Being #1 or #2
The current orthodoxy is that being number one or two in your selected markets is crucial. While he didn't originate the idea, it certainly was given its greatest currency from the ideas of former General Electric CEO Jack Welch.
Of all current American industry leaders, GE most resembles a conglomerate, with interests in broadcasting, appliances, jet engines, credit, and so on. The way in which Welch kept this ungainly company with so many disparate divisions in line was through the doctrine: 'We will be number one or two in every business we're in, or we will fix it, close it or sell it.'
As one online business source (Business Line) points out Welch saw that the number one and two companies can usually ride out any storm. He taught that "it was precisely the number three, four, five or six business that suffered the most during a cyclical downturn. Number one or two businesses would not lose market share." Or, as he is elsewhere quoted "be number one or number two in your market, [ because] when you're number four or five in a market, you get pneumonia when number one sneezes."
This doctrine of avoiding being number three or below has become an MBA staple, and is a commonplace of business journalism. Take this quote from an online magazine called New Nutrition. "The sharpest companies always aim to be number one or number two in their chosen markets - but who chooses to be number three? Or number four or five or even lower down the pecking order? But that's the entry point that Belgian beet sugar processor Cosucra may have chosen in the seemingly ever-more-crowded dietary fibre market."
In the past few years, being number one or two in a field has been the announced strategy of a wide variety of companies in every industry. It's become a cliché in company mission statements. Here are a few examples:
Banking: " Banc One was strengthening its already considerable Louisiana presence by purchasing a market-share dominant player in FCC. This fit Banc One's strategic goal of being number one or two in market share in geographic areas where it does business." (Mississippi Business Journal)
More banking: "Nordea presented a profit of DKK 18 billion which is an improvement of 17% compared to 1999. However, this was not considered satisfactory by the ambitious Nordea management. 'By the end of 2003 we will be number one or two within all business areas or with a growth rate higher than the market we are in,' states CEO Thorleif Krarup." (Press release)
Semiconductors: "'Cypress [Semiconductor] strives to be number one or number two in every market, and for us to be number one or two in the PLD business means we would have to displace Xilinx or Altera, and I don't think we have a path to do that,' Richardson said." (EE Times)
Staffing: "The combination [with Olsten] clearly would move Adecco a long way towards its strategic objectives of being number one or two in each of the major marketplaces and of reaching a 20 percent share of the industry worldwide." (Adecco press release)
More staffing: "The pan-European leading career portal, StepStone, acquired the Belgian company Jobscape in February of this year. This acquisition fits into StepStone's strategy of becoming number 1 or number 2 in all countries in which the company is active within six months of starting up activities." (press release)
Construction equipment: "Terex (TEX) has been rapidly growing revenues and earnings both internally and through a series of focused acquisitions. Terex competes globally with a suite of products categorized into two divisions: Terex Lifting and Terex Earthmoving. The company derives half its revenues from products where it has the number 1 or number 2 market position. (company prospectus)
Networking and telecom:
"We're playing there ,,, to be the number one or number two position in each."
--Eric Benhamou, 3Com
"We're either number one or number two in each one of the spaces where we play these days."
--Rich McGinn, Lucent
"We are number one and number two in almost every product area we've ever entered."
--John Chambers, Cisco
(quoted in Network Computing)
And more telecom: "We have a clear vision and a commitment to technology. We're staying in the fixed-line and wireless telephony, optics, and enterprise communications businesses. We will be number one or two in all these sectors." (online interview with Nortel execs)
Technology services: "Altech is a high-technology electronics and communications solutions group….Altech's policy is to be number 1 or 2 in any of the core markets that it serves." (Annual report)
Software testing [Key Labs] :
"Our Vision:
Inside three years we will be #1 or #2 in every market we choose to serve." (company Web site)
Computer gaming: [Spectrum Holobyte, now owned by Infogrames SA] " This company will continue to look for the right opportunities. We look for companies that would give us strength. We want to be a Number-One or Number-Two player in every major entertainment category, for any major platform. If we're looking at a company to acquire, we ask ourselves the question, Would this move us to the Number-One or Number-Two slot in a category we're already in? Will it give us the Number-One or Number-Two slot in a category we're not in?" (interview in Wired)
