Porter’ Market Positioning Chart, often referred to as the “Smiley” chart is a traditional way to profile a company’s or business units current market situation. When used to contrast one company with its key competitors, the Porter model provides useful information for developing growth strategies going forward. In the context of leadership, it also offers a basis for considering the merits of several alternative types of leadership styles and how they can impact the future direction of the company.
A market nicher has a unique, well defined market position. This strength is typically reflected in a combination of strategic advantages over their competition. Items such as technology, quality, service, market image, or brand identity are examples.
Leaders that employ a transformational style are a good fit in market niche’ situations as they inspire and foster creative thinking. Organizational enthusiasm and spirt strengthen market image and reinforce the identity of the company in their designated market space.
When using this leadership style, it is important that sufficient management structure is in place to support a well thought out strategy for the business going forward.
Market followers are characterized as companies having mainly me-too, un-differentiated products. The competitive environment is crowded. Market followers do just that- they follow the market leader.
Market followers have little leverage in the marketplace to gain share excepting price and special situations such as favorable plant locations. Frequently they feed off those less attractive elements of the market where market leaders and challengers have much less interest.
Leadership style, in this scenario, is often transactional with a structured approach in the way business is conducted. Thinking is short-term with little emphasis on creativity. There is also a regimentation and closely monitored accountability for most employee’s activities.
In some situations, leadership style among market followers, particularly in smaller mid-sized, privately owned businesses, can evolve into a more autocratic style of management. This is where one individual control’s most of the decision making in the organization.
A market challenger is an innovator. This can include leadership in their technology, in their approach to the market, and/or in the way they manage products and company brand image in the marketplace. Market challengers have a high market share and are positioned to gain share against the market leader.
Leaders of market challenger companies benefit from having some of the qualities of a transformational style of leadership. Fostering creative thinking and inspiring others in the organization adds to the competitive culture needed for an effective market challenger. The lack of an accompanying structure in management practice is a “Achilles’ heel” for this type of leadership style.
Situational leaders are a good fit for market challengers. They are able to adjust their style to accommodate individual business and organizational situations. The ability to interact and work in a team environment and achieve buy-in from others adds depth to the strength of the organization as they challenge the market leader. The addition of some of the attributes of a transformational leader to their skill set can be an added benefit.
A market leader has the highest market share and is the low-cost producer within each market segment where they have this distinction. The company has established itself with technology that is competitive if not leading edge and includes a broad array of products able to serve a variety of individual sub-market segments. Brand identify is high and geographic reach is broad.
Market leaders vary in their leadership style. The large corporations typically evolve (by necessity) into a hierarchical structure of leadership or a transactional type. The chain-of-command for decision making is clear and the organizational layers that exist slow the speed at which decisions are made.
Market leaders, especially the multi-national corporations, can strangle themselves with bureaucracy losing their competitive edge and opening themselves up to share loss to the market challenger(s). Leaders that can bring elements of situational leadership and a transformational style of managing into the mix can help retain their competitive edge.