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The Rule of Three: Surviving and Thriving in Competitive Markets Hardcover – Import, 25 Dec 2001
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The Rule of Three, by Jagdish Sheth and Rajendra Sisodia, offers an innovative take on corporate development that could help leaders put their own operations into a new context that improves competitive strategies and boosts market performance. Sheth and Sisodia, consultants and marketing professors, base it on their contention that just three major players ultimately emerge in all markets--such as ExxonMobil, Texaco, and Chevron in petroleum, and Gerber, Beech-Nut, and Heinz in baby foods. These giant "full-line generalists" are eventually surrounded by smaller "specialists" who successfully concentrate on niche products (such as high-end audio gear) or niche markets (like fashions for professional women), along with midsized "ditch-dwellers" who struggle to reach an audience in between (like second-tier airlines that compete with goliaths on price and regionals on service). The authors examine this pattern of market evolution and the "radical disruption" that can occur when technology or regulation changes or a new entry "succeeds in altering the rules" (as Starbucks did by sneaking up on coffee's Big Three). Appendices present helpful examples of the way this has shaken out in various industries. --Howard Rothman
Although this is the second book coauthored by Sheth and Sisodia, Sheth has written or coauthored many previous books dealing with marketing. The rule in their book is a Darwinian theory of sorts applied to business, stating that "natural competitive market structures evolve by an analogous selection process that favors the strongest and most efficient companies." The forces playing a role in the theoretical application are industry consolidation, government intervention, the establishment of de facto standards, and shared infrastructure. To study and analyze a particular market and the forces affecting it, the authors look to the three largest companies in that market. The companies can be divided into "generalist," with multiple brands that can perform on a global level, and "specialist," with a single brand. The breakdown of the theory into specifics, market snapshots, and notes, all based on the thorough research and expertise of the authors, makes this a good guide for business leaders, analysts, and students, as well as colleagues in advertising and marketing firms. Eileen Hardy
Copyright © American Library Association. All rights reserved
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The book's key thesis is that mature markets with three big companies are the most profitable. Two big companies are no good because they will not be innovative. Four big companies are not good because they will not have big enough scale economies. The number 3 is supposed to rule in all industries.
The evidence in the book is qualitative case studies and the book is written in a very informal management style. I would have liked much more rigour, but at least the ideas in the book have largely been validated by a more robust study. In some cases the book is straightout annoying because everything is shoehorned into fitting their rule of three. The book is also annoying because the authors' fact checking is so poor. There was no Nordic Telecom driving the GSM standard. William Hill and Ladbrokes are not publishing houses. They are betting houses. So many detailed facts are wrong. Such sloppiness is not acceptable.
The chapter on the strategy of #1, #2, and #3 is especially well written and interesting. The chapter on the strategy of niche players is poor. The final chapter on disruption is an afterthought and very poor.
Three stars because I think the authors are onto something. Reduction in points for shoehorning and getting so many facts wrong. Recommended if you read a lot in the area.
The reason most CEO's would benefit from reading it is that the book does a good job of summing up what is happening to the markets of industries that are maturing and consolidating. THe authors not only explain this phenomenon but prescribe helpful advice for wherever you find yourself in a consolidating industry. It was worth my time.