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Share is tougher to shift

Symptom: Competitors report that market share is becoming more difficult to shift as customers have consolidated their volume in the hands of current suppliers.

Implications for the market:

As hostility progresses, customer-supplier relationships will become much less volatile.

  • Supplier consolidation increases the pressure on competitors to gain and maintain volume. Competitors will struggle to meet the industry's high operating standards and still remain profitable.
  • Inevitably, some fail. As a result, customers encounter inconsistent service and product performance.
  • To avoid further disappointment, customers will begin to rely more exclusively on their tried-and-true suppliers, and will risk new competitors less often. As hostility advances, volume continues to shift among a customer's "old faithful" set of suppliers, but not between established and new suppliers.

The importance of an established customer relationship will increase proportionally. Long-term customer-supplier relationships -- always a substantial competitive advantage -- will become even more valuable.

 

Recommended Reading

 
 

For a greater overall perspective on this subject, we recommend the following related items:

Analyses:

Perspectives: Conclusions we have reached as a result of our long-term study and observations.

  • "Finding the Open Door" Volatility is the movement of volume from one supplier to another. A company can not gain volume unless customers are willing to make a change in suppliers. Volatility has special rules in hostile markets.
  • "The Big Slice of the Pie"The head of one industry leader explains his company's insistence on being a key supplier to each of his customers: "The guy with the big slice of the pie doesn't go hungry." The workings of the typical hostile market provide solid support for this philosophy.
  • "Use Subtle Strategy in Tough Markets"A hostile market operates differently than a market with "normal" competitive conditions. But as difficult as a tough market can be, it can also present an astute management team with an unusual opportunity.
  • "Which Customers Matter Most?"Average customer profitability differs dramatically in non-hostile and hostile markets. Does the relative importance of one customer versus another change as well? The answer is less evident than many business leaders believe.