As companies seek to gain a competitive market position and execute on their business objectives, various problems can crop up. In the last post, we examined a case study on inventory control as one issue that needs addressing. In this installment, we will look at a case study involving loss of market share:

A company in the Northeast had always been able to sell enough product to secure a 15-20 percent local market share within the primary price range and portfolio of designs. As other competitors began to outsell this company in the local market, the owner commissioned some research to determine what percentage of the market share had been lost. Upon discovering that their share had dropped to 9-11 percent, the executive team became worried.

Why would this company’s–or any company’s–market share deteriorate to this point? Experience shows that one common reason for the decreased market share might be increased competition. As other competitors, whether established or new businesses, begin to offer viable or even more attractive alternatives, your business may begin to lose a percentage of share  in the local market. Another possible reason for declining market share could be perceived poorer quality in the products offered. Rumors of a company’s demise can fuel such a perception and scare buyers away, allowing other businesses to take advantage of this image problem.

The solution to declining market share varies according to the source of the problem. If bad image and rumors appear to be hurting the business, the owner must move quickly to dispel any rumors and improve company image through a bold and highly visible public relations campaign. For example, companies can generate goodwill by meeting with influential members of the local community to let them know that any perceived problems are being taken care of and that the company plans to be making products in the community for some time to come. This exposure can often be gained through attendance at chamber of commerce and other local business group meetings.

To overcome competitive advances, the executive team must aggressively outmarket and outproduce competitors in each niche market. By beating them in head-to-head competition, the problem is solved while the company’s reputation for high quality products is enhanced. In terms of quality initiatives, management should devise ways of improving quality in all projects, passing the word along to all employees, suppliers, and subcontractors that quality is becoming an issue and that only those who can produce quality work will remain a part of the team.

Stabilizing and regaining market share demands that the team know the local market inside and out. While calculated risks are allowed if the executive team feels confident that they can get product manufactured and sold quickly, the potential success of any such project must be measurable in terms of researched demand for the product line the company plans to produce. Clearly, companies must target opportunities that allow them to make their best products at competitive prices. By keeping abreast of new developments and new competitors attempting to make an entry into a particular market, the team can revise plans–and keep buyers from running to the competition.