Pims finds a niche in stating the obvious

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The Independent Online
WHATEVER their public utterances, business people are desperately keen to corner the markets in which they operate. To pretend otherwise would be like suggesting that the Australian cricket team is more concerned about operating in a genuinely competitive arena than thrashing every side that comes its way. Not for nothing has business been so extensively colonised by the languages of sport and war.

Where opinion differs is in choosing what to dominate. And the answer must be to pick a market where you feel you have something special to offer - and fight like hell to hang on to it.

This is all obvious, especially at a time when business markets are becoming so complex that only a handful of organisations can hope to impress in more than a few. But then along comes a consultancy called Profit Impact of Market Strategy, or Pims, to pick a fight with management writers in the UK and the US who have been arguing that businesses should no longer aspire to being market leaders because their profits will decline in comparison with lower-ranked competitors. Such views are not exactly dangerous these days. They pretty much fit in with the arguments of Professor Gary Hamel, the management guru who has loudly criticised organisations taking part in mergers and acquisitions where the objective seems to be simply to create "the biggest" company. Claiming that size alone will not protect organisations in the increasingly competitive environment, Professor Hamel advocates that businesses search for niches where they can use or develop a "core competence" as the basis for success.

It is, therefore, difficult to see how this differs from the Pims claim that it has "hard evidence" proving a "very strong correlation between market share and profitability as long as the right assumptions are made at the outset".

Among those assumptions is that it is the share of served market at the business unit level - and not overall industry leadership - that matters. The most successful businesses have a high share in all markets in which they compete, even if they are not the overall market leader, says the consultancy.

This would not be much of a surprise to members of The Independent on Sunday's list of the 100 fastest-growing private companies or other successful entrepreneurs. Their game plans are often all about exploiting to the full niches that few others know about.

Moreover, the revelation that "in 37 per cent of cases, companies with a leading share of their served markets are the most profitable" is hardly conclusive evidence in support of the Pims argument. Much more convincing is the recognition that, while business may not be as complex as is often made out, success is dependent on more than one factor.

Curiously, in making his case, Keith Roberts, Pims' managing director, avoids any mention of the determination to beat the world with which we are so familiar thanks, among others, to the Australian cricket team.