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The rule of three in business and economics is a rule of thumb suggesting that there are always three major competitors in any free market within any one industry. This was put forward by Bruce Henderson of the Boston Consulting Group in 1976, [1] and has been tested by Jagdish Sheth and Rajendra Sisodia in 2002, analyzing performance data and comparing it to market share. This is an attempt to explain how, in mature markets, there are usually three 'major players' in a competitive market. [2]
The rule of three as put forward by Sheth and Sisodia in 2002 states that in a mature market, there will normally be three major competitors and several others, who only succeed if they are able to operate in a niche market. They based their studies on a review of a number of markets in North America. They compared market share to financial performance, and found that small, niche-market specialists and large, full-line generalists were those who performed best when holding a large market share. They also noticed a section in between the two in which companies performed poorly, which they referred to as “the ditch” (see reference); this is based on the form of the graph of market share versus financial performance as the graph slopes downwards for niche players (1% - 5% market share) and upwards for full-line generalists (over 10% market share). Sheth and Sisodia use the analogy of a shopping mall, in which they propose that there will be three major full-line generalist stores, along with various smaller, product and market specialist shops. [2]
Sheth and Sisodia also make a number of observations with regard to how companies behave in such cases. For instance, the first-ranked player will often be the least innovative in spite of spending the most on R&D. However, the first-ranked player may 'steal' ideas from the third-ranked player. [2]
It may be the case that, if a price war emerges between the first-ranked and second-ranked players, the third-ranked player may end up in “the ditch”, although a new third-rank player would be expected to emerge in due course. [2]
Using a diverse sample of more than 160 US industries, two base-time periods, and numerous performance measures, Uslay, Altintig, and Winsor (2010) empirically tested the rule of three and reported that industries with exactly three generalists outperformed every other industry structure. [3] They also found that micro-specialists, generalists with excessive market share, and firms "in the ditch" without clear strategic strengths tended to underperform others. Their findings provided empirical support for the “Rule of Three”.
Uslay, Can, Z. Ayca Altintig, and Robert D. Winsor (2010), “An Empirical Examination of the “Rule of Three”: Strategy Implications for Top Management, Marketers, and Investors,” Journal of Marketing, 74 (March), 20-39.
Marketing refers to activities a company undertakes to promote the buying or selling of a product, service, or good.
Distribution is one of the four elements of the marketing mix. Distribution is the process of making a product or service available for the consumer or business user who needs it. This can be done directly by the producer or service provider or using indirect channels with distributors or intermediaries. The other three elements of the marketing mix are product, pricing, and promotion.
In marketing, market segmentation is the process of dividing a broad consumer or business market, normally consisting of existing and potential customers, into sub-groups of consumers based on some type of shared characteristics.
Brand equity, in marketing, is the worth of a brand in and of itself — i.e., the social value of a well-known brand name. The owner of a well-known brand name can generate more revenue simply from brand recognition, as consumers perceive the products of well-known brands as better than those of lesser-known brands.
Porter's generic strategies describe how a company pursues competitive advantage across its chosen market scope. There are three/four generic strategies, either lower cost, differentiated, or focus. A company chooses to pursue one of two types of competitive advantage, either via lower costs than its competition or by differentiating itself along dimensions valued by customers to command a higher price. A company also chooses one of two types of scope, either focus or industry-wide, offering its product across many market segments. The generic strategy reflects the choices made regarding both the type of competitive advantage and the scope. The concept was described by Michael Porter in 1980.
Marketing strategy is a process that can allow an organization to concentrate its limited resources on the greatest opportunities to increase sales and achieve a sustainable competitive advantage.
Mass marketing is a marketing strategy in which a firm decides to ignore market segment differences and appeal the whole market with one offer or one strategy, which supports the idea of broadcasting a message that will reach the largest number of people possible. Traditionally, mass marketing has focused on radio, television and newspapers as the media used to reach this broad audience. By reaching the largest audience possible, exposure to the product is maximized, and in theory this would directly correlate with a larger number of sales or buys into the product.
The growth–share matrix is a chart that was created by Bruce D. Henderson for the Boston Consulting Group in 1970 to help corporations to analyze their business units, that is, their product lines. This helps the company allocate resources and is used as an analytical tool in brand marketing, product management, strategic management, and portfolio analysis. Some analysis of market performance by firms using its principles has called its usefulness into question.
Organizational ecology is a theoretical and empirical approach in the social sciences that is considered a sub-field of organizational studies. Organizational ecology utilizes insights from biology, economics, and sociology, and employs statistical analysis to try to understand the conditions under which organizations emerge, grow, and die.
In statistics and business, a long tail of some distributions of numbers is the portion of the distribution having many occurrences far from the "head" or central part of the distribution. The distribution could involve popularities, random numbers of occurrences of events with various probabilities, etc. The term is often used loosely, with no definition or arbitrary definition, but precise definitions are possible.
Philip Kotler is an American marketing author, consultant, and professor; the S. C. Johnson & Son Distinguished Professor of International Marketing at the Kellogg School of Management at Northwestern University (1962-2018). He gave the definition of marketing mix. He is the author of over 80 books, including Marketing Management, Principles of Marketing, Kotler on Marketing, Marketing Insights from A to Z, Marketing 4.0, Marketing Places, Marketing of Nations, Chaotics, Market Your Way to Growth, Winning Global Markets, Strategic Marketing for Health Care Organizations, Social Marketing, Social Media Marketing, My Adventures in Marketing, Up and Out of Poverty, and Winning at Innovation. Kotler describes strategic marketing as serving as "the link between society's needs and its pattern of industrial response."
Chindia is a portmanteau word that refers to China and India together in general. China and India share long borders, are both regarded as growing countries and are both among the fastest growing major economies in the world. Together, they contain over one-third of the world's population. They have been named as countries with the highest potential for growth in the next 50 years in a BRIC report. BRIC is a grouping acronym that refers to the countries of Brazil, Russia, India and China.
Jagdish N. Sheth is the Charles H. Kellstadt Professor of Marketing at the Goizueta Business School of Emory University. He was a prominent member of the core team during the initial years of the Indian Institute of Management Calcutta, the first Indian Institute of Management. Prof. Sheth was awarded by Padma Bhushan 2020 for his work in literature & education in United States.
Market share is the percentage of the total revenue or sales in a market that a company's business makes up. For example, if there are 50,000 units sold per year in a given industry, a company whose sales were 5,000 of those units would have a 10 percent share in that market.
The following outline is provided as an overview of and topical guide to marketing:
An incentive program is a formal scheme used to promote or encourage specific actions or behavior by a specific group of people during a defined period of time. Incentive programs are particularly used in business management to motivate employees and in sales to attract and retain customers. Scientific literature also refers to this concept as pay for performance.
Brand awareness is the extent to which customers are able to recall or recognize a brand under different conditions. Brand awareness is one of two dimensions from brand knowledge, an associative network memory model. Brand awareness is a key consideration in consumer behavior, advertising management, and brand management. The consumer's ability to recognize or recall a brand is central to purchasing decision-making. Purchasing cannot proceed unless a consumer is first aware of a product category and a brand within that category. Awareness does not necessarily mean that the consumer must be able to recall a specific brand name, but they must be able to recall enough distinguishing features for purchasing to proceed.
A target market is a group of customers within a business's serviceable available market at which a business aims its marketing efforts and resources. A target market is a subset of the total market for a product or service.
BeingGirl was a "kid-friendly" web site targeted at adolescent girls created in 2000 by consumer goods company Procter & Gamble (P&G).
Jagdish Sheth School of management is a business school in Bangalore, India. It was founded in 1995 and is located in Bangalore, popularly known as the Silicon Valley of India. The institute is located in Electronic City, one of India's largest industrial parks.