, but at a lower price. Walmart follows the leader in terms of product selection and pricing, but then adds its own unique twist. For example, when Amazon Prime was a big hit, Walmart followed suit and released its own subscription service, Walmart Plus, with added benefits such as discounts and free shipping.
  • Samsung: Samsung is a market follower in the smartphone industry. The company has a strategy to launch devices that feature the same hardware and software as its competitors, but at a lower cost. Samsung follows the leader in terms of hardware and software, but then adds its own unique twist. For example, when Apple launched the iPhone X, Samsung followed suit and released the Galaxy S9, which featured a similar design but a lower price point.

Advantages of Market follower

Following are some advantages of being a market follower:

  • Lower risk: By following the leader and avoiding taking risks, followers generally face a lower risk of failure.
  • Lower costs: Market followers can often benefit from the leader's investments in research and development, marketing, and other activities, allowing them to benefit from lower costs.
  • Knowledge of industry trends: Following the leader can allow followers to gain insight into industry trends and customer preferences.
  • Fewer resources needed: Market followers often have fewer resources than leaders and thus can concentrate on specific areas of expertise.
  • Ability to capitalize on mistakes: Following the leader can allow followers to capitalize on mistakes made by the leader, allowing them to quickly adjust their strategy to take advantage of the situation.

Limitations of Market follower

A market follower's strategy may have certain limitations, including:

  • Limited visibility or brand recognition - A market follower may lack the visibility and brand recognition of a market leader, making it hard for them to compete for consumer attention and loyalty.
  • Lower market share - A market follower's market share is typically lower than that of the leader, limiting their ability to impact the market.
  • Difficulty in adapting to change - A market follower may struggle to adapt to changes in the market or industry, making it difficult to stay competitive.
  • Lack of innovation - A market follower is typically slower to introduce new products or services than a market leader, making it hard to capture new markets or trends.
  • Limited resources - A market follower often has fewer resources than a market leader, making it difficult to compete on price or other competitive advantages.

Other approaches related to Market follower

Here are some other approaches related to Market follower:

  • Market Nicher: Market Nicher is a strategy where a company focuses on delivering niche products to smaller, more specific markets. The goal of this approach is to capture a larger share of the market without having to compete with larger, more established firms.
  • Market Challenger: A market challenger is a company that competes with other firms in an industry by offering a different or superior product or service. Market challengers often target market leaders or firms with a large share of the market.
  • Market Analyzer: Market Analyzer is a strategy where a company evaluates the marketplace to identify potential opportunities and develop strategies to capitalize on them. This approach is often used to identify new markets or to enter existing markets in a different manner.
  • Market Creator: Market Creator is a strategy where a company seeks to create a new market or to alter an existing market by introducing a new product or service. This approach often requires significant investment and research to determine the potential of the new market.

In summary, the different approaches related to market follower are Market Nicher, Market Challenger, Market Analyzer, and Market Creator. All of these approaches can be used to gain a larger share of the market, but each requires different strategies and investments to be successful.

Footnotes

  1. P. Kotler, G. Armstrong 2010, p.571
  2. P. Kotler, G. Armstrong 2010, p.567
  3. A. Kazmi 2010, p.260
  4. P.K. Venuvinod 2011, p.136
  5. G. Lancaster 2001, p.10


Market followerrecommended articles
Concentrated marketingImitator strategyFlanker brandMarket maturityHorizontal diversification strategyGeneric competitionDifferential advantageLateral diversification strategySustained competitive advantage

References

Author: Natalia Hajduk