Market leadership is usually understood in terms of the position of a given company within an industry or market, based on three factors. When determining whether a corporation can properly be referred to as a market leader, the profitability of the company will play a major role. Along with how profitable the company happens to be, the market share volume and value will also be considered.
While market leadership does not necessarily require the highest profitability margin or largest market share in the industry, a corporation is normally expected to demonstrate a consistent level of profitability from one financial period to the next. That level of profit should be significant and represent a sizable share of the available market. When the company is able to sustain the profitability through shifts in the general economy as well as during changes within the market sector, that degree of stability is one excellent indicator of market leadership.
Market share is important to market share in two ways. First, there is the issue of market share volume. Like the profitability margin, the volume of market share does not have to be the highest in the industry, but it should account for a significant amount. An ongoing strong position will demonstrate the ability of the company to appeal to the market even in the face of changes, and is certainly an earmark of a leader.
Along with volume, any company that engages in market leadership will also demonstrate value for their share of the market. The goods and services offered by the corporation are not only priced competitively, but also have a solid reputation for high quality. From this perspective, market leadership requires the production of goods that inspire the confidence of consumers, and are available at prices that consumers consider affordable.
In recent years, a fourth indicator of market leadership has begun to emerge. The quality and stability of the members of the executive and upper management team may also distinguish a company as being a market leader. This is often considered the case when the leadership of the corporation is composed of professionals who have been with the company for many years, and have a proven record of guiding the company successfully through shifts in the economy.
