Experience curves and the PIMS model both seem to imply that market share is an essential ingredient of a winning strategy. Does that mean that a company with a low market share has no way of running a profitable business?
What will be an ideal response?
While it has been formally conceptualized only recently (via the experience curve and PIMS), intuitively it has been known for a long time that the low-share competitor is at a disadvantage compared to its competitors with a relatively higher market share. For example, American Motors always had problems competing effectively in the auto industry. Conversely, IBM always had leverage over other computer manufacturers. Apparently it is difficult for a low-share company to run a profitable business. But if the low-share company adopts the right strategic perspective, it may be able to operate successfully. For example, if the low-share business neatly segments the market and concentrates in a small niche, it may find sufficient opportunities to be profitable. Usually a small segment in a large, diversified market is not of interest to the high-share competitor, since it may be too expensive to serve, due to high overheads.
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